Some Singapore real estate agencies are wooing Chinese investors to buy properties here.

They are doing so by having a representative office in China and networking with private bankers to reach prospective buyers.

These initiatives have benefited HSR International Realtors and ECG Property.

It is not just about the property for most Chinese investors, it is the lifestyle.

Property agencies said that six-in-10 prospective Chinese customers are asking about Sentosa Cove, seen as prestigious waterfront living.

HSR said foreign buyers now account for about 40 per cent of its sales in prime districts.

To further tap the market, it now has a representative office in the second-tier city of Wuhan in China.

HSR hosts trips for a group of eight to 10 wealthy Chinese investors to Singapore once every two months.

Jeffery Hong, executive director, Agency, HSR International Realtors, said: “We target to do slightly more in the forth quarter of this year and the first quarter of next year. We may have exhibitions and roadshows; we may even bring prestigious local projects all the way to China to do a launch over there.”

Meanwhile, ECG Property has set up a team to link up with wealth managers to reach out to high net worth individuals in China.

Daryl Ou, executive director, ECG Property, said: “Either we will fly over there or correspond through emails, after which we will just shortlist the properties they wanted; they will usually fly over to Singapore over the weekends, that is when we will bring them around to see the properties.”

ECG said sales of high-end homes rose 5 per cent in the first half of the year, at five to six units each month.

It hopes to set up an investment office, likely in Guangzhou.

Property agents said the demand for homes from Chinese investors will hold up. That is because the yuan appreciation has strengthen their buying power, and homes in Singapore are also more affordable compared to properties in other Asian cities.

Industry data has shown that the number of buyers from China inched up slightly in recent months.

Based on caveats lodged, 190 private homes were bought by the Chinese in the second quarter, 10 units more than the first quarter.

Overall, foreigners purchased 1,036 homes in the first three months of the year, compared with 1,004 units in the second quarter. The top three groups of buyers include the Indonesians, Malaysians and Chinese.

Source: Channel News Asia, 28 Jul 2010

A TENDER for a large high-rise commercial site in the 200ha innovation and research hub one-north has attracted just two bidders.

Ho Bee Developments put in the top bid of $410.99 million or $342.20 per sq ft per plot ratio (psf ppr).

That is about 7 per cent above the second highest bid of $384 million or $319.80 psf ppr from Mapletree Trustee.

Ho Bee’s general manager of marketing and business development, Mr Chong Hock Chang, said its plan is to rent out the office units for recurring income, and it is looking at achieving office rents of $5 psf.

‘We believe we can build an iconic building on this landmark site,’ he said.

The 99-year leasehold site has been on the Government’s reserve list of sites since April 2008. A tender was finally triggered in May when Mapletree committed to a minimum bid of $320 million, or $266 psf ppr, which the Government found acceptable.

The site of about 1.8ha is located at the junction of North Buona Vista Road and Commonwealth Avenue West and is near the Buona Vista MRT station. It has a

potential yield of 111,565 sq m, with 2,000 sq m being set aside for retail use.

JTC said the building will provide office space outside the Central Business District for the business support companies of the research institutes at one-north.

Cushman & Wakefield managing director Donald Han said the bids were within the expected range.

The low level of interest is due to the huge price sum involved, he added.

Also, ‘as an office product, it is untested in the area, which is predominantly industrial in nature’, he said.

CBRE Research said the development cost for a predominantly office tower is about $900 psf, based on the top bid.

Just under 1 million sq ft of net lettable area of commercial space could be developed on this parcel, said its executive director Li Hiaw Ho.

‘This would facilitate the expansion of research and development functions at one-north and serve as an alternative source of office supply post-2013 in the Buona Vista sub-regional centre,’ he said.

Mr Han said current rents in the area are about $3.80 psf to $4.50 psf.

As office rents have bottomed out in the second quarter, they are expected to rise in time. ‘The rental yield would therefore be in excess of 5 per cent,’ said Mr Han.

Source: Straits Times, 28 Jul 2010

HO Bee Investment is planning to invest about $1 billion to develop a commercial project at North Buona Vista Drive.

The company told BT this after it submitted the top bid for a 99-year leasehold commercial plot located in the one-north research area yesterday.

The tender for the 1.8 hectare site attracted two bids. Ho Bee’s was $410.99 million, which works out to $342 per sq ft per plot ration (psf ppr).

The second bid came from Mapletree Investments, at $384 million or $320 psf ppr.

The site has a maximum allowable gross floor area (GFA) of 1.2 million sq ft. Ho Bee hopes to set aside some 1-2 per cent of space in the commercial development for retail shops. It is also exploring the possibility of having service apartments within the development.

The site has a good size for creating ‘a landmark building in a very attractive location’, Ho Bee said. It plans to lease the development out for recurring income when it is ready in about four years’ time.

Market watchers had expected demand for the site to be lukewarm given its large size, which would involve a huge capital commitment.

But the site has other attractions: it is near Buona Vista MRT Station and lies within a growing research cluster for the biomedical, infocommunication and media industries.

CB Richard Ellis Research executive director Li Hiaw Ho believes the site can yield a net lettable commercial area of just under a million sq ft. ‘This would facilitate the expansion of R&D functions at one-north and serve as an alternative source of office supply post- 2013 in the Buona Vista sub-regional centre.’

Sentiment in the commercial property market has picked up of late. Official figures show that office rents increased 1.1 per cent in the second quarter from a quarter ago. Prices of office space climbed 4.6 per cent.

There was also a net increase of 398,264 sq ft in office space demand in the second quarter.

Source: Business Times, 28 Jul 2010

Analysts in panel give their take on the state of the world economy

PEOPLE wondering whether the economy is out of the woods still have reason to seek refuge in the trees.

Experts on the third NUS Business School-The Business Times CEO Luncheon Panel yesterday warned that the recovery of developed nations’ economies was slated to lose momentum after the fiscal stimulus runs out.

‘The best part of the recovery is over. Fiscal stimulus is going to turn into fiscal drag for most of the developed economies by the end of this year,’ said Manu Bhaskaran, director and chief executive officer of Centennial Asia Advisors, at the luncheon.

Mr Bhaskaran pointed out that in the United States, housebuilders’ confidence levels have plunged.

In July, the National Association of Home Builders/ Wells Fargo Housing Market Index (HMI) fell to its lowest level since April last year, as the federal home buyer tax credit programme expired.

Fixed mortgage rates in the US also declined to all-time record lows while housing starts in June fell to 5 per cent.

The outlook, while not abysmal, is turning out to be a cautious one, according to Mr Bhaskaran.

‘Going forward, the cost of capital is going to be higher and fiscal tightening is going to be here to stay for many years to come,’ he said.

On a more controversial note, Duan Jin-Chuan, director of NUS’s Risk Management Institute, recommended during his talk yesterday that Greece default on its enormous debt.

‘Greece can stay in the eurozone and massively deflate its economy or leave the eurozone to regain control of its monetary policy,’ said Professor Duan.

Neither would be likely, which meant that defaulting on its debt would be the most probable outcome.

‘Greece should consider the third option, which is to exercise its sovereign immunity, default on its debt and stay in the eurozone,’ said Prof Duan.

‘Default is a legitimate option, morally and legally, and should be exercised from time to time. Otherwise, why did the issuer pay the premium in the first place?’

He stressed, however, that he was not advocating a disorderly default of Greece’s debt, but rather one involving negotiations and coming to reasonable terms like coupon payments after the declaration of default.

The euro, however, should continue to shuffle along for a while, according to him.

‘The statistics give me no reason to think that the euro can’t survive another 10 years or more, even if it may not look pretty.’

Source: Business Times, 28 Jul 2010

CAPITACOMMERCIAL Trust (CCT) reiterated last week that it will not distribute a special payout to unit-holders when it completes its $380 million sale of StarHub Centre in September. Likewise, it did not return proceeds to shareholders when it completed the sale of Robinson Point in April.

The trust has said it is setting aside the net cash proceeds from these two divestments – totalling about $577.5 million – for future acquisitions and to reduce debt.

On the debt front, CCT can choose to refinance debt when it falls due, given its current gearing ratio is relatively low at about 33 per cent.

As for acquisitions, the trust has thus far found it difficult to buy office blocks. In fact, it has been selling office blocks which it believes have reached the optimal stage of their life cycle as office assets – such as Robinson Point and StarHub Centre.

CCT’s manager says it is keen to increase its exposure to the Singapore Grade A office sector. But buying such assets in today’s market is not easy for a Reit, as owners of Grade A office buildings are pricing the recovery in rents into their asking prices. As a result, the yields on these properties are not high enough to generate accretion for a Reit if it were to buy such expensive assets.

Given this challenge, some analysts think that instead of keeping its cash for future acquisitions, CCT could be saving it for something else – perhaps to re-visit plans to redevelop Market Street Car Park into a Grade A office project.

It was in January 2008 that CCT first disclosed it had obtained outline planning permission (OPP) from the Urban Redevelopment Authority to redevelop Singapore’s first multi-storey car park into a new office tower with gross floor area of about 850,000 sq ft and a maximum plot ratio of 14.49. It estimated the total cost then at $1-1.5 billion.

But the global financial crisis struck – and Singapore office rents started to slide. In January 2009, CCT’s manager announced its decision to abort the redevelopment plan, citing the uncertain market outlook and tight credit conditions, as well as high development cost and significant project size.

Quizzed about the possibility of re-visiting the Market Street plan at CCT’s second-quarter results briefing last week, CapitaCommercial Trust Management chief executive Lynette Leong said the OPP had lapsed, but added that the group continually reviews its assets. She also said that the Market Street property is generating an attractive net yield of more than 8 per cent based on its $47 million valuation as at June 30, 2010, thanks to a shortage of CBD parking lots. The yield surpasses that for office space.

However, some analysts think that the time could be right for CCT to make a fresh planning application to redevelop Market Street Car Park into offices. And approval from authorities should again be forthcoming. For one, there is concern among property consultants about a potential shortage of new prime Grade A office space post-2012. The redevelopment of Market Street Car Park into offices could help alleviate this to some extent.

Redeveloping the property will mean the loss of 704 CBD parking lots that provide season and hourly parking. But of course, the authorities could always require CCT to reinstate this supply in its new project. And some relief will come soon from 250 public parking lots – for hourly parking – that will be ready by October this year underneath the Lawn @ Marina Bay, which is part of the Marina Bay Financial Centre project.

Standard Chartered Equity Research estimates the cost of redeveloping Market Street Car Park has fallen from 2008, probably to $1 billion to $1.1 billion today, given lower construction costs and development charges now. ‘If the Grade A office building (about 850,000 sq ft) conversion is completed by 2015 and rented for $10-14 per sq ft a month, the yield on cost would be about 6-8 per cent and development profit would be 6-25 cents per unit,’ it said.

Given CCT’s $6 billion asset size and the rule that development properties must make up no more than 10 per cent of a Reit’s asset size, CCT will no doubt have to seek the appropriate structure to undertake the development, perhaps jointly with parent CapitaLand.

A cash hoard will come in handy for such a venture.

Source: Business Times, 28 Jul 2010