A RESIDENTIAL site in Choa Chu Kang has attracted a modest field of five developers, which have submitted bids at the bottom end of market expectations.

Some analysts had expected bids of above $200 million for the 99-year leasehold 1.54ha site, at the junction of Choa Chu Kang and Phoenix roads.

However, when the tender closed yesterday, the top bid was $142.78 million from Far East Civil Engineering and China Construction (South Pacific) Development Co – which works out to $411 per sq ft (psf) per plot ratio (ppr).

This was 17 per cent higher than second-placed EL Development’s $122 million bid. The other bidders were Hiap Hoe subsidiary Leng Hoe, Hezuo and Chip Eng Seng subsidiary CEL.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, said the level of interest in the site was closer to the bidding pattern seen before strong interest was shown in a tender for a site in West Coast last month.

‘After last week’s tender for the West Coast site which attracted 12 bidders, we are seeing moderate bidding again in this tender,’ he said.

‘With only five bids and the highest at $411 psf ppr, it is closer to the bidding pattern which we saw before the West Coast tender in the earlier part of June when tenders saw only three or four bidders with top bids below $400 psf ppr.’

He noted a softening in demand for less attractive Government Land Sale (GLS) sites as developers become more cautious and selective.

Developers’ participation was apparently affected by a rise in supply of freshly launched projects and more sites coming on stream under the GLS programme in the second half of this year.

Mr Joseph Tan, CB Richard Ellis’ executive director for residential, said: ‘The site is on Choa Chu Kang Road next to Phoenix Heights Estate. Located on the fringe of Choa Chu Kang and Bukit Panjang HDB estates, residents of the upcoming subject development will benefit from the amenities and facilities there. The ITE College West is nearby and the Teck Whye LRT station is a short walk away.’

He estimated that Far East’s bid will translate to a break-even cost ranging from $800 to $850 psf.

Far East Organization said in a statement: ‘We see potential in the Bukit Panjang area, and believe that the site will offer value to home buyers. The take-up at our project launched earlier this year, The Tennery, integrated with the edgy Junction 10 mall, has underscored the demand for a new ‘live, work and play’ lifestyle in this location.

‘We plan to develop two 24-storey towers offering a range of one- to four-bedroom apartments. To provide more choices for residents to enjoy the vast expanse of land spaces, we will also incorporate some townhouses in the development.

‘The development will have an array of exciting amenities to allow residents to fully enjoy the green hillside living environment.’

The Urban Redevelopment Authority said a decision on the awarding of the tender would be made later.

Source: Straits Times, 1st July 2011

THE outcry that may have led a developer to slash prices at a Tampines housing project will not deter other builders bidding for similar projects, say developers and property analysts.

They told The Straits Times that demand for land to build such Design, Build and Sell Scheme (DBSS) flats is expected to remain healthy.

This is because they believe home buyers are still keen on these premium flats with condominium-like features, including built-in wardrobes and air-conditioning. It also helps that DBSS flats are open to applicants with a higher income who do not qualify for normal new Housing Board flats.

‘There will always be a segment of buyers interested because DBSS flats come fully furnished,’ said Dennis Wee Group director Chris Koh. ‘Previous DBSS launches have also done well. If the location of the project is good, it will sell.’

The controversy over this category of flats centres around Centrale 8 at Tampines, the latest DBSS launch.

Developer Sim Lian Group had initially indicated that the biggest flats in the project would go for $880,000, or $750 per sq ft (psf), a record price that drew protests from the public.

But on Tuesday, the firm abruptly cut the top prices to $778,000, or $663 psf. While still a record, this makes units up to $102,000 cheaper.

The project’s reduced prices have also raised talk among industry players that an invisible price ceiling of about $800,000 has surfaced for new flats.

But some developers are unfazed by this. EL Development managing director Lim Yew Soon, who plans to launch a DBSS project in Clementi in the fourth quarter, said the revised prices for Centrale 8 were actually more realistic.

‘The project might not shift that many units with the higher price, and if a DBSS project doesn’t do well, it might reflect badly on future projects.’

On the other hand, if demand for Centrale 8 had been very strong despite the original high prices, that might have led to more cooling measures from the Government – also a bane for developers, Mr Lim added.

Usually, developers of DBSS flats do not aim to maximise profits and prefer to sell units quickly, given the many sale restrictions, said Mr Eugene Lim of ERA Realty.

Buyers of DBSS flats are subject to the usual HDB rules, except that their monthly income can go up to $10,000, compared with $8,000 for normal flats.

Profit margins are generally lower for DBSS projects, at about 5 per cent to 15 per cent, while mass market private homes have margins of 15 per cent to 20 per cent.

But the Centrale 8 episode may still affect some developers. The Government now says it will review the scheme.

A senior executive for a property firm, who declined to be named, said her company will study the take-up rate at Centrale 8 before deciding on how to price future DBSS projects. ‘We are more concerned about the review of the DBSS scheme that the Government has mentioned. There are more uncertainties there.’

Soure: Straits Times, 23rd June 2011

$200m above forecast – reflecting confidence in land outside city centre

A PRIME mixed-use site in the Jurong Lake District has shattered price records with a top bid of just under $1 billion – almost $200 million more than the market expected.

The huge offer stunned analysts and dramatically underscored demand for well-located land in the up-and-coming area.

The knockout bid of $969 million – or $1,012 per sq ft (psf) per plot ratio (ppr) – came from heavyweights CapitaMalls Asia, CapitaMall Trust and CapitaLand.

It is easily the highest offer for any mixed-use site outside the city centre and reflects confidence in the suburban office market, the remaking of Jurong and the value that developers see in choice locations near MRT stations, say experts.

The second highest bid – $917 million lodged jointly by United Engineers and Singapore Press Holdings – was also far ahead of market expectations.

A Keppel Land-led joint venture with Perennial Real Estate offered $785 million. Frasers Centrepoint and private fund Phoenix trailed the field of five with a joint bid of $640 million, 34 per cent lower than the top offer.

At least 40 per cent of the maximum permissible gross floor area (GFA) on the site in Boon Lay Way and next to Jurong East MRT station must be for offices.

Savills Singapore’s director of commercial leasing, Ms Agnes Tay, said she was ‘pleasantly surprised’ with the aggressive bids.

They suggest a shift of developers’ interest to explore opportunities in suburban commercial land, especially when a substantial amount of office space has been released in the city over the past few years. ‘Given limited suburban office supply, the Jurong site might provide good opportunities that developers see value in,’ she added.

Experts also weighed in on what the site might be used for apart from offices.

Savills’ Ms Tay said the remaining 60 per cent GFA could be used for apartments as there will be a good market for well-located homes.

However, CB Richard Ellis Research executive director Li Hiaw Ho said the project is likely to be a pure commercial development with a high proportion of retail space. Average monthly rents could be around $15 psf a month for retail and $6 psf for offices, he added.

‘The successful award of this parcel would hasten the development of Jurong East as a vibrant commercial hub,’ said Mr Li. ‘Given the sizeable amount of retail pipeline supply from the neighbouring Lend Lease’s and JCube projects as well as existing retail amenities in this area, it would offer residents and workers a retail experience rivalling that of Tam-pines in the east.’

SLP International research head Nicholas Mak also noted that CapitaMalls Asia and its partners looked keen to retain their market share of commercial space in the Jurong East MRT Station area. The IMM and JCube malls are both in the area and managed by CapitaMall Trust.

CapitaMalls Asia will hold a 50 per cent stake in the Jurong Lake project, HSBC Trust Services – as trustee of CapitaMall Trust – 30 per cent, and CapitaLand will hold the remaining 20 per cent.

The five bids the tender attracted suggest developers still want relatively big parcels of land, added Mr Mak.

‘An estimated 1,000 homes will also be added around Jurong East MRT station to provide more opportunities to live and work in the area,’ he noted.

‘Office and retail development on the subject site stand to gain ready access to a large pool of labour and customers – of more than one million residents – from the surrounding established towns of Clementi, Bukit Batok, Jurong East and Jurong West.’

In June last year, Australian developer Lend Lease beat five other offers with a bid of $749 million, or $650 psf ppr, for a 1.9ha site in the same area. It has since clinched the National Development Ministry as an anchor tenant, which experts say would have encouraged developers to bid for the second Jurong Lake District site.

The previous record for a mixed-use site outside the Central Business District was for the site of nex shopping mall in Serangoon which sold for $850 psf ppr in 2008.

Source: Straits Times, 26th May 2011

BUKIT Sembawang Estates paid a heavy price for write-backs in the fourth quarter, with net profit falling 34.4 per cent.

Earnings came in at $27.5 million for the three months to March 31, down from the $41.9 million in the previous quarter.

The hit came mainly from lower writeback of foreseeable losses on properties.

The write-back of allowances for foreseeable losses amounted to $13 million for the fourth quarter, compared with $40 million for the same period last year. A write-back is basically the process of restoring or increasing the value of an asset after a previous write-off or write-down.

But there were positive signs, with revenue for the quarter up 264.9 per cent to $76.6 million over a year earlier, fuelled by more property sales.

The full-year numbers were better, with revenue for the 12 months rocketing 658 per cent to $500 million.

Full-year net profit was also up 221.9 per cent to $170.5 million, attributable to more sales at Paterson Suites and Temporary Occupation Permits obtained for Parc Mondrian and Paterson Suites.

The increased earnings were down to higher profit recognition on Verdure, The Vermont on Cairnhill and Luxus Hills Phases 1, 2 and 3.

Earnings per share for the fourth quarter fell to 11.02 cents from 17.52 cents a year ago, while net asset value per share rose to $3.82 as of March 31, from $3.21.

The company said the property cooling measures in January have ‘moderated’ private housing prices. It said Luxus Hills Phase 1, which has 78 units, is expected to be completed during the first half of the financial year ending 2012.

‘The group will continue to closely monitor the property market and will time the launches of Luxus Hills Phase 5 and the new condominium project along Telok Blangah Road in the current financial year,’ it added.

Source: Straits Times, 24th May 2011

LUXURY property developer Wheelock Properties has seen a 3.9 per cent rise in its first-quarter net profit to $52 million on the back of higher margins from its high-end project Scotts Square.

But revenue for the three months ended March 31 dipped 3.6 per cent, to $103 million, from the same period last year.

This decrease was due to the completion of Ardmore Two in the second quarter of last year, the firm said.

The group’s revenue and earnings will be boosted this year by remaining profits on sold units at Scotts Square in Scotts Road.

All profits will also be recognised on any additional units sold at Orchard View and Scotts Square, it added.

Scotts Square is due to obtain its temporary occupation permit later this year.

It was 71 per cent sold as of March 31 at an average price of $3,999 per sq ft (psf).

In the quarter, four units of Scotts Square and three units of Orchard View were sold.

Orchard View in Anguilla Park has moved 12 units at an average price of $3,232 psf as of the end of the quarter.

In February, Wheelock was also successful in bidding for five sites totalling 3.2 million sq ft in Fuyang city, which is adjacent to Hangzhou, at 1.44 billion yuan (S$265.2 million).

The acquisition is due to be completed in February next year and construction is expected to start in the second half of the year, said Wheelock chief executive David Lawrence.

‘Wheelock Place, which has consistently achieved good rental rates and high occupancy, will continue to generate good recurring income,’ he added.

Its occupancy rate was 98 per cent as of March 31, with average rentals for office and retail space at $10 psf and $14 psf per month respectively.

With the completion of Scotts Square, rental receipts from the shops will further contribute to the group’s annual recurring income.

The firm will also start construction of its next luxury project here, Ardmore Three in Ardmore Park, by July. Its showflat is expected to be completed in the fourth quarter.

Wheelock Properties has a strong cash standing of $781 million and remains well-positioned to take advantage of new investment and acquisition opportunities locally or overseas, said Mr Lawrence.

Quarterly earnings per share rose to 4.37 cents from 4.21 cents in the same period last year, while net asset value per share was $2.36 as of March 31, unchanged from Dec 31.

Wheelock Properties’ shares closed down four cents to $1.77 yesterday.

Source: Straits Times, 12th may 2011

THE property boom and the huge sales it has generated sent first-quarter net profits up 78 per cent to $282 million at City Developments (CDL).

Revenue was up 10 per cent to $774 million for the three months to March 31, thanks to contributions from such projects as Livia, NV Residences, Volari and One Shenton.

CDL noted that sales take-up in central regions has moderated but demand in suburban areas remains healthy. ‘While there is unlikely to be any significant fluctuations in sales launch prices, projects located at areas earmarked as future growth areas as well as those near existing or future MRT/LRT stations are expected to continued to attract buyers, with the right pricing,’ it said.

CDL also said the sales committee of Tanglin Shopping Centre, of which its hotel arm Millennium & Copthorne Hotels has a 34 per cent interest, is considering a second collective sale tender. But no date has been fixed.

Earnings per share rose to 31.1 cents from 17.4 cents in the same period last year, while net asset value per share was $7.19 as of March 31, up from $6.89 cents as of Dec 31.

CDL shares closed two cents higher at $11.60 yesterday.

Source: Straits Times, 12th May 2011

Mass-market private home demand may fall if HDB income ceiling is raised

PROPERTY stocks fell yesterday on fears that a possible raising of the household income ceiling for HDB build-to-order flats could cool demand for mass market private properties.

The Government had indicated that the $8,000 income ceiling for families buying a flat from HDB could be raised to $10,000 after the General Election.

Shares of listed property developers dipped yesterday amid concerns among investors that this would shift demand away from private projects.

City Developments, which started trading without its latest dividend on Tuesday, fell 40 cents to $11.04. Keppel Land shed six cents to $4.07, while CapitaLand slid five cents to $3.27. Wing Tai fell three cents to $1.54, UOL shed eight cents to $4.73 and Fraser & Neave, with a big property arm, fell five cents to $6.23.

‘As Polling Day in Singapore on May 7 approaches, property stocks are being sold down over concerns that there could be more policy changes affecting both the public and private property markets,’ said a note by Kim Eng Securities.

‘For instance, the Government will now review the possibility of raising the household income ceiling for buying new HDB build-to-order flats from the current $8,000 to $10,000. If implemented, the demand for mass market private properties may be diluted, possibly leading to a price correction in that segment.’

OCBC Investment Research said the possible higher income ceiling could suggest an unchanged hawkish stance on property prices post-General Election.

‘This runs contrary to the views of some that the government curbs so far are mostly pre-election moves and that the General Election could be a positive price catalyst.

‘We think the upside in private residential prices remains limited due to continued policy overhang in 2011, coupled with expected increases in interest rates and physical supply in 2012 to 2013.’

OCBC remains neutral on the residential property sector, and has a ‘hold’ rating on City Developments with a fair value of $10.72.

But JP Morgan said it had a ‘positive stance’ on the Singapore property sector, adding that developers that have reported results have come out with better numbers in general despite the distortion from some new accounting rules.

JP Morgan said developers here are trading at a discount to net asset value estimates, a level it feels is ‘an attractive entry level from a valuation perspective’.

Some developers are also continuing to get the thumbs up. Citi Investment Research kept its ‘buy’ call on Wing Tai but dropped its target price from $2.53 to $2.05. Citi said Wing Tai has ‘attractive valuations’, but will face slower-than-expected sales at some of its projects such as Belle Vue, as well as higher-than-expected tax. It also highlighted increased risks of Wing Tai suffering from policy changes.

Source: Straits Times, 5th May 2011

PROPERTY players are a bit less optimistic about the market than they were previously, according to an industry measure.

The sentiment index has weakened to 4.9 from 5.7, while the mood for the months ahead also slipped as compared with the fourth quarter, a likely reflection of the recent market cooling measures.

The index, which is compiled by the National University of Singapore’s Department of Real Estate, consists of scores ranging from 0 – the most pessimistic – to 10, which registers a high level of optimism.

As part of the quarterly survey, developers were asked about their expectations of the new private property launches.

As a sign of weakening outlook towards the property sector, 62 per cent of developers surveyed expect more residential units to be launched over the next six months compared with 74 per cent in the previous quarter.

About twice as many developers – around 69 per cent – as compared with the fourth quarter also expect prices to remain flat.

Only 35 per cent of respondents anticipate greater interest in the collective sale market, down from 52 per cent.

Source: Straits Times, 30th April 2011

Home upgrading, more cycling tracks and better parks are on the plate for Sembawang residents when the town council pours in $500 million over the next five years to make the neighbourhood a better place to live in.

Unveiling the town council’s plans at an open area next to Woodlands Civic Centre yesterday, Health Minister Khaw Boon Wan said his six-man Sembawang GRC team had ‘fully implemented’ the five-year plan unveiled at the last general election.

He named the 27ha Admiralty Park as one promise made good. Another is Woodlands Waterfront, opened just over a year ago.

The team has also seen to the development of 26km of cycling tracks, which make it safer for both cyclists and pedestrians.

The highlights for the next five years include home upgrading for 150 blocks that will be eligible. Among the first will be Blocks 123 to 131 in Marsiling.

Another 168 blocks are due for neighbourhood upgrading over the next five years, with Blocks 101 to 143 in Marsiling in the first batch.

Mr Khaw also announced that another 5,500 homes will be built in the next five years. They will be a mix of Housing Board, private condominiums and landed property.

He promised that while they will not be higher than Pinnacle@Duxton – the upmarket flats in Tanjong Pagar – the Housing Board blocks will be more modern.

The 31-storey Marsiling Heights, which is being built, gives a preview of what is to come, he said.

There will also be more childcare centres and kindergartens to serve the growing needs of residents.

A mosque will be built in Admiralty to serve the large Muslim community. They account for between 20 per cent and 25 per cent of the residents in the GRC.

‘We’ve always been careful to make sure that their religious needs are well served,’ he said.

There will be at least two more CCs (community clubs/centres) in Woodlands and Admiralty.

Mr Khaw also said that the Transport Ministry is working hard to add more trains to ease the current congestion.

He ended by saying: ‘So long as we keep the Singapore economy growing strongly, there will be money for all the good work we want to do.’

Source: Sunday Times, 24th April 2011

Change to how revenue is recognised in account may affect numbers

PROPERTY firms, especially those with overseas investments, may report more volatile profit numbers following a change as to how revenue from projects is recognised in their accounts.

The amendments, to kick in for annual periods starting from Jan 1 this year, could lead to sizeable swings in revenue and profits from year to year, accountants told The Straits Times.

Property firms listed here are already gearing up for the changes. Industry giants Keppel Land and CapitaLand have disclosed in their annual reports how profits would have been affected last year, if the new rules had applied then.

Others indicated in their annual reports that they are assessing the possible impact of the changes.

Currently, developers smooth their revenue streams from projects, progressively recognising income over the contract period as certain milestones are met.

But under the changes announced by Singapore’s Accounting Standards Council (ASC) last August, revenue will be reflected only when control of the property is transferred to the buyers.

The change is officially known as an ‘interpretation’ of the Financial Reporting Standards. But accountants say the concept of revenue recognition when transfer of control is passed is fairly new.

For most property developments in Singapore, the laws mean that control is continuously transferred to the buyer as the construction progresses, said an accompanying note by ASC last August.

But this may not be the case overseas, leading to ‘lumpy’ recognition of revenues and profits as and when the project is completed, say accountants.

Some Singapore property agreements also do not allow for continuous transfer of control, said Ms Kok Moi Lre, assurance partner at PricewaterhouseCoopers (PwC).

Mr Shariq Barmaky, partner of assurance and advisory at Deloitte Singapore and South-east Asia, said: ‘If terms and conditions overseas are different from Singapore, under this interpretation, it could be possible that revenue is recognised only when the project is completed, rather than on a continuous basis.’

Already, developers are mobilising their accounting teams to determine just what this means for their numbers.

Keppel Land said in its latest annual report that when it applies the interpretation retrospectively, revenue last year would have dropped by about $38.8 million, while net profit would have slid $12 million. The value of properties held for sale as at Dec 31 last year would also be expected to decrease by about $192.2 million.

For last year, Keppel Land reported revenue of $792.3 million and net profit of $1.05 billion.

CapitaLand said in its annual report the changes applied retrospectively would have meant it reported a $152.5 million rise in net profits last year, and a fall in net assets of $152.3 million. The company said earnings per share last year would also have risen by 3.6 cents.

CapitaLand reported full-year profits of $1.27 billion last year, and net assets as at Dec 31 were $18 billion.

PwC’s Ms Kok said that companies’ past year revenues and profits may go up or down after applying the accounting change retrospectively. This depends on the timing of construction and completion of the affected properties, she added.

UOL said in its report that the accounting policy may need to be changed for its overseas projects. ‘The change will, however, not result in any material effect on the amounts reported for the current or prior financial years,’ it added.

Allgreen Properties said its management is ‘considering the criteria…to assess if there is any impact arising from the revenue recognition of the overseas construction contracts’.

It does not anticipate that the accounting changes will result in any material impact on the financial statements when implemented this year.

Wing Tai’s report for the year to June last year said the company is currently assessing the impact of the rule changes to its financial statements.

Kim Eng analyst Wilson Liew, who covers several property stocks, said the accounting moves will not change the way he looks at companies. ‘It’s basically an accounting change, in terms of the operations, there shouldn’t be much impact… The valuations wouldn’t be impacted.’

Source: Straits Times, 20th April 2011