Fast track for en bloc deals

Fast track for en bloc deals

By ARTHUR SIM

CREDO Real Estate will market two prime properties for collective sale through expression-of-interest (EOI) exercises - and it could just prove to be the faster way to get a sale done.

Each of the properties - The Hillpark off Dunearn Road and Chateau Eliza at Mount Elizabeth - has less than 80 per cent of owners’ approval for sale at the indicative prices, so the process of a collective sale cannot officially proceed.

However, by launching an EOI exercise, owners who are undecided may be swayed by bids from interested developers, even though the bids will not be legally binding offers.

But as Credo’s managing director Karamjit Singh notes: ‘It can be faster because you can secure a bid at an earlier threshold.’

The Hillpark sits on 77,646 sq ft of land and is zoned for two-storey bungalows. The indicative asking price is $106 million to $110 million, which works out at $1,365 to $1,416 per square foot.

Chateau Eliza sits on a 17,997 sq ft site and has a designated plot ratio of 2.8. The height limit is 36 storeys and the indicative price is $120 million or $2,223 per square foot per plot ratio.

Both developments have achieved around 70 per cent of owners’ approval for collective sale, an important consideration when proceeding with an EOI.

Giving an idea of how EOI can work, Credo’s executive director Tan Hong Boon revealed that for a recent collective sale deal it brokered through an EOI - Watten Heights off Dunearn Road - Credo received 16 bids.

One was high enough to convince undecided owners to agree to sell quickly.

An Offer to Purchase was then drawn up with the highest bidder and the collective sale was done within days, without having to proceed with a public tender.

Source : Business Times - 24 Jul 2007

Residential supply crunch to get worse, says Citigroup

Residential supply crunch to get worse, says Citigroup
Jobs growth, foreign worker inflow overwhelming available units
By UMA SHANKARI

THE property supply crunch is likely to get worse despite government assurances that supply over the next few years is sufficient, Citigroup says in a report released yesterday.
The report comes just a week after the investment bank advocated a shift from property to bank stocks, amid what it termed ‘policy uncertainty’.

Since mid-May the government has announced measures to tackle the surge in the property market - especially the rise in office rents. This has undermined the performance of property stocks, Citigroup said in a July20 report.

In yesterday’s report, Citigroup analysts Chua Hak Bin and Lim Jit Soon say a supply crunch can be expected because the number of units completed from 2007 to 2010 will likely fall short of the Urban Redevelopment Authority’s projection of 42,200.

‘Completion rates have been consistently over-estimated in the past,’ the analysts say. ‘Units under construction provide better guidance and suggest a potential shortfall. Shortage of construction materials and workers implies that risk of delays has risen.’

Units under construction far lag completion estimates, with only 25,100 to be built from 2007-2010, according to Citigroup. Specifically, just 4,573 units are under construction in 2007 plus a further 6,633 in 2008. Jobs growth and the foreign worker inflow continue to overwhelm available residential units, Citigroup says. Jobs growth in 2007 is keeping pace with the 176,000 jobs generated in 2006, of which about half were taken up by foreigners.

‘Accommodating the current flow of foreign workers looks near impossible with the current supply stock and pipeline,’ the bank’s report says.

‘The lack of any slack also shows in completed but unsold units, which reached a new low of 567 at the end of the first quarter of 2007.’

En bloc sales will exacerbate the residential supply squeeze, Citigroup reckons. And it sees a risk of more policy measures.

‘The government will likely favour supply side responses, including more land supply, more HDB flats and further relaxation of measures on rental of HDB properties,’ it says. ‘But demand-side measures cannot be ruled out if price increases continue to accelerate and speculation begins to test the comfort zone of the authorities.’

Anticipating dampening policies, Citigroup last week called for a shift from property counters to banks.

But it remains positive about the fundamentals for property because demand and supply dynamics continue to favour rental and capital growth for both the office and residential sectors. Still, policy uncertainty has affected the share prices of some property stocks, the report said.

Banks, which are beneficiaries of the property upturn because of property loans, are better proxies for the property boom, it said.

‘With reasonable valuations and steady earnings growth, banks provide exposure to the reflation theme without the downside from policy uncertainty.’
 
Source : Business Times - 24 Jul 2007

Mapletree is Anson Rd site top bidder

Mapletree is Anson Rd site top bidder

By ARTHUR SIM

MAPLETREE Investments has emerged as top bidder for an office site at Anson Road/Enggor Street in a public tender that also drew other big developers such as CapitaLand and Keppel Land.
What interests some analysts is that the top two bidders are ‘non-traditional’ CBD office developers.
 
 
 
At $391.9 million, Mapletree’s bid works out to be $1,021 per sq ft per plot ratio for the 39,732 sq ft site, which has a maximum gross floor area of 383,808 sq ft.

Five bids came in, with Mapletree’s offer topping second-placed NTUC Income Insurance Cooperative’s bid by 23 per cent.

The fifth bid was from a company associated with UOL.

The site, which will likely go to the highest bidder, will be formally awarded soon, making it Mapletree’s first major land acquisition in years.

On its likely win, Mapletree CEO Tan Boon Leong said: ‘Indication of interest from corporate users has been positive and we expect the building on this site to be substantially pre-leased before completion.’

Mr Tan believes the building can be completed quite quickly, ahead of office space being available in 2010.

At the allowed gross plot ratio, the optimal building will be 18-storeys high with floor plates of 22,000 sq ft.
 
Even though Mapletree’s bid was 23 per cent higher than the next bid, Savills Singapore director for marketing and business development Ku Swee Yong said: ‘The developer got the site at a good price. Even if rents remain at current levels for that location, the yield could be 5-7 per cent per annum.’

Li Hiaw Ho, executive director at CBRE Research, said that at end-June, the office occupancy level in the Tanjong Pagar area was 95.5 per cent, up from 92.7 per cent in Q107 and 91.8 per cent in Q406.

Mr Li reckons Mapletree’s development costs could be around $2,000 to $2,100 psf.

‘At a stabilised yield of 4 per cent to 4.5 per cent, office rents of about $9.00-$10.00 psf per month can be expected,’ he said.

What interests some analysts is that the top two bidders are ‘non-traditional’ CBD office developers.

DBS Vickers Research analyst Wallace Chu said Mapletree could be looking to ‘leverage the expertise it gained at HarbourFront’.

But he is flummoxed by NTUC Income Insurance Cooperative’s bid and wonders if it hints at a new direction for the co-op.
 
Source : Business Times - 24 Jul 2007

Why Bishan-Toa Payoh is a model town council

Why Bishan-Toa Payoh is a model town council 
By Arlina Arshad 
WHILE some foreign workers who clean housing estates are forced by employers to live in smelly, rat-infested HDB bin centres, eight Bangladeshi workers in the Bishan-Toa Payoh area are far luckier.
Home for them is a utility room in a multi-storey carpark the size of half a badminton court. Their room in Block 81C, Toa Payoh Lorong 4 has a toilet, a bathroom and two wash basins.

Three older workers sleep on single beds and the rest on mattresses. They share two TV sets, a standing fan and two refrigerators for their snacks and drinks.

However, they are not allowed to cook in their quarters, one of four under Bishan-Toa Payoh Town Council which the HDB leases to conservancy contractors at $800 to $900 each a month.

Conservancy contractors interviewed by The Straits Times repeatedly cited the town council as a model employer for looking out for the welfare of cleaning workers and awarding fair conservancy contract prices.

Yesterday, Central Singapore District mayor Zainudin Nordin told The Straits Times the town council rewards excellent workers, but comes down hard on errant contractors. He said: ‘When we get compliments from residents about a hardworking cleaner, or one who has found a wallet and returned it, we will give him $50 directly.’

Only work-permit holders are employed in its estates, while spot checks are conducted to detect illegal workers.

Counselling and warning letters are sent to contractors who fail to follow the rules.

The town council, which has 48,000 residential units in its charge, has engaged three conservancy contractors to manage its seven conservancy zones.

To keep up these standards, Bishan-Toa Payoh pays one of the highest conservancy service rates - $11 for every household unit, which is twice what most town councils pay.

The $5 to $6 offered by most other town councils barely covers labour, cleaning material and tools, say conservancy cleaning firms.

Mr Zainudin said Bishan-Toa Payoh Town Council makes it a policy to ‘ask for tender amounts that make sense’, that will enable the contractor to do the job properly without undercutting the competition.

‘We look at the contractors’ track record, quality of services, and awards they got. In short, the cheapest quote does not necessarily get the job.’
Source : Straits Times - 24 Jul 2007