Parkway Reit eyes $370m in stock sale

Parkway Reit eyes $370m in stock sale
PARKWAY Holdings, Asia’s second-biggest listed operator of hospitals, has said it will price the shares of its real estate investment trust (Reit) at $1.28 each to raise $369.8 million in a stock sale.
Parkway Life Reit, which will hold the company’s three hospitals in Singapore, is pricing 288.9 million shares near the top end of the $1 to $1.34 range it announced last month.

The company is raising funds to invest in health-care assets in Asia, it said in a filing to the Monetary Authority of Singapore yesterday.

‘The Asian health-care industry is expected to grow due to factors such as strong economic growth, rising personal income, increased awareness and expectation towards health care,’ the company said in the filing. The trust will offer a yield of 4.9 per cent for next year and 5 per cent for 2009.

Parkway Life Reit joins 17 other Reits in Singapore, a market valued at $18 billion, according to Bloomberg data. The trust will be the second Reit in Singapore that has hospitals in its portfolio, after the Lippo Group’s share sale for its First Reit, which owns three Indonesian hospitals and a country club.

Parkway Life Reit plans to double its assets in the next two years, Ms Lim Sze Mei, vice-president of finances and investor relations at the trust’s manager, said after a conference in Singapore yesterday. The trust has $774.6 million worth of assets now.

The Reit also plans to fund acquisitions using debt, Ms Lim said, adding that it is working on getting a credit rating that would allow the trust to borrow as much as 60 per cent of its assets.

The trust is also planning to invest more in Singapore and expects an announcement in the next six months.

Parkway Holdings said it will hold at least 30.1 per cent of the trust after its Reit goes public.
Source :  Straits Times - 08 Aug 2007

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Analysts issue buy calls on banks after sub-prime assurances

Analysts issue buy calls on banks after sub-prime assurances
By Alvin Foo

ANALYSTS have started issuing buy calls on Singapore banks after clear statements from the banks that they have insignificant exposure to the United States’ toxic mortgage market.
The positive sentiments come after a week where jittery investors sold down bank stocks, both in Singapore and across Asia. But assurances from United Overseas Bank (UOB), OCBC Bank and DBS Group Holdings over recent days seem to have steadied the ship.

A UBS Investment Research report on Monday noted that $8.2 billion worth of the three banks’ market capitalisation had been wiped out relative to their exposure to collateralised debt obligations (CDOs) of just $2.4 billion.

‘This is clearly an overreaction and we would urge investors to buy the Singapore banks…at current prices. The risk from CDOs has been priced in.’

CDOs are securities backed by a pool of bonds and loans, including mortgages, and lie at the centre of the US mortgage crisis. Millions of home owners are having trouble paying their instalments, which is undermining credit markets.

A UOB Kay Hian research note yesterday maintained its target price of $10.80 for OCBC’s stock. ‘The impact on OCBC’s financials is not expected to be material. We continue to recommend that investors buy OCBC during this period of share weakness,’ it said.

Insignificant exposure
DBS: US$850 million (S$1.28 billion) in collateralised debt obligations (CDOs) and collateralised loan obligations. Up to US$188 million have sub-prime exposure. DBS Asset Management has two CDO portfolios totalling $1.03 billion with no exposure.

UOB: $392 million in CDOs, with $91 million in high-grade asset-backed security CDOs. The bank has no direct exposure and little indirect exposure.
… more
Investors took the hint and sent UOB’s share price up 30 cents to $20 and OCBC’s stock 15 cents higher to $8.40. DBS’ share price, in contrast, fell 20 cents to $20.70.

All the banks have recently issued assurances to put investors’ minds at rest. The latest came yesterday when UOB chief executive Wee Ee Cheong used the bank’s first-half results briefing to state that it had CDO investments of $392 million, with $91 million in high-grade asset-backed securities.

He also said subsidiary UOB Asset Management manages $11.7 billion in CDOs for clients, of which $3 billion were in high-grade asset-backed securities CDOs.

UOB has no direct exposure to or investment in this portfolio, as the risks are borne by institutional investors. ‘Our exposure is minimum, and is immaterial,’ he said.

It also does not have direct exposure to US sub-prime mortgages.

Earlier yesterday, DBS stated that the bank and its asset management arm have no sub-prime exposure. Subsidiary DBS Asset Management has two CDO portfolios worth US$1.03 billion (S$1.55 billion) with no exposure to sub-prime mortgages.

DBS said in a statement: ‘DBS intends to hold the CDO portfolio until maturity and does not expect any losses to have a material impact on earnings or capital.’

It has also distributed US$1.7 billion in structured products involving CDOs, but these have no US sub-prime exposure.

On Monday, OCBC said its total exposure, including subsidiaries, was minimal and not at risk.

Source :  Straits Times - 08 Aug 2007

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UOB beats forecasts with second-quarter profit of $585m

UOB beats forecasts with second-quarter profit of $585m
It declares special and interim dividends of 15cents and 20cents a share respectively
By Grace Ng, Finance Correspondent
STRONG loans growth and sales of wealth management products helped to drive second-quarter net profit at United Overseas Bank (UOB) to a higher-thanexpected $585 million.
The result compares with the $1.13 billion net profit posted for the three months ended June 30 last year, when massive one-off gains from the sale of assets boosted the bottom line. Excluding those gains, UOB’s net profit would be up 32 per cent this year.

Its performance trumped the average forecast of $528 million by four analysts in a Reuters poll.

UOB declared a special dividend of 15 cents per share and an interim dividend of 20 cents a share.

The robust result and the bank’s reassurance yesterday that its exposure to collateralised debt obligations (CDOs) was ‘immaterial’, prompted investors to push the counter up 30 cents to close at $20. CDOs are instruments backed by loans and asset-backed bonds.

UOB released its results at lunch time.

Half-year net profits were at $1.1 billion, down 30 per cent from $1.57 billion a year ago. Earnings per share rose 26 per cent to $1.42. Net asset value per share rose 4.5 per cent to $10.95 at the end of June.

Against the current backdrop of ‘uncertain times’ and ‘volatile markets’, UOB deputy chairman and chief executive Wee Ee Cheong noted at a press conference yesterday that the bank is diversifying its regional portfolio and sources of income.

The bank saw particularly strong growth in non-interest income, which rose 73 per cent to $536 million during the quarter. This segment comprised 39 per cent of total income in the first half of this year.

A star performer in the fee income pool was UOB’s fund management business, which rose 136 per cent in the second-quarter to $99 million, and climbed 77 per cent in the first half.

Mr Terence Ong, UOB’s senior executive vice-president for global markets and investment management, noted that UOB Asset Management makes fees of less than $20 million from managing portfolios of CDOs each year.

Mr Ong said fee income from UOB Asset Management may see a decline going forward, due to shrinking risk appetite among investors for CDOs amid concerns about these securities. ‘It is a temporary setback but there will not be a very big impact on UOB Asset Management’s profit and loss.’

UOB has made cumulative provisions of $34 million for its exposure to the CDO market as at the end of last month. It made $20 million of provisions last year, and the rest in previous years.

During the quarter, net interest income rose 13.4 per cent to $761 million. Loans totalled $82.5 billion at the end of June, up 17.5 per cent from a year ago.

UOB’s impairment charges more than doubled to $81 million. About half was due to a drop in value of its Thai and Malaysian operations, while the remainder was a result of the lower value of the investment portfolio of its life insurance business UOB Life.
Source :  Straits Times - 08 Aug 2007

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Horizon Towers owners try to head off lawsuit

Horizon Towers owners try to head off lawsuit
Following aborted collective sale, failed buyers’ extraordinary claim works out to as much as $5.78 million for each unit
By Joyce Teo, Property Correspondent

OWNERS at Horizon Towers fear they could lose millions of dollars each in a lawsuit over their condominium’s aborted collective sale.
The parties who intended to buy the estate said they will sue the 173 owners who backed the sale for breach of contract and are claiming up to $1 billion in lost profits.

The extraordinary claim works out to about $5.78 million for each unit.

Minority owners - those who voted against the sale - will not be sued but they also fear the legal fallout could see them forced to sell their homes.

‘Horizon Tower owners are very concerned with the purchasers’ lawyer’s letter to sue them,’ said the deputy chairman of the sales committee, Ms Doreen Siow.

‘We are trying to protect the interests of individual home owners and are in discussions with our lawyers on how to proceed.’
Legal teams were locked in lengthy meetings with the sales committee yesterday trying to devise a response, which the buyers want delivered today.

The threat to sue is contained in a letter delivered on Monday demanding that the sellers extend the sale deadline - it is due to expire on Saturday - by four months.

This would allow a new sale application to be made to the Strata Titles Board (STB) - one without the procedural errors that caused the initial application to be axed last Friday.

The buyers - Hotel Properties Limited (HPL), Morgan Stanley Real Estate and Qatar Investment Authority - also said the sellers could appeal to the High Court over the STB decision.

If the demands are not met, the buyers have threatened to sue for lost profits, estimated at between $800 million and $1 billion.

The STB dismissed the $500 million collective sale of the two 99-year leasehold blocks - comprising 199 apartments and 11 penthouses - on technical grounds, and not because of any merits in the case.

It said that ’statutory requirements’ had not been met but did not elaborate.

Lawyers for the majority owners, Tan, Rajah & Cheah, have asked the STB for the reasons for its decision, in what has become the most contentious collective sale in years.

The deal struck in February eventually triggered protests from some owners, who felt the price was far too low.

Many owners were only too happy to see the deal fail even though they had earlier supported it because prime property prices have risen significantly since.

They cited the Grangeford estate next door, which was put up for sale a few months later with an asking price well above that achieved by Horizon Towers. Grangeford was sold last week at a level not far from its asking price.

Months of wrangling, meetings and ballooning legal costs led to last Friday’s STB hearing.

The Horizon Towers case is highly unusual in that it is thought to be the first time that a buyer has threatened to sue the sellers.

It is also one of the few collective sales to be thrown out on technical grounds.

The wrangle is also striking for the number of top-flight legal eagles it has attracted.

HPL has Senior Counsel K.Shanmugam and Mr William Ong of Allen & Gledhill on its team.

Majority owners are represented by Senior Counsel Jimmy Yim of Drew & Napier and Senior Counsel Chelva Rajah of Tan, Rajah & Cheah.

Two small groups of objectors to the sale assigned Mr Kannan Ramesh, senior partner of Tan Kok Quan Partnership, and Mr Phillip Fong, senior partner of Harry Ellias Partnership.

A company that owns several units appointed Dr S.K.Phang, who then enlisted Senior Counsel Michael Hwang.

Source :  Straits Times - 08 Aug 2007

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URA clarifies office property data in report

URA clarifies office property data in report
WE refer to the article, ‘URA’s new office data draws mixed reaction’ (BT, July 28), which compared the new office property data made available by URA on July 27, 2007 and those reported by some property consultants.
Your report highlighted that the office vacancy rate figures released by CB Richard Ellis were lower than that released by URA, but omitted the explanation we had given to your reporter. As explained, URA’s office vacancy rate figures are computed solely based on the physical occupation of space.

In contrast, property consultants usually also factor in office space that has been pre-committed to tenants but not physically occupied yet. This does not give the actual current physical vacancy and may also result in double-counting, as the tenants may be vacating other buildings when they shift to their new premises.

The differences in methodologies used by URA and property consultants hence could result in variances in office vacancy rates. The attention of the public should be drawn to this so that they can be more discerning when they make reference to the data.
The main purpose of releasing data for ‘Category 1′ and ‘Category 2′ office space is to allow the public to have a general gauge of the differences in rentals and vacancy rates between the two office segments as well as the changes of rentals and vacancies over time within each segment.

Hence, it is not necessary for us to name the specific buildings in each category. It is also not appropriate for the government to attach a label to any building which might have a quality connotation, as it can affect its market value. We had in fact given this explanation to your reporter.

By providing a separate set of median rental data for ‘Category 2′ office space, which accounts for about 80 per cent of the total stock of office space in Singapore, URA is also showing the level of typical rents being paid by the majority of office space users in Singapore.

The article also said that the market can easily absorb four million square feet of office space in one year. This is misleading. The average annual absorption or increase in occupied stock between 2004 and 2006 was only 2.4 million square feet per year.

In the history of Singapore, there was only one year, that is, 2000, since URA started compiling such data in 1990, when the increase in occupied stock exceeded four million square feet.

We wish to reiterate the importance of providing the public an accurate explanation of the methodologies and rationale so that the public can better understand the fuller context and be more discerning when they make reference to the new data released by URA.

Choy Chan Pong
Director
Land Administration for Chief Executive Officer
Urban Redevelopment Authority

Source :  Business Times - 08 Aug 2007

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Markets edgy as banks calm CDO fears

Markets edgy as banks calm CDO fears
DBS reveals ‘tiny’ exposure while UOB says it has cut back on collateralised debt obligations
By SIOW LI SEN AND R SIVANITHY

(SINGAPORE) Local banks tried once again yesterday to reassure investors that their exposure to collateralised debt obligations (CDOs) is small, but the stock market - which had battered their share prices on Monday - refused to respond. It ended the day in negative territory even though Wall Street had rebounded smartly just hours earlier.
It was a clear indication that caution still reigns over the state of the US credit market and the problems related to the sub-prime mortgage market.

After OCBC had tried to put fears about its CDO exposure to rest on Monday, DBS Bank followed suit yesterday. Meanwhile, United Overseas Bank (UOB) revealed that mark-to-market losses of $15 million were expected as at end-July and would be charged against the balance sheet. The bank has been scaling back its CDO exposure.

The market, however, remained wary. UOB hit $20.70 during the day but ended just 20 cents higher at $20 while DBS touched $21.60 but fell back to $20.70 for an eventual 20 cents loss.

DBS had tried to clear the air on its CDO exposure. It said its asset management unit has three retail funds with a tiny amount of exposure to CDOs while some affluent clients have bought CDOs directly though its Treasuries priority banking where the minimum investment is $25,000.
In a letter to DBS Asset Management (DBSAM) clients, it said the CDO exposure in three unit trusts was limited to between 1.02 and 5.33 per cent, amounting to a total of $17 million. The three funds are its highly popular Shenton Income Fund, DBS Enhanced Income Fund and Horizon S’pore Fixed Income Fund. DBSAM assured clients that the CDOs are strictly investment-grade with underlying securities credit rating of BBB- or higher by Moody’s.

‘The net asset values per unit of these portfolios have also been relatively stable during the last nine days even though world markets were fluctuating considerably due to the reassessment of credit risks,’ DBS said. It added that the CDOs have no exposure to US sub-prime mortgages.

DBS Bank yesterday further disclosed that DBSAM manages two CDO portfolios worth US$1.03 billion. Neither CDO has underlying assets with exposure to US sub-prime mortgages.

The bank has also distributed a total US$1.7 billion of structured products including those from third parties involving CDOs backed by AA- to AAA-rated collateral to institutional, private banking and sophisticated retail investors. None of these have exposure to US sub-prime mortgages.

UOB disclosed that, over the years, provisions of $34 million have been made as at end-June 2007 for its CDO holdings. Currently, the bank has $392 million of CDOs, of which $91 million are in asset-backed securities and $301 million are in corporate CDOs. ‘Further mark-to-market losses of $15 million are expected as at end-July and will be charged against the balance sheet,’ said Terence Ong, senior executive vice-president.

He said, at the peak, UOB had US$580 million of CDOs. He was speaking at UOB’s second-quarter results press briefing which was dominated by questions on the bank’s CDO exposure.

UOB Asset Management (UOBAM) currently manages S$11.7 billion of CDOs, or 43 per cent of total assets under management (AUM) of $27 billion. These CDOs are distributed to institutional investors. Mr Ong said the CDOs are high-grade and there have been no downgrades.

UOBAM at its peak managed $21 billion worth of CDOs but it began selling them from 2004. It earned about $20 million fees per year for managing CDOs. ‘Fees we earned (managing CDOs) make up less than 20 per cent of UOBAM’s income and we see that figure going down,’ said Mr Ong.

He said UOBAM decided to trim its CDOs because credit spreads had narrowed, the portfolio had become too big, we ‘have to digest’ and it was also a matter of taking profit.

Falls in the banks’ share prices had led a 3.7 per cent plunge in the ST Index on Monday and it appeared briefly that the trend would be reversed yesterday.

The STI first jumped 58 points before eventually closing 6.98 points weaker at 3,302.01. Hong Kong’s Hang Seng Index also surrendered a 240-point rise to end 28.74 down at 21,907.99. The same up-down trend manifested itself in most regional markets.

Since hitting an all-time high of 3,665 on July 24, the ST Index has now fallen 363 points or 10 per cent in 10 trading sessions.

Source :  Business Times - 08 Aug 2007

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