More properties sold for $4,000 psf in July

More properties sold for $4,000 psf in July
But prices are much lower at some projects in other market segments
By KALPANA RASHIWALA
DEVELOPERS managed to sell 72 homes for more than $4,000 per square foot last month - four-and-a-half times the 16 homes they sold at this price in June, latest figures show.
According to Knight Frank’s analysis of official data released yesterday, the big jump came as a result of the launch of Scotts Square by Wheelock Properties (Singapore).

Sixty-four of the total 150 units in the project sold by the developer in July were in the above $4,000 to $4,500 psf price band, while the other 86 units were sold in the above $3,500 to $4,000 psf range.

The median price for the 150 units sold at Scotts Square was $3,959 psf, with the lowest price being $3,638 psf and the highest $4,428 psf, according to the Urban Redevelopment Authority’s (URA) data on the number of homes in uncompleted projects launched and sold by developers in July.

Other projects that saw primary market sales at above $4,000 psf last month include The Orchard Residences, The Marq On Paterson Hill and Cliveden at Grange.
Projects that saw primary market sales at above $4,000 psf last month included The Orchard Residences, The Marq On Paterson Hill and Cliveden at Grange.

‘These were the same developments that contributed to the number of units that were sold above $4,000 psf in June,’ Knight Frank said.

The median price for the 25 units sold by City Developments for Cliveden in July was $3,729 psf, with the range of prices being $3,265 psf to $4,162 psf.

SC Global sold two units at The Marq in July, at $4,908 psf and $4,978 psf.

The Orchard Residences saw six primary market transactions last month at prices ranging from $2,808 psf to $4,577 psf, with a median price of $4,047 psf.

Soon Su Lin, chief executive of Orchard Turn Developments, the project’s developer, confirmed that the company has sold a penthouse for $5,500 psf - a new record for a condo in Singapore - but that the transaction was registered only in early August.

Examples of projects with primary market transactions at median prices above $3,000 psf in July include The Lumos at Leonie Hill, Parkview Eclat at Grange Road and Paterson Suites at Paterson Road/Lengkok Angsa.

The URA data also showed there were some projects with transactions at much lower prices in other segments of the real estate market.

GuocoLand sold 19 units at The Quartz in Buangkok at a median price of $648 psf, with the actual prices ranging from $554 to $749 psf.

Five homes at Suffolk Premier were sold at $481 to $753 psf and six units at La Casa in Woodlands fetched $506-561 psf. Far East Organization sold 13 units at The Lakeshore near Boon Lay MRT Station at $684-866 psf.

Brisbane Development sold six cluster landed homes at the freehold Illoura project at Old Holland Road at $970 to $1,175 psf while Clydesbuilt Capital found buyers for two freehold strata-titled detached homes at Lornie 18 at $1,150 psf each.

Grensburg Investment sold 65 units at Fontaine Parry at Poh Huat Road at $591-994 psf.

United Engineers sold 365 homes at The Rochester in the one-north precinct at $905 to $1,680 psf.

CapitaLand sold 55 units at The Seafront On Meyer at $1,364-$2,182 psf. Knight Frank’s analysis shows that developers sold a total of 1,378 uncompleted homes in July, up nearly 20 per cent from the figure for June.

The total number of uncompleted homes launched in July increased 15.7 per cent to 1,315 units over the same period.
Source :  Business Times - 16 Aug 2007

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Heeton may partner fund for $72.8m Grange Rd site

Heeton may partner fund for $72.8m Grange Rd site

By ARTHUR SIM
PROPERTY company Heeton Holdings may partner a foreign fund to develop a $72.8 million redevelopment site on Grange Road that it has just acquired.

Grange Court: Heeton expects to build a 50-unit development on this site
Heeton’s chief operating officer and executive director Danny Low yesterday said three foreign funds had initially approached Heeton. He would not say which fund it had decided to partner as details are still being finalised. He said the fund is not yet exposed to Singapore real estate.

Asked if the potential partner might be affected by the current global credit squeeze, Mr Low said it was not, and that confidence levels, as far as Singapore projects were concerned, were still high.

He added: ‘If they have the funds to invest, they will have to invest it. And in Singapore, the fundamentals are strong.’

A partner with deep pockets is part of Heeton’s growth strategy, especially as property development is a key revenue generator. Its 53-unit The Lumos at Leonie Hill has just been soft launched and is already 40 per cent sold. Thirty per cent of the sales were to foreigners.

Mr Low expects to launch another project in Pasir Panjang in November.

Heeton, which also owns investment property including Sun Plaza in Sembawang and six wet-market buildings, now aims to generate 30 per cent of its revenue from overseas projects. Earlier this year, it launched a 300-unit residential development in Damansara Heights, Kuala Lumpur, with partners AIG, the global insurance company, and Malaysia’s Lion Group.

It has two projects in Bangkok and is looking for a development site in Vietnam.

Its latest site on Grange Road - Grange Court - is expected to be launched in Q2 2008. Heeton was the highest of about five bidders, all boutique property developers. And the price paid works out to $1,706 per square foot per plot ratio excluding development charge. The break-even price is about $2,500 psf.

Mr Low said the company expects to build a 50-unit development on the site with a focus on smaller units, which sell faster nowadays since they are more affordable.

Source :  Business Times - 16 Aug 2007

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Sub-prime ripples spread to commercial paper

Sub-prime ripples spread to commercial paper
Lucrative source of funding for companies under pressure, banks nervous
(NEW YORK) Trouble is mounting in the US$2.2 trillion commercial paper market, and further deterioration could trigger problems for banks that would rival what they’ve suffered from the sub-prime crisis.
While the problem could still subside, and there are no signs of a full-blown panic, at least five issuers of asset-backed commercial paper have had trouble refinancing that debt when it matured, forcing them to make investors wait before getting repaid. The asset-backed notes now makes up US$1.15 trillion - or half of all commercial paper.

Standard and Poor’s has warned that it may downgrade several issuers of commercial paper, a short-term IOU issued by companies that promise to repay the loans typically within a period of weeks or months. In these cases, the commercial paper was backed by residential mortgages.

Across the border, banks are refusing to supply emergency financing for 17 Canadian asset-backed commercial paper issuers managing funds of C$27 billion (S$38.5 billion), after they failed to sell short-term debt.

These developments have raised concerns as until now the crisis in the credit markets has been limited to problems related to sub-prime mortgages, those given to borrowers with questionable credit histories. But as these troubles seep into other parts of the securities markets, fears of losses are rising in unexpected places.
The fear now is that investors will be less willing to buy asset-backed commercial paper, which has provided a lucrative source of funding to companies.

If troubles among issuers spread, investors could suffer, but so could banks, which are most likely to be on the hook if issuers cannot sell new asset-backed commercial paper.

‘Asset-backed commercial paper problems could be much worse than what we saw in the sub-prime market,’ said Josh Rosner, an analyst at independent research firm Graham Fisher in New York.

In some cases, banks may have sold bad loans to commercial paper issuers, which would only magnify trouble in the market, experts said.

Mr Rosner was a long-time critic of sub-prime mortgage lending practices and foresaw many of the difficulties in that market, and if he’s right about asset-backed commercial paper problems, bank earnings could suffer further after already getting hit by exposure to mortgages. Loans used to finance acquisitions might be hard to parcel out to other investors.

Many investors and dealers downplay the extent of potential problems in the US$1.15 trillion asset-backed commercial paper market. The type of commercial paper that is struggling, known as extendible ABCP, makes up a relatively small portion of the total, they say.

‘The whole market has been tainted by a few deals. We see it as an opportunity to add to our positions,’ said Patrick Ledford, chief investment officer at money market fund The Reserve Fund, which has some US$67.5 billion of money market assets under management, late last week.

Generally, when ABCP matures, it is refinanced with new commercial paper. If it cannot be refinanced, banks pay back investors and seize the collateral, assuming the performance of the entire portfolio of collateral has not declined too much.

With extendible ABCP - where most of the trouble in the US has been found - if the paper cannot be refinanced, the issuer has the option to extend the maturity of the debt until a particular date.

Dealers estimate there is about US$160 billion of extendible ABCP outstanding in the US.

Issuers in Europe and Canada have also faced difficulties. Germany’s IKB Bank had the eighth-largest ABCP programme in Europe, the Middle East, and Africa as at the end of May, and was forced to move bad sub-prime assets from its conduit onto its balance sheet, analysts said. German banks clubbed together to give IKB more capital.

Some analysts see these cases as a taste of more to come.

Some dealers may have put bad loans into these conduits as a way to offload them to investors, said Graham Fisher’s Mr Rosner. When investors wake up to this fact, they may be reluctant to buy ABCP, leaving banks on the hook.

Several dealers said that was an unlikely scenario. Banks’ credit groups and rating agencies carefully monitor the collateral that is placed into ABCP funding vehicles, and generally it is of high credit quality, one dealer said.

But Michael Parker, chief executive at Evergreen Collateral Consulting, said that he has seen asset-backed commercial paper deals that have bought assets like equity bridge loans, or loans made to private equity firms to help finance the equity portion of leveraged buyouts. Often, the trouble comes from smaller banks that are just starting their conduits.

‘When you’re small, and you have to build mass quickly, sometimes you put strange assets into the conduit,’ Mr Parker said.

Mr Rosner noted that rating agencies failed to detect bad debt for bonds backed by sub-prime mortgages, and lightning could strike twice.

‘We’re seeing a big adjustment in the cost of capital, and that could make it uneconomic for many to play and leave banks holding a lot of losses,’ Mr Rosner said. — Reuters
Source :  Business Times - 16 Aug 2007

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Floating hotels may ride F1 visitor wave

Floating hotels may ride F1 visitor wave
STB exploring novel accommodation ideas for expected 50,000 foreign guests
By SAMUEL EE
(SINGAPORE) When 50,000 foreign guests descend upon Singapore to watch the Formula One race in September next year, some could literally find themselves out at sea.
Rooms with a sea view: A ‘botel’ could be moored off the coast either at Labrador Park (above) or at Changi, says a source
Floating hotels may be commissioned to alleviate the room crunch that is expected during the race.

The inaugural Singapore Grand Prix will be held on Sept 28, 2008, and with a shortage of hotel rooms looming, the Singapore Tourism Board (STB) is said to be looking at this form of alternative accommodation.

The concept of a floating hotel is not new and has been applied in other parts of the world. In the Netherlands, for example, such a ‘botel’ can be found in the heart of Amsterdam in the dock area.

But instead of building a deckhouse aboard a flat-top barge and outfitting it with rooms and toilets, along with facilities like restaurants, sewage systems and diesel generators, the board is understood to be eyeing a couple of existing cruise ships from a charter company. Each vessel will then be retrofitted with hotel-like requirements at a cost of about ‘$2 million per ship’, says a source.

‘Each ship will have 500 to 1,000 rooms after the renovation work,’ he says. ‘The cost is high because they will have to be manned by cruise ship crew, not Shatec students. You need properly trained people who can work in a confined space.’

He adds that the plan is for the ships to be moored off Changi or Labrador Park.

Like the F1 race, STB aims to bring together potential investors and cruise operators for the floating hotel project so that the initiative is driven by the private sector. And just like F1, the board will do its part by dealing with any red tape and helping with all the necessary licensing required.

The 50,000 foreign guests expected at next year’s GP event are likely to exacerbate the existing shortage of hotel rooms in Singapore.

The supply crunch appears to be dire. According to a recent report by investment bank Merrill Lynch, the ‘demand for hotel rooms will increase at an average of 4,050 rooms per year between 2007 and 2015, while the supply of rooms is forecast to increase at 3,300 rooms per year - resulting in a 19 per cent shortfall per year’.

Merrill Lynch also forecasted that, by 2015, the demand for hotel rooms will reach 62,100 rooms per day, whereas supply will only be 59,220 rooms.

So if the floating hotel does become a reality, it will be useful not only for next year’s F1 race but also for surging tourist arrivals in general. It can bridge the gap until 2010, when the two integrated resorts (IRs) open with their more than 4,000 rooms between them.

But one industry source dismissed the need for such buoyant accommodation. He says there should not be a problem housing the 50,000 visitors to the debut race.

‘Singapore has an estimated 35,000 hotel rooms now and in a year’s time, the number will be about 37,000. If there is a shortage of rooms during the race week, the overseas visitors can easily turn to other accommodation like serviced apartments,’ he said.

There are an estimated 3,500 such units in Singapore, he added.

Source :  Straits Times - 16 Aug 2007

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Less property speculation on US sub-prime mortgage woes

Less property speculation on US sub-prime mortgage woes
Investors are more wary of risks amid falling markets and global credit crunch
By Joyce Teo, Property Correspondent
THE property boom seems bulletproof against the sub-prime fallout in the United States and the share market mayhem for now, but speculators seem more reluctant to pick up properties.
Experts said real estate sentiment is not as bullish as a few months back. But that is partly because of the widespread feeling that the Government may intervene to cool what some thought was an overheated market.

The turmoil in share markets has reinforced that mood and introduced a greater dose of reality but experts feel the real estate market is still sound.

‘People are selling down the stock market but the physical property market’s fundamentals are intact,’ said Mr Ku Swee Yong, the director of marketing and business development at property consultancy Savills Singapore.

Yesterday, the Straits Times Index plummeted again with property stocks taking a beating. City Developments’ share price was down 50 cents to $14.10, while CapitaLand’s stock shed 35 cents to $6.90.

‘People are reacting to the stock market’s reaction to the sub-prime fallout,’ said Knight Frank managing director Tan Tiong Cheng. ‘There’s a domino effect.’

The problem is no one knows how bad the crisis is. ‘When you don’t really know what’s going on, it is best to delay any major commitments until the picture is clearer,’ said Mr Tan.

Some global funds, even if they have not been directly affected by the US sub-prime mess, may stay out of the Singapore property market for a while, industry observers say. Some offshore funds have had difficulty getting financing, said one, while others will continue to fund property investments but on more restrictive terms.

Genuine home buyers would not be affected but property investors would be more conservative in their approach, Mr Tan said.

Many investors and speculators have been ploughing the easy money made from the stock market bull run into real estate. The fear is that liquidity will be hit if the market selldown continues.

Savills’ Mr Ku said demand for property has exceeded supply so far, adding that there is a temporary lull partly because it is the seventh month and partly because of the stock market’s tumble.

Many developers prefer not to launch projects in a big way during the Hungry Ghost month because superstitious buyers will stay away.

Nevertheless, the perception of risk has risen generally with the global credit crunch, said OCBC analyst Winston Liew.

‘That could lead to higher interest rates, which would in turn hit the physical market,’ he said.

Higher interest rates would raise the borrowing costs of developers and buyers as well as affect asset values.

For now, with the mood turning more cautious, home owners involved in collective sales holding out for more money might think it wiser to sign on the dotted line, said Colliers International’s executive director of investment sales, Mr Ho Eng Joo.

Another expert said that if the US sub-prime fallout - which is not a major issue in Singapore - does lead to more caution while driving away excessive speculation, then the market will only become healthier.

Source :  Straits Times - 16 Aug 2007

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