Merrill in talks with S’pore bank

Merrill in talks with S’pore bank
NEW YORK — Singapore’s state-owned investment fund is mulling a $5 billion investment in Merrill Lynch & Co., according to a report Friday, potentially providing the nation’s biggest brokerage with badly needed cash amid billions of dollars in credit losses.

The investment bank is said to be in advanced talks with Temasek Holdings about a capital injection, according to a report in The Wall Street Journal. It would become the latest major financial services firm to turn overseas for cash to bail it out of huge losses related to the subprime mortgage crisis.

A spokeswoman for Merrill Lynch declined to comment. Telephone calls to Temasek went unanswered.

Merrill has already taken $7.9 billion of write-downs from bad bets on risky mortgage-backed securities. Analysts said that Merrill’s mortgage write-downs may double with another $8 billion or more in the fourth quarter.

Global banks have written down an estimated $105 billion this year from exposure to mortgage-backed securities.

Source : Associated Press - 22 Dec 2007

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STI breaks losing streak as financial stocks, S’pore property counters stage rally

STI breaks losing streak as financial stocks, S’pore property counters stage rally

By Goh Eng Yeow, Markets Correspondent

AFTER five miserable days of losses, Santa Claus finally found his way to the Singapore market yesterday and delivered some overdue jolly tidings.
Badly bruised financial and property counters rallied, helped by reports that Temasek Holdings was on the verge of investing in giant United States brokerage Merrill Lynch.

The rally allowed the Straits Times Index (STI) to close up 40.76 points at 3,398.1, after it advanced almost 60 points at one stage.

Elsewhere in the region, it was pretty much the same picture, with Hong Kong and Tokyo registering strong gains in late trading after a weak start.

Investors might have been drawn back into taking fresh positions before Christmas by hopes that the worst of the sub-prime mess in the US might finally be over.

That was based on a Wall Street Journal report that Temasek might inject as much as US$5 billion (S$7.3 billion) into Merrill.

CHASING THE MONEY
The flow of funds into regional markets was a direct result of investors ‘being concerned about the slowdown in the US economy and going elsewhere to seek growth’.
CITIGROUP, in its latest report on the global credit crisis

‘Temasek is a canny investor. It won’t be making a big bet unless it is sure that such a fling is profitable,’ said one trader.

Traders were also cheered by reports suggesting that foreign funds were still pouring money into the region, even as the credit crisis in Europe and the US deepened.

On Wednesday, Merrill disclosed that foreign funds sank US$1.6 billion into Asian equities last week, even though Wall Street continued to suffer due to disappointment over the size of the latest cut in US short-term interest rates and rising oil prices.

A Citigroup report on Monday suggested that the flow of funds into regional markets was a direct result of investors ‘being concerned about the slowdown in the US economy and going elsewhere to seek growth’.

Yesterday’s uptick in the market raised hopes that for a fifth straight year, the market would get a late boost from fund managers dressing up share prices as the countdown to the new year begins.

‘Despite the wild price swings, 2007 has turned out to be a great year. Brokerages are rewarding their staff with bumper bonuses. We may well end the year with a big bang,’ said a trader.

Badly battered financial and property stocks topped yesterday’s gainers and gave the STI a much needed boost.

DBS Group Holdings rose 50 cents to $20.50, while United Overseas Bank gained 60 cents to $19.60.

Among property counters, City Developments rose 50 cents to $13.80, and Keppel Land was up 10 cents at $7.25.

The Singapore Exchange rose 60 cents to $13.40, while Cosco Corp advanced 35 cents to $5.90, both rises reflecting a renewed appetite for fresh positions among hedge funds.

Overall market volume, however, was anaemic - just 1.5 billion shares worth $1.97 billion.

So, while the jolly spirits gave a lift to some in the market, others kept their festive spirits in check and stuck to the sidelines.

‘It will take more than a simple rebound to make me believe that the bulls are back in force. I will wait till January before I make my next move,’ said a dealer.

Source : Straits Times - 22 Dec 2007

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Singapore Record office rents continue to climb

Singapore Record office rents continue to climb

Some companies forced to move to cheaper space in older buildings

By Joyce Teo, Property Correspondent

SOARING office rents have forced the Shenton Medical Group clinic out of its Republic Plaza location to a cheaper space at an older building nearby - The Arcade.
The company had been paying $5 plus per sq ft (psf) since 2002-2003 but was stunned with a demand for about $18 psf in the middle of the year, when lease renewal talks started.

Dr Lee Hong Huei, deputy president, Singapore operations division of ParkwayHealth, said the massive rise was a major factor in the firm’s decision to move.

‘We felt that it was a bit difficult to pass on the costs to our clients,’ he said.

It is becoming a familiar story around town with companies caught between a space crunch and relentless rent rises.

Parkway’s new clinic will open in January and take up a similar amount of space on part of The Arcade’s 18th floor and all of the 19th floor.
While The Arcade is in the prime Raffles Place area, it is not a new or top-grade building. Republic Plaza, on the other hand, is among the most coveted addresses in the area.

Asking rents at the City Developments-owned building have climbed to a whopping $19.80 psf amid the supply squeeze.

Monthly asking rents for prime office spaces in the Central Business District now average $16.30 psf, according to property consultancy Cushman & Wakefield.

This is up 4.5 per cent from last month and an eye-

watering 285 per cent increase from the market bottom about three years ago.

Even in the shopping belt of Orchard and Scotts Roads, prime office rents have risen to $13.61 psf, up 8 per cent from last month and nearly 102 per cent from a year ago, said Cushman & Wakefield.

‘Almost all our facilities have experienced rents rising at 30 to 40 per cent on average, except for the 300 per cent jump at Republic Plaza,’ said Shenton’s Dr Lee.

‘Medicine costs have also gone up, so our margins are very thin.’

The increase in prime office rents this year has been rapid.

Last month, net rents for the top 25 grade A office buildings were at a record $16.02 psf a month on average from $15.54 in October.

To manage the supply squeeze, the Government has released transitional office sites for short-term lease and more office sites for sale.

But a new building on a sale site may not come in time to meet current demand.

The buildings on sites sold recently in Tanjong Pagar and Marina View are expected to come on stream only around late 2010 to 2011, said Cushman & Wakefield managing director Donald Han.

There are also concerns of an oversupply from 2010, when a large amount of space in the Marina Bay Financial Centre becomes available.

Nevertheless, space remains tight for now.

Next year, just about 1.35 million sq ft of space will come on stream, with less than half a million sq ft in prime areas such as VisionCrest in the Oxley area near Orchard Road, said Mr Han, but historical office demand is at two million sq ft a year.

‘The upswing in rents will continue next year, but the pace of acceleration will slow as we are already moving to a high base,’ he said.

There is also increasing resistance, as companies move to cheaper space in alternative or suburban locations.

Mr Han forecasts a rise of 20 per cent to 25 per cent in office rents for next year.
Source : Straits Times - 22 Dec 2007

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S’pore Temasek in talks to take US$5b stake in Merrill

S’pore Temasek in talks to take US$5b stake in Merrill

Singapore investment firm’s board is reported to have given initial nod

By Alvin Foo

TEMASEK Holdings is reportedly poised to invest up to US$5 billion (S$7.3 billion) in American investment bank Merrill Lynch, which is reeling from a catastrophic loss over its subprime mortgage exposure.
The Singapore investment firm is said to be in advanced talks with Merrill and its board has reportedly given an initial thumbs up for the deal.

But details on timing and pricing and regulatory issues have apparently not been ironed out yet.

Talk of the investment comes less than two weeks after the Government of Singapore Investment Corporation (GIC) spent 11 billion Swiss francs (S$14 billion) - its single largest deal - to buy 9 per cent of Swiss bank UBS.

Like Merrill, which is the world’s biggest brokerage, UBS had been stunned by US$10 billion in subprime writeoffs.

The possible Temasek investment - reported in yesterday’s Wall Street Journal - is far from being a done deal as other government investment funds may also be in talks with Merrill, one of the giants of Wall Street.

Temasek and Merrill declined to comment when contacted by The Straits Times yesterday.

Merrill has been badly battered by the crisis affecting the US housing market and its mortgage lenders. It is stuck with billions of dollars in asset-backed securities that are now worth a fraction of their value a few months ago.

Its share price has plunged nearly 35 per cent since July and its market value slashed from US$71 billion to US$47 billion.

A US$5 billion investment would give Temasek a stake of around 10 per cent in a bank that could do with a funds injection.

It wrote off US$7.9 billion due to subprime woes in the third quarter and posted a loss of US$2.3 billion. The disastrous result cost chairman and chief executive Stan O’Neal his job in October.

But analysts have forecast that Merrill’s mortgage writedowns may double with a further US$8 billion or more of red ink in the fourth quarter.

The last few weeks have seen a series of Asian sovereign wealth funds buying into Western banks battered by the credit squeeze.

Earlier this week, the China Investment Corp made its largest deal, taking a stake of up to 9.9 per cent in Morgan Stanley for US$5 billion.

Earlier this month, Citigroup sold a 4.9 per cent stake for US$7.5 billion to the Abu Dhabi Investment Authority following admissions that it faces subprime-linked losses of between US$8 billion and US$11 billion in the fourth quarter.

And as well as GIC’s mega-deal with UBS, an unnamed Middle East investor is pumping in two billion Swiss francs into UBS.

But UBS faces a shareholder revolt over these funds injections, said the Financial Times (FT) yesterday. An institutional investor told the British newspaper that the terms offered to GIC and the Middle East investor were unfair to existing UBS shareholders.

The FT article said the mystery Middle Eastern investor hailed from Saudi Arabia.

Analysts say subprime and the credit crisis it has ignited may be good for investors with deep pockets and long-term outlooks.

CIMB-GK research head Song Seng Wun told The Straits Times: ‘This presents a good buying opportunity to acquire a decent stake in a financial institution with a long history.’ Mr Nicholas Yeo, a Hong Kong-based fund manager with Aberdeen Asset Management told Bloomberg: ‘Whether they’re buying cheaply enough is hard to say.’

Source : Straits Times - 22 Dec 2007

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STB nod for Gillman Heights Singapore enbloc sale

STB nod for Gillman Heights Singapore enbloc sale

By NISHA RAMCHANDANI

CAPITALAND and Hotel Properties Ltd (HPL) separately said yesterday that the Strata Titles Board (STB) had given the green light for the en bloc sale of Gillman Heights Condominium. Both cited notification by the vendors’ solicitors that approval was given yesterday.
Gillman Heights was sold in February for $548 million, or $19 million above the property’s reserve price, to a joint venture formed by CapitaLand, HPL subsidiary HPL Orchard Place Pte Ltd, and two private funds.

Gillman Heights, on Alexandra Road, covers an area of 836,432 square feet and is a 99-year leasehold site. It has a 2.1 plot ratio.

CapitaLand plans to turn the site into a distinctive residential landmark, with about 1,200 homes.

Earlier this month, the much publicised Horizon Towers’ en bloc sale was finally approved by STB, after several stops and starts along the way. The delay stemmed from various owners being dissatisfied with the $500 million sale price as the property market began to flourish and property prices started to appreciate steeply, shortly after the sale.

The buyers for the property are HPL and partners Morgan Stanley Real Estate and Qatar Investment Authority.

Another major en bloc sale that was approved this month was that of Farrer Court. In June, a consortium - comprising CapitaLand, HPL and US-based Wachovia Development Corporation - purchased Farrer Court for the massive sum of around $1.34 billion, the biggest amount ever garnered for a collective sale.

The privatised HUDC estate has 618 existing apartments of two sizes - 1,615 square feet and 1,453 square feet. A 36-storey condominium with about 1,500 apartments will be built and it is expected to be launched in the first half of 2009.

Source : Business Times - 22 Dec 2007

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Singapore Retail sector rising, but rents could follow suit

Singapore Retail sector rising, but rents could follow suit

Analysts confident that growth in the segment is sustainable
By NISHA RAMCHANDANI
(SINGAPORE) As far as retail space is concerned, the weakening market sentiment now grabbing the headlines might well belong to another planet. Retail rents are expected to rise next year - especially in prime areas such as Orchard Road - fuelled by strong demand and limited prime space.

Retailers, too, are expecting cash registers to ring into the New Year, thanks to the festive season and fat bonuses.
Jones Lang LaSalle (JLL) expects rents to rise between 4.5 and 4.8 per cent in the Orchard area, while CB Richard Ellis (CBRE) is forecasting an increase of 4-8 per cent. And rents at suburban malls could go up 2-5 per cent in 2008, says CBRE.

In Q3 2007, the Orchard area achieved about $40 to $41 per square foot (psf) per month, according to JLL. And for the same quarter, retail rents increased 3.3-3.5 per cent year on year.

With occupancy rates around 95-98 per cent in Orchard Road malls, demand is clearly alive and well.

But Pua Seck Guan, CEO of CapitaLand Retail, CapitaMall Trust Management and CapitaLand Financial, is quick to point out that any increase in rent has to be relative to increases in retailers’ takings, so as to ensure sustainable growth.

‘Sales this year, over last year, are 5-7 per cent higher due to the economy and sales productivity,’ he says. ‘Customer traffic has seen a 27 per cent increase over the past four to five years. This outweighs the rent increases.’

According to him, rent renewal rates this year are 12 per cent higher than the expired rent, which he deems reasonable owing to GDP growth and rising inflation. ‘Moving forward, we expect to see an 8-12 per cent increase over the next two to three years,’ he told BT. The leases are generally three years for specialty stores.

While the injection of new retail space next year will help pace retail rents, take-up is expected to increase with the new supply. CBRE puts new supply for 2008 at 2.57 million sq ft, thanks to upcoming shopping malls such as ION Orchard, Orchard Central and West Coast Plaza.

Consumer spending has been on the rise. According to Citibank economist, Zheng Kit Wei, private consumption rose 4.5 per cent in the first three quarters of this year, which is substantially higher than the 2.5 per cent increase last year. Retail sales are expected to remain robust in the high single digits.

‘The unemployment rate has fallen to a 10-year low of 1.7 per cent,’ says Mr Zheng. ‘Wages have risen almost 7 per cent in the first three quarters of the year, nearly double the 3.2 per cent increase last year. This has put more cash into consumers’ pockets and given them greater confidence to spend more.’

Mavis Seow, executive director of retail services for CBRE, says retail sales to date this year total $23.8 billion on the back of the hot property market, optimistic economic outlook and steady stream of tourist arrivals.

And with the launch of the Singapore Flyer and the inaugural Formula One night race next year, as well as the upcoming integrated resorts, sales are expected to keep going strong, if not improve, says Chua Yang Liang, head of research (South East Asia) for JLL.

Retailers, too, are expecting cash registers to ring into the New Year, thanks to the festive season and fat bonuses. Tan Yew Kiat, general manager of homegrown fashion label bYSI, is forecasting a sales increase about 25-30 per cent this Christmas.

bYSI, for one, plans to capitalise on the additional supply of space by launching a flagship store when Orchard Turn opens in October next year.

As for shoppers, they can look forward to new concept stores, flagship stores and new entrants to the market. This year has seen a lot of demand from retailers in terms of new brands compared with last year, says CapitaLand’s Mr Pua, who cites examples such as Cortefiel as well as new stand-alone stores like Kate Spade and Agnes B.

‘Fashion is on its way up, although I think there’s still strong growth for jewellery and watches and even healthcare and beauty products,’ he reckons. ‘This year has been particularly encouraging across the board.’
Source : Business Times - 22 Dec 2007

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Merrill may get US$5b cash injection from Singapore Temasek

Merrill may get US$5b cash injection from Singapore Temasek

WSJ report says it is in advanced talks to invest in the troubled financial giant
By SIOW LI SEN

(SINGAPORE) Temasek Holdings may be joining its sister entity in taking a stake in a troubled major financial institution, as it has been reported to be considering a cash infusion into America’s leading brokerage and investment bank.
A Wall Street Journal report yesterday said Temasek is in ‘advanced talks’ to inject as much as US$5 billion into Merrill Lynch, which has been whiplashed by the US sub-prime crisis.

On Oct 24, Merrill posted a US$2.3 billion net loss for the third quarter and significant net write-downs of US$7.9 billion on mortgage-related investments and high risk corporate loans.

The financial giant’s chief executive Stan O’Neal was ousted in October after the third quarter losses came to light.

Merrill, which won’t report fourth quarter results until next month, is expected by analysts to announce further mortgage write- downs of US$8 billion or more. They expect the firm to post its biggest loss in its 93-year history.

Stuck with billions of dollars in asset-backed securities that are now reckoned to be worth a fraction of their value a few months ago, Merrill has seen its stock hammered, falling 41 per cent this year.

The firm’s market capitalisation now stands at roughly US$47 billion, so a US$5 billion investment would represent a significant stake in the company.

Temasek may not, however, be the only suitor; The Journal also said other sovereign wealth funds may be talking with Merrill.

Rob Stewart, a Hong Kong-based Merrill Lynch spokesman, said he could not comment on the Wall Street story.

‘You see what the situation is. You’ve seen what other banks are doing,’ said Mr Stewart.

A Temasek spokesman also told BT he had no comment.

Quoting an unnamed source, the Journal said Temasek’s board has given preliminary approval to the investment in Merrill, although pricing, timing and regulatory issues remain to be negotiated.

Since last month when Temasek took profits on some of its China holdings, speculation has been rife that the asset manager was getting ready to invest in a major global investment bank.

In November Temasek sold some of its stakes in three giant China firms - China Cosco, Bank of China and China Construction Bank - reaping proceeds of about HK$8.6 billion (S$1.6 billion) in November. As of March 31, 2007, Temasek manages a portfolio worth $160 billion.

Over the last three months, Asian and Middle Eastern sovereign wealth funds have been snapping up substantial stakes in blue ribbon global financial institutions seeking to repair their capital, damaged by the US mortgage default crisis and their investments in risky corporate loans.

In October, Bear Stearns Cos, the second-biggest underwriter of US mortgage bonds, sold a stake to China’s government-controlled Citic Securities Co for US$1 billion.

On Wednesday, Morgan Stanley said it would sell a stake of as much as 9.9 per cent for US$5 billion to China Investment Corp, which was founded in September, to manage US$200 billion of China’s US$1.4 trillion in foreign exchange reserves.

Citigroup Inc last month received a US$7.5 billion investment from the Abu Dhabi Investment Authority.

And just last week, the Government of Singapore Investment Corporation (GIC), in a surprise move, invested 11 billion Swiss francs (S$13.9 billion) in UBS notes, which could convert into a stake of up to 9 per cent in the Swiss bank in two years.

So far, in what is seen as placatory moves to stave off nationalistic sentiments, sovereign wealth funds which have invested in global financial institutions have maintained that they are passive investors and are not seeking management roles.

However, GIC indicated it would be open to considering a board role in UBS and Temasek’s stated mission is to be an active shareholder and seek board seats in the companies in which it invests.

Some US lawmakers are suspicious of foreign governments taking stakes in their country’s assets and they want such transactions to be reviewed by the US Committee on Foreign Investment, particularly in areas related to national security.

However, the big investments made by sovereign wealth funds into US financial institutions have not, as yet, attracted much concern from either regulators or politicians.

On Thursday, US President George W Bush said at a White House press conference that he was ‘fine’ with wealthy foreign investors snapping up hefty shareholdings in top US banks and financial firms, and warned against protectionist sentiments.

‘I’m fine with capital coming in from overseas,’ Mr Bush said, adding, ‘I don’t think it’s a problem.’
Source : Business Times - 22 Dec 2007

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