Facing a financing void? Call Warren Buffett

Facing a financing void? Call Warren Buffett 
BUYING SPREE: Mr Buffett has announced at least 28 purchases for Berkshire in the past two years. 
 
NEW YORK - IT’S Mr Warren Buffett to the rescue.
The multi-billionaire investor’s Berkshire Hathaway has helped finance a second take-

over in the past three months, as tightening credit leads the world’s biggest banks to retreat from backing deals.

Mr Buffett, who has announced at least 28 purchases for Berkshire in the past two years, committed US$3 billion (S$4.08 billion) on Thursday to Dow Chemical’s US$18.8 billion purchase of Rohm and Haas.

In April, he put up US$6.5 billion to assist Mars’ takeover of Wm Wrigley Jr Co.

‘The word is clearly out on Wall Street that if you want capital, Warren’s someone to speak with,’ said Mr Tom Russo, a partner in Gardner Russo & Gardner.

Mr Buffett, 77, is funnelling some of Berkshire’s US$35 billion into a financing void after US$408 billion in losses on United States sub-prime mortgages prompted banks to hoard capital and slow lending.

He built Berkshire over four decades from a failing maker of men’s suit linings into a US$185 billion investment company. It has been buying up dozens of businesses that sell products from lollipops to manufactured homes and corporate jet leases.

BLOOMBERG NEWS

Source : Straits Times - 12 July 2008

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Stanchart’s Singapore-based private bank wins global praise

Stanchart’s Singapore-based private bank wins global praise 

By Bonnie Oeni 
 
THE private banking arm of Standard Chartered Bank (Stanchart) has been named the world’s best by Euromoney magazine - the first time the accolade has been awarded to a private bank based in Singapore.
Stanchart set up the private bank in the middle of last year, using Singapore as a gateway to key markets in Asia and the Middle East. Being based in the Republic also meant the bank could capitalise on Singapore’s strengths in product development, investment research, recruitment and training.

Euromoney saluted the successful venture, singling out Stanchart’s risk management strategies, its focus on growth markets, its client base expansion and commitment to service.

It also pointed to the bank’s talent strategy and rapid expansion. The unit opened in 10 locations in just five weeks last year, including Britain, China, India, United Arab Emirates and South Korea.

A merger with American Express Private Bank meant Stanchart’s distribution strength tripled to 33 offices. It now has more than US$40 billion (S$54.5 billion) of assets under management.

Stanchart global head for private banking Peter Flavel revealed why Singapore was chosen as a base: ‘The Singapore government is astute and sensible in the way it has set up the regulatory environment for private banking,’ said Mr Flavel who is based in Singapore.

‘It’s also a competitive advantage - others see Singapore as merely part of a network, but we see it as the heart of a global network.’

 
Source : Straits Times - 12 July 2008

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Singapore Tampines Court collective sale in peril

Singapore Tampines Court collective sale in peril 

STB rules not to bring forward Aug 7 hearing, which must take place before deal is signed by July 25 deadline

By Jessica Cheam 
CRUCIAL: With no extension, the Tampines Court sale agreement will likely lapse on July 25. — PHOTO: WWW.CHANKOKHONG.COM.SG
 
THE sales committee at Tampines Court looks to have shot itself in the foot after a ruling by the Strata Titles Board (STB) yesterday almost certainly killed off its estate’s $405 million collective sale.
It delayed seeking mandatory STB approval for the deal and is now caught in a deadline trap of its own making.

The key date is July 25, that is when the estate’s sales committee must complete the deal. However, that looks impossible now after yesterday’s STB decision.

The board ruled that it would not bring forward an Aug 7 hearing set to allow testimony from witnesses that have yet to be called.

The STB had pencilled in the date after listening to sale objectors on June 16 to 18 and ‘taking into account the availability of all parties and the board’, it said.

Until that Aug 7 hearing is conducted, the sale cannot be signed and sealed.

The Straits Times understands that the sales committee wanted a date change as the buyers - Frasers Centrepoint and Far East Organization - will not extend the completion deadline.

With no extension, the sale agreement will likely lapse on July 25. This means the developers can walk away from a deal that looks far less compelling now than last July, given souring homebuyer sentiment and escalating construction costs.

However, this might be a blessing in disguise for some owners at the estate. The deal was inked just before the property boom at prices around $430 per sq ft (psf), but private homes in Tampines now go from $550 to $700 psf.

The deadline crunch seems to be of the sales committee’s own making.

The conditions of the sales agreement were met on July 25 last year but the committee delayed applying for the standard STB approval until Jan 7.

The committee told the STB that it wanted to await the outcome of legal challenges over the contentious Gillman Heights sale.

The committee argued that if the Gillman Heights sale was halted over issues of majority consent, it would have made a Tampines Court application futile.

In the Gillman Heights case, minority owners appealed all the way to the High Court, claiming that collective sale rules did not apply to former Housing and Urban Development Company (HUDC) estates.

Tampines Court is also a former HUDC estate so any ruling could have killed its own collective sale.

But Justice Choo Han Teck ruled last month that a privatised HUDC estate can be sold collectively if the requisite conditions are met.

While that also cleared the way for the Tampines Court sale, it left the sales committee with little time to tie up loose ends, including objections by minority owners.

The STB registrar had some sympathy yesterday for the committee’s argument about why it delayed applying for sale approval.

But he pointed out that a sale agreement has a deadline and, by waiting for the High Court ruling, the committtee took the risk that it would not have enough time to get a ruling from the board before the expiry date.

‘This is a calculated risk, whose consequences they will have to bear,’ he said.

‘The board should not be pressured to accommodate a deadline set by the applicants and the buyer.’

A lawyer acting for the minority owners told The Straits Times that he did not want to comment on the outcome.

The one lifeline for the majority owners would be if the buyers extend the deadline but that also looks a lost cause.

Far East Organization and Frasers Centrepoint told The Straits Times last night that they are ready to complete the deal, but ‘the onus was upon the vendors to secure the STB order within the agreed timeframe, which is about 16 months from the date of the agreement’.

Savills director of marketing and business development Ku Swee Yong said since the deal was inked last July, construction costs have escalated a lot faster than mass market property prices.

‘The project, unsurprisingly, has become less attractive,’ he said.

Tampines Court is a sizeable 702,162 sq ft site with 560 units. It could be redeveloped into a new condominium with around 1,580 units averaging 1,300 sq ft.

 
Source : Straits Times - 12 July 2008

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Morgan sees higher Asean-4 GDP growth

Morgan sees higher Asean-4 GDP growth

FOR all the concerns about rising inflation, the major Asean economies will likely deliver higher-than-expected growth in 2008, say Morgan Stanley Asia’s economists. But the outlook for the region in 2009 looks ‘challenging’.
The investment bank has actually raised - if marginally - its forecast of 2008 GDP growth for the Asean-4 region (Singapore, Malaysia, Thailand and Indonesia) to 5.6 per cent, from an earlier estimate of 5.5 per cent.

A stronger-than-expected global growth backdrop and a relatively slow monetary policy response to emerging inflation risks have resulted in the region’s 2008 first-half growth being mostly higher than it had earlier forecast, Morgan Stanley says in a report this week.

While it has kept intact its recently upgraded GDP growth projections for Malaysia (5.7 per cent) and Thailand (5.6 per cent), it has now jacked up the forecast for Indonesia to 6 per cent (up half a point) and slashed Singapore’s to 4.3 per cent, from 5.1 per cent previously, following the poor Q2 numbers just released.

But the Asean economies will ‘face headwinds’ next year as higher inflation cuts into purchasing power and capital investment decisions, domestic demand weakens from policy tightening, and export markets soften, it says. There’re also ‘idiosyncratic risks’ in the form of political uncertainty in some countries, it notes. As such, it has cut its 2009 GDP growth forecast for the region by close to one point, to 5.1 per cent.

 
 
From an earlier estimate of 6.1 per cent, Morgan Stanley now sees the Singapore economy growing just 4 per cent in 2009.

According to the bank, Singapore will, compared with its Asean neighbours, face the ‘maximum adverse knock-on effects’ of a global slowdown as its growth strategy has been fully centred on catering to global demand. In 2009, with the property market softening, support from construction will wane at a time when external conditions weaken further, it notes.

But, as the only country in the region with a ’stable and predictable’ political climate, Singapore faces ‘the least uncertainty in terms of what could go wrong relative to market expectations’.

Region-wide, Morgan Stanley sees upside risks to inflation if the global slowdown does not quite ease the commodity demand-supply mismatch. This, in turn, could spell more monetary tightening - which, in the face of further weakening of global demand, would exacerbate growth risks.

Voicing similar views, HSBC Global Research also says that its 2008 growth forecasts for Asia are ‘largely intact’ even after jacking up markedly the inflation estimates, as it believes that the region’s economic fundamentals are generally sound.

But if the US economy slides into a deep recession, and/or if the Asian financial sector suffers a credit crunch, and commodity prices fail to stabilise, the inflation and growth outlook in 2009 will be ‘more severe’.

Source : Business Times - 12 July 2008

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Mapletree starts work on Singapore Shah Alam logistics park

Mapletree starts work on Singapore Shah Alam logistics park

When completed, estimated value of 10-ha project will be $60m
By KALPANA RASHIWALA

MAPLETREE Investments Pte Ltd (MIPL), a fully-owned subsidiary of Temasek Holdings, yesterday announced the start of construction for its 10-hectare logistics park in Shah Alam, Malaysia.
 
Centrally located: The new logistics park is likely to be mostly pre-leased to logistics operators when it is scheduled for completion early next year 
When completed, the project will have an estimated $60 million value and will be offered on a right-of-first-refusal basis to the listed Mapletree Logistics Trust. MIPL holds a 30.16 per cent stake in MapletreeLog, which recently announced a rights issue.

Mapletree Shah Alam Logistics Park is expected to be mostly pre-leased to logistics operators by the time it is scheduled for completion early next year, MIPL said in a release yesterday.

The facility will have 60,000 sq metres (nearly 646,000 sq ft) gross floor area in three single-storey warehouses with mezzanine offices.

Located in Section 23, Shah Alam, the new logistics park, will be easily accessible from the Klang-Kuala Lumpur Federal Highway and Shah Alam Expressway.

It is 30 minutes’ drive from the Malaysian capital’s city centre, international airport and Port Klang.

MIPL’s chief executive Hiew Yoon Khong said: ‘With our latest logistics park in Shah Alam, we can now offer a broader network of facilities to our tenants. The prospects for the logistics sector in Asia remain strong and we are fully committed to grow our logistics real estate platform in the region.’

The Shah Alam facility is one of the 10 logistics park projects which MIPL has committed some $850 million to develop in China, Vietnam and Malaysia.

‘Mapletree’s logistics real estate business is executed firstly through developing such greenfield projects in markets where there is a shortage of good quality logistics facilities and secondly through sponsoring and supporting MapletreeLog, a Reit which owns and manages completed investment logistics facilities across Asia,’ MIPL said.

MapletreeLog’s proposed rights issue comes against the backdrop of still-challenging equity market conditions.

However, the issue will be underwritten by DBS Bank, Goldman Sachs (Singapore), Macquarie Capital Securities (Singapore) and UBS Investment Bank.

MIPL has undertaken to take up its entire 30.16 per cent entitlement of the rights issue and also has an option to apply for excess rights units if necessary. The proposed rights issue is subject to unitholders’ approval at an EOGM on July 18.

‘Once the rights issue is completed, MapletreeLog will have a more robust balance sheet to capitalise on very attractive opportunities that may be available over the next 24 months,’ MIPL’s Mr Hiew said.

At the rights issue price of 73 cents per unit, MapletreeLog will offer a historical distribution yield of almost 8 per cent based on annualising its Q1 2008 distribution after adjusting for the rights issue.

‘We’ve therefore undertaken to vote in favour of the resolution for the rights issue and will step up to pick up excess rights, if necessary,’ Mr Hiew said, adding: ‘We’ve every confidence that MapletreeLog will continue to grow the distribution per unit for investors with a focus in the short-term on organic growth and asset enhancement to optimise yields.’

MapletreeLog closed unchanged at 74 cents yesterday.

Source : Business Times - 12 July 2008

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$40m F1 pit building ready for the roar - Singapore

$40m F1 pit building ready for the roar - Singapore

By SAMUEL EE

(SINGAPORE) Construction of the $40 million Formula One pit building took just 10 months to complete, with only the interiors left to be fitted out before the inaugural race on Sept 28.
 
All systems go: The pit building was completed in just ten months. At its completion ceremony yesterday are (left to right) emcee Allan Wu, Singapore GP chairman Teo Hock Seng, Mr Iswaran and deputy chairman and CEO of Singapore Tourism Board Lim Neo Chian 
Senior Minister of State for Trade & Industry S Iswaran, together with race promoter Singapore GP Pte Ltd and the Singapore Tourism Board, marked its completion yesterday with a tour of the facilities at 1 Republic Boulevard along the Marina Promenade.

‘It was accomplished in time . . . and it is a nice building that blends in with the environment,’ said Mr Iswaran. He said the construction of the pit building is just part of the many preparatory activities that have been undertaken for Singapore’s F1 night race - the first on the F1 calendar.

‘We tested the night lighting system in March this year, completed the road works last month and announced the traffic and transport management plan last week,’ he said.

The three-storey building is 350 metres long and houses the F1 race facilities such as the 36 garages for the teams, race control facilities, media centre, winners’ podium and Paddock Club.

Due to the high demand for corporate hospitality tickets, the original 18,000 sq m gross floor area was increased to 23,000 sq m in March 2008 to accommodate a more spacious Paddock Club for up to 4,000 guests.

The pit building has a glass facade that provides for a panoramic view of the race action along the pit lane and the pit straight, which is part of the 5.067 km street circuit.

Mr Iswaran said ticket sales have been strong, with 90 per cent of the 100,600 tickets to September’s grand prix race already snapped up.

‘At least 40 per cent are from overseas,’ he said, adding that is a good sign because it means Singapore is achieving not just the objective of holding a major racing event but it is also raising its profile internationally. He also said feedback from the hotel industry indicated that the take-up rate for rooms is good.

After this, Mr Iswaran said the next significant step is to complete the testing and installation of the lighting system for the circuit.

Source : Business Times - 12 July 2008

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Next 5 to 10 years will be most promising for S’pore: Singapore MM Lee

Next 5 to 10 years will be most promising for S’pore: Singapore  MM Lee

We are going to move into a new plateau, a new platform, he says
By LEE U-WEN
(SINGAPORE) For someone who has openly admitted that he worries constantly about the future of the country he’s helped to build, Minister Mentor Lee Kuan Yew yesterday painted a surprisingly upbeat picture of what the near future holds for Singapore.
The next five to 10 years will be the ‘most promising’ in the Republic’s entire history, said Mr Lee last night at a dialogue organised by the Economic Society of Singapore (ESS).

Responding to a question about whether he was still optimistic about Singapore’s growth prospects, Mr Lee said: ‘If there are no big recessions worldwide, easily 4 to 6 per cent, maybe 7 to 8 per cent (a year). We should be all right.’

The hour-long dialogue at the Ritz-Carlton Hotel - attended by over 800 guests including economists and academics - was the first time that Mr Lee had spoken at an ESS event since 1969.

‘We are going to move into a new plateau, a new platform. I took a drive around Marina Bay the other day. You can see the boardwalk they are putting up, the integrated resorts, Clarke Quay, the Singapore River. This will be a beautiful city in five years. In 10 years, it will be wonderful and on a different plane,’ he said.

But with Singapore facing tough structural issues such as an ageing and dwindling domestic population, Mr Lee described the country as ‘not normal’ compared to other cities such as Hong Kong and Macau.

 
 
‘We are on our own, running our own navy, army and air force. Hong Kong does not do that, neither does Macau. We therefore have no room for making mistakes, hence the biggest expenditure in our budget is defence, followed by education. Without defence, you are inviting everyone to just walk in and take over - and they will,’ he said.

At the end of the day, Mr Lee said, the government had a duty to give the best life possible for the population. But the ‘biggest problem’, he said, was in retaining talented individuals that want to make Singapore their home.

‘We have educated Singaporeans in English to the best of the world’s standards, made them viable and employable anywhere in the world. You need that core group who are able, well-trained, to say this is my country and I’m going to build it up,’ said Mr Lee.

On the flip side, however, he explained how Singapore has been successful in attracting talent from overseas who eventually take root and settle down here.

‘We have lost some whom we would have dearly loved to keep. We’ve trained them, high fliers who went to the US to top universities, then worked for financial corporations and big institutions. Maybe they’ll come back, maybe they won’t. At the same time, we have even larger numbers of people - from India, China, Malaysia, Indonesia, Thailand, Nepal, who want to stay here,’ he said. ‘I’m not so pessimistic about the trade-off. I think so far we are net winners.’

Mr Lee was also asked about whether Singapore needed a liberal democracy to succeed economically, a suggestion that the Minister Mentor pounced on.

‘Over the years, nations have become quite ideological in saying that if you want to succeed, you must have a free market and liberal democracy. The idea is that if everyone had a liberal democracy, there would be no wars. I doubt that.’

‘They are prescribing universal rules for the whole world. My question to them is: ‘Have you ever run Singapore? Do you know how we got here?’. . . We are not stupid people, they give us all this advice. The International Bar Association, who are they? Have you ever built a community and given them jobs? We have, and we know what’s good for us.’

Mr Lee then suggested how there was a conspiracy by foreigners against Singapore’s success story. ‘Why? Because we are a little red dot. They see us as a threat. The Russians are studying us. How does this little country, with so little talent, keep its ruling party in place and run a tight ship, honest and effective, and make progress? Can they do it? I don’t know. They are picking up points here and there. If they can, good luck to them.’

The key to being successful in this regard, he added, was to ‘have a feel for the people and be honest and meritocratic’.

‘Can this system last? I’m not sure. I’ve done my job. I’ve passed it on to the next generation. I hope they will pass it on to an equally confident generation. As long as they can do it, they will last.’

Source : Business Times - 12 July 2008

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US Treasury jumps in to calm markets - WASHINGTON

US Treasury jumps in to calm markets - WASHINGTON

Paulson plays down talk of plans to take over two cornerstones of the US housing market

(WASHINGTON) Treasury Secretary Henry Paulson, seeking to calm nervous investors about the financial state of Fannie Mae and Freddie Mac, said yesterday that the government’s primary policy focus currently is to leave the congressionally created mortgage giants intact.
 
Mr Paulson: Maintaining dialogue with regulators and the companies 
‘Today, our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,’ Mr Paulson said.

The financial health of the two companies is of critical concern to Washington policymakers because of the crucial role they play in the housing market.

The pair hold or guarantee around US$5 trillion worth of mortgages, roughly half of the US$9.5 trillion debt of the United States.

The fear is that a failure of one or both would wreak havoc on the nation’s financial system and the broader economy as well.

Mr Paulson’s comments came amid reports that the government was considering a plan to take over one or both companies and place them in a conservatorship.

Under a 1992 law, Fannie or Freddie could be put into conservatorship if their top regulator found that either one is ‘critically undercapitalised’. A conservator would have sweeping powers to overhaul them, but would not have the authority to close them.

A government rescue of Fannie and Freddie would mark the second time that Washington has had to step in to support the financial system since mounting defaults in the US sub-prime mortgage industry grew into a global credit crisis in August 2007.

In March, the Federal Reserve backed a plan for JPMorgan Chase & Co to buy beleaguered investment bank Bear Stearns.

Shares of the companies’ stocks have plunged in recent days, with Freddie’s down sharply on Friday as fear intensified. Investors are increasingly worried that the companies would suffer more losses as housing prices keep falling and foreclosures keep rising.

They are also worried that the companies would have to raise a lot more money to cover those losses. By law, the companies are required to hold only a fraction of what is mandated for commercial banks as a financial cushion against risk.

The Treasury chief said that his department was ‘maintaining a dialogue with regulators and with the companies’. The companies’ main regulator will continue to work with the Fannie Mae and Freddie Mac ‘as they take the steps necessary to allow them to continue to perform their important mission’, said Mr Paulson.

Congress created the companies to provide a steady stream of money for home mortgages. Although the government doesn’t guarantee Fannie’s and Freddie’s debts, most investors believe that the government would come to their rescue if the companies fell into dire straits.

This ‘implicit’ guarantee allows them to borrow money at lower interest rates than other financial companies.

Citigroup Inc, however, is keeping its ‘buy’ rating on the two largest buyers of US home loans. It says that the sell-off in the shares of the two companies isn’t based on fundamentals.

Before noon, shares of the two companies were the worst percentage decliners and most actively traded by volume on the New York Stock Exchange, with Freddie down 37 per cent at US$5.03 and Fannie down 33 per cent to US$8.74.

On Wall Street, the Dow Jones industrial average slid 205.66 points, or 1.83 per cent, to 11,023.36. The Standard & Poor’s 500 Index slumped 22.36 points, or 1.78 per cent, to 1,231.03. The Nasdaq Composite Index tumbled 35.80 points, or 1.59 per cent, to 2,222.05.

Citigroup analyst Bradley Ball said that he doesn’t expect ‘nationalisation’ of Fannie and Freddie. Freddie is also committed to raising US$5.5 billion in capital, he wrote in a note to clients.

Mr Ball said that Freddie management said at a meeting yesterday that there was no ’significant change’ in its financial condition during the second quarter. — AP, Bloomberg, Reuters

 
Source : Business Times - 12 July 2008

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