Growth in Singapore office occupancy costs tapers off in Q2

Growth in Singapore office occupancy costs tapers off in Q2

Prime Raffles Place space up only 1.1% quarter on quarter: DTZ report

By UMA SHANKARI

GROWTH in office occupancy costs in Singapore has started to taper off after the meteoric rise last year, reflecting the increased resistance to higher occupancy costs, according to a new report.

Small rise: Average occupancy cost of prime office space in Raffles Place grew only 1.1 per cent in Q22008
‘Apart from Raffles Place, Shenton Way/ Robinson Road/Cecil Street and decentralised areas, growth in occupancy costs in other areas like Marina Centre and Orchard Road was flat in 2Q 2008,’ said DTZ in its second-quarter office market brief.

Average occupancy cost of prime office space in Raffles Place grew only 1.1 per cent quarter on quarter to $19 per square foot per month (psf pm) in the second quarter of 2008.

In the Shenton Way/Robinson Road/Cecil Street area, the average office occupancy cost rose by 2.6 per cent quarter on quarter to $11.80 psf pm, while office buildings in HarbourFront enjoyed a higher growth of 5.3 per cent to $10 psf pm.

By contrast, in the first quarter of 2008, occupancy costs continued to rise amid a dearth of supply. Prime occupancy cost in Raffles Place gained 13.9 per cent quarter on quarter to $18.80 psf pm in the first quarter of 2008, for example.

‘As more new supply come on stream, office occupancy is likely to ease and limit growth in occupancy costs in the CBD for the rest of 2008,’ said DTZ, referring to the Central Business District.

However, the report also said that the cautious business outlook and companies gravitating towards cheaper premises like decentralised office buildings, industrial properties, business parks and disused state properties are putting a downward pressure on office occupancies.

Islandwide, average occupancy eased by 0.2 percentage point quarter on quarter to 96.9 per cent in Q2 2008.

As a result of occupiers moving out to cheaper locations after lease expiration, office occupancies in Raffles Place and Marina Centre dropped by 0.3 percentage point to 97.4 per cent and 1.2 percentage points to 98.6 per cent respectively.

But over in decentralised areas like Novena and HarbourFront, occupancy levels rose by 0.4 percentage point to 99.0 per cent and 1.1 percentage points to 98.7 per cent respectively, supported by lower occupancy costs.

DTZ also released its Q2 2008 office report for Kuala Lumpur yesterday.

Gross occupancy costs for prime buildings in the Malaysian city rose 3.9 per cent quarter on quarter to RM6.32 (S$2.65) psf pm in the second quarter of this year, the property firm said.

But despite this, financial institutions with presence in Singapore are considering locating call centres in Kuala Lumpur because of cost differential and special tax breaks, DTZ said in response to a query from BT.

Source : Business Times - 05 Aug 2008

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Banyan Tree sees opportunities for growth in West

Banyan Tree sees opportunities for growth in West

By EMILYN YAP

RESORT developer and manager Banyan Tree Holdings yesterday said that it is on track to becoming a dominant player in the high-end hospitality sector, and that the emergence of distressed assets in the West could present growth opportunities.

Mr Ho: Is targeting major markets in the Middle East and the Americas
Banyan Tree has about five years to establish itself as a top player, its executive chairman Ho Kwon Ping told a leadership conference yesterday. Globalisation is vital to achieve growth, so the company is targeting major markets such as the Middle East and the Americas.

Banyan Tree has almost 50 resorts slated to open in countries as far afield as Mexico and Greece in the next four years.

Speaking to reporters on the sidelines of the conference, Mr Ho said that he is pleased with Banyan Tree’s rapid progress. ‘We don’t see in our space other companies trying to really globalise as rapidly as we are,’ he said.

Mr Ho also said that Banyan Tree is looking at distressed assets: ‘In every crisis there is opportunity - a lot of distressed assets in US and in Europe, a lot of places with cash and capabilities.

‘We would see a lot of opportunities coming up in the next two, three years - opportunities we would have normally eschewed because they’re just too expensive.’

According to Mr Ho, Banyan Tree takes a strategic approach to expansion - it aims to build a global presence that can meet the short, medium and long-haul travel needs in North-east Asia, Western Europe and America.

Setting up a resort in Lijiang, Yunnan was another strategic move. Banyan Tree chose this location over the more popular Bhutan because entering China would open up a larger market.

Headcount could increase from around 9,000 to 25,000 in the next three to four years as Banyan Tree grows, said Mr Ho. And as this happens, the company will have to develop leaders who can guide other employees and spread the corporate culture.

Banyan Tree has been tapping private equity for expansion, and there are plans for more real estate development funds to support growth in Japan and the Middle East.

Banyan Tree shares closed three cents lower at $1.19 yesterday.

Source : Business Times - 05 Aug 2008

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Accounting standards proposed for charities - Singapore

Accounting standards proposed for charities - Singapore

Feedback invited from public, charity sector till Sept 7

By LEE U-WEN

(SINGAPORE) In a bid to enhance public confidence in Singapore’s charity sector, all charities may soon have to abide by a new set of accounting standards to ensure better transparency and accountable financial reporting.

Yesterday, the Accounting Standards Council (ASC) proposed that all charities comply with a new set of standards that it has drawn up, regardless of their status or size.

The ASC, formed last November, prescribes accounting standards for companies, societies, charities and cooperatives.

In a statement, the ASC proposed that all registered charities and Institutes of a Public Character (IPC) - irrespective of whether they are legally constituted as Companies Limited by Guarantee under the Companies Act, or as societies under the Societies Act - should have to comply only with the ASC’s own accounting standards.

Among the key proposals is the use of a charity’s income or expenditure as a basis to determine its size. Currently, charities are classified as large and non-large charities based on their annual income. Those with an income of $10 million and above are defined as large.

The council also suggested doubling the threshold for statutory audit for charities from the current income or expenditure to $500,000, from the current $250,000.

It also wants to make it mandatory for all charities to prepare accounts using accrual basis, and for additional information - such as details of their investment policies - to be disclosed in their annual reports.

In addition, the ASC’s committee for charities also proposed a building depreciation policy to provide guidance to charities and their auditors.

The draft proposals come at a time when one of Singapore’s most recognisable charity figures, Ren Ci Hospital chief Shi Ming Yi, was recently charged with criminal breach of trust, forgery and abetting falsification of accounts.

Commissioner of Charities Low Puk Yeong said that feedback by the charity sector, auditors and donating public was taken into account when drafting the proposals.

Mr Low, who also chairs the ASC’s committee for charities, added: ‘These draft proposals reflect our aspirations to promote greater transparency and accountability of the charity sector by improving the standards of financial accounting and reporting, while at the same time also ease the burden on smaller charities and IPCs.’

Looking ahead, the ASC also wants to make sure that the standards are not a ‘one-size-fits-all’ system but are stratified, in which larger charities and those that raise funds from the public are subject to stricter reporting requirements.

From now until Sept 7, the ASC wants to hear from the public and the charity sector on their proposals.

Source : Business Times - 05 Aug 2008

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Pricing pressure, talent are top issues for firms - Singapore

Pricing pressure, talent are top issues for firms - Singapore

E&Y poll identifies factors that impact supply chain, procurement

By CHEW XIANG

(SINGAPORE) Pricing pressures and attracting good staff are the biggest challenges facing businesses’ procurement departments, according to an Ernst & Young survey released yesterday.

The poll of 257 C-level executives at large companies worldwide found that 33 per cent of respondents think downward pressure on prices will have the biggest impact in the next two years on supply chain and sourcing functions. All the executives polled work for businesses that report over US$1 billion in revenue.

Mildred Tan, managing director of Ernst & Young Associates, said: ‘Procurement plays an increasingly significant role in driving corporate performance. Given the current economic climate, it is not surprising that organisations view downward pressure on prices as critical, particularly at a time when there is consistent and accelerating upward pressure on input costs.’

Attracting and retaining talent was the second biggest issue, cited by 30 per cent of respondents. Mrs Tan said: ‘The high demand for skilled procurement experts and the challenges they will face are only likely to increase with the growth of globalisation and cost pressures.’

Adrian Edwards, global head of supply chain and procurement at Ernst & Young, said: ‘The return on investment from the procurement function can be considerable and it can be an opportunity to create real differentiation.’

Other factors cited by senior executives as having an impact on procurement were the need to change their company’s operating model, the growing complexity of global supply chains and the accelerating pace of globalisation.

The need to manage price fluctuations of critical inputs or services, as well as threats from new low-cost centres, were also said to have a large impact.

Not rated as important were issues such as changes in technology and green and sustainable supply chain issues, which were cited by fewer than 20 per cent of respondents.

The survey report also found that organisations do not have the confidence to tackle or manage the challenges.

‘There is clarity on the major issues facing organisations, but the ability to deliver against them is severely constrained,’ the report said. More than half of respondents said they are not very confident they can manage downward pressure on prices or the accelerating pace of globalisation, the report said.

But ‘paradoxically, despite being unsure how procurement can deal with price pressure, ‘controlling and containing costs’ remains the most significant contribution senior executives expect to see from the function in the next two years’, the report said.

About 52 per cent of respondents said this is their most significant business initiative priority, while 37 per cent cited the delivery of bottom-line savings to boost Ebitda (earnings before interest, tax, depreciation and amortisation) contribution.

Source : Business Times - 05 Aug 2008

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Singapore Temasek shortlists 5 in sale of Senoko Power

Singapore Temasek shortlists 5 in sale of Senoko Power

HONG KONG - SINGAPORE investment company Temasek Holdings has shortlisted five bidders from preliminary bidding for its sale of Senoko Power, banking sources said.
France’s GDF Suez, Japan’s Marubeni, India’s Tata Power, Malaysia’s YTL Power and the OneEnergy tie-up between Hong Kong’s CLP Holdings and Japan’s Mitsubishi are the shortlisted bidders, bankers told Reuters Basis Point, in a deal that market players have said could fetch about US$3 billion (S$4 billion).

Other firms that were understood to have submitted non-binding expressions of interest last week included Bahrain investment bank Arcapita, Singapore’s Keppel Corp and Sembcorp Industries.

The shortlisted candidates will be allowed to conduct due diligence around September.

The Senoko sale, the second of three generating company divestments that Temasek plans by mid-2009, has sparked huge interest in the loan market with more than 10 banks earlier talking to would-be bidders about debt financing to back the acquisition.

With an electricity generating capacity of 3,300 megawatts (MW), Senoko is larger than Singapore’s 2,670 MW Tuas Power, which was sold to China’s Huaneng Group for $4.2 billion in March.

REUTERS

Source : Straits Times - 05 Aug 2008

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Stalemate threatens Singapore Thomson collective sale

Stalemate threatens Singapore Thomson collective sale

KSH Holdings seeking more time to close property deal, say sources

By Jessica Cheam

ROADBLOCK: KSH reportedly had to delay the purchase as it had trouble acquiring from the SLA part of a road that divides one development from the other four.

THE collective sale of five small estates near Thomson Road seems to have hit the rocks, with the owners of 88 units set to walk away - taking the $12 million deposit with them.
Unlike in recently aborted sales, where the developers appeared to have changed their minds because of the property slide, this deal may likely become a victim of a three-way stalemate among the buyers, sellers and the Singapore Land Authority (SLA).

The deal was inked last November, when a unit of listed developer KSH Holdings signed up to buy Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui for $120 million.

It also paid a 10 per cent deposit.

The buyers, however, have failed to close the sale despite a two-month extension.

One owner, who declined to be named, told The Straits Times yesterday that KSH offered to stump up $3 million as additional deposit if the sellers would agree to a further three-month extension.

It is understood the sellers are considering the offer.

KSH declined to comment yesterday, but sources said the deal hit problems when the firm tried to buy a 1,000sq m section of a road from the SLA.

The land is needed so the five estates near Rangoon and Moulmein roads can be combined and developed into one large project.

This will give a land area of 74,355 sq ft and a gross floor area of 208,196 sq ft. It will allow a high-rise block with about 142 luxury flats each measuring 1,250 sq ft on average.

Industry sources told The Straits Times that the SLA had priced the land at $16 million - double what KSH and industry experts expected.

The property firm has appealed to the SLA to review the price.

The deal now seems to hinge on whether the sellers and buyers can reach an agreement.

The owners are said to be considering the offer and have requested a specific date when the sale can be completed from the buyers.

If no consensus is reached - and the sellers reject the $3 million sweetener - the deal will be off, but the flat owners will keep the $12 million deposit. That works out to about $136,000 on average for each of the 88 units.

If the deal goes through, on the other hand, each unit stands to receive between $906,856 and $1,908,491.

There has been a string of failed collective sales since sentiment in the property market turned sour.

Bravo Building Construction withdrew from a series of purchases earlier this year.

It forfeited deposits of $1.6million for Makeway View, $25.8 million for Tulip Garden and $12 million for Pender Court rather than go ahead with the deals.

Property giants Far East Organization and Frasers Centrepoint walked away from a $405 million deal to buy Tampines Court when the Strata Titles Board dismissed their sale application.

Analysts said the failed deals could be indicative of the wider credit crunch, with developers finding it difficult to find financiers to complete their purchases.

‘Even if the developers can complete their projects, they will be wondering if they can achieve their desired prices in this market,’ said Mr Colin Tan, the head of research and consultancy at Chesterton International.

Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong, agreed: ‘Buyers face quite high levels of risk now to go ahead with projects inked at last year’s prices.’

Source : Straits Times - 05 Aug 2008

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Mindy Yong

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