Singapore GIC eyes bigger stake in Aussie property firm

Singapore GIC eyes bigger stake in Aussie property firm

By Grace Ng

THE Government of Singapore Investment Corporation (GIC) has reportedly agreed to invest up to A$700 million (S$702 million) in an Australian property company.
GIC’s real estate arm said that it has invested in GPT, and sees this partnership with the Sydney-based real estate investment trust as ‘a good fit…and an important part of (its) investment strategy in Australia’.

In a statement yesterday, GIC Real Estate said that it will pump money into GPT through two ways - buying convertible preferred securities and participation in a rights issue.

‘This will give us appropriate downside protection as well as the opportunity for upside in capital appreciation,’ said GIC Real Estate. The Singapore group, which holds 2.2 per cent of GPT, did not state how much more it will invest in the property firm.

But GPT stated yesterday that GIC will emerge with a total stake of between 12 and 18 per cent of GPT following its rights issue. This will make GIC the largest shareholder in the company.

GPT said GIC will take up its A$250 million exchangeable securities. GIC has also agreed to help underwrite 504 million securities in a rights issue to retail investors, which is expected to raise about A$300 million. GIC will also participate in a rights issue to institutional investors which may raise A$1 billion.

Cash from the rights offer will be used to repay the debt of GPT, which reported a half-year loss of A$68 million.

GIC noted that it ‘has been a long-term investor in Australia’, and has ‘always believed in the fundamentals of the Australian economy and its property sector’. It is believed to have invested well over A$3 billion in Australian real estate, including Sydney’s Queen Victoria Building and the Strand Arcade.

Meanwhile, Temasek Holdings is reportedly ‘exploring options’ on its nearly 70 per cent stake in Singapore Food Industries (SFI), a manufacturer and distributor.

Bloomberg quoted Mr David Heng, Temasek’s managing director of investments, as saying that ‘as an active investor, Temasek reviews its portfolio regularly’.

‘We are exploring options with regard to our stake in SFI, with the aim of unlocking shareholder value and optimising returns,’ he said, adding that no decision on the stake has been made.

SFI’s shares rose two cents to close at 82 cents yesterday.

Source : Straits Times - 24 Oct 2008

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Gold hits lowest level in a year

Gold hits lowest level in a year

Strong greenback eroding gold’s appeal as an alternative investment

By Yang Huiwen

INVESTORS are fleeing commodities, including recent red-hot favourite gold, as global inflation eases and the United States dollar gains ground.
Gold, popular as a hedge against inflation, has lost much of its dazzle in the past fortnight with prices slumping to their lowest level in more than a year.

After hitting a record US$1,033.90 an ounce in March this year, gold slumped to US$705.53 at one point yesterday, the lowest level since September last year.

This sharp drop has surprised some analysts since gold is traditionally seen as a safe haven in times of uncertainty.

However, investors are cashing out of commodities in general, leading to a pullback in prices of other precious metals, including silver and platinum.

Silver fell to its lowest level in more than two years, trading as low as US$9.305 per troy ounce yesterday, while platinum is at a five-year low. Base metal copper is at its lowest in almost three years on prospects of a global recession.

Commodity prices, led by oil, started losing ground in August as sky-rocketing prices started to dampen demand. Crude oil has more than halved in value after hitting a record US$147 a barrel in July.

Investors, starved for cash, started pulling out of commodities other than gold after Lehman Brothers’ collapse and AIG’s US$85 billion (S$126 billion) bailout last month.

They also appear to be liquidating positions in precious metals to fund short-term cash needs in falling equity markets, said ANZ Banking Group analyst Natalie Robertson in a report yesterday.

The decline in gold, which was still as high as US$913.25 as recently as Oct 9, is more recent.

The main reason is the fast-strengthening US dollar, which erodes the metal’s appeal as an alternative investment, say analysts.

Hedge funds have also recently reduced their net long exposure to gold, with the recent strength in the dollar. The greenback has gained about 12 per cent against the euro so far this year.

For example, SPDR Gold Shares, a locally-listed exchange-traded fund (ETF) which reflects the performance of the price of gold bullion, lost over 21 per cent in nine straight days to $71.82. It is down 13.1 per cent so far this year.

A commodities ETF, the Lyxor Commodities CRB Fund which tracks the performance of the Reuters/Jeffries CRB Total Return Index, has lost over 20 per cent since the start of the year.

‘The recent fall in gold prices has been rather surprising for many people in the market because gold is traditionally seen as a safe haven asset class which should benefit in a time of uncertainty,’ said Barclays Capital commodities analyst Yu Yingxi.

‘The key reason is gold has been following the euro-dollar exchange rate - the single most important factor determining prices in the gold market.’

In the near term, Ms Yu expects the US dollar to strengthen further, which will contribute in a further weakening in gold prices. But over the next six months, the dollar is expected to weaken against the euro, and this will be associated with more support for gold prices, she said.

‘Gold is a beacon of stability in the current unstable environment, and should be stronger than it is currently in the coming months, given that there are no clear signs of economic recovery.’

Gold historically tends to perform better in a recessionary environment.

‘We are of the view that the global meltdown of the financial sector and prevailing capital market crises will bring investor focus back to the yellow metal as an investment hedge,’ said IGI Securities in a report, adding it remains ‘bullish on gold in the short to medium term’.

Source : Straits Times - 24 Oct 2008

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Petrol prices dip again; all rates now below $2 a litre

Petrol prices dip again; all rates now below $2 a litre

OIL companies yesterday cut pump prices again, sending all petrol rates below $2 a litre for the first time in three years.
The reduction - the 10th consecutive cut since July - was initiated by Shell and followed swiftly by the others.

Pump prices were brought down by five cents a litre, as crude oil prices continued to slide.

The move brought 92-, 95- and 98-octane petrol down to $1.763, $1.796 and $1.87 a litre respectively before discount. Ultra-premium fuels Shell V-Power and Caltex Platinum are $1.999 and $1.996 respectively, while diesel is now $1.553.

Petrol breached the $2 mark for the first time in August 2005, when Hurricane Katrina disrupted production in the United States and sent oil soaring past US$70 a barrel. The price of ‘black gold” hit nearly US$148 a barrel this July - an all-time high.

But the global financial turmoil has curtailed demand as manufacturers cut back on production and motorists drive less or switch to more fuel-efficient cars. The credit crunch has also dampened speculative trading of oil.

Crude oil futures plunged to a 16-month low of US$66.75 a barrel on Wednesday. But prices recovered slightly on news that the Organisation of Petroleum Exporting Countries would meet today to discuss a production cut.

Crude oil for December delivery recovered yesterday to US$67.81 a barrel on the New York Mercantile Exchange.

Mr Ng Weng Hoong, the editor of energy news portal EnergyAsia.com, remains bullish about oil.

‘Recession or not, oil isn’t going to fall much further from here,’ he wrote in his blog. ‘It’ll start to claw its way back up, thanks in great part, and ironically, to America’s financial crisis.

‘Instead of day-dreaming, people should start preparing for the arrival of US$200 oil. It’ll come sooner than we fear.’

Source : Straits Times - 24 Oct 2008

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30-cent fuel levy for cabs may be lifted

30-cent fuel levy for cabs may be lifted

ComfortDelGro to review charge in view of economic climate

By Christopher Tan, Senior Correspondent

CAB commuters may have something to cheer about soon, as the 30-cent fuel surcharge introduced in July may be lifted.

ComfortDelGro, Singapore’s largest taxi operator, which initiated the unprecedented levy three months ago, is meeting the Taxi Operators’ Associations today to review the surcharge.

If the company decides to drop or reduce the surcharge, the other, smaller players are likely to follow suit.

ComfortDelGro spokesman Tammy Tan said: ‘We had committed to removing it when market pump prices fell to December 2007 levels.’

Though the price of diesel has fallen by about 25 per cent since July, she noted that it had not reached $1.19 a litre - the lowest price sold at public pumps last December.

‘But given the current economic climate, we want to help. So we are reviewing the surcharge with the association,’ she added.

Mr Chang Meng Dong, the executive secretary of the Taxi Operators’ Associations, which represent drivers of six cab firms, confirmed the meeting. Asked for their reaction to the proposal, he said: ‘I’m not prepared to comment further at this point.’

But the prospect was welcomed by Consumers Association of Singapore president Yeo Guat Kwang.

‘It’s about time. Airlines are starting to remove surcharges,’ he said.

‘Service providers have to be responsive. When costs are up, we understand, but when costs come down, we look forward to timely adjustments.’

Cabbies themselves seem ambivalent. Veteran driver Tony Pang, 59, said: ‘Most of my colleagues feel that if it is not removed, more people will stop taking cabs because of the economy.

‘I think they should be firm on their previous stand and remove the surcharge only when diesel outside hits $1.19.’

The fuel surcharge was introduced to ease the burden on cabbies, who were faced with higher fuel costs despite subsidies.

Taxi firms traditionally offer discounted diesel to their cabbies at their own pumps. The discount can be as much as 35 per cent off commercial pump prices. But cabbies noted that the discount has been reduced since the fuel surcharge was introduced.

In July, ComfortDelGro was selling diesel at $1.19 a litre, 64 cents lower than the public pump rate of $1.83.

Today, the respective prices are $1.10 and $1.397, a gap of about 30 cents, leading some to question if the surcharge had, in fact, gone to help the taxi firms.

Mr Chang would not comment.

Stock analysts who track ComfortDelGro expect it to yield better diesel revenue and earnings in the second half of this year. Nomura Singapore, for one, is forecasting an $11 million pre-tax profit, from a $17.6 million loss in the first half.

Ms Tan of ComfortDelGro countered: ‘We are still subsidising diesel and losing money on it.’

Source : Straits Times - 24 Oct 2008

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Tenants left in limbo

Tenants left in limbo

THE battle surrounding the collective sale of Katong Mall has left the complex’s stable of enrichment, tuition and music centres in a state of limbo, business owners told The Straits Times.

While the mall has been sold for $219 million, several minority owners are contesting the deal, making the future uncertain for the building’s 28 education-related businesses.

‘Although the place has been sold, nothing has been said to us,’ said Mr Richard Lau, a sales manager at X’clusiv Interior, which moved to the mall in July.

The Straits Times spoke to 20 businesses, which said they would take a wait-and-see approach to finding a new location. Standard leases give most tenants up to six months to vacate the premises. But some fear they will be unable to find similar units for the same rentals at nearby malls, such as Parkway Parade.

Despite the uncertainty, some businesses have renewed their existing leases - such as Tien Hsia Language School and confectionery Awfully Chocolate - while others have inked new ones.

But a few are looking elsewhere.

As soon as the deal was announced in July, Ms Tan Poh Ling, 40, began scouting for an alternative location for her studio, The Ballet and Music Company.

‘All I know is what the papers have reported. So I was worried initially and started hunting,’ she said.

Some parents are concerned that they will be left in the lurch if enrichment centres close shop. That has prompted them to look for other options.

Business owner Loo Weng Lin, 36, who has a daughter enrolled at a mathematics tuition centre, fretted about a move. ‘I finally found a good tuition centre here where my child is improving. Where will I send my child if the centre closes or moves far away?’

Madam Linda Low, whose daughter attends several enrichment centres in Katong Mall, said the location is ideal.

The 46-year-old office assistant said: ‘It would be very inconvenient if the centres were to move to locations in different parts of Marine Parade.’

SEARCHING FOR NEW PLACE

‘All I know is what the papers have reported. So I was worried initially and started hunting.’

Ms Tan Poh Ling, who began looking for an alternative location for her studio, The Ballet and Music Company (left), when the collective sale deal was announced

SEOW KAI LUN

Source : Straits Times - 24 Oct 2008

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Singapore DBS begins compensation process

Singapore DBS begins compensation process

By Francis Chan & Grace Ng

Shop owners fight sale of Katong Mall

18 file protest against en bloc sale, alleging it was done in bad faith

By Melissa Sim & Seow Kai Lun

Katong Mall was sold to property group Tuan Sing Holdings for $219 million. But shop owners are concerned that the two companies that owned 72 per cent of the mall, Golden Cape Investments and Megaton Investments, are wholly owned by Tuan Sing. — ST PHOTOS: DESMOND WEE

AT LEAST 18 shop owners in Katong Mall have filed objections to a $219 million collective sale of the East Coast Road complex.
The owners, some of whom do not want to move from the mall, lodged a protest last month with the Strata Titles Board (STB), which deals with en bloc applications.

Property group Tuan Sing Holdings bought the mall, which has 256 units, in June.

It was one of the few collective property deals this year in a market that has been hit by the economic slowdown and rising building costs.

The shop owners are contesting the sale, though, saying proper procedures were not followed and the deal was conducted in bad faith.

Key among their concerns is that the two companies that owned 72 per cent of the mall, Golden Cape Investments and Megaton Investments, are wholly owned by buyer Tuan Sing Holdings.

When the mall went on the market in June, there were two bids - the lower one came from Tuan Sing-owned Golden Cape.

Although both were above the reserve price of $180 million, the property consultants were asked to negotiate better terms.

Golden Cape eventually increased its offer to $219 million.

While the final bid was almost $40 million above the reserve price, unit owner Jeanette Aruldoss said she is fighting the sale as ‘a matter of principle’. The 45-year-old said the deal was struck in bad faith.

But Ms Stella Hoh, a local director at Jones Lang LaSalle, which handled the sale, said proper procedures were followed.

Store owners also complained the sales committee did not have the 80 per cent majority needed to approve the deal by Oct 4 last year.

New collective-sale rules kicked in islandwide that day, which meant the whole process would have been scuttled if the 80 per cent threshold had not been reached.

But Ms Hoh said the committee had 80 per cent support.

Tuan Sing declined comment when approached by The Straits Times.

The STB said the collective sale is scheduled to undergo mediation beginning on Nov 10.

Source : Straits Times - 24 Oct 2008

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Singapore DBS begins compensation process

Singapore DBS begins compensation process

By Francis Chan & Grace Ng

DBS BANK said yesterday it has started the process of compensating some customers facing losses from investment products linked to collapsed United States investment bank Lehman Brothers.
The compensation process was likely to be completed by the end of the year, a DBS spokesman said.

DBS and two other financial institutions, Maybank and Hong Leong Finance, said on Wednesday that they would be working to ensure that all deserving investors got their money back.

However, as recommended by the Monetary Authority of Singapore (MAS), they would be focusing on helping the ‘highly vulnerable’ including the elderly, retired and less educated.

In a statement last night, a DBS spokesman said that, after a review, ‘we have found that a number of cases did not meet the standards DBS upholds’.

One investor told The Straits Times he had received a call from his DBS relationship manager yesterday.

‘He hasn’t called me in a while but this time, he hinted that I could be compensated, but I don’t have the details just yet,’ said the investor who bought $100,000 worth of High Notes 5.

DBS was in the process of unwinding the High Notes Series 5 in Singapore and Constellation Notes Series sold to customers in Hong Kong, the spokesman said.

Both were rendered almost worthless after the collapse of Lehman last month.

DBS is still assessing the final redemption credit amount, based on prevailing market conditions but estimated that it will pay out a total of $70 million to $80 million in the two markets.

In Singapore, cash compensation would be credited to customers’ DBS or POSB accounts within a week of them signing to agree to the offer. They must sign a waiver agreeing not to take legal action against DBS for mis-selling.

As at last night, Maybank and Hong Leong had not provided an update on their progress on the compensation issue.

Another firm which sold Lehman-linked Minibonds, ABN AMRO, said yesterday that it was committed to resolve all complaint cases ‘with fairness and speed’.

‘Should there be proven cases of mis-representation, we will take appropriate responsibility,’ a spokesman said.

The Minibond programme collected about $375 million from about 8,000 retail investors through nine distributors, while 1,400 investors bought $103 million worth of High Notes 5 from DBS.

Yesterday, some investors who did not fall into the ‘vulnerable’ category mentioned by DBS, Maybank and Hong Leong, expressed fears that their legitimate complaints might be overlooked.

One retiree, asking to be identified as Mr Tan, 52, who put $100,000 in DBS High Notes was concerned about his case.

Another investor, Mr Edward, 57, who bought $20,000 of Minibonds at Maybank is semi-retired. He wanted to know how his case would be dealt with.

Mr David Gerald, president and chief executive of the Securities Investors Association of Singapore said: ‘The plight of the non-vulnerable group comes to my mind. Clearly the immediate group that needs help is the vulnerable group…but others may still not be satisfied.’

But other industry experts like Mr Albert Lam, an investment director with IPP Financial Advisers, said that investors must be realistic. ‘There has to be a balanced approach where those who have been genuinely mis-sold should be compensated,’ said Mr Lam.

‘But those who have bought it knowing what they are buying should also take responsibility. That way, everyone is treated fairly.’

Another issue that vexed High Notes 5 investors was DBS’ exposure in Hong Kong. Some investors like Mrs Tan, 45, were worried that DBS may end up spending more to compensate its Hong Kong customers due to pressure from the territory’s central bank.

‘There’s talk that they may focus more on customers there, but I hope they will be fair,’ said the Singaporean who invested $75,000 in High Notes 5.

Brokerages like OCBC Securities, which distribute, but do not advise investors on Minibonds, are also ready to address customer complaints.

‘OCBC Securities has an existing complaints management framework that is in line with the MAS guidelines,’ said Mr Yeow Chin Wee, executive director of OCBC Securities.

Source : Straits Times - 24 Oct 2008

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S’pore and China sign free trade pact

S’pore and China sign free trade pact
Beijing’s first deal with Asian country expected to give Singapore firms and exports a big boost
By Chua Chin Hon, China Bureau Chief

PM Lee (left) and his Chinese counterpart Wen Jiabao sharing a toast after the FTA signing ceremony in Beijing yesterday. Mr Lee said the pact sent out a strong signal about both nations’ commitment to free trade despite the global economic uncertainties.

BEIJING: Singapore’s businesses and exports are set to become more competitive in the booming Chinese market from next year as a newly signed free trade agreement (FTA) between the two countries kicks in.
The landmark agreement, the Chinese government’s first with an Asian country, will eliminate tariffs for 85 per cent of Singapore’s exports to China from January. An additional 10 per cent of exports will be duty-free from 2010 onwards.

The Singapore exports covered by the FTA, which include such items as instant coffee, aviation kerosene and ornamental fish, have a total trade value of over $18 billion, according to the Ministry of Trade and Industry.

The FTA will also allow ‘preferential access’ for Singapore companies hoping to invest in China’s health-care sector by allowing them to hold a 70 per cent stake in a mainland hospital.

Other benefits include the freer movement of businessmen and professionals between the two countries (see below).

‘Eventually you hope more exports (would lead to the creation of) more jobs, and also more investments from China coming to Singapore to take advantage of the FTA,’ said visiting Prime Minister Lee Hsien Loong when asked how the agreement would benefit Singaporeans.

He and Chinese Premier Wen Jiabao witnessed the signing of the FTA yesterday morning in Beijing’s Great Hall of the People. Both leaders praised the agreement as a major step forward in bilateral ties.

PM Lee, who also held back-to-back meetings with President Hu Jintao, legislative chief Wu Bangguo and Vice-Premier Li Keqiang, said that the FTA sent out a strong signal about the two countries’ commitment to free trade despite the current global economic uncertainties.

Echoing this view, President Hu said the China-Singapore FTA highlighted the ‘confidence and determination of both countries in further opening up and promoting free trade’.

Singapore and China began negotiating the bilateral FTA in August 2006, and wrapped up formal talks last month after meeting for eight rounds. Both sides are expected to meet regularly in future to review and update the agreement, such as by exploring the possibility of opening up new business sectors.

Spokesmen for business associations in Singapore hailed the newly inked pact.

Said Mr Dennis Ng, a spokesman for the Singapore Manufacturers’ Federation: ‘Businesses which import raw materials from China will benefit from lower costs when the tariff concessions kick in.

‘More importantly, companies which have not ventured into China in a big way will be encouraged to seize the opportunity.’

For consumers in Singapore, the FTA will bring good cheer in more ways than one. As part of the agreement, Singapore will lift tariffs for all Chinese exports to Singapore.

Currently, only six Chinese products, mostly beers, are still subjected to such taxes. When these taxes are lifted, consumers can look forward to cheaper China-produced beers like Tsingtao and Yanjing from next year.

The FTA also allows Chinese health-care companies to set up wholly owned hospitals in Singapore, and approved mainland universities specialising in traditional Chinese medicine to conduct external degree programmes in Singapore.

China’s Commerce Ministry said in a statement that the FTA would help boost bilateral economic growth, but gave no indication as to whether any Chinese health-care companies had immediate plans to set up new ventures in Singapore.

Looking ahead, PM Lee said he hoped the successful completion of the China-Singapore FTA would ‘give a push’ to a similar pact being negotiated between China and Asean as a whole.

China and Asean have been negotiating an FTA since it was first formally proposed in 2001, and expect to wrap up discussions by 2010.

‘The China-Asean FTA still has a few pieces to be completed,’ said Mr Lee. ‘We hope that (the China-Singapore FTA) will give that a push, because you can see that Singapore has moved further.’

Highlights of agreement

History: Negotiations began in August 2006 and wrapped up about two years later after eight rounds of talks. The pact will come into force on Jan 1 next year.

Significance: This is the first free trade agreement (FTA) between China and an Asian country.

Benefits
ZERO-TARIFFS: 85 per cent of Singapore exports to China will be duty-free from next year. An additional 10 per cent of exports will follow in 2010. Singapore will lift all tariffs for Chinese exports to Singapore next year.

BETTER ACCESS: Singapore and Chinese companies will enjoy preferential access to the hospital and business services sectors in each other’s market. In addition, China will enjoy similar treatment for Singapore’s education services sector.

EASIER MOVEMENT: Singapore and Chinese companies will find it easier to deploy their staff to their operations in each other’s markets.

Source : Straits Times - 24 Oct 2008

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Prime retail rents to slip 5-15% Knight Frank

Prime retail rents to slip 5-15% Knight Frank

It cites new retail space of 3.4m sq ft available in ‘09, and spending slowdown

By KALPANA RASHIWALA

RETAIL landlords are headed for a rough patch as consumer spending weakens amid the economic downturn and with 3.4 million sq ft of new retail space scheduled for completion next year, property consultants say.

Knight Frank’s head of retail Sherene Sng predicts that average rents for prime retail space in Orchard Road and at suburban malls could slip 5-15 per cent in 2009. ‘For super-prime retail space on Orchard Road, the decline, if any, will be capped at around 5-10 per cent at most, because there’s not that much super-prime space around and most of it is in malls that are very well managed,’ she said.

For full-year 2008, Ms Sng expects retail rents island-wide to be pretty much flat, increasing no more than 5 per cent.

CB Richard Ellis said yesterday retail rents stagnated in the third quarter of this year, and trimmed its full-year 2008 forecast for prime Orchard Road rents.

It now expects Orchard Road rents to edge up 2-3 per cent in 2008, lower than a 3-5 per cent increase it predicted earlier this year. However, CBRE is maintaining its 3-5 per cent increase forecast for prime suburban mall rents in 2008, due to the captive market of HDB heartland shoppers these malls can count on, as well as limited new supply of retail space in the suburbs.

Some 41 per cent of the 3.4 million sq ft of new retail space slated for completion next year will be in the Orchard Road belt - coming from developments like ION Orchard, Orchard Central, 313@Somerset and Mandarin Gallery.

‘This will bump up total private Orchard Road retail stock some 36 per cent in just 2009 alone and undoubtedly raise concerns about space absorption, despite the fact that retail take-up tended to be somewhat supply-led in the past,’ CBRE said.

The biggest contributor to new retail space on the island next year will be The Marina Bay Shoppes at Marina Bay Sands, with 800,000 sq ft of net lettable space, according to CB Richard Ellis. The Downtown Core region, where the development is located, will account for 24 per cent of new retail space being completed here next year.

Knight Frank’s Ms Sng says the big factor affecting retail rents next year will be not so much the completion of 3 million-plus sq ft of new space but a slowdown in sales as people tighten their belts and cut spending due to the economic downturn.

‘This will cause retailers to become more cautious and adopt a watch-and-wait attitude and hold back business plans,’ she said. ‘Some smaller retailers operating as sole proprietorships or partnerships may also be affected by the stockmarket crash. Of course, there will be some retailers that are still doing well - but they too will use the weaker economic climate to secure more attractive rents from landlords when they renew leases or open new stores.’

CBRE’s data shows that in Q3 2008, the average monthly prime retail rent in Orchard Road was $36.80 per sq ft, while the average super-prime rent there was $54.40 psf. The average prime retail rent in the suburbs was $29.30 psf. All three numbers were unchanged from Q2.

CBRE’s director (retail services) Letty Lee declined to forecast retail rents going ahead. ‘A number of factors will determine the rate of rental change for the rest of this year and the next,’ she said.

‘The full impact of the financial meltdown on the job market is still unknown. In the meantime, consumers will remain cautious and may cut spending as a result.

‘The financial turmoil will also affect tourism, which will in turn affect consumer spending. Landlords may be pressured to reduce rents as a result. We are still assessing the situation and it is difficult to make a projection at this stage.’

Colliers International said in a report yesterday that while year-end festivities may provide some relief for retailers, consumer spending is likely to remain subdued given the poor economic outlook and the drop in foreign visitors.

Any retail rental growth is therefore expected to be minimal in the last quarter of the year. ‘As such, rents are projected to increase by up to 5 per cent for the whole of 2008,’ Colliers said.

Source : Business Times - 24 Oct 2008

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Singapore GIC RE to up stake in troubled Australian property group

Singapore GIC RE to up stake in troubled Australian property group

Up to A$700m extra investment will boost 2.2% shareholding in GPT Group

By ARTHUR SIM

(SINGAPORE) The Government of Singapore Investment Corporation (GIC), through its real estate arm, will invest up to A$700 million (S$705 million) in Australian property trust GPT Group.

While GPT Group is one of Australia’s largest and most established diversified listed property groups, it has been been hit hard by the current global financial crisis due to foreign currency exposure and the recent decline of the Australian dollar.

Reuters earlier reported that the group had been trying to sell almost a third of its A$14 billion in assets. It added that GPT Group struggled to sell off its Voyages Lodges chain of eco resorts and its US seniors housing business to shore up its balance sheet.

In a statement released yesterday, GIC Real Estate president Seek Ngee Huat said: ‘We have always believed in the fundamentals of the Australian economy and its property sector. We see this partnership with GPT as a good fit, and an important part of our investment strategy in Australia.’

GIC RE already has a 2.2 per cent shareholding in GPT Group.

GPT Group, which has seen its share price fall over 70 per cent this year, also released a statement yesterday saying that it is making an entitlement offer to raise a minimum of A$1.3 billion.

It added that GIC RE would take up its pro rata entitlement as well as be issued with A$250 million in perpetual, exchangeable securities.

GIC RE also agreed to sub-underwrite 504 million securities of the retail entitlement offer. GPT Group will place additional securities to GIC RE such that GIC RE receives a minimum of 250 million securities through its sub-underwriting of the retail entitlement offer.

In all, GIC RE is expected to invest between A$450 million and A$700 million in GPT Group and have a shareholding of between 12 and 18 per cent.

GPT Group has said that the net proceeds from the entitlement offer will be used to repay debts and deleverage its balance sheet, with its business plan and debt maturities fully funded through January 2010.

The Sydney Morning Herald also reported yesterday that shareholders of the company were intending to launch a class action suit, alleging that GPT Group’s board provided misleading and deceptive earnings guidance - centring around statements made by GPT Group in July, when it released a statement to the Australian Stock Exchange, in which its forecast earnings for the 2008 calendar year were cut by 27 per cent.

Asked if GIC RE was concerned that GPT Group will require more recapitalisation, a spokeswoman for GIC RE said: ‘We believe that GPT has made a realistic assessment and its move for a recapitalisation will be able to strengthen its balance sheet.’

She added: ‘Moreover, our structure of convertible perpetual preferred securities and rights issue participation will provide sufficient downside protection and opportunities for upside in capital appreciation. There is also a reset provision should there be further dilution.’

Source : Business Times - 24 Oct 2008

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