Union Investment buys $63m building

Union Investment buys $63m building

By UMA SHANKARI

(SINGAPORE) German fund manager Union Investment Real Estate has acquired the Applied Materials Building in Changi Business Park Vista for $63 million for one of its funds, it said yesterday.

Diversification: Acquiring the Applied Materials Building in Changi Business Park Vista, Union Investment Real Estate says business parks are well sought after by a different tenant profile than the typical CBD tenant
The 198,000 square foot industrial facility was owned by Applied Materials SEA - a supplier of products and services to the semiconductor industry - and is being sold with a sale-and-leaseback agreement. The development was acquired for Union Investment’s UniImmo: Global fund. It has a 30+30-year lease.

Union Investment entered the Singapore market in 2007 with its purchase of Vision Crest’s office block and the House of Tan Yeok Nee next door in the Penang Road/Clemenceau Avenue area for a total of $260 million. It bought the properties from a unit of mainboard-listed property group Wing Tai.

The latest purchase adds to the fund’s diversification as it is in a business park, Union Investment said.

‘Business parks are well sought after by a different tenant profile than the typical CBD tenant,’ said Steffen Wolf, managing director of Union Investment’s Asia-Pacific real estate unit. ‘ It offers us the possibility to diversify our portfolio in Singapore, both in usage and location.’

Apart from Applied Materials Building, which will lease back its existing space for one-and-a-half years, other prominent tenants in the building include EMC International and Discovery Channel.

The six-storey Applied Materials Building was designed as an environmentally conscious and intelligent building. It was given a Gold Green Mark award by the Building and Construction Authority in 2008. The building’s green features include energy-efficient air- conditioning and lighting systems with functions such as motion sensors for after-hours lighting control and the toilet lighting system.

Source : Business Times - 31 Oct 2008

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More private equity may flow into hospitality sector

More private equity may flow into hospitality sector

But investors must be choosy and have a long-term view, say analysts at a panel discussion

By NISHA RAMCHANDANI

PRIVATE equity is expected to play a bigger role in the hospitality sector, given the likely medium-term difficulty in securing debt finance.

‘If you take a longer term view, then you have to some extent ignore what’s happening now. That’s how you make serious money.’

- David Faulkner,
Colliers International

But investors should be careful to pick the right type of project and must realise that investments have to be made with a long-term view.

‘Prices have been correcting. And we expect them to correct a lot more,’ said Quek Kwang Meng, Citigroup’s real estate investment head international, yesterday. As such, investors should take their time in choosing which projects to put their money in, he said. Ideally, hospitality projects should fulfil a basic need - such as three-star service apartments to cater to business travellers.

Greenfield projects in parts of China such as Shanghai and Beijing also remain of interest to most private equity investors, Mr Quek said.

This is because of rural-urban migration and a steady stream of some four million university graduates every year. ‘They need to find jobs and are going to the cities to look for them,’ he said.

Still, investments have to be made with a long-term view.

‘If you take such a view, then you have - to some extent - ignore what’s happening now,’ said David Faulkner, regional director, valuation and advisory for Colliers International, referring to the slowing economy and credit crunch.

‘That’s how you make serious money.’

While distressed properties are likely to be found on the market in time, for now, Asia remains in good shape financially, he said.

‘The bigger corporations are in a better position. Smaller developers and corporations are suffering a bit. But there’s no sign of panic in the region.’

Mr Quek and Mr Faulkner were speaking during a panel discussion at the inaugural Invest, Develop, Build - Resorts, Spas, Hotels, Marinas Asia-Pacific 2008, a networking platform for the hospitality sector which kicked off yesterday.

The event is supported by the Singapore Tourism Board and the Economic Development Board and endorsed by governments of countries such as Thailand, Indonesia, Japan and Russia.

In a presentation yesterday morning, EDB positioned Singapore as the ‘living lab to develop and test new concepts’ such as green buildings or health-and-wellness concepts.

Singapore’s pro-business environment, access to regional partners, supply chain management capabilities and stylish city scene are among factors that make it a window to the future of urban Asia, according to EDB.

Source : Business Times - 31 Oct 2008

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Japan ready to calm markets, ease yen rise

Japan ready to calm markets, ease yen rise

Several measures expected to be unveiled today to fight financial fires

By ANTHONY ROWLEY
IN TOKYO

PRIME Minister Taro Aso is expected to advance to today the unveiling of a package of emergency measures that form part of an arsenal of weapons Japanese authorities are deploying to fight the global financial and economic crisis.

Mr Aso: Said to be rushing through plans now to clear the decks for an election
This will almost certainly be followed tomorrow by a cut in the Bank of Japan’s (BOJ) policy lending rate - the first in seven years - coupled, possibly, with foreign exchange market intervention.

Mr Aso’s announcement had also been expected to come tomorrow but, given the dramatic collapse of Tokyo stock prices earlier this week and the brutal surge in the value of the yen, the package of emergency measures will almost certainly come today in order to help calm markets, sources close to the government suggested.

The BOJ is, meanwhile, under pressure to lower interest rates, chiefly as a gesture of solidarity with other leading central banks and as a means to calm shattered market nerves. The central bank is expected to cut its 0.5 per cent overnight lending rate to 0.25 per cent, especially if the US Federal Reserve drops rates by further 0.5 per cent at a meeting which was being held yesterday. The European Central Bank (ECB) and the Bank of England will probably follow suit next week.

Tokyo’s Nikkei 225 stock average rebounded 7.7 per cent or 589.98 points yesterday to 8,211.90 in expectation of an interest rate cut and in anticipation of the government’s package of emergency measures. The yen, which hit a 13-year high of around 90 to the US dollar, earlier this week declined after the Group of Seven (G-7) finance ministers warned of excessive movements in the currency on Monday. But yesterday it climbed back to 96 to the dollar.

The G-7 statement stirred speculation of foreign exchange market intervention to stem the yen’s disorderly rise. A former senior Japanese Finance Ministry official told The Business Times that such intervention would be most likely to succeed if it were accompanied by a cut in interest rates.

Chief economist Richard Jerram at Macquaries Securities in Tokyo agreed. A rate cut ‘would have limited effect unless accompanied by other actions from the BOJ’, he said.

Currency markets are watching very closely for signs of any such intervention because of the critical role played by the formerly weak yen in boosting global asset prices via yen ‘carry trades’, an analyst said.

According to media reports, the Bank of Japan will tomorrow slash its estimate of the country’s 2008 economic growth from the 1.2 per cent previously forecast by the central bank to virtually zero.

This is in line with recent forecasts by many private economists as Japan’s exports tumble, removing the one remaining prop to the growth of a Japanese economy hit by tumbling consumer spending and weakening corporate capital spending.

The package of measures anticipated today are expected to centre on restoring stability to Japan’s financial markets and institutions, however, with macro-economic supports in the form of tax cuts and public spending on infrastructure and other big-ticket government projects coming later.

Today’s package will likely include several measures to stabilise Japan’s equity markets. These will include a clampdown on ‘naked’ or uncovered short- selling of stocks; a more flexible interpretation of restrictions on equity holdings by banks; allowing Japanese firms to expand equity sales on behalf of their employees; extending a reduction in tax on capital gains from stocks; and promoting equity holdings by small investors .

Measures to ’strengthen the intermediation function’ of Japanese financial markets will include flexibility in determining the capital ratios of Japanese banks and injections of public capital into banks. Japan’s three giant bank holding companies have admitted a need to raise substantial new capital but the government is hoping they can do this through the market, so that public funds - up to 10 trillion yen (S$159 billion) - can go into smaller regional banks

The onset of the financial crisis has heightened speculation that Mr Aso will now delay an earlier-expected announcement to dissolve the Lower House of Japan’s Parliament on Nov 30 so that a snap general election can be held.

However, sources close to the prime minister insisted yesterday that no such decision has yet been made. Some political analysts say that Mr Aso is rushing through measures now in order to clear the decks for an election.

Source : Business Times - 31 Oct 2008

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Singapore Sentosa IR to delay parts of project

Singapore Sentosa IR to delay parts of project 

Only four hotels, casino and Universal Studios to open as scheduled in first quarter of 2010 

FOUR hotels, Universal Studios and the casino of the Sentosa integrated resort are set to open as scheduled in the first quarter of 2010.
But sources told The Straits Times that Resorts World at Sentosa is negotiating with the Government to defer the opening of the remaining facilities in the $6 billion resort.

The setback, The Straits Times understands, has arisen out of a pressing need to find storage space for the equipment for the 14 attractions in the Universal Studios theme park.

To create space on-site, the resort has had to turn one of its venues into a store and, while the venue is used this way, construction has to be put on the backburner.

Asked about this, Resorts World at Sentosa head of communications Krist Boo would only say the project is ‘on track’ for a ’soft opening’ in 2010.

She added: ‘Due to the tight labour market and the need for many varied specialist skills - both front-line and in operations - in the resort and in Universal Studios Singapore, we will be progressively opening our many hotels, food and beverage outlets, casino, entertainment and attractions from the first quarter of 2010.’

Like Las Vegas Sands Corp, Resorts World at Sentosa’s parent company Genting has been hit by the financial crisis. Its stock price fell by half from RM8.50 a year ago to its current value of about RM4.

The Singapore Tourism Board declined to respond to queries on the ongoing negotiation.

Source : Straits Times - 30 Oct 2008

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Asia shrugs off Wall St rally

Asia shrugs off Wall St rally 

Bourses across region close mostly flat as investors remain wary 

By Lee Su Shyan, Assistant Money Editor 
  
A RECORD-BUSTING overnight rally on Wall Street is usually rocket fuel for Asian markets as they open for business - but not yesterday.
Even an astonishing surge of nearly 900 points on Wall Street on Tuesday, and the second-largest point gain on record, failed to ignite bourses in Asia.

They gave up early gains to close mostly flat as fears over a global economic slowdown continued to leave investors cautious and wary, even as governments signalled they were going to cut interest rates further to boost their economies.

Markets had initially surged following the Dow Jones Industrial Average’s 10.9 per cent jump on Tuesday.

But market experts like Mr Kevin Scully, executive chairman of Singapore- based NRA Capital, was among those unconvinced about the rally’s sustainability.

‘Don’t be fooled by this rally… it was partly because the markets had been oversold. Fundamentally nothing has changed,’ he said.

This sort of view was echoed in other markets worldwide, underscoring the growing pessimism with which traders are viewing dramatic rises and falls.

London analyst David Buik of BGC Partners told Britain’s Daily Telegraph newspaper that the overnight rally in the United States was ‘madness’.

‘What happened yesterday, in my opinion, is that we had no redemptions, no hedge fund selling in New York… It was a hysterical rally based on nothing,’ he said.

As a result, the only Asian market that performed well was Tokyo, where the benchmark Nikkei 225 index soared 7.74 per cent, recouping the losses suffered since Thursday last week.

There, the talk was that the Japanese central bank could cut rates for the first time since March 2001.

A cut from 0.5 per cent to 0.25 per cent would ’send a message to the world that Japan is cooperating with other nations in tackling the financial crisis’, said one Tokyo analyst.

Interest rate cuts typically boost the economy by lowering borrowing costs for companies and consumers, spurring greater spending and investment.

There was plenty of news about rate cuts yesterday, with the market also expecting the US Federal Reserve to cut rates yesterday by anything from 0.5 to 1 percentage point to the lowest level since 2004.

China also cut bank benchmark lending and deposit rates by another 0.27 percentage points, the third cut in six weeks, after the market’s close.

Yet markets from Australia to Singapore surrendered gains of 4 or 5 per cent to close largely flat for the day.

Australia’s ASX was up just 1.34 per cent, while Hongkong and Singapore added 0.84 per cent and 0.28 per cent respectively.

As Singapore gets into the thick of the third-quarter reporting season, investors are on the edge of their seats for confirmation of how bad the slowdown will get.

Already Neptune Orient Lines has warned of a sharper and longer downturn to the shipping industry, while fellow shipping line Cosco Corp reports today.

Financial institutions whose shares have been sold down recently will also report results soon. United Overseas Bank will release its results tomorrow, with insurer Great Eastern, OCBC Bank and DBS Bank having their turn next week.

Amid the gloom, pockets of good news continued to stream in last night.

Orders for durable goods in the US such as cars and appliances rose 0.8 per cent last month, bucking an anticipated 1.2 per cent decline.

In London, markets rose as the rate at which banks charge each other for loans - the Libor - continued to decline, indicating that lending activity is improving.

But dealers warned that things will get worse before they get better.

‘There are still pockets of de-leveraging with hedge funds still selling down stocks to meet margin calls,’ said one dealer that The Straits Times spoke to.

Source : Straits Times - 30 Oct 2008

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Singapore Marina IR not likely to open fully in end-’09

Singapore Marina IR not likely to open fully in end-’09 

By Lim Wei Chean 
  
The construction of the Marina Bay Sands integrated resort, which sources confirm is ’several months’ behind schedule, has run into problems including a delay in foundation works, a shortage of labour and the rising cost of building materials. — ST PHOTO: ALPHONSUS CHERN

THE integrated resort (IR) at Marina Bay is unlikely to be fully open for business at the end of next year, sources have said.
An old British-built sea wall on its site, which stands on reclaimed land, is among the problems. It delayed foundation works by three to four months, and then a shortage of labour and the rising cost of building materials also created setbacks.

When the Marina Bay project was awarded to Las Vegas Sands in 2006, its top executives announced that the entire resort would be ready by end-2009 - a departure from the industry practice of opening such mega projects in stages.

But sources now confirm that it is ’several months’ behind schedule and that, even if the physical structure can be ready by then, it will be ‘impossible’ for all its facilities to be fully operational.

The 2,600-room resort with a gross floor area bigger than 70 football fields is supposed to be the new hub for the meetings, incentives, conventions and exhibitions business with its 200 meeting rooms, exhibition hall for 2,000 booths and ballroom for 6,600 diners.

Asked about the delay, Marina Bay Sands general manager George Tanasijevich maintained: ‘As previously announced, we are scheduled to launch at the end of 2009.’

But show organisers and wedding couples hoping to book the venue at the end of next year have been turned away.

Bride-to-be Rachel Law, 27, called the resort in August to ask about holding her wedding dinner there next November and was turned down despite having begged for her booking to be taken.

An event organiser, who said the earliest booking available was for an April 2010 event, asked: ‘If they are opening next year, why are they turning away business until 2010?’

Construction woes aside, the free-fall in the stock value of the resort’s parent company Las Vegas Sands Corp - from US$178 13 months ago to under US$5 now - has also raised questions about the fate of the US$4.5 billion (S$6.7 billion) project here.

CIMB-GK economist Song Seng Wun, predicting that the gaming sector will be hit by the global recession, said the operators’ vulnerability is on everyone’s mind.

The collapse of banks like Lehman Brothers Finance Asia and Merrill Lynch International Banks has also put a question mark on the $5.25 billion loan secured by Marina Bay Sands. The two American banks were among the lead arrangers for the loan, along with local banks like DBS Bank, United Overseas Bank and OCBC Bank.

Mr Tanasijevich did not reply to questions on the status of the Singapore loan, nor those on whether the IR will open in phases and when it would accept bookings for events.

Singapore Tourism Board (STB) director of integrated resorts Margaret Teo told The Straits Times the board is monitoring the situation, but did not respond to other queries on penalties or whether the resorts will open in phases.

She said, however, that the STB was working with key agencies and the resorts to resolve potential delays and to enable the resorts’ completion.

Analysts note that the two resorts have up to eight years to finish construction, but delays are bound to hurt the Singapore economy because of the 60,000 new jobs and $5.4 billion in revenue that they are expected to generate.

Tourism and gaming consultant Jonathan Galaviz, reckoning the losses to run into millions of dollars every month, said: ‘It brings into question the true economic value each bidder promised the Singapore Government in the formal proposal.’

The rules of the awards of the two projects given in 2006 stated that both companies must start construction within three years and complete them in eight years.

They stand to lose their deposits of $200 million each and the Government could repossess the land as a penalty.

Source : Straits Times - 30 Oct 2008

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