Singapore to develop new ways to get citizens working longer

Singapore to develop new ways to get citizens working longer

By Valarie Tan,

SINGAPORE: Singapore will need to develop new arrangements to help the elderly work as long as they can.

Prime Minister Lee Hsien Loong said one such feature in place is getting companies to rehire workers at 62 years old for another three years till 65. But that could mean taking up a different job at a lower pay.

Housekeeping is not the most sought-after job, but someone has got to do it.

66-year-old Lee Lai Eng has been working as a housekeeper for over 20 years.

The grandmother of four chose to continue working six days a week, eight hours each day, even after retirement.

Even though she gets the same pay as her younger colleagues, the former nurse feels empowered by her added responsibilities as a housekeeping trainer.

She is also glad that being employed means her medical needs are taken care of by the company.

Madam Lee said: “My children have asked me to stop work, but it is hard.” She said she prefers to be independent financially. “I prefer to be free.”

“Pay is important, but I feel that I don’t need so much money since I’m so old,” said Madam Lee.

That is something Prime Minister Lee will be glad to hear.

Speaking at Singapore’s first Retirement Conference on Thursday, he said social attitudes must change.

“The job of hotel attendant may be a humble one, but it is an honourable employment. We should not discourage anyone from taking on such jobs. To do so would limit his options to be active, engaged and to earn an income,” Mr Lee said.

“They need to be ready to adjust to different responsibilities, and possibly lighter work and less pay and understandably, these adjustments are harder to accept,” he added.

Besides attitudes, Mr Lee said wage structures - where workers get paid according to the number of years on the job - must also change with the times, so that companies will hire more older workers instead of younger and cheaper ones.

The labour movement is working with companies to make older workers’ wage structure more competitive so that it is easier for them to stay employed.

NTUC deputy secretary-general, Heng Chee How, said: “For the older workers, you are looking at aspects of health, you’re looking at aspects of skills, you’re looking at aspects of job performance.

“And all these are specific areas that must be further enhanced because as the population ages, you’ll have more and more older workers. They’ll have to work longer and they’d want to work longer.”

The unions are also working with companies to help older workers find and keep jobs during this downturn.

Union leaders say they are working with companies to encourage them to send not just the younger workers for retraining but the older ones as well, as part of the government’s S$600m skills upgrading scheme.

- CNA/ir

Source : Channel NewsAsia - 08 Jan 2009

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More REITs, developers expected to put projects on hold

More REITs, developers expected to put projects on hold

By Ng Baoying,

SINGAPORE: Shares of CapitaCommercial Trust (CCT) rallied to a two-month high on Wednesday following an announcement that it would refinance as much as S$580 million of mortgage-backed securities. The counter was up 7 per cent to S$1.00.

Analysts are also cheering the company’s decision to scrap a billion-dollar redevelopment plan in Singapore’s business district as more developers are expected to hold back development plans in the months ahead, due to weak rentals.

Construction costs may be moderating but not at a satisfactory rate, according to market-watchers. There is also a weak property market and an increasingly tight credit environment.

All these make it difficult for REITs to justify pursuing aggressive growth strategies.

Brandon Lee, investment analyst, DMG & Partners, said: “Capital preservation right now really ranks on top of most REITs radar. If the REITs have any additional cash position or capital, they would actually try to reserve it for any near-term refinancing issues instead.”

Therefore, analysts said it is no surprise that CCT chose to scrap plans to transform the Market Street car park in Singapore’s business district into a Grade-A commercial building, which would have cost S$1.5 billion.

The Market Street car park project was first announced in January last year. However, in April, CCT decided to delay the project and to make a decision after mid-2009. Since then, it has decided to work on improving tenant mix and extending longer term leases.

Analysts said this piece of news brings relief not only to the tight car park situation in the central business district, but also to tenants who have shops in the building.

Donald Han, managing director, Cushman & Wakefield, said: “In the past, one of the issues for the Market Street car park was the uncertainty in time frame. There are tenants operating who are unsure of whether their leases can be renewed.

“Some of them have packed in fairly high renovation costs. To be given notice to quit or to amortize all the expensive fit over a shorter period is an expensive affair for tenants.

“So now the deferment or non-development position by the owners would create certainty, not only for existing tenants but also new tenants who are looking into potentially taking a position in the Market Street retail component.”

Other REITs apart from CCT have also found it sensible to hold back development or acquisition projects for now. Among them are CapitaMall Trust, Suntec REIT and Saizen REIT.

Mr Lee said: “Since the third quarter last year, I think there are a handful of REITs which have put on hold their plans, such as CapitaMall Trust. They have actually deferred the asset enhancement plans for three assets, as well as Suntec REIT which put on hold its further acquisition of more strata title spaces in Suntec City.”

This conservative stance is one that even large developers are taking.

Mr Han said: “Owners of Marina House for instance have backed out from wanting to develop. UIC announced last year they’re not going to redevelop UIC building into a residential building and they are continuing longer term leases for office tenants.

“Of late, you’ve got the South Beach project delayed by virtue of high construction costs and there’s also the Funan Digital Mall (project) which has been deferred.”

Analysts said the situation will only improve by end-2010 or 2011 – a year or so after the economy picks up when the credit situation improves.

- CNA/so

Source : Channel NewsAsia - 08 Jan 2009

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Prime office rents could plunge by up to 40%: Report

Prime office rents could plunge by up to 40%: Report

Office stock in the Central Business District is expected to rise by up to 7 per cent by 2010 to 2011.

OFFICE rents in prime districts could dive as much as 40 per cent by next year, says consultancy Cushman and Wakefield in a new report.
The industry has been expecting falls, but the magnitude of the projected slump is surprising. The consultancy blames a huge stock of office space that is rising amid tough times and rising job losses.

‘The fact that Singapore is an international financial centre also means it will be badly hit during the downturn as a lot of investment activities are dependent on foreign participation,’ it said.

Prime office rents, it said, will fall from a high of $14.20 per sq ft a month last year to $12 psf a month this year. It expects this to drop to about $8 psf next year, and to about $7.50 psf by 2011, when prime office vacancy rates are set to rise to 11 to 15 per cent.

But rents remain above the $7 psf witnessed in previous peaks of 1995 to 1997 and 2005 to 2006.

Three factors, said Cushman, are contributing to the fall in rents. First, office stock is rising at a time when economic growth is stagnating or falling.

Second, a huge pipeline of office inventory is building up because of the overwhelming optimism shown by developers during the boom years of 2006 and 2007.

And third, employment is likely to flatline or even shrink by 1 per cent, as seen in downturns in 1998 and 2001-2002.

‘The rate at which new supply is added to existing stock in 2009 and 2010 will be one of the highest since 1992,’ said the report.

Pre-commitments by tenants for office buildings due for completion this year and next are estimated to be only 30 per cent so far. The rate is not expected to improve in the near term, said Cushman.

A total of 10.7 million sq ft of office space will be available by 2013 - of which 2.7 million sq ft will be ready by 2010 - representing about 15 per cent of total stock, it said.

Office stock in the Central Business District will rise by up to 7 per cent by 2010 to 2011 - the second highest rate after 8.7 per cent in 1995 when economic growth was higher.

But demand, which averaged about 2 million sq ft a year in the past two years, is expected to fall by more than half, and possibly to just 500,000 sq ft a year.

JOYCE TEO

Source : Straits Times - 08 Jan 2009

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1,200 luxury homes yet to find takers

1,200 luxury homes yet to find takers

CBRE says growing supply overhang may see prices drop by up to 15%

By Joyce Teo, Property Correspondent

A STOCKPILE of up to 1,200 luxury homes in prime districts remains unsold, adding to a growing supply overhang that is likely to drag prices lower this year.
That grim assessment of the very top end of Singapore’s property market has been made by leading property consultancy CB Richard Ellis (CBRE).

However, it has also concluded that despite the challenging market conditions, some developers may be able to hold on to projects until the market recovers.

‘Developers who are laden with unsold units in projects that were already launched would prefer to focus on clearing them rather than launch new projects,’ it said.

‘This would inevitably lead to price cuts,’ the consultancy added.

CBRE is projecting a decline this year of about 10per cent in the prices of good-class bungalows (GCBs) - the most prestigious bungalow type here - and 10 to 15per cent price falls for luxury apartments.

Last year, 49 GCBs worth about $785million were sold, down from 87 GCBs worth $1.15billion in 2007 and 119 GCBs worth $1.23billion in 2006.

Average prices of GCBs hit $822 per sqft (psf) last year, up from $681 psf in 2007 and $501 psf in 2006.

The top-priced GCB deal last year was a 52,528 sqft Leedon Park property sold for $43.2million in May. On a psf basis, the most expensive deal was at $1,303 psf for a Leedon Road property, also in May.

CBRE said GCB prices hinge on the location and land characteristics.

Given the current downturn, buyers will be looking to pay competitive prices for GCBs, but fire sales will be hard to come by as most GCB owners have the capacity to hold, said director of luxury homes Douglas Wong.

The luxury apartment market also saw a drastic fall in sales last year, with just 1,096 caveats lodged. Government data showed this worked out to just 19per cent and 32per cent of sales in 2007 and 2006 respectively, said CBRE.

Caveats lodged for high-end apartments worth $1million to $3million stood at 777, which is about 22per cent of the 3,566 caveats lodged in 2007 and 29per cent of caveats lodged in 2006.

But a considerable number of more expensive homes were sold last year, with 82 caveats lodged for apartments worth $10million and above, though 63 were units in Nassim Park Residences. This compares with 143 in 2007, 22 in 2006 and none in 2004-2005.

Price-wise, new luxury projects saw average launch prices drop to $2,000 psf to $2,600 psf by the end of last year, from $2,000 psf to $4,000 psf in 2007.

Prices of existing luxury developments, such as Ardmore Park and Grange Residences, hit $2,000 psf to $2,400 psf, from $2,000 psf to $3,300 psf in 2007 and $1,600 psf to $2,000 psf in 2006.

Most of the luxury projects launched in early 2007 have been fully sold. But several projects remain on the market, especially those launched in the second half of last year when the sub-prime crisis hit.

As of last November, only 41per cent of units offered at these launches had been sold.

This year, luxury sales activity is expected to be lukewarm, similar to the second half of last year, said CBRE.

Source : Straits Times - 08 Jan 2009

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Software company’s staff in Singapore shocked

Software company’s staff in Singapore shocked

By Jessica Cheam

NEWS of the billion-dollar scandal at software giant Satyam Computer Services sent shock waves through its Singapore offices and the Indian business community here yesterday.
Some Satyam staff seemed dumbfounded at what had unfolded at their blue chip company while Indian business leaders fear the fraud could damage India’s reputation as a business centre.

The leading outsourcing company - which counts a third of Fortune 500 firms as its clients - set up a major operation here in 2000 to serve the Asia-Pacific, Middle East, India and Africa.

It has two facilities - an office in OUB Centre at Raffles Place and a larger space at the Ultro Building at Changi Business Park - and a 500-strong workforce here.

A shocked employee at the Changi site said the news was a complete surprise. ‘I wouldn’t have imagined something like that to happen to Satyam,’ she said.

But three Indian national employees, also Singapore PRs, told The Straits Times that they were not totally surprised given the run of bad news in the last two weeks.

‘We’re slightly worried, but Satyam is a good company…we’ll get to keep our jobs,’ said one man in his thirties.

The Satyam scandal - already being dubbed India’s Enron - has also been felt deeply in the Indian business community in Singapore. ‘The news is utterly shocking,’ said Mr Predeep Menon, chief executive of the Singapore Indian Chamber of Commerce and Industry. ‘Satyam is a very established company with a very good reputation…the most bewildering thing is, how did this go undetected for such a long time without the slightest sign of wrongdoing?

‘There are going to be lots of questions…In the short-term, foreign investors are going to be suspicious of other companies, whether they are involved in such similar fraud. Credibility will be severely affected.’

The firm has a significant presence here. It said in a statement yesterday that it ‘counts among its clients in Singapore several leading statutory boards and government departments as well as publicly listed and private [multi-national] companies having operations [here]‘.

Satyam also operates a Global Innovation Hub at its Changi facility, where it works with partners to develop mobile applications and business processes in telecom, banking and supply-chain management. In 2004, it launched a partnership with home-grown Singapore infocomm company System Access.

Satyam’s senior vice-president here, Mr Virender Aggarwal, said the firm ‘as an organisation remains committed to its customers in Asia Pacific, a region which continues to offer promising growth’.

‘Singapore is not only an important market for Satyam but also serves as its regional headquarters and a critical pillar of its global delivery model,’ he added.

The firm’s interim chief executive in India, Mr Ram Mynampati, said in a televised statement in India last night that he was ’shocked and distressed by the disclosures coming from the organisation’.

Additional reporting by Elizabeth Wilmot

Source : Straits Times - 08 Jan 2009

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Billion dollar gap

Billion-dollar gap

WHAT WENT WRONG: The shares of one of India’s biggest outsourcing firms, Satyam Computer Services, are in free fall after its chairman admitted that his company had doctored accounts over several years to inflate its profits.
It was unable to account for a US$1 billion (S$1.47 billion) gap in its balance sheet despite faking its books with non-existent cash and fictitious assets.

WHO’S TO BLAME: Satyam chairman Ramalinga Raju has quit along with his brother B. Rama Raju, its managing director.
In a letter to the board, Mr Raju admitted that the US$1 billion hole could no longer be concealed after a deal intended to save the struggling company was scuppered. ‘Every attempt made to eliminate the gap failed. It was like riding a tiger, not knowing how to get off without being eaten,’ he said.

The Indian government said it is investigating Satyam’s directors and its auditors, PricewaterhouseCoopers.

THE EFFECT: Satyam’s shares plunged 77 per cent to 40 rupees yesterday. The Sensex stock index fell 7.6 per cent to 9,546.78 on news of the fraud.

HOW BIG IT IS: Satyam has clients and operations in 66 countries including the United States, China, Britain, Australia, Japan and Dubai. At end-September last year, it had 52,865 people on its payroll.
Its clients include General Electric, Nestle, Fujitsu and Qantas.

Source : Straits Times - 08 Jan 2009

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Singapore Property investment sales fall in Q4 ‘08

Singapore Property investment sales fall in Q4 ‘08

It is the lowest level in five years, says a DTZ report

By UMA SHANKARI

(SINGAPORE) Property investment sales in the fourth quarter of 2008 fell to the lowest level since Q4 2003, with most players sidelined as prices weakened and credit tightened, a DTZ report shows.

Dormant market: The residential sector slowed tremendously in 2008 as interest in collective sales abated
Total transaction volume was just $352 million - a 74 per cent fall from Q3 2008. With sales falling rapidly towards the end of the year, total transaction value in 2008 plunged to $15.8 billion - a mere one-third of that in 2007 and two-thirds of that in 2006.

The investment market is expected to remain dormant in the first three to six months of 2009 as investors wait for prices to fall further and for tight credit conditions to ease, DTZ said.

Transactions will be confined to the private sector as government land sales through the confirmed list have been suspended and reserve sites are unlikely to be triggered.

‘The second half of 2009 is likely to see more deals as the price gap between sellers and buyers closes,’ said Shaun Poh, DTZ’s senior director of investment advisory services.

‘How much the investment market recovers will depend on the depth and length of the economic and property downturns.’

Although there was no major office deal in the second half of 2008, the office sector was still the main driver of investment sales during the year with $5.6 billion or 35 per cent of total sales - an increase from 24 per cent in 2007. All the major office transactions were in the first half of 2008. In the second half, all office deals were below $30 million.

The residential sector slowed tremendously in 2008 as interest in collective sales abated. Residential transaction value tumbled 82 per cent year-on-year to only $3.9 billion, accounting for 25 per cent of total sales, compared with 49 per cent in 2007.

There were only seven residential collective sales in 2008, compared with 150 in 2007. ‘With high construction cost, financing difficulties and weak market sentiments, developers are shunning residential collective sales,’ DTZ said.

Transactions in the industrial sector, by contrast, increased in 2008 as investors shied away from high office prices. Some $3.4 billion of industrial property was transacted, or double the amount in 2007.

About half of 2008’s deals resulted from the divestment of JTC’s industrial properties in Q2. And despite the restrained mood in Q4, several notable industrial transactions took place, including the purchase of Applied Materials Building by German fund manager Union Investment.

DTZ said that investment by real estate investment trusts (Reits) was subdued in the second half of 2008, as they shifted attention away from acquisitions and focused on refinancing and deleveraging.

There were only three purchases by Reits in Q3 2008 and just one in Q4, compared with 22 purchases in the first half of the year.

Source : Business Times - 08 Jan 2009

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Egypt offers blueprint to end fighting in Gaza

Egypt offers blueprint to end fighting in Gaza

Israel views plan positively but stops short of acceptance

(CAIRO) Egypt’s President Hosni Mubarak on Tuesday proposed a plan for ending the fighting in Gaza, including a call for an immediate ceasefire between Palestinian militants and Israel.

Peace brokers: Mr Mubarak (left) welcoming Mr Sarkozy to a meeting in Sharm-el-Sheikh on Tuesday
Israel said that it viewed talks on the proposal ‘positively’ but stopped short of accepting Egypt’s plan.

The proposal from Mr Mubarak came at a news conference on Tuesday at the Red Sea resort Sharm-el-Sheik with French President Nicolas Sarkozy, who has been travelling around the region to try to mediate the violence which has seen at least 600 people killed in the past 11 days.

Mr Mubarak’s plan calls for a ceasefire for a limited period of time, designed to allow humanitarian aid into Gaza, and an urgent meeting between both Israel and the Palestinians to discuss ways to prevent further military action and reasons for the conflict, including lifting the blockade of Gaza.

He also once again called on the Palestinian Authority, under the control of President Mahmoud Abbas, and Palestinian factions to renew reconciliation talks; the Palestinian territories have been split between the West Bank under Mr Abbas and the Hamas-controlled Gaza Strip.

Mr Mubarak did not specifically mention the militant group Hamas by name, but a Hamas delegate who came to Cairo for talks with the Egyptians on Tuesday said that the group would take the proposal back to its Damascus, Syria headquarters for discussion.

The Egyptian leader said that he was offering the proposal in order to end the fighting on the Gaza Strip, where Egypt has in the past played a mediator role including helping to bring about a six-month truce between Hamas and Israel which expired in December just before the recent violence began.

During his tour, Mr Sarkozy also met the Syrian president, Israeli leaders, Lebanon’s president and Mr Abbas to try to bring about an end to the conflict.

Egyptian officials have also been increasing pressure on the Syria-based Hamas leadership to accept a ceasefire.

Egypt, which has a peace deal with Israel, wants Hamas to cooperate with international efforts to end the Gaza conflict, Egyptian officials close to the negotiations said on Tuesday.

Egypt’s influential intelligence chief, Omar Suleiman, and a delegation of Syria-based Hamas leaders spoke in Cairo on Tuesday.

‘The message Hamas is getting (from Suleiman) is that without a ceasefire, the Palestinians will be in a grave danger and everything they have achieved so far will be gone,’ one of the Egyptian officials said. — AP, Reuters

Source : Business Times - 08 Jan 2009

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ARA to start country funds for China, India, Japan

ARA to start country funds for China, India, Japan

SINGAPORE property fund manager ARA Asset Management plans to launch country-focused funds for China, India and Japan to take advantage of declining real estate prices that it expects will bottom in late 2009.

Portfolio: Besides Suntec, ARA also manages Fortune Reit in Singapore
ARA, partly owned by Hong Kong tycoon Li Ka-shing’s Cheung Kong (Holdings), will also consider taking its listed real estate investment trusts (Reits) private if share prices remained weak, group chief executive officer John Lim told Reuters.

‘In terms of the deal flows, we do see more and more opportunities coming up,’ he said in reference to properties that are being offered at reduced prices.

Credit markets have also loosened slightly from October-November last year in that bankers are now willing to consider proposals from investors such as ARA, he added.

Asian property prices have fallen sharply since the middle of last year, and listed developers and property trusts in Asia excluding Japan are now trading around 30 per cent below net asset values, JPMorgan said in a report on Monday.

Suntec Reit, which owns office and retail space in Singapore’s central business district and is the largest of four listed property trusts managed by ARA, was last traded around 81.5 cents a unit - less than half its value at the start of 2008.

‘As a responsible manager, we always explore all options (and) privatisation is one of the options,’ Mr Lim said when asked about the fall in Reit prices.

Besides Suntec, ARA also manages Fortune Reit in Singapore, Prosperity Reit in Hong Kong and AmFirst Reit in Malaysia along with several privately held funds.

Mr Lim also said that although office rents in Singapore have fallen from the highs reached in the middle of 2008, most tenants renewing leases this year would have to pay higher rates as current rents are still more expensive than three to four years ago.

‘It has to be. Most of the leases were signed in 2005, 2006 . . . Our average passing rent is $6.50 per square foot and rentals in the Suntec area are still achieving $10 psf,’ he said.

Looking ahead, he said that ARA hoped to launch country-specific closed-end funds that would invest in China, India and Japan to buy assets near the bottom of the property cycle.

The firm hoped to raise a minimum of $500 million for each fund, he said.

Meanwhile, ARA’s flagship Asia Dragon Fund, which on Monday bought a 51-storey office-cum-retail building in Nanjing, China, for about $340 million, has more than $1 billion available for new investment.

The fund plans to focus on China, Hong Kong and Singapore, fund director Ng Beng Tiong said.

China remained attractive because of the size of the market and its growing middle class, while regional business centres Hong Kong and Singapore will be the first to benefit when the global economy eventually recovers, he said.

Mr Ng said that banks were still prepared to lend money but would now provide 50-65 per cent financing compared with 70-80 per cent a year ago.

‘The compensating factor for us is that we are able to buy at much cheaper prices.’

As for ARA’s listed Reits, Mr Lim said that the focus would be on maintaining occupancy levels and refinancing debt rather than acquiring new assets as that would involve asking shareholders for more money.

In general, larger Reits should be able to roll over existing bank loans, albeit at higher interest margins, and Mr Lim said that the challenge would involve refinancing maturing convertible mortgage-backed securities (CMBS) as the market for asset-backed securities was still shut. — Reuters

Source : Business Times - 08 Jan 2009

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Developers may want to take that haircut right away

Developers may want to take that haircut right away

By KALPANA RASHIWALA

PROPERTY consultancy groups have issued reports over the past couple of weeks reporting declines in Singapore residential property values, especially for the high-end segment, in 2008 - with pretty grim prognoses for 2009 too. This will mount pressure on listed property groups to make provisions for Singapore residential sites.

Storm warning: For companies that acquired sites at prices which are above current values, booking provisions in Q4 2008 will avoid putting further strain on bottomlines in the tough year ahead
When listed property groups did not announce such provisions in their Q3 results last year, the thinking among analysts was that these companies would take haircuts in their books on their pricier residential sites only in second-half 2009, or even later.

DTZ recently published a report estimating a 21.6 per cent decline in average prime non-landed freehold private home prices in 2008 and predicted a further 15 to 20 per cent drop this year.

CB Richard Ellis last week also said that in 2008, average prices of new luxury homes under construction had slipped 30-35 per cent in prime districts 9 and 10 and by 10-13 per cent in Marina Bay and Sentosa Cove.

Developers could argue that while property consulting groups may talk about declines in property values, there has been a scarcity of transactions to confirm the declines.

Nonetheless, for companies that acquired sites at high prices which are above current values, there’s a case for booking the provisions in Q4 2008 - and moving on.

For one, most developers reported strong earnings in first-half 2008 that can help cushion against provisions on their Singapore residential landbank - if they choose to book them in their Q4 and full-year 2008 financial statements.

However, if they postpone the decision till 2009, the haircut could add further strain to bottomlines going ahead, which are already expected to weaken on the back of poor home sales, an all-round weaker economic showing and lower valuations for investment properties (these refer to assets like office buildings and shopping centres held for rental income). Right now the mood is so weak, that if developers were to announce provisions for their Q4 results, it would not dent sentiment much further. It may be better to flush out all the bad newsflow now.

Making provisions sooner also clears the decks for developers to price projects more attractively to tap any windows of opportunity to launch projects - and begin a new cycle of profit booking. As a big property group said over seven years ago when announcing massive residential provisions, the exercise provided it ‘pricing flexibility to generate cashflow’.

Beyond writing down sites to current values, at least one big developer in the past went a step further and provided more than it perhaps needed to.

This is what many analysts say CapitaLand did in August 2001, when it marked down the value of its residential assets, mostly landbank, by $508 million, in its half-year result statement.

Analysts said the group wrote down the value to below then market prices. In short, it overprovided. The group’s management refuted this point, but the strategy may be revisited by some property groups today spring cleaning their books.

Ask most property agents today and they’ll tell you potential buyers are asking at least 20-25 per cent off current property values before they will make a commitment. This is to cushion against future price falls. Indeed, expectations are running high among analysts for a further drop in home prices this year.

Given this scenario, some developers may find it sensible to mark down values of high-cost residential sites in one fell swoop (not just to current valuations but also to factor in likely future price movements), instead of making a series of piecemeal adjustments over a period of time.

Of course, such a strategy may be frowned upon as an exercise in earnings management in some quarters.

This time round, CapitaLand may not be the market leader in making provisions for its residential landbank.

Still, some analysts point out that breakeven costs for two sites it bought in 2007 - Farrer Court and Char Yong Gardens - are higher than what new projects on these sites would command today. Other listed property groups too acquired sites at steep prices during the property fever.

Examples include two 99-year leasehold condo plots on Sentosa Cove - the Beachfront Collection site that SC Global bought at $1,800 psf per plot ratio in 2007, and The Pinnacle Collection plot purchased by a Ho Bee and IOI Properties joint venture in early-2008 for $1,822 psf ppr.

The latter was the highest price paid for a condo site in the waterfront housing precinct. Then there was the 99-year leasehold Grangeford site, bought at $1,810 psf ppr by Overseas Union Enterprise in 2007.

In fact, a seasoned property agent says that pretty much most sites bought in 2007 would be below water today. There is indeed impetus for developers to make provisions.

However, there will be ramifications. Beyond issues of managing earnings, for some developers, there could be a real limit to how much they can write down their sites as provisions may trigger breaches in loan covenants. They may be asked by their banks to top up more equity.

That would stretch smaller developers, many of whom are already highly leveraged and cash strapped.

Source : Business Times - 08 Jan 2009

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