URA grants last-minute extension

URA grants last-minute extension

Property owner ends landlord’s lease and plans talks with tenants

By Tan Weizhen

Hotel designer Bernard Johnson, 23, packing in his room at The Grangeford. Tenants at the condo had earlier been told to move out by yesterday, the deadline for tearing down the illegal partitions put up in the apartments by Ideal Accommodation to collect more in rent.

SOME 200 tenants of an Orchard Road condominium who were to have moved out by yesterday have been given a last-minute reprieve.
But in a twist, their landlord, Ideal Accommodation, has been given the boot.

The situation arose after the Urban Redevelopment Authority (URA) discovered that Ideal had illegally partitioned apartments - thus creating 600 sub-units from 140 units - at The Grangeford condominium.

This tactic allowed Ideal to collect more in rent. It could collect up to $8,000 by leasing one apartment to eight tenants, instead of about $4,600 by renting it out to one.

URA told Ideal in late April that the partitions had to be torn down by yesterday, but it did not let the tenants know. Most were told only on Sunday, giving them a scant three days to clear out.

Yesterday, the official owner of the condo, Cove Development, a unit of Overseas Union Enterprise (OUE), took action.

It terminated Ideal’s two-year lease after just five months, and gained a deadline extension from the URA.

Cove now has till July 27 to tear down the partitions and restore the apartments.

The tenants, mostly expatriate professionals and students from places like the United States, Hong Kong and Indonesia, will have to move out earlier than that, although the date is uncertain, said Mr Steven Ngai, OUE’s company secretary.

He said there were several options before the tenants, and that Cove would meet them soon to discuss these.

In a statement yesterday, OUE said it decided to terminate Ideal’s lease because the company sub-let illegally partitioned rooms and did not comply with URA’s enforcement notice.

URA, meanwhile, said it acted because of the unauthorised use of the Grangeford. It said it did so in response to public complaints.

It revealed that Ideal had already been given one chance to comply with its enforcement order: The company was first told to tear down the partitions on April29, and was given a month to do so.

Ideal then appealed, and was given a few days more, till June 3, to comply. However, it failed to do so and made another appeal for more time, which URA rejected.

Yesterday, residents - some of whom said they were prepared to stay put even if told to go yesterday - were visibly relieved.

Operations manager Lam Nguyen Van Ann, a Vietnamese who shares a room with her husband, said: ‘I’m really happy about the new deadline. Just a few days ago, I didn’t even know where I was going to stay.’

The residents added, however, that though the immediate crisis had passed, Ideal has many more questions to answer.

They said substantial amounts of money - agents’ fees, deposits and rent that was paid upfront - are still with the company, and they want to get these back.

Said Mrs Lam, who has been in Singapore for three years: ‘What about compensation from Ideal, all our deposits and agent fees?’

Added the 32-year-old: ‘Are they going to take all our money and run away?’

When The Straits Times visited the condo, an Ideal representative was seen discussing matters with residents.

However, she refused to comment when approached, and instead physically attacked a photographer from this newspaper.

Another tenant, Singaporean Kevin Chia, 27, wanted to know if the new landlord had answers.

No, said Cove Development.

Explained OUE’s Mr Ngai: ‘Their tenancy contracts are with Ideal, not us. Besides, we’re victims ourselves.

‘Ideal still owes us about two months’ rent, which we cannot get back despite repeated chasing. We’re considering our options too.’

He added that Cove also cannot help tenants who moved out abruptly and gave up their deposits when Ideal issued eviction notices.

However, the company said it will move to meet tenants quickly.

Said Mr Ngai: ‘They could stay at Grangeford, or we could give them some new accommodation options.’

Source : Straits Times - 4 June 2009

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Temasek eyeing AIG’s asset management unit

Temasek eyeing AIG’s asset management unit

AIG has agreed to sell two New York buildings, including its downtown Manhattan headquarters, according to a source.

NEW YORK: - Singapore’s Temasek Holdings and Hong Kong tycoon Richard Li’s Pacific Century Group may join an investor group in talks to buy American International Group’s asset management unit, a source familiar with the matter said on Tuesday.
Franklin Resources and Crestview Partners are in exclusive talks for the business, and the two Asian investors are considering taking part in that consortium, the source said.

The asset management business, which rests with AIG Investments, had drawn interest from both private equity and strategic buyers, sources have said previously. Initial bids for the unit had come in around US$500 million (S$720 million).

AIG also agreed to sell two New York buildings, including its downtown Manhattan headquarters, another source familiar with the matter said.

The insurer’s headquarters at 70 Pine Street are in a 66-storey building topped with a Gothic-like spire. It was the tallest building in downtown Manhattan prior to the building of the World Trade Center. Occupants of the office are likely to stay there through the end of next year.

The other building is located at 72 Wall Street, and employees are to be relocated by the end of this year, the source said.

The source declined to name the buyer or the value of the deal.

Separately, AIG said it had agreed to sell its consumer finance operations in Argentina for nearly US$44 million to Banco Galicia and an investment group led by Grupo Pegasus.

Banco Galicia bought 80 per cent of the company and the Pegasus investment group purchased the remaining 20 per cent.

AIG is also in negotiations to sell its consumer finance businesses in Colombia and Mexico, said another source.

AIG declined to comment. The sources are anonymous because the talks are private.

The moves are part of a larger divestiture programme by AIG, as it looks to sell assets to pay back the United States government.

The government has committed some US$180 billion to AIG’s rescue, including about US$85 billion in loans that the insurer is trying to repay with these divestitures.

REUTERS

Source : Straits Times - 4 June 2009

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Temasek’s Barclays stake ’sold’

Temasek’s Barclays stake ’sold’

By Alvin Foo

TEMASEK Holdings sold its stake in British banking giant Barclays in December and January, at an estimated loss of between £500 million (S$1.2 billion) and £600 million, sources have told The Straits Times.

News of the sale first broke yesterday with a Reuters report in London saying that the Singapore investment agency had lost up to £800 million on the sale of its holding of almost 2 per cent.

Temasek and Barclays both declined to comment when contacted by The Straits Times yesterday. A Temasek spokesman said: ‘We don’t comment on unsourced reports.’

The sale was apparently done during December and January, a tumultuous period for global markets. Barclays shares ranged from 136 pence to 167.8 pence in December but swung wildly from 47.3 pence to 190.6 pence in January.

In January, the stock hit its lowest since 1985, reflecting the near-panic over bank shares, and Barclays in particular, given rumours it could be nationalised.

The shares have recovered sharply since, partly due to improved market sentiment and partly due to its posting a 15 per cent jump in pre-tax profits to £1.37 billion in the first quarter this year. They closed at 273.5 pence on Tuesday and hovered around 260 pence yesterday. Temasek paid £975 million to buy the shares at 720 pence apiece in July 2007.

The Reuters report came a day after news that the Abu Dhabi government made a killing in its Barclays investment.

It bought into Barclays last October - just weeks after the collapse of Lehman Brothers - and sold out for a US$2.5 billion profit seven months later.

The Straits Times understands that Temasek was also approached in October to increase its investment, but declined.

This is Temasek’s second exit from a high-profile investment in a Western bank recently. It sold its 3 per cent stake in Bank of America (BoA) in the first three months of the year, crystallising estimated losses of between US$2.3 billion (S$3.3 billion) and US$4.6 billion.

Although Temasek has suffered heavy losses on these investments, its long-term record has nonetheless been defended as being comparable to those achieved by top fund managers.

Finance Minister Tharman Shanmugaratnam said in Parliament last week that Temasek had made ‘large investment gains’ during the market cycle which began in 2003 and included both boom and bust phases. He said Temasek’s portfolio grew $56 billion from March 2003 to November last year, even after taking recent sharp declines into account. It averaged returns of slightly over 15 per cent a year, outperforming benchmark indexes.

Its portfolio gained $114 billion over the five years to March last year, but its value was hit by the financial tsunami. It dropped $58 billion - from $185 billion to $127 billion - a fall of 31 per cent, during the March 31 to Nov 30 period last year.

However, analysts now estimate its value at $143 billion - a rebound of 12.5 per cent from late November to mid-last month due to the global market recovery.

The sale of its Barclays and BoA stakes is in line with Temasek’s recent tweaking of its long-term investment strategy to focus more on Asia and emerging markets such as Brazil and Russia. It will, in turn, reduce emphasis on developed countries such as the United States and Europe.

Temasek recently invested a further US$600 million in China Construction Bank, raising its stake in the Chinese bank from 6 per cent to 6.5 per cent.

Reducing its exposure to financial stocks could be another key reason for its sale of Barclays and BoA. Brokerage Nomura released a report on Tuesday touching on Temasek’s direction after outgoing CEO Ho Ching hands over the reins to Mr Charles Goodyear on Oct 1.

It said the ex-BHP Billiton boss may seek to ‘rationalise Temasek’s large exposure in banks (40 per cent)’, reallocating to ‘under-represented’ sectors such as energy and natural resources.

Source : Straits Times - 4 June 2009

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New sites may entail hefty bids

New sites may entail hefty bids

High values may limit number of bids for the two sites, say market watchers

By KALPANA RASHIWALA

THE two new sites that have been added to the Reserve List for second-half 2009 Government Land Sales (GLS) Programme are attractively located next to MRT stations. However, with estimated values of about $150 million (for the residential plot next to Bartley Station) and $300 million (for the commercial and residential plot in Bedok), bidding for the sites will involve substantial sums and this may limit the number of bids, market watchers say.

‘With no new hotel rooms in the pipeline, hotels will face less pressure in resorting to fierce price-cutting measures which is currently being practised. The residential property market should sustain the recovery that we have been experiencing in the last few weeks.’
– Kwek Leng Beng
‘We’ve seen some smaller developers starting to look out for residential sites to restock their land banks but they are generally looking for smaller-scale sites, costing less than $100 million each,’ says DTZ executive director Ong Choon Fah.

Developers may still bid for bigger sites - such as the new plots announced yesterday by the Ministry of National Development (MND) - but may form joint ventures to mitigate the investment risk, she added.

The 1.98 ha plot next to the newly opened Bartley MRT Station on the Circle Line can be developed into a new condo with about 505 units. The plot has a 2.8 plot ratio (ratio of maximum potential gross floor area to site area).

It is currently occupied by a plant nursery and the Jin Long Si Temple. ‘The temple will be relocated by Sept 30, 2010 or when the site is triggered for sale, whichever is earlier,’ a URA spokeswoman said. Earlier this year, the Court of Appeal upheld a High Court judgment that the government did not discriminate against the temple when it acquired its land for the Circle Line.

As for the nursery, it is operating on a Temporary Occupational Licence that expires on July 31, 2009. ‘The tenant has been informed to move out by this date,’ URA’s spokeswoman added.

Knight Frank chairman Tan Tiong Cheng estimates the site is worth about $150 million or $250 per square foot (psf) of potential gross floor area (GFA). That’s assuming a new condo on the site can sell for about $600-$700 psf today and based on current construction costs.

CB Richard Ellis highlighted that four of the 19 residential sites on the H2 2009 Reserve List will be of special interest to developers because of their proximity to MRT stations. Besides the new Bartley plot, the other three are at Bishan St 14, Serangoon Ave 3 and Dakota Crescent.

Knight Frank’s Mr Tan reckons that the Bedok plot, designated for commercial and residential use, could be valued at about $280 million-$300 million today, based on a blended land price of about $300 to $320 psf per plot ratio. The estimated commercial GFA in the development will be about 31,460 sq m (about 338,632 sq ft).

Market watchers feel that the most logical use for the commercial component of the Bedok project would be retail and entertainment.

The plot’s developer will have to incorporate a new bus interchange. ‘Transport-oriented developments or TOD are a global trend and Singapore is no different,’ observes DTZ’s Mrs Ong.

City Developments executive chairman Kwek Leng Beng, commenting on the MND’s H2 2009 GLS Programme, which comprises entirely the Reserve List, said: ‘With limited supply coming on-stream, the office sector should start to stabilise in that the drop in rentals will be less severe.

‘With no new hotel rooms in the pipeline, hotels will face less pressure in resorting to fierce price-cutting measures which is currently being practised. The residential property market should sustain the recovery that we have been experiencing in the last few weeks. Overall, we welcome this news which will certainly help to instill confidence.’

Jones Lang LaSalle’s head of research for South-east Asia Chua Yang Liang reckons that even when the market recovers, the Reserve List may remain the mainstay of the GLS Programme. ‘The confirmed list is a policy tool for the release of sites for strategic developments,’ he said.

Dr Chua acknowledged, however, that a serious drawback of such a strategy is that the lead time for releasing a reserve site is longer than a confirmed site. ‘So relying solely on the Reserve List when the market picks up may cause a supply crunch,’ he added.

Source : Business Times - 4 June 2009

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S’pore sees steepest drop in office occupancy cost

S’pore sees steepest drop in office occupancy cost

Republic slips to No.15 on costliest markets list from No.9 a year earlier

By UMA SHANKARI

(SINGAPORE) A new report shows that office occupancy costs in Singapore fell a whopping 34.4 per cent in the 12 months to March 2009 - the largest fall among some 170 cities tracked.

New topper: London’s West End has been supplanted by Tokyo’s inner central district as the world’s most expensive office market, the survey showed
CB Richard Ellis’ (CBRE) semi-annual Global Office Occupancy Costs survey showed that Singapore’s occupancy cost stood at US$82.79 per square foot (psf) per year, which put the country at No. 15 on the list of the most expensive markets. Singapore was No. 9 a year earlier with an occupancy cost of US$139.31 psf per year.

This is a reversal from what was seen in CBRE’s last report on global occupancy costs, which said that office occupancy costs in Singapore rose 27.8 per cent in the 12 months to end-November 2008.

The office market here was hit as rents fell off sharply in the first quarter of this year.

‘The fall in office occupancy costs escalated in Q1 2009 with an average decline of 18 per cent across the island,’ said DTZ.

And data from Knight Frank showed that rents of Grade A offices in Raffles Place fell 29 per cent in Q1 2009, while rents of offices in suburban areas declined 15.3 per cent over the same period.

Singapore was not alone. Occupancy costs fell by 20 per cent or more across most of the major global office markets in the 12 months to March 2009.

CBRE considers rents as well as local taxes and service charges when calculating office costs.

‘The great global recession has clearly taken its toll on the world’s office markets, particularly those with significant concentrations of financial industry employers,’ said Raymond Torto, CBRE’s global chief economist.

Across the 170 cities as a whole, office occupancy costs fell 2.8 per cent over the 12 months ending March 2009 compared with an increase of 8 per cent for the 12-month period ending September 2008.

The findings from the survey showed that Tokyo’s inner central district has supplanted London’s West End as the world’s most expensive office market.

London’s West End is now the world’s second most expensive office market, followed by Moscow, Hong Kong’s central business district and Tokyo’s outer central district.

‘The most expensive office markets, as measured in dollars, are considerably less expensive than a year ago and occupiers are now in a strong position to procure prime space at attractive costs,’ said Dr Torto. ‘For instance, a year ago office space in London’s West end was nearly US$300 psf, while today that space goes for $172 psf.’

In the Asia-Pacific region, Hong Kong, Tokyo and Mumbai also posted large drops in office occupancy costs together with Singapore.

The decline in office occupancy cost and rentals is expected to continue, said Andrew Ness, executive director of CBRE Research Asia. However, ‘it is likely that the pace of decline will slow and leasing activity will begin to pick up, especially when corporations become more certain about their business outlook’, he added.

For Singapore, analysts expect office rents to continue to fall as more new supply comes on stream over the next few quarters amid a shrinking demand.

Knight Frank, for one, predicts that rents of Grade A office space could drop by 40-50 per cent for the whole of 2009, with rents of prime office space falling more due to the substantial new supply scheduled for completion.

Source : Business Times - 4 June 2009

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Govt land sales stay nimble to nurse property recovery

Govt land sales stay nimble to nurse property recovery

Confirmed list still suspended; only 2 sites added to reserve list
By KALPANA RASHIWALA
(SINGAPORE) The government yesterday announced a land sale programme for the second half of this year that should help nurse the nascent property market recovery.
As expected, the Ministry of National Development (MND) has continued its suspension of the confirmed list for the July-December period and has not made any dramatic increase to the reserve list either. In fact, it has added just two sites to the reserve list.

One is a private housing plot next to the new Bartley MRT Station on the Circle Line. The other site, next to Bedok MRT Station, is slated for a commercial and residential project incorporating a new bus interchange that will help rejuvenate Bedok Town Centre.

MND has removed from the reserve list a ‘white site’ above Outram MRT Station, ‘as it will be affected by future infrastructure works’.

Reserve list sites are launched for tender only if there is a successful application by a developer, unlike parcels on the confirmed list, which are released for sale according to a pre-stated schedule. In October last year, the government suspended the confirmed list.

 
‘The government is not rushing to re-introduce the confirmed list just because of a few months of strong home sales activity, which makes sense because we have not seen the economy bottom out yet.’
 
- Chua Chor Hoon, 
DTZ senior director and head of South-east Asia 
 
 
 
City Developments executive chairman Kwek Leng Beng said the latest announcement will ‘certainly help instill confidence’ in the property market.

DTZ senior director and head, South-east Asia research, Chua Chor Hoon said: ‘The government is not rushing to re-introduce the confirmed list just because of a few months of strong home sales activity, which makes sense because we have not seen the economy bottom out yet.’

MND said its decision to extend the confirmed list suspension for another six months, amid prevailing uncertainties, will provide ‘flexibility for the market to adjust supply in accordance with current economic conditions’.

‘The government will monitor the situation closely before reviewing in late 2009 whether to suspend the confirmed list further.’

Besides the two new sites, the H2 2009 reserve list will include 36 sites from the H1 reserve list that will be rolled over to the second half.

The total 38 sites can potentially yield 8,655 private homes, 448,550 sq m of gross floor area (GFA) of commercial space and 4,430 hotel rooms.

The potential private housing supply on the H2 list is 9 per cent higher than the 7,920 units on the H1 list. The commercial supply is 12 per cent lower and the hotel room supply 14 per cent lower than in H1.

The smaller commercial space quantum is mainly due to MND’s decision to remove the Outram site from the reserve list.

Knight Frank chairman Tan Tiong Cheng said: ‘The government has not done anything that will cause alarm amid the supply glut for commercial space.’

According to CB Richard Ellis, 8.3 million sq ft of net lettable office space is slated for completion between now and 2013. Already, the office market has seen two consecutive quarters of negative take-up.

 
‘The government has not done anything that will cause alarm amid the supply glut for commercial space.’
 
- Tan Tiong Cheng, 
Knight Frank chairman
 
 
‘The absence of new office sites on the latest Government Land Sales (GLS) list is hardly surprising,’ said CBRE director (research) Leonard Tay.

Mr Tay expects more reserve list sites to be activated for release in H2 this year - including the better-located housing plots and smaller hotel sites - contrasting with a dearth of such releases in the past nine months.

CBRE figures show residential supply of about 40,300 private homes, comprising unsold units in projects launched as well as projects yet to be launched. Based on average annual demand of about 8,000 units over the past 10 years, this can last four to five years.

MND also said yesterday that outside the GLS Programme, government agencies will not release any additional supply of private homes and hotel rooms in H2 2009. And the commercial space supply from these agencies will also be lower, at about 28,000 sq m of GFA compared with planned supply of 40,000 sq m in H1.

‘These comprise projects to meet strategic economic or development objectives, and some of these projects also have pre-committed end users,’ MND said. The planned commercial space supply for H2 includes localised retail facilities at Sentosa, community centres, parks and MRT stations and about 7,000 sq m of GFA at one-north.

Knight Frank’s Mr Tan said the latest announcement will contribute to the property market recovery. ‘Private housing sales are in recovery mode but there isn’t sufficient evidence to say the worst is behind us,’ he said.

‘The Deferred Payment Scheme, on which many high-end homes were sold in the past, may or may not cause another round of concern, as projects sold on DPS during the peak year of 2007 near completion,’ he added.

‘At the same time, there is a sufficient spread of suburban housing sites catering to upgrader demand on the reserve list. Anyone who thinks the upgrader market has recovered can trigger these sites for release.’
Source : Business Times - 4 June 2009

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