Reits row: MAS nixes idea of common manager

Reits row: MAS nixes idea of common manager

Rare statement from regulator hints at concerns over MI-Reit, Cambridge tussle

By Lee Su Shyan , ASSISTANT MONEY EDITOR

ANY hopes that Cambridge Industrial Reit had of also managing MacarthurCook Industrial Reit (MI-Reit) were shot down by the regulator yesterday.

The Monetary Authority of Singapore (MAS) issued a strongly worded announcement on the issue just three days before a crucial meeting involving both Reits. The MAS said it will ‘not approve (the manager of Cambridge) being appointed as the manager of MI-Reit in view of potential conflicts arising from the competing interests of unit-holders’ in both.

Such MAS pronouncements are rare and likely indicate there were concerns over the way Cambridge and MI-Reit have been conducting their war of words through newspaper advertisements and a rash of announcements on the Singapore Exchange (SGX).

The MAS thunderbolt also seems to have prompted Cambridge to back away from the aggressive stance it has taken regarding MI-Reit.

Cambridge holds 9.76 per cent of MI-Reit and was preparing for a showdown with its management at Monday’s extraordinary general meeting to vote on MI-Reit’s refinancing plans.

MI-Reit’s proposed $430 million rescue package, involving a share placement to ‘cornerstone’ investors, a rights issue and $215 million in loans, had been branded as ‘value-destructive’ by Cambridge.

It launched an all-out campaign to drum up support for its case with various SGX announcements and newspaper ads giving its side of the story.

Cambridge wanted to oust MI-Reit’s manager and appoint its own, maintaining that the larger asset pool would bring more growth to both sets of unit-holders. It also said it wanted to implement an initiative to take advantage of the larger asset base - a comment that caused speculation about the two Reits merging.

Cambridge also stated it was finalising financing plans which would help MI-Reit deal with its debt.

Observers said all of these proposals would have been likely to make MI-Reit unit-holders vote against its own deal as Cambridge appeared to be able to deliver more value.

But Cambridge began backtracking on Thursday morning when it said it had no plans to merge the two Reits.

By making this announcement, Cambridge is also ruling itself out from a merger for the next six months.

On Thursday afternoon, Cambridge halted trading in its shares again pending an announcement. This was yesterday’s MAS ruling barring Cambridge’s manager taking on MI-Reit’s assets. Not long after that landed, Cambridge announced that it ‘has no financing arrangements in place for MI-Reit’.

With Cambridge having backed away from its key claims, MI-Reit made its own statement yesterday.

The manager said it has the ‘only proposal which meets the… funding requirements of MI-Reit which must be completed by Dec 31′.

Cambridge units, suspended on Thursday pending an announcement, closed half a cent down to 42 cents. MI-Reit closed 3.5 cents down to 36.5 cents with 4.7 million units traded.

Source : Straits Times - 21 November 2009

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No stamp duty boost for Govt

No stamp duty boost for Govt

More units sold, but these may not match up to last year’s overall value

PROPERTY SALES, STAMP DUTY

THIS year’s surprise housing boom may have provided an unexpected windfall for property owners - but not necessarily for the Government.

Developers and individual sellers will probably sell twice the number of private homes this year than they did last year, going by the latest property market figures.

However, the Government is unlikely to see an increase in its revenues from stamp duty, which is a tax on transactions such as property sales.

This is mainly because many of the homes sold in the current boom are much smaller in size and located in the cheaper suburban areas.

So the value of homes sold this year - which determines the amount of stamp duty payable - may not surpass that of last year, when more luxury homes were sold, say property consultants.

Stamp duty takings so far this year bear this out. From January to September, the Government took in $1.37 billion in stamp duty, according to figures from the Department of Statistics website.

This is about 15 per cent less than in the same period last year, even though the property market was slowing down then in anticipation of the financial crisis that hit hard in September that year.

For the whole of last year, the Government received $1.84 billion in stamp duty. This year’s stamp duty collections may be about the same level or even lower, now that the property boom appears to be losing steam, say property consultants.

However, stamp duties look set to exceed the Government’s initial expectations at the beginning of the year, when the recession was at its worst and the property market was in a slump.

In its January Budget, the Government projected stamp duty takings of only $1billion for the 2009 financial year, which started in April and ends in March next year. So far, between April and September, the Government has already collected $1.1 billion.

Stamp duty is a tax on commercial and legal documents used in some transactions such as property sales, which make up the bulk of stamp duty collections.

For housing transactions, stamp duty ranges from 1 per cent to 3 per cent of the purchase price. In the massive boom year of 2007, stamp duty reached a record $4.1 billion.

In the first nine months of this year alone, almost 25,800 private homes were sold - nearly double the number sold in the whole of last year.

But the sizes of the homes sold this year have generally shrunk, said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

‘Because unit sizes have fallen, the total quantum of the home price is less,’ he said. ‘The market value of transactions this year actually remains at about the same level as last year.’

A spike in demand for smaller mass-market homes means that while property developers are likely to double their sales of new homes this year compared with last year, the total value of sales will be halved, according to recent research by property consultancy CB Richard Ellis (CBRE).

In the coming months to the end of the Government’s 2009 financial year, there may be a pick-up in sales of upmarket homes, which could add to stamp duty collections, said Mr Li Hiaw Ho, executive director of CBRE Research.

He said the higher-end segment of the property market has not moved much in the current boom, but recent improved economic data may attract more buyers.

Foreigners, in particular, could be drawn back into the market early next year after the festive season is over, said Dr Chua.

‘The economy is showing a better outlook, and there is more bullishness compared with six months ago, so there is a potential for more interest in the high-end market,’ he said.

Source : Straits Times - 21 November 2009

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Foreign demand for professional services up

Foreign demand for professional services up

It is playing an increasingly important role in driving professional services growth

By TEH SHI NING

SINGAPORE’S professional services have been traditionally dependent on domestic demand but external demand for them has risen in recent years and will be key to the sector’s future growth, says a Ministry of Trade and Industry (MTI) report.

Growth in professional services also led to jobs growth - 4.7% in the second quarter, versus Singapore’s overall employment growth of 2.2%.

Professional services defied the downturn to grow 3.5 per cent in the first three quarters of this year, as the overall economy and the services sector contracted 4.1 per cent.

For architectural and engineering services, this was thanks to a strong pipeline of construction projects. Recent liberalisation moves in the legal sector have attracted foreign law firms to Singapore, boosting legal services.

And accounting firms have been kept busy by continued demand for restructuring and forensic reporting services, despite the slowdown in their auditing business, the MTI report says.

Growth in professional services also led to jobs growth - 4.7 per cent in the second quarter, versus Singapore’s overall employment growth of 2.2 per cent.

Examining the longer-term growth trend of professional services here, MTI economist Kenny Goh says in the report that their compounded annual growth rate of 8.8 per cent from 2000 to 2008 outpaced the nominal GDP growth of 6.1 per cent over the same period.

A key driver has been the growth of other sectors of the economy that use professional services - such as the wholesale and retail trade, manufacturing, other business services and the financial services sector.

Professional services have traditionally catered mainly to domestic demand. But exports have risen in recent years, and foreign demand is playing an increasingly important role in driving professional services growth.

According to the report, accountancy, legal and architectural and engineering services were the most inward-looking segments with over 70 per cent of output consumed domestically in 2000.

But all three segments showed double-digit growth in their export receipts from then until 2008.

Mr Goh thinks that the sector’s medium-term prospects are bright, as domestic demand rises in tandem with Singapore’s economic growth, and Asia’s growth spurs greater overseas demand for professional services too.

One challenge for the sector will therefore be ‘to ensure an adequate supply of qualified manpower to meet the expected increase in demand’, Mr Goh says.

Source : Business Times - 21 November 2009

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