China firms acquire Bukit Batok properties for $300m

A GROUP of Chinese investors has collectively spent $300 million to buy commercial properties along Bukit Batok Crescent to house their businesses.

These companies – with interests in health care, education, technology and other businesses – plan to use Singapore as a launch pad for their regional expansion plans.

They bought part of the new 61-storey WCEGA Tower, as well as a neighbouring 500-unit commercial building, to hold their offices.

Another 29 top mainland companies will set up a giant showcase for their signature cooked fare and China-made food products at nearby WCEGA Plaza.

All these Chinese companies are members of four major trade organisations that represent health care, technology and other business interests, as well as enterprises from Guangdong province.

More than 30 executives of these firms attended yesterday’s official launch of WCEGA Plaza and WCEGA Tower along Bukit Batok Crescent.

The guests of honour at the event included Mr Xue Yun Gang, a representative of the Chinese embassy; Mr Chen Bo Jian, a representative of China’s World Trade Organisation delegation; and, Mr Wang Zhao Lin, chairman of the Guangdong Association of Enterprises.

‘Many Chinese companies appreciate the advantages of using Singapore as a platform to expand worldwide and to raise public funds from initial public offerings here,’ said Mr Chen.

Local developer Sin Soon Lee Group is currently building the WCEGA Tower and WCEGA Plaza, as well as the neighbouring 500-unit building . Construction is expected to be finished by May 31, 2009.

The World Chinese Entrepreneurs General Association (WCEGA) is expected to be the co-manager of these properties. The entire second floor of the WCEGA Plaza will be devoted to 29 companies chosen from China’s 100 most famous restaurants, including the Xiao Fei Yang, or ‘Little Fat Sheep’, which sells Tianjin province’s famous ‘Gou Bu Li’ meat dumplings.

Source : Straits Times – 15 Nov 2007

Surprisingly low bids for Marina View site

BARELY two months after a site at Marina View fetched a record $2.02 billion, a similar plot next door has managed only half that price.

The unexpectedly low bids for the plot, which was seen as highly attractive, came on top of lukewarm response to other recent land sales. This is further proof that sentiment in the property market has started to cool, consultants warned.

The second Marina View plot drew only two bids when its tender closed yesterday. The top offer came in at $952.9 million – a far cry from the first site’s price and well below the experts’ predictions of up to $1.6 billion.

Both Marina View sites, which are located behind the One Shenton condominium, had the same high bidder: Macquarie Global Property Advisers (MGPA), a private equity real estate firm partly owned by Australia’s Macquarie Bank Group.

Property group CapitaLand also put in offers for both plots.

MGPA’s offer in September for the first site, which is slightly bigger, worked out to $1,409 per sq ft per plot ratio (psf ppr), almost double the $779 psf ppr bid it submitted for the second site.

The stark difference shows how much the mood in the market has shifted in just two months, said Knight Frank director of research and consultancy Nicholas Mak.

‘Clearly, they had a change of heart,’ he said. ‘The two sites are right next to each other, but the second bid is only 55 per cent of the previous bid.’

Mr Mak agreed that the price is ’still decent’, and that there was ‘a fair bit of exuberance in land tenders previously’.

But, in general, property investors are now turning more cautious, he said. This is due to stock market volatility, uncertainty over the global credit crunch and recent government measures in the property market.

The Government last month removed the deferred payment scheme for homebuyers in a surprise move that is being seen as an act to discourage speculation.

Mr Mak suggested, however, that this may have helped overcool the market.

Following the Government’s move, a residential land parcel on Enggor Street at Tanjong Pagar attracted only two offers when it went on sale, while an office site in Tampines found just one bidder.

This is despite these plots being fairly attractive, said Mr Mak.

‘If the Government throws in a site in Jurong, they may not get any bids at all.’

But while other consultants agreed that developers and investors are now more circumspect, some said the low Marina View bids could be an aberration.

‘The mood has changed somewhat, but it’s not as drastic as this. This is a bit of a flash in the pan,’ said Mr Li Hiaw Ho, CB Richard Ellis’ executive director.

He had expected bids for the second Marina View site to come in at a lower level because 25 per cent of the plot’s gross floor area must be used for hotel rooms, which have slightly lower land values.

Mr Li said, however, that the huge difference in bids was unexpected. He attributed it partly to the fact that there were only two bids: ‘This cannot draw out the most competitive offers.’

The Marina View site has a land area of about 0.9ha and a maximum floor area of 1.2 million sq ft. On top of the hotel use requirement, at least 60 per cent of the plot’s area must be given to offices.

If MGPA is awarded the second site, it could lower its average price for the two plots to about $1,100 psf ppr and combine them to form a mega commercial development, said Mr Donald Han, managing director of Cushman & Wakefield.

Source : Straits Times – 14 Nov 2007

Modest bidding for CBD office site as caution sinks in

The new-found caution surrounding the Singapore office market is now spilling over to the Central Business District.

Reflecting this, a site at Marina View diagonally behind One Shenton yesterday attracted a top bid from Macquarie Global Property Advisors (MGPA) of $779.42 psf per plot ratio – only about half of the group’s winning bid in September for the site next door.

Knight Frank managing director Tan Tiong Cheng acknowledged that office investors have turned cautious. ‘The outcome of the sub-prime episode may have an impact on demand for office space in Singapore, while the government has expressly stated recently it will boost supply of office land in the next few years to alleviate the current shortage,’ he said.

Another reason for the lower bid for the latest site – Marina View Land Parcel B – is that it has a minimum hotel component of at least 25 per cent of the site’s maximum gross floor area, property consultants said. ‘Hotel land values are a lot lower than office values,’ said Mr Tan.

‘The latest tender outcome is also a knee jerk-reaction to what has been happening lately in the US – the sub-prime crisis being worse than initially thought and big banks being affected. Banks are prime users of office space.’

The only other bid at yesterday’s tender came from units of CapitaLand, at $898 million or $734.52 psf ppr.

BT understands that CapitaLand was to team up with Thai tycoon Charoen Sirivadhanabhakdi’s privately held vehicle Pacific Coast Assets, had its bid been successful.

By most counts, the top bid at yesterday’s tender by MGPA unit MGP Kimi of $952.89 million or $779 psf ppr was lower than had been predicted.

CB Richard Ellis executive director Li Hiaw Ho had expected Marina View Land Parcel B to fetch about $1,200 to $1,300 psf ppr, lower than the $1,409 psf ppr that an MGPA unit paid in September for the next door Marina View Land Parcel A, considering the minimum hotel component for the latest plot. ‘There is a chance that the state’s reserve price may not have been met and that the latest site may not be awarded,’ Mr Li suggests.

However, other property consultants argued that the plot will be awarded.

Mr Tan said his firm, Knight Frank, predicted in late July projected that the site would attract bids of $1.1 billion to $1.3 billion, or $900-1,060 psf ppr. ‘Taking the mid point of $1.2 billion, the top bid was about 20 per cent lower than our projection. To me that is within range, and I would expect the site to be awarded,’ Mr Tan said.

‘The price is still substantially higher than other sites sold in the Marina Bay area in recent years.’

Jones Lang LaSalle’s Asia Capital Markets head Stuart Crow said: ‘The price seems fair going by recent land bids and taking into account the hotel component for this site.’

MGPA’s top bid at yesterday’s tender also ‘reinforces the foreign investor interest in the Singapore property market fundamentals’, he added. ‘In my view, the site will be awarded.’

Mr Crow estimates that MGPA’s bid price for Parcel B yesterday reflects a break-even cost of about $2,200 to $2,300 psf for the office component of a potential development on the site. As for the hotel component, market watchers estimate the break-even cost could be about $700,000 to $800,000 per room.

Marina View Land Parcel B has a site area of about 0.9 hectare and can be developed into a maximum gross floor area (GFA) of about 1.22 million sq ft, of which at least 60 per cent must be for offices and at least another 25 per cent for hotel use.

Source : Business Times – 14 Nov 2007

Separate deals, but court rules it’s en bloc deal

En bloc sale or 53 separate contracts entered into by individual owners of the apartments to sell? That was the $286,000 question that emerged in the High Court in what can be described as a test case for property developers to get savings on stamp duty.

United Overseas Land subsidiary UOL Development Novena (UOLD) claimed that its purchase of 53 properties at Minbu Road for $61 million was not an en bloc sale but 53 separate contracts which it entered into with the individual owners.

At stake was $286,200 in stamp duty savings if it was found to have bought the 53 properties separately.

This is because under the Stamp Duties Act, stamp duty is charged at one per cent on the first $180,000 of purchase price, two per cent on the next $180,000 and three per cent on the balance of the purchase price that exceeds $360,000.

The way this works out is that stamp duty can be calculated simply by taking three per cent of the purchase price minus $5,400 – that being the sum of one per cent on $180,000 and two per cent on the next $180,000.

So if there was only one contract arising from an en bloc sale, the $5,400 could only be subtracted once.

But if there were 53 contracts, then $5,400 can be subtracted 53 times, resulting in savings of $286,200 for the property developer.

However, the High Court ruled last month that UOLD bought the 53 properties in an en bloc sale.

The court said that the owners of the Minbu properties intended to sell their properties on the basis of an en bloc sale.

The invitation to tender issued by the owners said that they ‘collectively’ invite offers to buy their property on an ‘en bloc’ basis.

The court also found that there is no evidence that UOLD’s offer to buy the Minbu properties for $61 million was made on the basis that separate contracts were to be entered for each property.

And even though the owners sent 53 separate letters of acceptances to UOLD according to the developer’s request, the court found that the owners did not ‘give any thought’ to converting the en bloc sale to 53 separate contracts.

Justice Tan Lee Meng said that the case raises an interesting question as to how stamp duty is assessed on properties bought through en bloc sales.

However, he found that the plan for 53 separate contracts was mooted ‘for the sole purpose of lessening the stamp duty payable on the en bloc sale’.

BT understands from UOLD’s lawyers that the developer has not filed an appeal yet. It has until tomorrow to do so.

UOLD was represented by Tan Kay Kheng and Teo Lay Khoon from WongPartnership.

Source : Business Times – 14 Nov 2007

Overstretched Singapore pushes back projects worth $2b

The government said yesterday that it would postpone several public projects – at a time when the building boom is stretching Singapore’s construction resources to the limit.

The government’s cut-back could reduce the demand for additional construction manpower in the next two years by 20-40 per cent. The authorities will further relax policies on the employment of foreign manpower and help expand construction capacity.

The government’s move to push back projects worth at least $2 billion comes as construction costs escalate and contractors are in short supply.

Developers told BT that most contractors are fully booked for the next 12 months.

Construction costs have also gone up by as much as 40 per cent over the last year on the back of rising raw material prices and wage increases brought on by tight labour supply.

‘The investment and property boom is leading to a construction squeeze,’ said Citigroup economist Chua Hak Bin. ‘The property boom is moreover not confined to just one segment, but is across the board – commercial, residential, infrastructure and the integrated resorts (IRs).’

Annual construction demand is expected to hit $19-$22 billion in 2007, and is likely to be sustained at this high level in 2008 and 2009, said industry regulator Building and Construction Authority (BCA).

The sharp increase in construction demand in Singapore also coincides with a global surge in construction activity – especially in China, India and the Middle East.

For developers here, this adds up to a shortage of contractors and rising costs. ‘Contractors are booked 12, 15 months ahead,’ said the chief executive of a Singaporean developer. ‘And it’s not just the main contractors; the main contractors are saying that sub-contractors are hard to find as well.’

‘I think most contractors already have big orderbooks, so supply is tight,’ said Cheang Kok Kheong, development and property general manager for Frasers Centrepoint (FCL). ‘There are many big projects for them, such as the IRs and the Gardens by the Bay.’

FCL is not feeling the pinch as it has the support of contractors it has worked with for many years, Mr Cheang said. But others, he added, might not be as lucky. ‘If you don’t have that many projects and you are new in the market, then there will be difficulties getting contractors,’ he said. FCL’s construction costs have gone up by 20-30 per cent over the last year. Other developers report cost increases of up to 40 per cent.

Several big projects have already been hit. Genting International recently upped its budget for its Sentosa IR to $5.75 billion – from an original $5.2 billion. The company said that $275 million of the $550 million budget increase is due to rising construction costs.

And in August this year, Marina Bay Sands said that its cost could escalate to $5.2 billion, from $5.05 billion originally.

On the flip side, things are starting to look very bright for construction companies, as the sector is coming off a decade of sub-zero growth rates.

Kim Eng analyst Wilson Liew estimates that some contractors are now able to command a higher pre-tax margin of about 15 per cent, as compared to 5 per cent in the past. ‘This margin is expected to improve even further as established contractors hold greater bargaining power amidst an increased number of contracts,’ he said.

But this could soon change. Right now, BCA is working with developers and builders to expand the capacity of both local and foreign firms in Singapore. It is also exploring attracting new foreign contractors – especially those in the top-tier and specialist trades – to come to Singapore, it said.

The government will also monitor the manpower situation closely and will further adjust its manpower policies if necessary, BCA said.

For now, various government agencies have identified a list of public projects in the pipeline for 2008 and 2009 that could be rescheduled to 2010 and beyond.

The projects being deferred include the Health Ministry’s National Addiction Management Centre, and Cluster C of the Changi Prison Complex.

Public sector projects that are ‘essential’ – such as those required for Singapore’s economic growth or needed to meet key social needs such as public housing – would not be affected, BCA said.

‘The bulk of the construction activities and resources in 2008 and 2009 are expected to be concentrated on mega projects such as the IRs, Marina Business Financial Centre, Downtown MRT Line and petrochemical plants,’ said BCA. ‘Once these have been completed, more construction resources and capacity will be available for other new projects beyond 2009.’

Source : Business Times – 14 Nov 2007

SC Global Q3 net up more than 4-fold at $4.3m

PRIME residential developer SC Global Developments’ net profit more than quadrupled to $4.3 million for the third quarter ended Sept 30, from $931,000 for the previous corresponding period. Revenue rose 4 per cent to $30 million.

The group said that Q3 revenue comprised mainly the recognition of sales of the remaining units at The Tomlinson and sale of units at The Boulevard Residence and The Lincoln Modern.

Share of profits from the group’s associated company in Australia, AVJennings Limited, came to $2.5 million, against a loss of $600,000 for Q3 2006.

For the first nine months, SC Global’s net profit doubled to $20.6 million as revenue edged up 4 per cent to $117.9 million.

Q3 earnings per share (EPS) rose to 2.28 cents from 0.75. EPS for the first nine months rose to 12.46 cents from 8.48.

The group said that its recent projects, The Marq on Paterson Hill and Hilltops have received approval to offer the deferred payment scheme which will continue to be available.

With the recent acquisition of sites at Ardmore Park and Sentosa Cove in the third quarter, the group says that it will aim to deliver high quality residential developments in prime locations.

SC Global shares remained unchanged at $2.50 yesterday.

Source : Business Times – 14 Nov 2007

Ho Bee posts 297% jump in Q3 earnings

HO Bee Investment, the dominant residential developer at Sentosa Cove, yesterday posted net earnings of $39.27 million for the third quarter ended Sept 30, up 297 per cent from $9.89 million a year earlier.

The jump was on a 137.9 per cent increase in revenue to $129.6 million, due mainly to a 149 per cent rise in the sale of development properties.

The main contributor to revenue was progressive recognition of sales of residential projects such as Coral Island, which obtained a Temporary Occupation Permit in August, Orange Grove Residences, The Coast and Paradise Island.

For the first nine months of this year, Ho Bee’s net profit leaped 391.8 per cent year on year to a record $233.4 million, benefiting not only from a 133.8 per cent increase in revenue to $535.4 million but also a $71 million gain in fair-value changes on investment properties.

Chairman and CEO Chua Thian Poh said the group’s revenue and earnings for the rest of the year and the next few years will be buttressed by the progressive recognition of income from successful residential projects that have been launched.

In its results statement, Ho Bee said that the recent withdrawal of the Deferred Payment Scheme by the authorities will have an initial impact on prices and demand.

‘The group does not anticipate its upcoming residential projects in the Core Central Region, which includes Sentosa Cove, to be adversely affected as underlying demand from both local and foreign buyers is expected to remain relatively strong,’ it said.

Mr Chua said that despite good sales, ‘we continue to be prudent in the way we conduct our business, always bearing in mind that we have to ensure long-term sustainable growth for shareholders’.

Ho Bee’s Q3 earnings per share jumped to 5.33 cents from 1.34 cents in the year-ago period.

Net asset value per share was 102.8 cents at Sept 30, up from 67.9 cents as at Dec 31, 2006. On the stock market yesterday, Ho Bee shares ended one cent higher at $1.78

Source : Business Times – 14 Nov 2007

F&N full-year net profit up 18.5% to $378.6m

IT was a news conference many journalists were looking forward to. They expected Lee Hsien Yang to face the media for the first time as Fraser & Neave’s chairman at the group’s full-year financial results announcement yesterday.

But Mr Lee was a no-show, and director and group company secretary Anthony Cheong fielded the questions.

Mr Lee was not required to attend the news conference, Mr Cheong said. ‘Mr Lee is a non-executive chairman, so he need not be here.’

Operationally, the strong property market helped the food and beverage and property and publishing conglomerate lift net profit for the full year ended Sept 30 by 18.5 per cent to $378.6 million, from $319.5 million.

Before exceptional items, net profit attributable to shareholders increased 28 per cent to $377.9 million.

Full-year revenue rose 25 per cent to $4.74 billion. Earnings per share rose to 28.7 cents from 27.3 cents.

‘Our properties division continues to benefit from better-than-expected development margins and higher rental rates achieved from new and renewed leases,’ Mr Lee said in a statement. ‘Likewise, for eight consecutive years, food and beverage has maintained strong growth momentum and delivered rising profits. Publishing and printing also showed good progress and is on track to return to historical levels of profitability.’

Development property, which accounts for the lion’s share of the group’s attributable profit, came in at $214 million for the full year. Revenue from development property grew 24 per cent to $1.4 billion for the year.

During the year, the company sold more than 1,680 units at 19 developments in Singapore and close to 200 units at five projects overseas. It launched One St Michael’s, St Thomas Suites and Soleil @ Sinaran to strong interest.

Meanwhile, F&N subsidiary Asia Pacific Breweries (APB) reported a 3 per cent increase in net profit attributable to shareholders to $133.7 million for the full year. This was on a 17 per cent increase in revenue to $1.78 billion.

CEO Koh Poh Tiong said: ‘APB achieved strong organic profit growth amidst a healthy regional economy. Our ongoing strategy to expand our business, enhance the equity of our brands, and continually enlarge the global footprint of Tiger beer have once again delivered robust top line growth.’

IndoChina – Cambodia, Laos and Vietnam – remained APB’s largest profit contributor, accounting for about 48 per cent of APB’s total profit before interest and tax.

F&N and APB have recommended a final dividend of 8.5 cents and 18 cents a share respectively.

In response to a recent BT report, Mr Cheong said that there is a possibility that F&N’s business may be split in the future, but not now. ‘There are ways of increasing shareholder value,’ he said, adding: ‘All kinds of options will be explored and scenarios worked out, I’m sure some of these process will include examining the scenario of break up. But at this stage, at this time, there’re no plans to split.’

He also acknowledged Temasek’s role in growing the F&B business for F&N. ‘Temasek was looking for a vehicle for F&B, and we were looking for somebody who has a good track record and good stream of deals, a very good deal-maker to help us grow our F&B business,’ he said. F&N looked at several deals but unfortunately none of them came to fruition, so it is still looking.

Mr Cheong also acknowledged differences between former CEO Han Cheng Fong and the board. ‘We don’t want to get into details about the differences but I think at this stage, differences in opinion are par for the course,’ he said. ‘It is common when you put a group of people together. Dr Han left not because he had a difference in opinion with the board but because this resulted in a dysfunctional relationship.’

The separation was amicable and both sides had moved on, Mr Cheong said.

On the search for the new CEO, he said that it is in the hands of the chairman of the board and chairman of the nominating committee. ‘I’m afraid we don’t have any progress reports,’ he said. But F&N is open to looking internally and externally.

When asked about who the likely candidates were, he said to much laughter: ‘Why don’t you ask Conrad Raj?’ – referring to the BT correspondent who has broken many stories on F&N, including Mr Lee’s appointment as chairman and the possible splitting up of F&N.

Source : Business Times – 14 Nov 2007

3 Bukit Timah properties up for joint collective sale

THREE adjoining freehold properties at Robin Drive, off Bukit Timah Road, have been put up for joint collective sale.

Credo Real Estate, the marketing agent representing the majority owners of Robin Court and Robin Star and the sole owner of No 1 Robin Drive, has indicated a price range of $128-138 million for the combined plots, which have a total land area of 64,878 sq ft. This reflects a unit land price of about $1,500-1,600 psf of potential gross floor area inclusive of an estimated $8 million development charge.

Based on this, the breakeven cost for a new condo on the site works out to about $2,075-2,190 psf, Credo executive director Yong Choon Fah said. The combined site of the three properties is large enough for a condo with about 43 units averaging 2,000 sq ft.

The site is zoned for residential use with a 1.4 plot ratio (ratio of maximum potential gross floor area to land area) and a five-storey maximum height.

Robin Court comprises 15 apartments, Robin Star 10 apartments, and No 1 Robin Drive is a detached house with a pre-school operating on its site.

Owners controlling more than 80 per cent of share values in each of Robin Court and Robin Star, and the sole owner of No 1 Robin Drive have agreed to the sale, Credo said. The tender for the three properties closes on Dec 12.

Source : Business Times – 13 Nov 2007

DTZ: $500m was best en bloc price possible

$500 million – the amount it eventually attracted – was realistically the best price Horizon Towers could have fetched in an en bloc sale, DTZ Debenham Tie Leung director Tang Wei Leng told the Strata Titles Board (STB) yesterday.

She was one of several marketing agents invited in early 2006 to make a presentation on the en bloc sale potential of the development to its newly formed sales committee.

Ms Tang’s testimony to STB yesterday suggests the eventual price of $500 million obtained by the Horizon Towers sales committee was the highest it could have hoped for, given some of the development’s shortcomings.

Ms Tang said the Leonie Hill 99-year leasehold development was a challenge to market, compared with other sites in the area.

She described the site as unattractive because it had a limited view, was oddly shaped and impossible to sub-divide. She also said the two access roads leading to it were not an advantage.

She compared it to its neighbouring development The Grangeford, which she said had a regular shape, a full view of Orchard Road and a Grange Road address.

Her testimony comes in the face of some of the arguments put up by minority owners – those who did not agree to the en bloc sale.

It is the minorities’ case that the collective sale of Horizon Towers should not be allowed because the deal was done in bad faith – as the sales committee did not do its best to secure the highest possible price.

Still, the minorities’ case got support when former sales committee member Henry Lim returned to the stand later yesterday. He had first testified last Friday.

Yesterday, he said the sales committee received a higher offer than the $500 million from Hotel Properties (HPL) and its partners, which was eventually accepted by the bulk of the owners.

Mr Lim said Hong Kong developer Vinyard Holdings, through its Malaysian lawyers Chan & Shu, offered $510 million for Horizon Towers. He said he made attempts to contact them but was advised by lawyer David Ang of Drew & Napier not to pursue the offer as Chan & Shu was an ‘unknown name’.

Mr Limsaid last Friday that there were at least four offers comparable to or better than HPL’s $500 million bid. He said three out of nine of the sales committee members were happy with the HPL offer but rushed into the deal and had failed to consult the majority owners before accepting it.

The hearing continues today.

Source : Business Times – 13 Nov 2007