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Hong Kong billionaire Li Ka-shing’s Cheung Kong Holdings may sell its one third stake in Singapore’s Marina Bay Financial Centre (picture) to Suntec Real Estate Investment Trust (Reit) when the complex is completed in 2010.

The stake is likely to be worth “more than US$1 billion ($1.5 billion)”, Mr Justin Chiu, executive director of Cheung Kong said. The company is building the 24-hectare office and residential complex on a waterfront site in Singapore with Hongkong Land Holdings and Keppel Land.

“We haven’t made a decision yet,” Mr Chiu said. “But as a parent, of course you want to take care of your own children. If the price is not that far off from the next interested buyer, we will sell.”

Cheung Kong and its partners made a joint bid of US$1.8 billion in 2005 for the 3.55-hectare site, part of Singapore’s plans to create a new business district.

The new Marina Bay, which will include projects such as a botanical garden, a casino-and-convention centre and luxury apartments, is aimed at luring companies and tourists.

Suntec Reit owns offices and retail space in Singapore, including the Suntec City development. Recently, Cheung Kong said it will sell its one-third stake in One Raffles Quay, another downtown office block built with Hongkong Land and Keppel Land, to Suntec Reit, for US$941.5 million.

“The offer was good, so we sold it,” Mr Chiu said. “Suntec Reit is our long-term commitment to Singapore. We like the place.”

Cheung Kong is bidding for a site at Beach Road near Suntec City, Mr Chiu said. It is working with Keppel Land on the tender. — BLOOMBERG

Source : Today - 3 Aug 2007

Rasif’s alleged aide gets five years and five months

The property agent who allegedly conspired with missing lawyer David Rasif to pocket almost $1 million during the sales of 22 properties was sentenced yesterday to five years and five months jail.

Goh Chong Liang (picture), a former director of a real estate company, had overstated flat valuations in clients’ applications for bank loans, thereby convincing banks and the CPF Board into providing higher loan amounts.

In passing sentence, District Judge Liew Thiam Leng said the scam was “organised” and “well-planned”. The amount involved in the scam was also “considerable”, he added.

Goh had earlier pleaded guilty to 22 conspiracy charges and 14 other forgery charges.

He would propose to the sellers’ agent a higher price after showing buyers the flat for sale. This inflated price included purported “renovation costs” for the flat, which was paid to Danis Interior Design — a “shell” business set up by Goh, 37. Renovation works, however, never took place.

The cashback monies would then be made through Rasif’s law firm, which would then deduct a share, as “legal fees”. In all, Danis Interior Design pocketed a total of $917,500.

After investigations started in 2005, Goh claimed Rasif told him to forge documents, and to find someone to sign them. These documents were used to deceive Commercial Affairs Department investigators.

In mitigation, defence lawyer Peter Fernando pointed the finger at Rasif as the mastermind in the offences. Mr Fernando also argued that Goh’s financial share in the scam was minimal — ranging between $5,000 and $7,000 per transaction.

The banks which had approved the inflated housing loans also stood to gain financially from the additional interest earned, argued Mr Fernando.

Judge Liew, however, said the offences committed had “an adverse impact on banking transactions”.

Goh is the first to be charged in Court for his role in the scam. The whereabouts of Rasif, who disappeared last year allegedly taking with him about $12 million of his clients’ money, are not known.

Source : Today - 3 Aug 2007

Property owners must be realistic about what is marketable: CEO

CapitaLand Ltd, the biggest buyer of enbloc projects in Singapore in the past year, said that such property sales have ‘peaked’, as owners ask for record prices for their homes.

The market for existing buildings has hit a high ‘in terms of pricing’, said Liew Mun Leong, chief executive officer of CapitaLand. The developer, South-east Asia’s largest, had 18.3 per cent share of the $13.49 billion of such collective sales from July 2006 to June 2007, according to data from real estate consultant Knight Frank.

A frenzy of redevelopment of prime condos around the main Orchard Road shopping district and the neighbouring prime residential area of Holland Road prompted the government to raise the development charge, which must be paid for enhancing a site’s use.

‘The problem now is that en bloc owners’ expectations are raising the hurdles,’ Mr Liew, 61, said in an interview on Tuesday. ‘Going forward, en bloc owners must be realistic about what is marketable.’

Developers were buying older homes in the city’s prime areas to redevelop and resell at prices that were more than four times higher as demand for luxury apartments pushed some residential units to record prices.

A record of 70 older apartment developments were sold last year for $8.1 billion, according to data from Knight Frank. In the first half of this year, there were 48 transactions amounting to $9.48 billion.

‘En bloc sales are about derived demand,’ said Nicholas Mak, Knight Frank’s research director. ‘As long as high-end property demand continues, the en bloc sales would continue.’ CapitaLand in June said that it’s buying Farrer Court, an existing apartment complex in the Holland Road area, which is a five-minute drive from the shopping district, for a record $1.3 billion.

SC Global Developments, a builder of luxury homes, said earlier in June that it had agreed to buy apartments next to the shopping district for $262 million, or $2,338 a square foot, the highest price for an existing complex.

‘There will come a time when the market cannot bear’ the prices, CapitaLand’s Mr Liew said.

SC Global, which paid $1,064 a square foot for a downtown apartment complex last year, sold new homes on the same site in June for as much as $5,100 a square foot, a record.

CapitaLand’s shares fell 15 cents, or 2 per cent, to $7.35 yesterday. The stock has risen 19 per cent this year, compared with the 15 per cent gain in the ST Index.

Some apartment developments in the city’s downtown districts are having a harder time with en bloc sales. Pacific Mansions, a 10-minute walk from the shopping district, had an asking price of $1.18 billion, or $2,400 a square foot, its marketing agent Savills Singapore said in June.

The Straits Times reported on Tuesday that the owners didn’t get bids that met their asking price and are negotiating with possible buyers to achieve their reserve or minimum price, which is 10 to 20 per cent lower than the asking price.

‘We are seeing vendors adapting to be more accommodating,’ said Donald Han, managing director of Cushman & Wakefield.

‘Instead of expecting record price after record price, there is some price stabilisation, which will be good for the market.’ - Bloomberg

Source : Business Times - 02 Aug 2007

KEPPEL Land and Cheung Kong (Holdings)’ sales of their respective one-third stake in One Raffles Quay (ORQ) to K-Reit Asia and Suntec Reit have generated much interest in the property market, with many seasoned observers saying the deals are underpriced.

KepLand and Cheung Kong are each selling their one-third stake for a headline figure of $941.5 million. In addition, the vendors are providing ‘income support’ to the respective buyers of up to $103.4 million through 2011 in the case of K-Reit Asia’s purchase, and $103.48 million spread over 54 months for Suntec Reit’s acquisition.

The acquisition price works out to $2,109 per square foot of net lettable area based on the headline price of $941.5 million. Stripping out the $103.4 million income support provided by the vendors reflects a lower net purchase price of $1,877 psf.

Office industry players generally regard this price as low. 1 Finlayson Green was transacted recently at over $2,600 psf. No doubt it is freehold but the 99-year leasehold ORQ, completed last year, is considered a superior property, with bigger floor plates and a top-grade tenant list including UBS, Credit Suisse, ABN Amro and Deutsche Bank.

Talk is rife that a deal is close to being struck for Chevron House (formerly Caltex House), a much older 99-year leasehold property, for $2,700 psf. The buyer is not expected to be a Reit.

Based on this, market watchers say such a non-Reit buyer would have offered at least the same price as Chevron House, if not around 10 per cent higher, or nearly $3,000 psf, for a new Grade A office property like ORQ.

By selling their stakes in ORQ to Singapore Reits (S-Reits), KepLand and Cheung Kong are getting a much lower price.

Reits (real estate investment trusts) need any acquisition to be immediately yield-accretive. Otherwise, there is a risk of the unit price on the stock market falling. This limits the price that a Reit can pay for a property - all other factors being equal.

However, non-Reit buyers, including foreign private equity and unlisted funds, can bid more aggressively. They are prepared to look beyond poor initial yields, on expectation that Singapore office rentals and capital values will continue to increass leases are renewed at higher market rents, and there is also a possibility of selling the asset a few years down the road, to crystallise capital appreciation.

Based on a $2,700 psf price, Keppel Land could have sold its one-third stake in ORQ for $1.2 billion. Assuming a higher $3,000 psf, its divestment could have been for $1.34 billion.

Why did Keppel Land feel compelled to sell its stake for a much lower price to its 40.7 per cent- owned associate K-Reit Asia, which is also listed on the Singapore Exchange?

Of course, there are some merits to the deal from KepLand’s perspective. As UBS Investment Research notes: ‘Selling the asset to K-Reit allows Keppel Land to control the asset in a more tax-efficient structure.’ Reits do not pay corporate tax at the vehicle level if they distribute all their income to unit holders.

But even after factoring the tax saving, KepLand will book a smaller contribution from ORQ following the divestment of its stake to K-Reit.

Of course, many KepLand shareholders may still hold units in K-Reit. The trust was not listed through an initial public offering; instead, KepLand shareholders were given 200 K-Reit units for every 1,000 KepLand shares they held, as at April 18 last year.

At the time that K-Reit was introduced to the Singapore Exchange last year, around 60 per cent of the total number of units went to KepLand shareholders, with KepLand itself holding the remaining 40 per cent stake.

Of course, there may be some KepLand shareholders who do not own any K-Reit units, because they sold them or they bought their KepLand shares after last year’s distribution-in-specie of the K-Reit units.

From their perspective, the argument that KepLand could have fetched a much higher price for its ORQ stake had it sold it to a non-Reit buyer, is even stronger.

The situation is even more complex for Cheung Kong’s sale of its ORQ stake to Suntec Reit. Cheung Kong itself does not hold a stake in Suntec Reit but its ultimate controlling shareholder Li Ka-shing owns some units in Suntec Reit. However, Cheung Kong has a 30 per cent interest in the entity that manages Suntec Reit and, through this, would get a share of the acquisition fee for the deal, usually 1 per cent.

But on a more positive note the deals are attractive to K-Reit and Suntec. They may not have found such attractive acquisitions elsewhere in Singapore.

Source : Business Times - 2 Aug 2007

Five adjoining projects in Mergui/ Thomson area up for collective sale

CATHAY Realty has put The Majestic in the Chinatown area up for sale. And marketing agent Knight Franks expects to receive offers in excess of $43 million for the three-storey restored freehold conservation building.

The Majestic

Over in the Mergui/Thomson road area, Credo Real Estate is marketing five adjoining freehold projects for joint collective sale. The properties are Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui.

‘The developments have land areas ranging from 10,061 sq ft to 18,524 sq ft,’ said Credo Real Estate executive director Yong Choon Fah. ‘But upon amalgamation with one another, along with some remnant state land (of about 20,000 sq ft) in between and adjoining them, the developer could potentially build on an aggregate land area of 93,355 sq ft.’

Under Master Plan 2003, the site is zoned for residential development with a 2.8 plot ratio. Based on the height control for the site, the developer should be able to build up to 30 storeys, Credo reckons.

‘The indicative price range for the five plots combined is between $115 million and $125 million,’ MsYong said. ‘Some $474,000 is payable as development charges (DC). Including DC and land premium for the state land, if an approval is granted for their alienation, the indicative price range reflects $488 psf per plot ratio to $526 psf ppr.

Based on this range, the developer should be able to break even at about $800 psf to $850 psf (for a new project on the site).’

Norfolk Court comprises 20 units, Mergui Lodge nine units, Northern Mansion 18 units, Mergui Court 23 units and The Mergui 18 units. More than 80 per cent of the owners by share value in four of the five projects have agreed to the sale. At the last project, consent from two more owners is needed to cross the 80 per cent mark, said Credo.

As a result, marketing is by way of an expression-of-interest exercise that closes on Sept 3.

The Majestic is being marketed through a tender that closes on Sept 13. The property has a gross floor area of 42,181 sq ft and a site area of 15,666 sq ft. It is suitable for use as shops and food outlets.

The Majestic’s rich and colourful history dates back to the 1920s. Eu Tong Sen, a wealthy tin miner and rubber planter from Perak, built it in 1927 on a whim for his wife, an opera fan.

‘Then known as Tin Yin Moh Toi or Tin Yin Dance Stage, it attracted glamorous opera stars from China, who performed to capacity audiences,’ said Knight Frank. ‘Some of them came especially to perform and raise money for China’s war against Japan.’

Source : Business Times - 2 Aug 2007