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CapitaCommercial Trust (CCT) has decided to defer the planned redevelopment of the Market Street car park.

In January 2008, CCT was granted an outline planning permission by urban planners to redevelop the property into a Grade A office building.

Since then, it has been working with its appointed architect and consultants to finalise and submit design plans to the Urban Redevelopment Authority.

In a statement on Tuesday, CCT said it does not expect a plan for the redevelopment to be made before mid-2009. This came after taking into consideration the significant size of the project, rising construction costs and the present volatility in financial markets.

Industry watchers said the decision is unlikely to dampen the market. The delay may, in fact, be welcomed due to the tight car parking space situation in the Central Business District.

Property analysts added that the deferment is a prudent move, given the bulk of office supply coming on stream between 2010 and 2012.

They said there is no hurry for CCT to redevelop the property in a climate of rising construction costs, which could also pose some challenges in getting construction firms to work on the project.

CCT said it will continue to take necessary steps to obtain the provisional permission from the authorities, as well as assist retail tenants in relocation and continue to operate the car park. - CNA/vm

Source : Channel NewsAsia - 29 Apr 2008

Asia expected to weather real estate downturn

The mood was generally subdued at a property conference held by Citi yesterday although a few positive assessments of the market provided some bright spots.

Opening the event, Citi country officer Piyush Gupta said that 2007 was a strong year for property across Asia but the first quarter of this year had been challenging.

Property indices are under-performing the broad market in several regional cities, such as Hong Kong and Singapore, he said.

Amid this broad picture however, it is not all doom and gloom. Banyan Tree executive chairman Ho Kwon Ping pointed out that the US sub-prime crisis and the resulting credit crunch have so far had minimal impact on the high-end hospitality business.

In fact, having just returned from a roadshow in the Middle East to promote the group’s Indochina hospitality fund, Mr Ho said that investors’ reception was positive.

According to him, there has been no perceptible slowdown in the hotel business, though travel within the US has probably come down.

‘Even the sale of branded residences by us this year has increased several-fold over the last year,’ said Mr Ho, as buyers probably see them as a relatively attractive form of alternative investment.

Citi’s real estate research team also reckoned that there are some worthwhile investment real estate plays, despite the market slowdown, in the form of real estate investment trusts (Reits).

An April 25 Citi report on Singapore property says: ‘We believe news flow for developers will remain negative and are hence putting a cap on developers’ performance. Suntec, Ascendas, Parkway Life and Capitamall Trust are our preferred buys among Reits.’

Ending yesterday’s media session on a hopeful note, Citi’s Asia-Pacific director of research Adrian Faure said that although Asia will not be immune from the sub-prime crisis, it is in good shape to weather the real estate downturn, underpinned by low loan-deposit ratios and strong liquidity.

Source : Business Times - 29 Apr 2008

Fed watchers expect stormy meeting, possible surprise

(WASHINGTON) This time, will the Fed’s words speak louder than its actions? Just ahead of a Federal Reserve monetary policy meeting this week, the widely shared consensus is that the Fed is likely to cut its benchmark short-term interest rate to 2 per cent from 2.25 per cent, signalling that while financial markets have stabilised somewhat, concerns about an American economic downturn remain paramount.

There is always a chance for a surprise, Fed watchers say.

‘I think it’s going to be a contentious meeting,’ said Lyle E Gramley, a senior adviser at the Stanford Washington Research Group and a former Fed board member. ‘There are lots of people on the board who have demonstrated they are pretty hawkish on inflation, and developments in the past month have given them ammunition.’

But lowering the rate for a seventh time since August would be consistent with the comments by Ben Bernanke, the Fed chairman, that a recession is still possible this year and that, as Treasury Secretary Henry Paulson Jr puts it, the risks are to the downside.

Beyond what the Fed does, economists and other specialists will be looking for what it says.

Of particular interest is whether the Fed hints that this might be the last rate cut for a while, as many experts think, on the ground that further reductions will fan inflation and send the dollar to further lows.

‘I don’t think there’s any question that they’ll cut 25 basis points off the rate,’ said David Rosenberg, chief North American economist of Merrill Lynch. (A basis point is one one-hundredth of a percentage point.) ‘The real question is what they say about the future. It won’t be an ‘all clear’ signal. But they’ll find a way to tell the markets that they’ve done enough for now, simply put.’ The reaction in the markets has been positive of late, with the Dow Jones Industrial Average rising 10 per cent since falling to 11,740, a 17-month low, on March 10.

The meeting, today and tomorrow, is of the Federal Open Market Committee, the rate-setting panel that includes the Fed’s board of governors and the presidents of the regional Federal Reserve banks.

A month ago, the committee met on the heels of the Fed’s startling participation in the fire sale of Bear Stearns to JPMorgan Chase, an action Mr Bernanke defended as necessary to avert turmoil in the financial markets and the possible collapse of financial institutions.

The Fed’s involvement came in the form of an emergency US$29 billion loan in return for collateral in the form of mortgage-related securities of uncertain value.

The committee then lowered the federal funds rate - the rate it charges banks for overnight loans - by three-quarters of a percentage point, to the current 2.25 per cent. Trying to still the chaos in the markets, the Fed also left the door open to more rate cuts if necessary.

Two members of the committee dissented, however, saying that a smaller rate cut would have been preferable in the light of the danger of inflation. The disagreement opened an unusual window into the Federal Reserve’s internal debates under the leadership of Mr Bernanke, who has called for greater transparency at an institution known for its secrecy.

If anything, inflation fears have increased in the last few weeks. Soaring prices for food, oil and other commodities appear to be inflicting as much pain on Americans as unemployment and the shrivelling of the mortgage market.

These trends are certain to be a matter of lively discussion this week. — NYT

Source : Business Times - 29 Apr 2008

INTERCONTINENTAL Hotels & Resorts (IHG) is launching 30 new hotels - predominantly in China - over the next three years in the Asia-Pacific region, banking on strong domestic markets as well as inter-Asia travel to bolster revenue.

Five hotels and resorts are slated to open this year, of which four will be in the Chinese cities of Beijing, Qingdao, Huizhou and Dalian. The 16-storey, 337- room InterContinental Beijing Beichen, for one, is located close to the National Olympics Stadium and seeks to open its doors in June, just in time for the Olympic Games.

IHG expects to increase its portfolio of hotels in China from the current nine to 24 by 2010.

‘In Asia, there’s huge opportunity, given such strong domestic markets and strong inter-Asia markets,’ said Gary Rosen, senior vice-president of sales and marketing for IHG Asia Pacific.

He added that the Asia-Pacific operations were generally protected from the effects of the economic turmoil overseas as they were not reliant on travellers outside Asia for significant business.

Other Asia-Pacific markets that IHG is expanding into include Ho Chi Minh City, New Delhi and Melbourne, adding to the 35 hotels currently owned across the Asia-Pacific region.

For its Singapore branch, demand stems largely from South-east Asia. InterContinental Singapore reported an average occupancy rate in the high 80s.

With regard to rising costs, Mr Rosen said IHG would ‘act as a unified system’ and leverage on its various hotels to keep costs competitive when it came to managing its supply chain and logistics.

Finding quality staff to fulfil its expansion needs was also a challenge. ‘We want to make sure we continually fill our network with great people,’ added Mr Rosen.

IHG chalked up a total gross revenue of £9 billion (S$24.5 billion) for the FY2007 ended Dec 31, up 14 per cent from the previous fiscal year.

Net profit fell 43 per cent to £231 million from £405 million due to reduced property sales.

Other hotel brands owned by the group include Crowne Plaza & Resorts and Holiday Inn Hotels & Resorts.

Source : Business Times - 29 Apr 2008

Commerzbank unit buys 71 Robinson Rd for $743.8m

Commerz Real, a fully-owned subsidiary of Germany’s Commerzbank, has bought 71 Robinson Road, setting a record in the process and perhaps heralding a new wave of office deals.

The price paid for the building, which was owned by a partnership of Lehman Brothers and Kajima Overseas Asia, was not disclosed by Commerz Real. But sources say it was $3,125 per sq ft of net lettable area (NLA), or $743.8 million. This is 7.7 per cent higher than the $2,900 psf of NLA paid for Hitachi Tower in January.

Lehman/Kajima acquired the building in October 2006 from SingTel for $163.4 million. A year later, the partnership said it would spend about $450 million, including the land cost of $163.4 million, to redevelop 71 Robinson Road into a 280,000 sq ft (gross floor area) building to be completed by mid-2009.

While the selling price represents a healthy capital appreciation, it is understood that the acquisition comes with a coupon payment by Lehman/Kajima to Commerz Real amounting to 4.5 per cent - or about the investment yield for Commerz Real for the duration of construction.

Jones Lang LaSalle (JLL) was appointed by Lehman/ Kajima to market the development in late-2007. JLL managing director (SEA) Chris Fossick said marketing was done globally, with interest from both Singapore and international funds.

In terms of leasing, Mr Fossick said there are no pre-commitments yet but talks are going on with several parties.

Commerz Real was advised by CB Richard Ellis. Commerz Real management board member Hans- Joachim Kuehl said: ‘We have seen strong interest from major financial institutions in the development and expect to attract rents in the region of $15 psf.’

The acquisition was made by Commerz Real’s real estate fund hausInvest global which also owns 78 Shenton Way, bought in December 2007 for $650 million or $1,857 psf of NLA.

It is worth noting that 78 Shenton Way was sold by a joint venture between Credit Suisse and CLSA funds after they paid $348.5 million for it earlier in the same year.

JLL’s Mr Fossick believes this year could see more such assets held by opportunistic funds go to core funds like Commerz Real.

By his reckoning, 2007 saw core funds acquire at least 10 office assets held by opportunistic funds. Larger deals include that by CLSA, which sold the SIA Building to German pension fund SEB.

Mr Fossick believes at least another 13 office assets could be targets for core funds, including DBS Towers 1 and 2. ‘We could look back on 2008 and still see quite a lot of transactions despite the global credit crunch,’ he said.

Source : Business Times - 29 Apr 2008