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Of Late, I have noticed a common practice among listed companies involved in property development of giving their directors and executives the first bite at property launches, enabling them to choose the best units.

I understand that there is generally a pecking order, with the directors of these companies at the top of the queue, followed by executives of different levels of seniority.

It is well known that properties acquired at pre-launches are often sold almost immediately through sub-sales at a substantial profit.

In addition to such a practice being a case of the rich being given a chance to get richer, it raises some governance issues. First, given that these properties can be sold at a substantial profit through sub-sales almost immediately after they are launched, it would suggest that they were sold to the directors and executives at below the fair market value.

If these units were offered directly to the public instead, it is reasonable to assume that the company would get something close to the sub-sale prices.

It would therefore appear that the practice of giving preferential rights to directors and executives is detrimental to the interests of shareholders of these companies.

Second, the gains from ‘flipping over’ these properties should arguably be considered part of the remuneration received by directors and senior executives as they are a form of benefit, and should be disclosed as part of their remuneration.

In the case of independent directors drawing fees of, say, $30,000 to $50,000, I would imagine that such gains could be larger than the fees, and could be a non-transparent way of rewarding them.

Shareholders of companies with property interests should consider asking some questions about such practices at AGMs.

SHAREHOLDERS’ LOSS

Giving preferential rights to directors and executives is detrimental to the interests of shareholders.

Source : Straits Times - 13 Apr 2007

Developers unfazed by higher risks as these schemes have become the norm

Deferred payment schemes have proved so popular with home buyers that they are now standard fare in most new residential projects.

They allow home buyers to delay paying the bulk of a new home’s price for years, but the flip side is that units bought under such plans are costlier.

Deferred payments were thrust into the spotlight yesterday after the Monetary Authority of Singapore (MAS) said such schemes pose higher risks to developers and their banks, and that it expects banks to take these risks into account.

A Straits Times poll of developers showed that most new projects offer deferred payments. And where they are available, the take-up rates are usually significant.

At one end of the spectrum are developments such as The View @ Meyer, where all the buyers so far have opted for deferred payments, said developer GuocoLand yesterday.

CapitaLand, the biggest developer in South-east Asia,

also said that ‘the bulk’ of its home buyers choose such schemes whenever they are offered as an option.

Another major developer, whose projects range from mass market to luxury homes, said 74 per cent of its home buyers across the board have taken up deferred plans when they are available.

But there are also developers, such as City Developments, which say that more of their buyers opt for normal payment schemes.

And some developers, such as Indonesia’s Lippo Group, do not offer deferred plans at all.

‘We have never used such schemes and we have no intention of using them,’ said

Mr Thio Gim Hock, executive director of Lippo Realty (Singapore), which developed Newton One in Newton Road and Trillium in Kim Seng Road.

In general, property developers were unfazed by MAS’ comments yesterday.

GuocoLand said it is ‘likely to continue with deferred payment schemes’ as its buyers - ‘both owner-occupiers and investors’ - find them ‘attractive and convenient’.

It added that to date, it ‘has not encountered default cases’ when such schemes at its other projects are due.

‘If MAS clamps down on these schemes, we will have to change them accordingly,’ said Ms Diana Kuik, executive director of boutique developer Sim Lian Land.

‘But if all they do is make comments but not policy changes, we might just leave it. At the end of the day it’s the buyer’s choice to take up deferred payments,’ she added.

In any case, she said Sim Lian’s experience was that ‘most of the serious buyers prefer normal payment schemes because they pay a lower price for the unit’.

Property consultants concurred, saying that deferred payments appealed mostly to speculators or home buyers on the fence. They argued that there is little reason to change such schemes, as both the level of property speculation and the risk of mortgage defaults is relatively low.

‘There’s no reason to regulate because the risk is on the developer,’ said Mr Peter Ow, executive director of residential marketing at Knight Frank. He added that ‘in any market there must be some element of speculation’.

Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, also said that deferred payments are becoming less relevant in a rising market.

Initially offered as a carrot to home buyers during the property downturn, they actually require developers to set aside more capital as a guarantee to banks, said Mr Ku.

He added that as home sales boom, some developers are starting to discourage buyers from taking up deferred plans by widening the price gap between homes under deferred and normal payments.

‘There is definitely a reluctance from developers to give deferred payments now,’ Mr Ku observed.

Source : Straits Times - 13 Apr 2007

The appetite of Thai Beverage chairman Charoen Sirivadhanabhakdi for Singapore property is as keen as ever despite a remarkable series of purchases recently.

The tycoon is said to be intent on adding to his already impressive portfolio of apartments and commercial buildings in Singapore. The problem is that there is not enough stock on the market.

Mr Charoen can partly blame himself for that given his string of deals, including buying 47 of the 48 units of Suites @ Cairnhill a day before a private preview sale.

He would have grabbed the lot in the Hoi Hup Realty project but for a law stipulating that foreigners cannot own all the units of a development.

Mr Charoen, who bought Intercontinental Hotel at Bugis Junction last year for about $250 million, is said to have paid $205 million for his Cairnhill development units. This amounts to around $2,550 per sq ft (psf).

It has also been reported that Mr Charoen bought four floors consisting of 16 units at the Orchard Residences condominium at Orchard Turn, an investment of about $135million or $3,600 psf.

Many of Mr Charoen’s property investments are sourced by a firm he controls, TCC Land International.

Its president, Mr Chia Kwok Ping, was quoted by The Business Times yesterday: ‘Interest in the hospitality sector is quite buoyant because of the integrated resorts coming up. The problem is there are no sellers.’

Property consultancy DTZ Debenham Tie Leung executive director Ong Choon Fah said Mr Charoen was among the growing number of foreigners investing in Singapore.

‘A lot of people see good value in the residential market as Singapore gets more globalised,’ she said.

Mr Charoen’s wealth has been estimated at US$3.4 billion (S$5.2 billion), making him Thailand’s richest man.

The son of an oyster omelette hawker, he started Thai Beverage when he was only 15 and now has a near-monopoly on whisky sales in Thailand.

A decade ago he launched Chang beer and has slashed rival Singha’s market share.

Thai Beverage listed in Singapore last May after its plans to float on the Thai bourse were thwarted by protests from anti-alcohol groups in the predominately Buddhist nation.

Mr Charoen has been buying Thai Beverage shares but they have rarely passed the 28 cents offer price. They closed at 25 cents yesterday.

Mr Charoen’s investments here will benefit Singapore, said Mr Jeremy Lake, executive director (investment properties) of property consultancy CBRE.

‘There is always a positive impact on the market when a well-known and high-profile person makes a sizable investment,’ he said.

CAIRNHILL BUY

Mr Charoen, who bought Intercontinental Hotel at Bugis Junction last year for about $250 million, is said to have paid $205 million for his Cairnhill development units. This amounts to around $2,550 per sq ft.

Source : Straits Times - 13 Apr 2007

MALAYSIAN conglomerate Sime Darby plans to keep riding the wave of Singapore’s buoyant property market after the success of its developments here.

The group’s property executives said they were looking to acquire sites for residential developments in prime areas, including Sentosa Cove. They are also keen on commercial or industrial projects.

Sime Darby Property’s divisional director, Mr Jauhari Hamidi, said the firm expects the good times to keep rolling in Singapore’s property market for the next one to two years. He was speaking at yesterday’s launch of the eight-storey Sime Darby Enterprise Centre in Jalan Kilang, off Jalan Bukit Merah.

The commercial centre, which is 97 per cent let out, was redeveloped from a single-storey warehouse building at a total cost of $12.8 million.

It has a total lettable space of about 47,500 sq ft and tenants pay rents ranging from $2.50 to $3.20 per sq ft (psf).

The rental yield has climbed tenfold to about 12 per cent in the new building.

The group said its two residential projects - Orion in Orange Grove Road and Balmoral Hills - have risen in value.

The 46-unit Orion has five unsold units. One unit was recently sold at $2,500 psf, well up on the late-2005 launch price of $1,300 psf, it said.

The group expects Singapore property to contribute about 20 per cent to its real estate division. It projects profit from Singapore to rise from RM34 million (S$15 million) in 2005-2006 to as much as RM50 million in 2006-2007.

In Malaysia, Sime Darby is merging with Golden Hope Plantations and Kumpulan Guthrie to create the world’s largest listed palm oil firm.

The property arm of Sime Darby and the merged entity will have one of the biggest landbanks in Malaysia, said Sime Darby group chief executive Ahmad Zubir Murshid.

Source : Straits Times - 13 Apr 2007

Imagine owning a Singapore hotel room where you could stay during holidays, and collect rent the rest of the time.

A property industry figure said yesterday that Singapore’s hospitality sector, which is expected to grow, could support the development of this market - known as condominium hotels.

Mr Gurjit Singh, the director of property at Sentosa Leisure Group, said this concept could work in strong tourist spots here. He was speaking at a conference held alongside the Cityscape Asia exhibition of global property investment and development projects.

A condominium hotel is a strata-titled hotel unit that is sold to individual investors. This concept has already taken off in places such as the United States, Europe, Dubai and the Philippines.

At Waikiki in Honolulu, 464 units at Trump International Hotel and Tower were snapped up in one day late last year. Sales topped US$700 million (S$1.06 billion), with buyers said to pay an average of US$1.5 million for each unit.

If condominium hotels are built here, it would help speed up the provision of hotel accommodation, Mr Singh said, and be a catalyst for urban regeneration.

This approach would provide developers with upfront capital, as hotels have very long gestation and payback periods.

Investors would get a a low price entry point into the hospitality sector.

‘It can provide another form of property investment for retail investors,’ said Mr Nicholas Mak of Knight Frank.

Returns would be split 50:50 between the hotel manager and the owners, after deducting expenses.

‘Singapore needs to think through the alternative ownership structure,’ said Mr Singh.

There would be legal, taxation and zoning issues, for example.

Source : Straits Times - 12 Apr 2007