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Singapore construction and property firm Chip Eng Seng, which has teamed up with Lehman Brothers to develop property, said it plans to tie up with the investment bank on more projects amid a booming market.

Pinnacle @ Duxton

Chip Eng Seng’s executive director Raymond Chia said in a recent interview that the partnership would give them more resources to undertake larger projects.

‘We like to have joint ventures to spread out risks,’ said Mr Chia, the son-in-law of company founder and executive chairman Lim Tiam Seng. ‘We want to move forward but at the same time, we have to be prudent.’

Last July, the firm formed a joint venture with US investment bank Lehman Brothers’ private equity real estate fund - Lehman Brothers Real Estate Partners II - to develop properties in Singapore including two high-rise apartment blocks in Singapore’s prime and suburban districts.

Singapore’s smaller real estate firms are scouting for bigger partners in order to improve their chances against property giants such as CapitaLand and City Developments in the city-state’s land auctions.

Besides Lehman Brothers, Chip Eng Seng has also joined up with Chicago-based hedge fund Citadel Investment Group to develop properties in Singapore. Sing Holdings tied up with United States-based fund Forum Partners.

Chip Eng Seng, which means ‘united and eternally successful’ in Mandarin, has developed five high-rise residential apartments since it ventured into property development in 2001.

With a market value of US$162 million, Chip Eng Seng ranks sixth out of 23 companies in the Singapore Construction Index . Its stock has nearly doubled over the past six months.

Although two-thirds of the firm’s profits come from property development, Mr Chia said he remains focused on construction amid a recovery in the city-state’s building market.

Chip Eng Seng is building Pinnacle@Duxton, Singapore’s tallest public housing apartment block with 50-storeys and a sky bridge.

Peter Khoo, the firm’s chief financial officer, said the builder’s current order book stands at S$560 million, adding that it might grow to S$800 million in the next three to four years.

Mr Chia declined to give a profit forecast. However, he said that UOB Kay Hian’s forecast of a S$36 million net profit for 2007, is ‘close enough’. UOB Kay Hian forecast a net profit of S$12.3 million for 2006. Chip Eng Seng is due to report its full-year earnings on Feb 13.

Singapore’s two planned casinos, which are due to open in 2009-2010 and cost a total of US$6.6 billion, will generate more business for local construction firms, and Mr Chia said that he hopes to make an acquisition in the sector to benefit from that demand. ‘Foreign companies that come in would likely need a local firm to help them execute the project. They would need specialist sub-contractors as it’ll be extremely expensive to bring theirs in,’ he said.

‘To me, the best way for an expansion plan is not through organic growth, I would have to go into acquisitions.’

Mr Chia said that the company plans to issue a two-year bond of up to S$150 million in tranches to finance its current projects, acquisitions and for working capital. - Reuters

Source : Business Times - 12 Feb 2007

Potential buyers said to include German, Dutch and Australian parties

Office space owned by the Singapore Exchange at SGX Centre 1 has attracted top bids exceeding $1,600 psf of net lettable area, say industry sources.

SGX Centre

This would be a new high for such space in the central business district in the current property cycle, though still shy of the $2,200 psf record set in January 1996 when Straits Steamship Land (now Keppel Land) sold seven floors of what is now known as Prudential Tower in the China Square area to Prudential Assurance Company Singapore.

It remains to be seen if SGX will sell its space at current price offers or seek even higher bids. Besides the 19th to 29th floors of the 29-storey SGX Centre 1, SGX also owns space on the second and third levels of the podium of SGX Centre.

United Overseas Bank and Singapore Land own the rest of the space in the tower and probably have a right of first refusal to buy the space owned by SGX, reckon industry watchers.

The property stands on a site with a remaining lease of about 87 years. Market watchers expect SGX to lease back space from the buyer for at least five years.

Jones Lang LaSalle, which SGX has appointed to handle the sale of 169,500 square feet of net lettable area that it owns in the property, declined to comment.

However, industry sources say that shortlisted bidders have already made their offers. They are said to be primarily overseas parties - including German, Dutch and Australian.

Market watchers believe that bidders included an ING-linked fund, along with Australia’s Allco group. Others who may have bidded included Deutsche Bank’s real estate arm DB Real Estate, and Australia’s Macquarie group, along with entities linked to Credit Suisse and CLSA.

The latter three have been active in recent office deals in Singapore. Last year, a property fund managed by CLSA Capital Partners bought SIA Building for $343.88 million or $1,165 psf; a Credit Suisse-managed property fund bought Lippo Centre at 78 Shenton Way for over $348 million or about $1,160 psf; and a fund managed by Macquarie Global Property Advisors snapped up 12 floors at Springleaf Tower for a total of about $134 million or $1,240 psf.

Just last month, the Difa-Global fund advised by ING bought Vision Crest’s office block and the House of Tan Yeok Nee next door in the Penang Road/Clemenceau Avenue area for $260 million.

Source : Business Times - 12 Feb 2007

Home owners should first decide the amount of mortgage cover and the premiums they can pay

The recent case of Madam Kok Pooi Leng, who lost her semi-detached house after her husband was killed last year, has thrown into the spotlight the importance of mortgage insurance.

Madam Kok’s house was repossessed by the bank last year because she had not been able to make loan repayments on the outstanding mortgage on the property.

Mortgage insurance takes care of this by ensuring that in the event of the death or disability of the home owner, the outstanding amount on his home loan will be settled.

This means that the home owner’s dependants ‘will not have to worry about meeting mortgage repayments’, selling the home or downgrading to keep a roof over their heads, said DBS Bank.

This form of insurance is required for owners of Housing Board flats, but not for those of private property.

However, most banks will recommend that you take out mortgage insurance when you apply for a home loan with them.

Some have tied up with insurers to offer these policies, such as DBS with Aviva.

So what should you consider when deciding which product to buy?

Some of the first things to consider would be how much of the total mortgage you want to cover as well as how much you can afford to pay in premiums, says DBS.

Most policies also allow you to choose the number of years covered, which can range from five to 40 years, as well as whether you want to pay annual premiums or a single premium.

Single premium products tend to be slightly cheaper, noted Mr Tan Chia Seng, Citibank Singapore’s business director.

As well, joint home owners can opt to take a joint-lives policy to cover both owners, which usually costs less than taking two separate single life policies.

Such a policy will cease after the first claim is paid on the party who dies first.

Another thing to look out for is the type of protection coverage offered.

Preferably, the policy should cover death, total and permanent disability, and critical illness that renders the policyholder unable to work.

DBS’ MortgageShield product also provides an ‘interim accidental death cover’ that offers up to 90 days of accidental death cover for the period between the home owner applying for the policy and when it takes effect.

However, it must be noted that some insurers provide certain benefits only up to a specified age limit such as 60 years, said NTUC Income’s head of life insurance, Mr Peh Chee Keong.

Lastly, it is essential to choose the right interest rate to apply to your mortgage insurance to ensure that it can cover any future rises in home loan rates.

DBS recommends that home owners take insurance at a slightly higher interest rate than that on their current home loan package because home loan rates can change unexpectedly.

Policy choices

DBS MortgageShield (DBS/Aviva)

Offers term coverage from five to 40 years, with annual interest rates available at 5 per cent, 7 per cent and 9 per cent.

No premiums are payable in the last two years of the policy.

Includes accidental death cover for up to 90 days, covering the period required to process the insurance application after the mortgage has been approved.

PruMortgage (Prudential)

Offers term coverage from 10 to 35 years, with interest rates ranging from 3 per cent to 7 per cent.

No premiums are payable in the last three years of the policy.

Available for ages 20 to 60.

Mortgage Protection Plan (NTUC Income)

Offers term coverage from 5 to 35 years. Its permanent total disability coverage has been extended to age 65.

Premiums are payable only for 75 per cent of the policy term.

MortgageProtector (HSBC)

Offers term coverage from 10 to 40 years, with interest rates ranging from 1 to 10 per cent.

No premiums are payable in the last four years of the policy.

Total and permanent disability coverage goes up to age 65, while life insurance protection goes up to age 70.

Source : Sunday Times - 11 Feb 2007

Q MY HUSBAND incurred personal debts totalling $80,000 from a few banks, which are now pressing him for payment.

My husband is unemployed and we are unable to repay.

He is intending to file for bankruptcy.

We have a joint account for our safe deposit box. Would the bank freeze our box and seize the items, most of which do not belong to him?

We live in an HUDC apartment. Is this classified as an Housing Board flat or a private flat? Would we be forced to sell it off to repay the debts?

We do not have an outstanding mortgage.

We understand that the sale proceeds are likely to go back into our Central Provident Fund (CPF) accounts and that there would not be any cash payouts.

My husband has a personal bank account and a joint account with me. Would our joint account be frozen?

One bank has issued a writ of seizure, and a representative has been to our home to paste court stickers on some of our household items.

We are unable to produce receipts to prove that these items are mine as they were bought a very long ago and some are lucky draw prizes.

How do we apply for these not to be removed?

We also need basic household items such as the refrigerator and washing machine. How do we apply for these items not to be taken away?

We also need the computer for my husband’s job applications and our children’s schoolwork.

A One of the consequences of being a bankrupt is that any credit balance in a bank account vests in the Official Assignee (OA).

Therefore, it is likely that the bank would not allow any transactions regarding the safe deposit box.

In any event, as a bankrupt, your husband is required by law to file a statement of affairs and he would have to disclose the existence and contents of the safe deposit box.

The HUDC flat does not enjoy the same protection as an HDB flat under the HDB Act and it will thus be treated as a private property.

It is unlikely that the OA would force you to sell your flat. However, your husband’s share will form part of his estate and will vest in the OA.

As the housing loan has been fully repaid, you would not have to worry that a mortgagee bank would bring about a forced sale of your property.

Given that the proceeds of any sale will go into your husband’s CPF account, the CPF Act affords considerable protection in the event of bankruptcy.

Under the CPF Act, a person’s CPF monies do not vest in the OA as these are not deemed to be the property of the bankrupt that the OA can lay his hands on.

If your husband is an undischarged bankrupt

upon reaching the age of 55 years, the withdrawal of his CPF monies would be at the discretion of the CPF Board.

Generally, he would be allowed to withdraw a lump sum less the Minimum Sum, Medisave and any other amounts that he may be required to set aside.

The Minister of Manpower must approve such withdrawals.

If there is insufficient money in his CPF account even for the setting aside of the Minimum Sum and Medisave, then he would be allowed to make monthly withdrawals instead of a lump sum.

Under the CPF Act, all monies paid out to your husband from his CPF account will also not be regarded as ‘after-acquired’ property - that is, property that your husband acquired after becoming bankrupt because ordinarily, any after-acquired property would also vest in the OA and be available for distribution.

Whilst there is no express prohibition against a bankrupt operating or holding a bank account, any credit balance in a bank account vests in the OA.

Therefore, it is likely that his bank accounts would be frozen. In fact, banks will usually ask to see an authorisation letter from the OA for a bankrupt to operate a bank account or even to open a new one.

If the bankrupt is allowed to operate or open a bank account, it is his duty to provide the OA with whatever information may be required by the OA in respect of that account. If he fails to do so, the bank account may be closed by the OA.

When the court bailiff visited your flat to seize the goods, he would have left behind a copy of the Notice of Seizure and Inventory that would state the value of items seized and may either state the date of auction or the words, ‘auction date will be fixed upon request of execution creditor’.

Therefore, you should check the notice and if no auction has taken place so far, it can only mean that the bank has not applied for a date yet. When an auction date is fixed, you will be informed of it.

Anyone, apart from your husband, may lodge a claim to the seized items by lodging a Form 22 (obtainable from the Bailiffs Section of the Subordinate Courts) to say that the seized items do not belong to him.

If the creditor admits the claimant’s ownership of the items seized, those items may be released; otherwise there will be a hearing to determine ownership.

At such a hearing the claimant would have to provide documentary proof or at least set out his grounds for claiming ownership. This may be the only way for you to save the items from being sold off.

Amolat SinghLawyerAmolat &Partners

Advice in this column is not meant as a substitute for comprehensive financial advice.

Source : Sunday Times - 11 Feb 2007

In boom times, Lease is more

Leasehold V Freehold
Which would you rather buy - a leasehold property or freehold?

For many Singaporeans, it’s a no-brainer.

Why? Ownership of the freehold property lasts generations (unless it’s acquired by the authorities) compared to leasehold, where the fear is that after 99 years, you may lose your home.

But if the largest en-bloc sale on Tuesday is any indication - where CapitaLand paid a staggering $548 million for the leasehold Gillman Heights - it just goes to show that en-bloc possibilities are not limited to the freehold market.

Just last month, the leasehold Minton Rise at Hougang was also sold en-bloc for $209 million to the Kheng Leong group. With the market looking up, this leasehold or freehold dilemma will be on many home-buyers’ minds.

Consider this: The number of new homes sold hit a staggering 11,147 last year, far exceeding the sub-10,000 units sold during the last three peaks in 1996, 1999 and 2002, according to figures released by the Urban Redevelopment Authority last month.

For a home-buyer, the price difference between a freehold and leasehold unit in the same area could be a premium of as much as 40 per cent.

Here’s an example: Four years ago, we compared some properties in the East Coast area, such as the freehold Amber Park and the 99-year leasehold Mandarin Gardens.

Both units were three-bedroom apartments of about the same size.

Back then, Amber Park was about 15 years old, while Mandarin Gardens was about 21 years old. We polled 50 people then and asked: ‘If you have to live in one of the above developments, which would you choose?’

Without knowing the price and land leases, 42 out of 50 chose Mandarin Gardens - the main attraction being the condo’s huge grounds and facilities.

But when told that Mandarin Gardens is leasehold, 46 out of the same group of 50 chose Amber Park.

Today both properties have seen the same price increase of about 25 per cent. (See comparison above.)

But if you had bought the two properties to rent out, you’ll realise that Mandarin Gardens gives you more bang for your buck.

Currently, the monthly rental at Amber Park is about $3,500.

This means a yield of about 4 per cent a year ($3,500 x 12 months divided by the property value of $1.07m).

In comparison, the monthly rental at Mandarin Gardens is about $2,800.

But its rental yield of about 5 per cent a year is better than Amber Park ($2,800 x 12 months divided by the property value of $668,000).

ERA Singapore vice-president Eugene Lim explained:

”The tenant doesn’t care if the property is leasehold or freehold. If the age, size, location and facilities of the two places are about the same, the rental should be similar too.’

During a boom, prices of both types of properties will appreciate. The reverse happens when the market dips, said Mr Colin Tan, Chesterton International’s head of research and consultancy. He said: ‘Some may say that freehold has better capital gains. But it’s inconclusive if one type of tenure is better than the other. In some areas, the freehold gains are better but in other areas, leasehold does better.’

Tenure aside, the location, the surroundings, and even a new MRT line does affect property prices.

In the past, it was true that a leasehold property’s value depreciated sharply after 60 years.

Then, you couldn’t use your CPF to pay for properties with less than 60 years on the lease.

This forced potential buyers to use only cash to pay for the unit if bought at the cut-off mark. That affected the asking price drastically.

This policy was revised in 2005 for properties with less than 30 years on the lease, which is good news for leasehold property owners.

For leasehold properties, however, going en-bloc is not a given compared to freehold ones. This is because there’s still the issue of lease top-up which needs approval, property watchers said.

And for that to happen, the plot ratio must be hiked where there is potential for intensifying the use of the land.

For auditor James Tang, 37, property location is foremost on his mind.

His dream is to own a freehold property, both for the prestige factor and also so that the place will be ‘mine forever’, he said.

He said: ‘It’s a notion that we want to leave something for our children that can last forever. But knowing how upgrade-crazy Singaporeans are, it may make sense to just jump from a leasehold property to another.’

Source : The New Paper - 10 Feb 2007