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Sellers are netting average profit of $300,000 within a couple of years

PROPERTY investors are making a killing on apartments at The Sail @ Marina Bay as interest in waterfront living continues to build in Singapore.

In all, 52 units of the 99-year leasehold development were sold in the sub-sale market in the third quarter, property consultancy Savills Singapore found in a check of caveats lodged.

The lucky sellers who had picked up their units just one or two years ago netted an average of $300,000 in profit.

The number of sub-sales for The Sail in the third quarter is a significant rise from the seven deals in each of the first and second quarters.

Sub-sales are transactions in which homes bought directly from the developers are resold before the development has been completed.

They are seen as a proxy for property speculation as the units are ‘flipped’ for a quick profit without the original buyers ever occupying the homes. So far this year, about 490 sub-sales have been transacted islandwide, Savills found.

At The Sail, the highest price for a sub-sale unit this year was $1,640 per sq ft (psf) for a 2,185 sq ft unit sold in August. This was on a high floor in the 70-storey first tower that was launched in November 2004 at around $900 psf to $950 psf.

Earlier this month, a 936 sq ft unit in the first tower was flipped for $1,548 psf.

The Sail is a joint venture development by City Developments (CDL) and AIG Global Real Estate Investment.

Its second tower was launched just last October at $1,080 psf and units have also been flipped for quick profits.

Larger units at The Sail were sold at an average of $1,285 psf in sub-sales this year, Savills found.

Market watchers said the interest in The Sail is due to a limited supply of inner-city waterfront living and its proximity to the upcoming integrated resort (IR) and Marina Bay Financial Centre.

Besides the Marina Bay homes, investors are springing for other waterfront properties such as those on Sentosa Cove.

At the 264-unit, 99-year leasehold The Oceanfront @ Sentosa Cove, 15 units have already changed hands since the development was launched in early July.

A 3,025 sq ft seafront unit was sold in the sub-sale market last month at $1,750 psf, much higher than the average of $1,300 psf to $1,350 psf CDL launched the condo at.

Two other Sentosa Cove condos launched earlier - The Berth by The Cove and The Azure - saw less sub-sale activity.

But many owners have advertised to sell, with one asking for $1,250 psf for a 3,100 sq ft penthouse in The Berth, compared with the condo’s launch price of less than $800 psf.

The Berth obtained its temporary occupation permit last week, which means owners have to start paying for their apartments. The speculators are cashing out, a market watcher said.

At another Sentosa Cove development, The Coast, a buyer has put his 2,024 sq ft unit up for sale for $3.85 million, or $1,902 psf. This is even as developer Ho Bee is still marketing the development. It has already sold around 190 of the 249 units at between $1,300 psf and over $1,800 psf.

While stories of quick profits may reek of the bad old property speculation of the past, market watchers are not yet worried about the increase in sub-sales.

Sub-sales today are not rampant and far from alarming, said Savills Singapore director of marketing and business development Ku Swee Yong.

‘It’s all a matter of timing,’ said a market watcher. ‘When The Sail was first launched, prices were lower because we didn’t know that the IRs were coming.’

Indeed, Mr Ku said: ‘The higher prices achieved in the market today is just a reflection of the reduction of risks, an improving economy and the growth of the financial industry here.’

Source : Straits Times - 27 Oct 2006

I REFER to the query, ‘How is en-bloc payout tied to ’share value’?’ (ST, Oct 24).

Share value determines share of common property, voting rights and amount of maintenance contribution of each subsidiary proprietor (owner) of a strata sub-divided lot (condominium units, among others, are strata sub-divided lots).

The schedule of share values is filed by the developer and must be accepted by the Commissioner of Buildings (COB) before the sale of any strata lot in a development.

The COB issues guidelines on the filing of the schedule of share values. In the latest guidelines, share values of condominium units are assigned based on floor-area groupings of 50 sq m intervals (see http://www.bca.gov.sg/BMSM/others/Share_Value_Guidelines.pdf). Thus a unit with a floor area of 45 sq m would be assigned five shares and one with 55 sq m would be assigned six shares.

The COB reviews and revises the guidelines periodically. Before the latest revisions, share values of condominium units were assigned based on floor-area groupings of 100 sq m intervals, with share value of three for floor areas of less than 100 sq m.

In the case of Eng Lok Mansion, the share values for the 118 sq m and 146 sq m units were assigned based on the previous guidelines and were of the same share.

Source : Straits Times - 27 Oct 2006

THE real-estate arm of Indonesian conglomerate Lippo Group is raising up to $110.92 million with the listing of a property trust called First Real Estate Investment Trust (First Reit) on the main board of the Singapore Exchange, according to a preliminary prospectus filed yesterday.

PT Lippo Karawaci Tbk, the largest listed broad-based property company in Indonesia, is offering 140.40 million units at an indicative range of 68 cents to 79 cents per unit.

The initial asset portfolio of First Reit, which will be managed by Bowsprit Capital Corp, will comprise Siloam Hospitals Lippo Karawaci, Siloam Hospitals West Jakarta, Siloam Hospitals Surabaya, and Imperial Aryaduta Hotel & Country Club.

All these properties are worth up to $257 million, making First Reit the first Singapore-listed Reit to have Indonesian-based assets. Each of the property will be leased to PT Lippo Karawaci Tbk.

Lippo, which is controlled by Indonesia’s Riady family, said the trust was established with the aim of owning and investing in diversified healthcare and related assets in high-growth markets in Asia, including Indonesia, Singapore, China, Malaysia, Thailand and Hong Kong.

‘First Reit seeks to invest in health care and healthcare-related assets that are positioned to capitalise on the growing demand for healthcare services in Asia,’ the prospectus said.

In fact, the group has already started the process of identifying and evaluating assets for future acquisition by First Reit.

The Reit manager has also entered into non-binding memoranda of understanding (MOU) with three companies managed by Singapore-listed Pacific Healthcare Holdings Ltd. This is related to the proposed acquisition and leaseback of two Singapore nursing homes, as well as a Singapore hospital. It has also entered a non-binding MOU with PT Nusautama Medicalindo in connection with the proposed purchase and leaseback of an Indonesian hospital.

First Reit manager is presently negotiating the financing and the broad lease terms with regard to the potential acquisition and leaseback of these properties. The manager intends to use a combination of debt and equity to fund future acquisitions, property enhancements and capital expenditure.

The group is forecasting a distribution yield of between 9.57 and 8.24 per cent in 2007.

Merrill Lynch and Oversea-Chinese Banking Corp are joint lead managers for the listing of First Reit.

Source : Business Times - 27 Oct 2006

Over $2.5b spent so far this year on development sites and investment properties; upcoming IRs said to be one factor for renewed investor interest

Foreign investors - many of them new faces - have ploughed more than $2.5 billion into Singapore’s property market this year, says consultancy CB Richard Ellis (CBRE). And the feeling is that they are happy to continue paying top dollar for plum prospects.

Foreign parties have bought development sites and investment properties, with new players including Chicago-based Citadel Equity Fund, CLSA Merchant Bankers and Pacific Coast Assets.

And yesterday CBRE chalked up another sale to a foreign investor. Royce Properties, which is linked to Emirates Investment Group, outbid local developers to clinch the Horizon View condo in Cairnhill for $113 million.

‘In my 15 years here, I have never seen so much foreign capital,’ says CBRE’s executive director of investment sales Jeremy Lake. Prices here are lower than in Hong Kong and Japan, but according to Mr Lake: ‘Investors are not bottom-fishing. We have passed that point.’

Singapore’s property yields of 3-4 per cent surpass Hong Kong’s 2-3 per cent. And although the potential for capital appreciation is higher in Hong Kong, Mr Lake believes investors now prefer a ‘blend’ of income and capital gains.

Interestingly, more than half the recent purchases were by property funds or private equity firms.

There are now more ‘investment-grade property ownership opportunities’, says Henderson Global Investors’ director of property (Asia) Chris Reilly. ‘This hasn’t been the case for a long time.’ Citing a Jones Lang LaSalle report, Mr Reilly said net global funds flowing into Asia are still modest at US$1 billion, compared with US$13.3 billion for the US. So there is ’scope to see a greater allocation to property in Asia among institutional investors’, he says. ‘Over the long term, we will see more pension funds.’

On the size of returns, Daisuke Tanaka, vice-general manager of Kajima Overseas Asia - which with Lehman Brothers recently bought SingTel’s Crosby House for $163.4 million - says foreign investors ‘like the political situation here’. ‘But if the risk is there, we will expect a higher return.’

Kajima has a US$1 billion portfolio in South-east Asia, with Singapore accounting for the biggest slice, followed by Indonesia and Hong Kong. Mr Tanaka says the integrated resorts (IRs) have been a catalyst for much of the new investor interest, pointing out: ‘Relatively low returns could translate into high returns in the future.’

Property values in Singapore have been slow to pick up compared with those in Hong Kong, but this has also contributed to the pull factor. Allen Law, a director of Hong Kong’s Park Hotel Group, a bidder for the Collyer Quay site, is unequivocal about his reasons for investing here: ‘In Hong Kong, the market condition is not viable - prices are a bit on the high side now. Singapore presents many opportunities.’

Lehman Brothers has been particularly aggressive. With construction firm and developer Chip Eng Seng, it will develop two residential sites - one in Cairnhill and the other on the West Coast.

Foreign investors have been knocking on other doors too. Sim Lian Group, which is also involved in construction and development, has been approached several times in the past year, says managing director Kuik Sing Beng.

The most recent meeting was just two weeks ago, but Sim Lian will not be rushing to sign deals, Mr Kuik says. For a start, funds and private equity firms must account for their investments and provide a suitable return. ‘Funds will want to sell their developments quickly to recoup their investments,’ he explains. ‘Local developers prefer to keep a certain proportion of units to sell at a higher price later.’

CBRE’s Mr Lake says it is no longer unusual for foreign investors to make up half of the bidders for choice commercial sites, as with the Collyer Quay tender, which attracted not one but three Hong Kong-based hotel developers.

The Collyer Quay tender was also significant because another foreign investor, Dubai Properties, put in a solo bid without a local partner, following Lend Lease’s lead at Somerset Central.

The executive director for Middle East and Islamic finance at Chesterton International, Fazlur Rahman Bin Kamsani, says the Orchard Turn, Somerset Central and Sentosa Cove sites could have seen even more competition if Middle Eastern investors were more familiar with the public tender process.

About four Middle East investors have approached Chesterton so far about development sites here, he says. ‘They are prepared to pay the price but they don’t want to go through the tender process. All they want to know is how much.’

Source : Business Times - 27 Oct 2006

Placement is to fund purchase of strata offices at Suntec City

SUNTEC Real Estate Investment Trust, controlled by Hong Kong tycoon Li Ka-shing, plans to raise up to $182.4 million for expansion by selling new units in the trust to investors.

In a statement released yesterday, ARA Trust Management (Suntec), which manages the Suntec Reit, said the property trust would sell 120 million Suntec units in a private placement with an issue price of between $1.48 and $1.52 per new unit, or a 1.9 to 4.5 per cent discount to yesterday’s $1.55 closing price.

ARA Trust’s announcement came after its chief executive Yeo See Kiat confirmed earlier in the day a Reuters report on the placement.

ARA Trust said the placement is to fund the first phase of Suntec Reit’s programme to acquire office strata units in Suntec City not presently owned by it.

The deal, of which Citigroup Global Markets Singapore is the financial adviser, lead manager and underwriter, is expected to be priced by today. This probably explains Suntec’s request for a trading halt today.

Click here for Suntec Reit’s FY2006 financial statements

Suntec Reit is expanding as Singapore’s office rents recover from their lowest in a decade and are expected to surpass their 1996 peak, reaching $11 per square foot by 2008, according to UBS AG’s estimates.

Suntec, based on three commercial and office complexes in Singapore, yesterday said it would pay investors $24.8 million in distributable income for its July 1-Sept 30 fourth quarter. The trust said investors would receive 1.91 Singapore cents per unit for Q4.

‘The office market is enjoying a strong growth momentum underpinned by sustained demand amid tight supply, translating into further rental growth in the third quarter of 2006,’ the company said.

Suntec Reit said gross office revenue rose to $15.5 million, exceeding its forecast by $3.7 million. Gross retail revenue increased to $29.4 million, also surpassing forecast by $6.7 million.

Source : Business Times - 27 Oct 2006