Re-rating follows recapitalisation exercise

MOODY’S Investors Service has upgraded AIMS-AMP Capital Industrial Reit’s corporate family rating to Ba2 from Caa1 following its recent recapitalisation exercise.

The industrial trust – which was formerly known as MacarthurCook Industrial Reit – underwent a change of name after a recent debt-and-equity-raising plan. The Reit placed out shares to new investor AMP Capital Holdings and existing sponsor AIMS Financial Group as well as other cornerstone investors. This was then followed by a rights issue and a new term loan.

Concluding a rating review that was started on Nov 9, Moody’s said that the rating outlook for the Reit is stable.

‘The upgrade reflects AIMS-AMP Capital Industrial Reit’s remarkably improved liquidity profile and capital structure following the successful completion of its recapitalisation plan and refinance of the maturing Singapore dollar loan,’ said Moody’s analyst Kaven Tsang.

The Reit has applied part of the proceeds from the issuances to complete its acquisition of a building (4A International Business Park) and will also acquire four new properties from AMP.

‘These new properties are cash flow generative and will to some extent support its income diversification and debt service coverage,’ Mr Tsang added.

In addition, its liquidity profile has improved substantially, without material refinancing needs in the near term, Moody’s noted. The Reit’s debt/capi-talisation leverage has fallen to 30 per cent, from 47 per cent as of Sept 2009. The Reit’s major borrowing, a new $175 million term loan, is only due in December 2012.

But Moody’s also noted that while new sponsor AMP’s ‘established market presence and solid track record’ could benefit AIMS-AMP Capital Industrial Reit as it pursues growth and seeks new funding, AMP still needs to establish a track record in managing the Reit’s business as planned.

Source : Business Times – 30 Dec 2009

LCBC expects to complete the project in 14 months

LUM Chang Holdings subsidiary Lum Chang Building Contractors (LCBC) has won a $27.5 million design-and-build contract for the third phase of a commercial development at Changi Business Park Avenue 3.

The deal was awarded by the trustee of Ascendas Real Estate Investment Trust. LCBC expects to complete the project in 14 months and will recognise the earnings progressively, according to completion stages.

It does not see the project having a material financial impact on group results for the current financial year ending June 30, 2010.

The development at Changi Business Park comprises three eight-storey towers, and LCBC was involved in the first two phases of construction. In 2007, it clinched a $71.8 million tender to build an office building and a basement carpark.

Then in August last year it won a $76.5 million contract to construct another tower and a podium.

The latest tender is for the third and final phase of the development, which involves building the third tower.

LCBC has closed several other deals this year, including a $452.4 million contract for the new Bukit Panjang MRT station and associated tunnels. The latest Changi Business Park tender takes the value of contracts in progress to over $800 million.

Past projects have boosted takings for LCBC’s parent Lum Chang Holdings.

Last month, the latter reported a net profit of $7.02 million for its first quarter ended Sept 30 – more than eight times the $837,000 a year ago. Revenue was $52.74 million, up 50 per cent year-on-year.

Shares of Lum Chang closed unchanged at 28 cents yesterday.

Source : Business Times – 30 Dec 2009

IT WAS the rally that should never have happened. The world was in recession, credit was being crunched, investors across the board were in a state of near panic, yet no one seemed to have told real estate buyers.

After a tentative few months early in the year, property found its feet and staged the sort of upswing normally associated with economic booms, not near-busts.

Indeed, this year saw a recovery of Singapore’s residential market, said Frasers Centrepoint chief executive Lim Ee Seng.

‘We expected 2009 to be a very bad year for us but it turned out to be a good year,’ said EL Development managing director Lim Yew Soon.

Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, agreed: ‘It’s been a remarkable year – with transaction and pricing outperforming expectations, driven by latent demand, low interest rates and primed by lower pricing.’

Sales and prices of new private homes picked up significantly from April, a turnaround from the first quarter when sellers were cutting prices just to offload their homes.

As the private homes market swung quickly from despondency at the start of the year to ‘unwarranted enthusiasm’ in the middle, this year turned out to be a ‘record-breaking’ one, said DTZ head of South-east Asia research Chua Chor Hoon.

Record quarterly and monthly highs were achieved for launches and sales of new private homes while some new launches outside the city area sold at record prices, said Ms Chua.

Centro Residences in Ang Mo Kio, for instance, sold for more than $1,100 per sq ft (psf) – a suburban record.

Resale landed homes in prime districts also hit record prices while resale mass market home prices rebounded within two quarters to reach 2007 peak levels, Ms Chua added.

The four seasons

‘ONE of the hot topics this year was climate change, and if you apply that to the property market, it went through the four seasons for the first time ever,’ said Knight Frank chairman Tan Tiong Cheng.

The market is now in a ‘mild winter’ state, after a hectic year with an unusually hot summer, he said.

It started the year in deep winter – with only 108 new homes sold in January – the worst monthly sale figure on record. The mood was clearly grim.

Then came spring and sales quickly started to rise in February, easily pushing past the 1,000-unit mark to reach 1,332 units. March was similarly positive at 1,220 units.

By the time summer rolled around, market sentiment had improved tremendously.

Despite the heat, buyers were queueing outside showflats, eagerly awaiting their turn to pick a mass market unit.

Showflats of newly released projects aimed at HDB upgraders were packed to the brim on preview days with investors, singles, couples and families – often with grandparents in tow.

With affordability a key issue, developers turned to producing smaller and smaller units to satisfy those looking for an ‘affordable’ total outlay; never mind that the psf price may be high.

EL Development’s Mr Lim said: ‘Developers had to react to the market very fast. We were lucky to switch to small units for Illuminaire fast. Otherwise, we won’t be able to sell it out and at the price we achieved.’

Sales of new homes kept rising each month, culminating in a monthly record of 2,772 units in July.

‘We were supposed to be in a recession. The Government was talking about job losses which hit the lower-income group,’ said Knight Frank managing director, residential services Peter Ow.

‘Given the bleak outlook at that point, the momentum was surprising. It shows that you can never underestimate the purchasing power of the upgraders.’

Considering that the 2006-07 boom was led by the high-end segment with foreigners buying up a storm, many doubted the ‘bottom-up’ recovery was for real.

But it kept going strong amid concerns that a property bubble might be developing.

Government made its move

THAT prompted the Government to step in with anti-speculative measures in September.

It took away the interest absorption scheme, which allows buyers to defer payment until the project is completed, and said it will push out more supply.

An Urban Redevelopment Authority sample survey of recently launched projects showed that the average take-up rate of the interest absorption scheme was about 20 per cent to 25 per cent.

Property experts said at the time that the measures were minor and meant to get buyers to think twice about committing.

The Government continued to warn of the possibility of the market overheating. What followed seemed to suggest the measures had worked to some degree.

Signs of speculation disappeared, launches slowed and buyers were no longer rushing into new showflats to check out the latest launch and commit their cash.

Sales of new private homes slipped to 600 units last month, the second-lowest monthly sales this year.

But Jones Lang LaSalle’s Dr Chua feels the market will not see the full effect of the measures until early next year as activity traditionally winds down towards Christmas.

Ngee Ann Polytechnic lecturer Nicholas Mak believes there is a slowdown because developers have more or less run out of mass market projects while the high-end segment has yet to take off.

Looking ahead

EXPERTS say the slowdown – what DTZ’s Ms Chua describes as a ‘quieter and more rational mode’ – is a good thing.

It is a precursor to next year’s trend when the market is generally expected to revert to normal in terms of sales and upward price movements.

The bet is on a pick-up in the high-end segment as it has yet to push near previous peaks, experts say. With the opening of the two integrated resorts, more foreigners are expected to enter the Singapore market.

Dr Chua believes the high-end segment is likely to outperform the mass market on two levels.

Firstly, buyers of high-end homes are not so dependent on interest rates, which have been one of the key drivers in the mass market.

‘I reckon there is an upside to the currently low interest rates as we go into the second half of 2010 and that is likely to keep mass market activity in check,’ he said.

‘Secondly, regional economies have been performing better than expected and we can expect some of the higher-income foreigners to return to the Singapore market by the second to third quarter of 2010.’

Dr Chua does not expect a buying surge but more moderate growth.

‘I would describe the period since the collapse of Lehman Brothers in the later half of 2008 as that of a landscape of rolling hills. And now as we ascend, no one can really see what lies behind the knoll,’ he said.

Source : Straits Times – 30 Dec 2009

Some flats were 12 times over- subscribed at the close of applications

TWO highly anticipated public housing projects in Dawson estate have drawn overwhelming response, with some flats close to 12 times over-subscribed.

The 1,718 flats at SkyVille@Dawson and SkyTerrace@Dawson in Queenstown – offered by the Housing and Development Board (HDB) under the build-to-order (BTO) scheme – had received 10,098 applications as at 5pm yesterday.

Applications for the project ended yesterday.

‘As expected, there has been strong interest in the two Dawson projects, given their choice location,’ HDB noted in a statement.

SkyVille@Dawson and SkyTerrace@Dawson are near Singapore’s city centre and also close to Queenstown MRT station.

The five-room Dawson flats were the most popular, with 2,090 applications received for 176 available flats – about 11.9 times over-subscribed.

The 1,102 four-room flats attracted 6,015 applications while the 270 three-room flats drew 806 applications.

The 40 studio apartments available at the two projects also saw hot demand – 429 applications were received, making the studio apartments 10.7 times over-subscribed.

Paired units under HDB’s new multi-generational scheme also saw high demand. The scheme allows parents and married children to buy paired flats. HDB received 379 pairs of applications for the 65 pairs of flats available at SkyTerrace@Dawson.

Other than Dawson’s attractive location, the high prices of new private condominium apartments may have also pushed some buyers to these projects, noted Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

Demand was also strong – albeit to a lesser degree – at the two other BTO projects launched by HDB. At Montreal Dale in Sembawang, 1,412 applications were received for 424 flats. And at Segar Grove in Bukit Panjang, 1,367 applications were received for 528 flats.

However, the two-room flats in both Sembawang and Bukit Panjang, and the three-room flats at Bukit Panjang were under-subscribed, which analysts said could be due to the low income ceiling that might exclude some potential buyers.

‘HDB may have to review the income ceiling because the salary levels of Singaporeans have increased over the years,’ said Mr Mak.

HDB said that the next BTO launch will be held on Jan 5. Buyers can look forward to another 1,300 flats in Choa Chu Kang and Hougang then. Added the agency: ‘HDB will continue to launch more BTO projects in 2010 if there is sustained demand for new flats.’

Source : Business Times – 29 Dec 2009

Analysts expect 2-3 times the committed bid of $70m for site

A 99-YEAR leasehold residential site in Sengkang has been triggered for sale from the government’s reserve list.

The plot, at the junction of Sengkang West Avenue and Fernvale Link, will be launched for a public tender in about two weeks. It is being made available after an unnamed developer committed to bid at least $70 million, or $128 per sq ft of gross floor area. But analysts expect it to fetch two to three times that amount in the tender.

Under the reserve list system, a site is only put up for public tender once an application is received from a developer who commits to bid at or above a minimum price deemed acceptable to the government.

The Sengkang parcel is 182,973 sq ft and has a maximum allowable gross floor area of 548,920 sq ft. It is estimated that about 450 units of 1,200 sq ft can be built on the site.

Market watchers say that the triggering of the site – likely to be the last triggered sale in 2009 – shows that interest in residential plots is likely to continue to be strong in 2010.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak expects three to seven bids for the site, and reckons that the top few bids will be in the region of $260-$300 psf per plot ratio.

Peter Ow, Knight Frank’s executive director for residential, is more bullish – he expects the winning bid to be in the region of $370-$420 psf per plot ratio. He also feels that the site will receive ‘more than a few’ bids.

‘It is still an upgraders’ market and I think there is still demand from HDB upgraders for projects,’ he said.

At the nearby 625-unit The Quartz, the average resale price of units over the past six months was $714 psf. But The Quartz is in a more attractive location, Mr Ow said.

The latest site is in a relatively undeveloped area, so the number of bids will be smaller than in previous government tenders, analysts believe.

Earlier this month, a landed housing site at Jurong West put up for sale by the government drew a whopping 32 bids. The top bid for the 99-year leasehold parcel was $38.5 million or $254 psf of land area.

Source : Business Times – 29 Dec 2009

THINGS are looking up in the property investment sector, according to DTZ Research.

It reports a hike in both the number and size of property investment deals with a value of at least $5 million over the past year. DTZ noted that in the fourth quarter alone, the number of transactions across residential, government and private sales jumped to 38 from 14 for the same period last year.

Its data excludes transactions involving residential property which cannot be redeveloped into more than one unit.

Larger deals dominated investments in the last quarter.

Transactions valued above $100 million – of which there were eight in the fourth quarter – accounted for 77 per cent of total transaction value. This marked a 48 per cent improvement on the third quarter, and a sharp turnaround from the first half of the year when no such deals were registered.

DTZ’s Head of South-east Asia Research Chua Chor Hoon puts the rally down to a return of developers to the property market.

‘We now see a change in the profile of buyers – from smaller to bigger… Developers have been actively bidding in the Government’s land sales programme,’ she said.

The residential sector took 56 per cent of investment sales in the October to December period. This accounted for $14.6 billion worth of deals, representing half of the year’s total transaction value.

The retail sector followed closely behind, taking 16 per cent of the year’s transaction value.

DTZ said that activity in the office market remained muted.

‘Sellers don’t want to sell low, and buyers don’t want to buy high… Also, many foreigners still are not looking at our market,’ Ms Chua said. She expects the residential sector to continue to dominate the investment scene.

‘Much activity will come from the government land sales programme, which has eight sites on the confirmed list to be released for tender,’ she added.

Source : Straits Times – 29 Dec 2009

FRENCH cheeses and exotic wines will soon be at the doorsteps of residents in the north, north-east and west of the island as supermarket chain Carrefour looks to expand to these neighbourhoods.

Known for introducing the hypermarket concept to Singapore in 1997, the French company is set to open eight new supermarkets and one hypermarket, all in the heartland, over the next three years.

Announcing its expansion plan yesterday, Carrefour’s assistant operations and merchandise director Siva Kumar Haridas said this was prompted by greater demand from customers who want its range closer to home.

Its two current hypermarkets are located downtown at Suntec City and Plaza Singapura in Orchard Road.

Carrefour is not the only player eager to go high-end in the heartland, as consumers develop a taste for finer foods.

Local chain FairPrice this month opened two upscale FairPrice Finest supermarkets – in Marine Parade and Tampines. Its first two Finest outlets are in Bukit Timah and Upper Thomson.

The Straits Times understands that FairPrice, Singapore’s biggest supermarket chain, is also planning to launch more of its regular supermarkets around the island in the coming year.

But Carrefour is confident the market’s appetite is big enough for both players.

‘I think there’re enough customers and space. Besides we have our strong range of imported Carrefour products,’ said Mr Haridas.

The big players’ moves to expand will likely tighten the noose around the necks of mum- and-pop store owners and wet market stallholders.

Another supermarket chain, Sheng Siong, made the news recently when it bought five private wet markets as part of its expansion plans.

The convenience of supermarkets and their extended operating hours have led to more shoppers filling their aisles.

A recent Nielsen study found fresh food spending fell by 9 per cent at wet markets last year, but rose 53 per cent at hypermarkets and 8 per cent at supermarkets.

This year is likely to have been fruitful for supermarkets as recession-conscious Singaporeans chose to cook at home instead of splashing out on restaurant meals.

Latest retail sales index figures, taken in October, show that supermarkets earned more in nearly every month this year, compared with last year.

And bolstered by these sales, supermarkets are now targeting more niche markets.

Following in the footsteps of competitors FairPrice, Giant and Cold Storage, Carrefour has created dedicated halal sections in its outlets.

Their butchery, fish and bakery departments have halal areas for Muslim customers, with foods certified by Muis, the Islamic Religious Council of Singapore.

As a result of rising demand among its shoppers, particularly Malay housewives, Carrefour has also raised its halal fresh produce by 30 per cent.

The chain now offers 12,000 types of halal produce and products.

Future outlets will have these halal sections too, said Mr Haridas.

The expansion will not stop there. He added that Carrefour convenience stores may be next on the cards.

In the meantime, Woodlands resident Maimunah Ismail is looking forward to more grocery shopping choices closer to home.

The 44-year-old customer relations officer said that for heartlanders who live far from downtown, ‘it’s inconvenient to travel so far when I want to buy promotional items or uncommon imported food’.

Source : Straits Times – 29 Dec 2009