K-REIT Asia is looking to add to its portfolio and may take a stake in the upcoming Marina Bay Financial Centre (MBFC).

The commercial real estate investment trust said this yesterday after releasing its results. Net property income was $13.4 million for the fourth quarter ended Dec 31, 2009 – up 13.8 per cent from a year ago.

Earnings were lifted by positive rental revisions and contributions from newly purchased strata floors in Prudential Tower. Distributable income to unitholders also rose, by 11.4 per cent to $19.4 million.

However, distribution per unit (DPU) fell as the unit base grew from a $620 million rights issue in November last year. DPU in Q4 was 1.45 cents, down 45.7 per cent from 2.67 cents a year ago. Adjusting for the rights issue, DPU in Q4 last year would have been 1.32 cents, reflecting a 9.8 per cent increase.

K-Reit will pay out 2.77 cents per unit on Feb 25, for July 1 to Dec 31.

At a press briefing, K-Reit manager CEO Ng Hsueh Ling said that the trust is actively looking at acquisition opportunities. She told BT that a stake in MBFC held by its parent Keppel Land is under consideration. This confirms what several analysts have been deducing in the past few months.

The Reit has not struck a deal because the first phase of MBFC is still on its way to completion. ‘We will only look at it when there is greater stability of income,’ Ms Ng said.

And because a deal between K-Reit and Keppel Land would be an interested party transaction, both sides will have to work on getting the ‘right and best value’ for their investors, she added.

K-Reit has considerable capacity for acquisitions because of the rights issue. As at end-December, its aggregate leverage was 27.7 per cent, almost the same as that a year ago. This could drop to 9.1 per cent should it pay off a loan due to Kephinance Investment.

Its debt headroom would be about $438-648 million, assuming an aggregate leverage of 30-40 per cent.

K-Reit’s portfolio value stood at $2.1 billion as at Dec 31, which works out to an average of $1,616 per sq ft (psf). This is 5.3 per cent lower than a year ago.

The portfolio occupancy rate slipped to 95 per cent from 99 per cent over the same period. On a brighter note, the average portfolio rent in December last year inched up to $8.16 psf.

For FY2009, K-Reit’s net property income grew 23.3 per cent to $48.9 million. Distributable income to unitholders also increased 21.1 per cent to $70.5 million.

Annualised DPU was 5.28 cents – 40.7 per cent less than the 8.91 cents a year ago. The annualised distribution yield would be 4.8 per cent based on K-Reit’s closing unit price of $1.10 as at Dec 31.

Annualised DPU would have risen 19.7 per cent year-on-year if the FY2008 figure was adjusted for the rights issue to 4.41 cents.

K-Reit units gained two cents yesterday to close at $1.20.

Source : Business Times – 21 Jan 2010

IT HAS been quite a journey for the Housing and Development Board (HDB).

When it was set up in 1960, Singapore was mired in a housing crisis, but today the country has one of the highest home ownership rates in the world. Public homeownership in Singapore is 80 per cent.

To share its achievements – and mark its 50th anniversary – the HDB is hosting the International Housing Conference from next Tuesday to Friday.

The event will bring a host of housing experts to Singapore, with many of them no doubt keen to pick up some pointers.

The HDB’s development and procurement director, Mr Fong Chun Wah, told The Straits Times the board hopes to ’share stories from this long journey’, with not just Singaporeans but also an international audience.

More than 30 speakers and experts, including housing ministers from Finland and Spain, will attend the conference along with an estimated 500 local and foreign delegates.

The HDB will share its practices in planning housing estates – such as in design and construction and in fostering human interaction.

These include technology breakthroughs in construction, the use of alternative energy sources such as solar and universal design catering to residents of all capabilities, said Mr Fong.

To some extent, certain aspects of the Singapore model can be replicated in emerging countries such as China, and the HDB hopes to share this experience, he said.

‘But there is much more to learn from others,’ he added. ‘We hope to gain some new ideas and concepts from the speakers, and find areas of collaboration.’

The conference will also feature a special session with Minister Mentor Lee Kuan Yew, who was prime minister at the time of the HDB’s inception and who conceived the home ownership programme implemented in 1964.

The HDB’s golden jubilee ‘is not just an occasion for (it) to celebrate its success’, said Mr Fong, who has been with the organisation for more than two decades.

‘It’s also a time for us to focus on realising our vision for the next five decades – and to rise to the challenge of meeting the housing aspirations of a new generation of Singaporeans.’

The conference will focus on the theme of sustainability – something that the HDB has embraced in its mission for the past 50 years ‘before the word became fashionable’, said Mr Fong.

‘The topic is very current, and sustainable housing is part of a bigger sustainable development trend happening around the world now.’

The deputy director of the HDB’s housing administration department, Mr Norman Chee, added: ‘It goes beyond the ‘hard- ware’ into the ‘heartware’ – providing not just housing but a town with facilities that are easily accessible, and social spaces where people can interact.’

Mr Fong said the HDB will face challenging issues such as land scarcity, changing aspirations and lifestyle of residents, and an ageing population over the next 50 years.

‘The board will be reflecting on how to tackle these challenges even as we look back on what we’ve achieved in the past five decades – we hope the conference will help to discuss some of these issues.’

Source : Straits Times – 21 Jan 2010

It is selling Robinson Point, looking at Starhub Centre redevelopment

OFFICE Reit CapitaCommercial Trust (CCT) wrote down the value of its investment properties by another $327.6 million and unveiled plans to revamp its portfolio.

The trust also said yesterday that it will receive $9.3 million from parent company CapitaLand to make up for a shortfall in income from One George Street.

CapitaLand sold One George Street to CCT in 2008 with a yield protection clause in case the net property income from the property is less than $49.5 million a year. The developer was required to pay for the shortfall for 2009, which resulted from lower operating performance as a result of global economic slowdown as well as the low rental rates for some of the existing leases that have not expired, CCT said.

The Reit also said it will sell Robinson Point to a private fund managed by AEW Asia for $203.3 million. CCT will book a gain of $19.2 million from the sale.

The trust is also looking at redeveloping Starhub Centre at Cuppage Road. The property is currently zoned for purely commercial use but CCT is hoping to convert it into a residential and commercial development.

It has obtained outline planning permission from the Urban Redevelopment Authority to change the use of the property, but the change of use is still subject to other government authorities’ approval. CCT will only decide on the next course of action after all relevant approvals are received, it said.

Both Robinson Point and Starhub Centre are non-Grade A properties, which the trust said have not performed as well as its Grade A projects in the current downturn.

‘Our Grade A offices continue to show resilience by recording an increased average occupancy rate in Q4 2009 to 98.7 per cent, significantly higher than the Grade A office market occupancy rate of 93.8 per cent,’ said Lynette Leong, chief executive of CCT’s manager. In comparison, the overall portfolio occupancy stood at 94.8 per cent in Q4.

Robinson Point was identified as being ripe for divestment. Selling it will allow CCT to re-invest in a Grade A property instead, Ms Leong said. Starhub Centre, which now suffers from lower than usual occupancy, could be given a revamp.

CCT also reported a downward revaluation of its properties from $6.03 billion in May 2009 to $5.7 billion at end 2009. The write-down follows an earlier one in May, where the value of CCT’s portfolio was reduced from $6.71 billion in December 2008.

CCT reported a 39 per cent climb in distributable income to $52.9 million for Q4 2009, from $38 million a year ago. Distribution per unit (DPU) – adjusted for rights units – rose to 1.88 cents from 1.36 cents.

For the full 2009 financial year, CCT reported a distributable income of $198.5 million, up 30 per cent from $153 million in 2008. The full year DPU (adjusted for rights units) of 7.06 cents is a 29 per cent year-on-year increase from 2008 DPU of 5.48 cents.

Source : Business Times – 21 Jan 2010

I REFER to yesterday’s report, ‘Proposed law changes to protect clients in property deals’. I doubt the proposed law changes will prevent the problem of lawyers running off with their clients’ money.

I find the new proposals time-consuming and cumbersome without getting to the root of the problem – stakeholder status of law firms. The chain of events in the new proposals creates duplication. The labyrinth of administrative procedure does not address the ‘parking bay’ of transaction proceeds right from the start.

Under the new proposals, who pays to monitor each step of withdrawals during the whole period of transaction? How to ensure no conflicts in approval between client and lawyer to hold up to $5,000 to meet many miscellaneous expenses (ME) in a short time? There could be more questions than answers.

The basic elements in property transaction equation are transaction proceeds (TP), ME, and interest of buyer and seller. Abuse can occur when proceeds are paid into the accounts of the law firm as stakeholder money, and the law firm has full control over its use. If payments for ME are separated from TP, the interest of buyer and seller will be safely protected in the transaction equation.

The key is isolating the client’s money in property transactions from law firms. Strictly speaking, the proceeds have nothing to do with the law firms. The duty of law firms is to administer the process and disbursements. Using a neutral party as stakeholder will eliminate the risk.

I think it is feasible to create a new rule that stipulates that 95 per cent of the proceeds go direct into a conveyancing account in an approved bank as stakeholder until completion, while the balance 5 per cent is administered by the law firm. Disbursements for ME are approved by both parties’ lawyers. It is neat and simple.

This way, the bulk of clients’ money is isolated and protected in the bank. The risk of running off with clients’ money is isolated. The role of the bank is to disburse payments with clear instructions from both parties’ lawyers. This simple tweak to the current procedure will effectively protect clients in property deals.

Paul Chan

Source : Straits Times – 21 Jan 2010

THE strong recovery in private home prices during the course of last year pushed down HDB upgraders’ share of private home purchases to 33.8 per cent in Q4 2009 from a high of 56.2 per cent in Q1 last year, shows the latest caveats analysis by Jones Lang LaSalle.

HDB upgraders accounted for 44.4 per cent of private home purchases in Q2 last year, with the share slipping to 37.9 per cent in Q3.

DTZ executive director Ong Choon Fah says: ‘Whenever the market is down, for instance in Q1 last year, you tend to see more buying activity by HDB upgraders. When prices go up, HDB upgraders pull back, as they are very price sensitive. And there’s no strong push factor for them to buy a private home since they already have a very good-quality roof over their heads.’

Urban Redevelopment Authority’s price index for private homes contracted 18 per cent in the first half of 2009 (from end-2008 level) but recovered 24.2 per cent in the second half.

JLL’s SE Asia research head Chua Yang Liang points out that the gap between prices of private condos/apartments and Housing & Development Board flats has widened since 2008. ‘As such, we expect HDB upgraders’ ‘participation’ in private home purchases to continue to pull back moderately before picking up again as more mass-market condo projects are launched when the government tenders out more sites during the course of this year.’

‘I reckon HDB upgraders’ share of private home purchases could hover around 35-40 per cent by end-2010,’ he added.

Source : Business Times – 21 Jan 2010

Westerners choose units in $1.5-5m band; most Asians prefer $500,000-1m

Among the top foreign buyers of private homes last year, Asians (excluding Indonesians) primarily bought units in the $500,000 to $1 million range, while most Western buyers (Australians, UK and US citizens) picked up homes mostly in the $1.5-5 million range.

Indonesians were in the same category as the Western buyers, with the $1.5-5 million range being their most favoured price band. In fact, 47 per cent of the 1,219 caveats for private homes lodged by Indonesians last year were in this band, shows Jones Lang LaSalle’s analysis of URA Realis caveats.

On the other hand, Malaysians, mainland Chinese, Indians, Koreans and Burmese were more likely to have bought a private home last year in the $500,000 to $1 million category.

DTZ executive director (consulting) Ong Choon Fah argues that Indonesians tend to buy a property here as a home away from home, often as a residence for their children studying here, and as a safe haven to park their wealth in a nearby country. Hence they are prepared to invest more for a property in Singapore.

Generally, though, Asians may set aside smaller budgets for their property investments in Singapore because they also compare property prices here relative to their home markets, Mrs Ong suggests.

JLL’s South-east Asia research head Chua Yang Liang observes that while there is no noticeable difference in the location (district) preference between Asian and Western foreign buyers, there is a more prominent difference in terms of their price range. He suggests that this could be because the majority of Western foreign buyers are probably here on expatriate terms, while Asian buyers are likely to be working here under local terms or are just investors.

Mrs Ong suggests that Asians may be more ‘adventurous’ and prepared to shop for a property in Singapore’s suburban locations, where deals below $1 million can still be found, whereas Western buyers may be more comfortable sticking to their traditional investment locations such as Districts 9 and 10 where expats have traditionally lived and property is pricier.

However, property market watchers point to a stronger presence by mainland Chinese in the higher-end property market in Singapore. JLL’s analysis shows that they picked up 22 properties exceeding $5 million apiece last year. Most of their purchases in this price band were in Districts 10 and 4. District 4 includes Sentosa Cove, while District 10 is one of Singapore’s traditional prime districts covering such locations as Ardmore Park, Cuscaden Road and the Nassim area.

Some 41 Indonesians, 28 Malaysians, 18 British Virgin Islanders and 16 UK citizens each bought properties costing over $5 million apiece in Singapore last year.

JLL’s caveats analysis showed that foreigners’ share of private home purchases increased to 27 per cent in Q4 last year, from a low of 15 per cent in Q1 2009, when the property market was still eschewed by foreign investors who had gone into hibernation in the aftermath of the global financial crisis. Foreigners lodged 20 and 23 per cent of caveats in Q2 and Q3 last year.

Their relatively low share in the first two quarters of last year dragged down their full-year share to 21.8 per cent from 24.1 per cent in 2008. However, in absolute numbers, the number of private residences bought by foreigners doubled from 3,176 in 2008 to 6,472 last year, amid the spectacular overall recovery in private home sales following price cuts by developers in the earlier part of last year. As well, investors soon developed a preference towards investing in property as an asset class after the global financial slump when billions vaporised overnight in investments in financial instruments.

Dr Chua forecasts that foreigners will continue to be active in the local property scene this year as the regional economies improve.

Source : Business Times – 21 Jan 2010