April 15, 2008
MPCB to build hub for trade in IDR
PROPERTY developer Malaysia Pacific Corporation Berhad (MPCB) is
planning a giant retail and wholesale trading hub as part of its
flagship development LakeHill Resort City in Johor's Iskandar
Development Region (IDR).
IDR is a special economic zone aimed at garnering both domestic and
foreign investment.
Bill Ch'ng, CEO of MPCB, told BT last week that its Asia-Pacific
Trade & Expo City (Aptec) would be a 'platform for greater regional
collaboration, bringing about greater socio-economic benefits'.
He also said that it would create a strategic partnership between
Singapore and Malaysia - one that could, among other things, tap the
mass consumer market of Asia-Pacific's 800 million population.
At 4 million sq ft, Aptec aims to be the largest trade, expo and
wholesale distribution centre in the region. It is projected to
create over 50,000 jobs directly as well as an additional 200,000-
plus jobs in supporting industries.
Costing RM1.2 billion (S$517 million) to build, Aptec is slated for
completion within three years once plans for construction have been
given the green light.
Besides housing a wide variety of products from India, China and the
Asean countries, it will also boast an entertainment and tourism
complex.
Aptec will be part of the 196 hectare LakeHill Resort City, an
integrated resort town that will hold about 12,000 residential units,
a shopping mall, office suites as well as a heritage and cultural
village.
Taking into account the property market here, young Singaporeans may
want to look across the Causeway for more affordable properties,
suggested Mr Ch'ng, especially with the recent relaxing of certain
Malaysian laws such as long-stay visas.
To be developed at a cost of some RM3 billion, LakeHill Resort City
is expected to generate an estimated gross development value of RM6.3
billion over 8-10 years.
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
Tuesday, April 15, 2008
Katana launching second KL project
April 15, 2008
Katana launching second KL project
Katana II tagged at RM1,600-1,900 psf, double price of first project
in 2005
BOUTIQUE firm Katana Developments, which is linked to Oriental
Holdings chairman Loh Cheng Yean, will launch its second residential
project in Kuala Lumpur at RM1,600-1,900 (S$687-815) per square foot.
This represents an increase of about 100 per cent over its first KL
development in 2005.
Katana director Sherman Lim said: 'High-end properties in Kuala
Lumpur have easily more than doubled since 2005.'
Pointing out the crucial difference between developing property in
Singapore and Malaysia, Mr Lim said that in Singapore, land costs
typically accounts for up to 70 per cent of the investment costs
while in Kuala Lumpur, it might be as little as 20 per cent.
This is why location alone is not the only distinguishing factor in a
Kuala Lumpur property.
'You can have two properties side-by-side and yet they could be very
different, depending on the design and construction,' added Mr Lim.
For Katana II, the developer engaged award-winning Singaporean firm W
Architects to undertake the design. This is in line with the
company's credo of, 'doing something more design-driven'.
Located in Kuala Lumpur's 'embassy row', Katana II will have 40
units, comprising a mix of townhouses, triplexes, duplexes and lofts.
Of these, there will be six penthouses with private lap pools.
Another award-winning Singapore firm, SCDA Architects, designed the
30-unit Katana Residences, which is now fully taken up after the
developer sold the remaining 10 units it held for investment last
year for RM1,400-1,700 psf.
Meanwhile, in the pipeline is The Boulevard Katana in Penang,
expected to be launched in the third quarter of the year.
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
Katana launching second KL project
Katana II tagged at RM1,600-1,900 psf, double price of first project
in 2005
BOUTIQUE firm Katana Developments, which is linked to Oriental
Holdings chairman Loh Cheng Yean, will launch its second residential
project in Kuala Lumpur at RM1,600-1,900 (S$687-815) per square foot.
This represents an increase of about 100 per cent over its first KL
development in 2005.
Katana director Sherman Lim said: 'High-end properties in Kuala
Lumpur have easily more than doubled since 2005.'
Pointing out the crucial difference between developing property in
Singapore and Malaysia, Mr Lim said that in Singapore, land costs
typically accounts for up to 70 per cent of the investment costs
while in Kuala Lumpur, it might be as little as 20 per cent.
This is why location alone is not the only distinguishing factor in a
Kuala Lumpur property.
'You can have two properties side-by-side and yet they could be very
different, depending on the design and construction,' added Mr Lim.
For Katana II, the developer engaged award-winning Singaporean firm W
Architects to undertake the design. This is in line with the
company's credo of, 'doing something more design-driven'.
Located in Kuala Lumpur's 'embassy row', Katana II will have 40
units, comprising a mix of townhouses, triplexes, duplexes and lofts.
Of these, there will be six penthouses with private lap pools.
Another award-winning Singapore firm, SCDA Architects, designed the
30-unit Katana Residences, which is now fully taken up after the
developer sold the remaining 10 units it held for investment last
year for RM1,400-1,700 psf.
Meanwhile, in the pipeline is The Boulevard Katana in Penang,
expected to be launched in the third quarter of the year.
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
This year's hot real estate destinations in India
April 15, 2008
This year's hot real estate destinations in India
For investment, emerging localities are preferable to established and
often saturated ones any time
By ANUJ PURI
IN Indian real estate today, the only constant is change. Hot
destinations of the last year are not assuredly the best options this
year, and the next year brings its unique set of emerging investment
destinations with it.
The reason for this state of flux is that the real estate boom is
causing many of the country's metros and even some of the previously
popular Tier II towns to saturate at an incredible pace.
Property prices there skyrocket beyond the reach of middle-income
home buyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyse the magnitude and
scope of activity, and identify one or the other new town as the next
destination.
Information technology (IT) companies, which are now the primary
drivers in the Indian real estate market, are not dependent on
central business locations.
The crux of the whole outsourcing boom is that it makes more sense
for foreign-based companies to offload back-office functions and even
research processes to India than to undertake these in their home
countries.
However, what would necessarily be a CBD-based business function in,
say, the US, can be a non-CBD-dependent function in India.
After all, both the sellers and final buyers of IT-based products and
services are based abroad anyway. This means that IT/ITES
(information technology enabled services) companies can operate from
anywhere in India, as long as there is access to skilled manpower and
necessary resources.
The fact that such companies can benefit from the advantage of
cheaper real estate prices in smaller towns has led to the Tier
II/III city boom. IT/ITES companies catalyse every other sector of
real estate wherever they go, so the retail, residential and
infrastructure sectors soon start perking up in those localities.
A fundamental real estate investment mantra is that emerging
localities are preferable to established and often saturated ones.
Established areas eventually reach a peak in terms of appreciation
potential, after which the growth rate either slows down or stagnates.
Moreover, there is little scope for new market drivers such as malls
to find a place in saturated localities - meanwhile, prices remain
high.
This is not the best of scenarios from an investment point of view,
since optimal investment requires low entry levels and appreciable
growth within a realistic time-frame. Therefore, as one or the other
destination reaches its peak potential on all these counts, new ones
come into the limelight.
It follows that in 2008, we will be looking at an entirely new set of
hotspots in the Indian real estate market.
A few of these are given below, along with some vital statistics and
the basic reasons for their emerging high profiles on the Indian
property landscape.
* Vizag - Andhra Pradesh
Vizag's growth drivers are availability of land at cheaper cost vis-
à-vis Hyderabad, relatively lower cost of skilled manpower (as
well as lower attrition rates), improving infrastructure, and
considerable demand. The market also has less competition and project
costs are lower, leading to increased margins.
Meanwhile, overall purchasing power in Vizag is high. The upcoming
commercial and retail destinations in Vizag are Dwarakanagar,
Seethamadhara, Gajuwaka, Rushikonda, Anakapalli, Bheemili and
Paarwada.
For residential investment, the best areas now are Madhurawada,
Pendurthy, Parawada, Bheemunipatnam and the areas towards the
Anakapalli Corridor.
Property rates:
- Seethammadhara (1,400-3,000 rupees per square foot)
- Murali Nagar (1,400-2,200 rupees psf)
- Beach Road, MVP colony (2,800- 3,500 rupees psf)
- Siripuram (2,500-3,200 rupees psf)
- Parwada (1,200-2,000 rupees psf)
* Vadodara - Gujarat
Vadodara definitely ranks high among the emerging investment
destinations.
The prime residential areas are Alkapuri, Race Course Road, Old Padra
Road, Jetalpur, Akota and Fatehganj.
Property rates:
- Old Padra Rd (1,200-1,500 rupees psf)
- Alkapuri (1,900-2,300 rupees psf)
- Race Course Road (1,500-1,800 rupees psf)
- Fatehganj (1,300-1,700 rupees psf)
* Dehradun - Uttrakhand
Dehradun is seeing a gradual but definite boom associated with the
rise of malls in the region. Land rates are rising and there is
considerable infrastructure development. Another driver is the growth
of the IT sector in the region.
The State Industrial Development Corporation of Uttaranchal is
setting up a high-tech software park on more than 1,000 hectares of
land in Dehradun. Chatrata Road, Mussoorie Bypass and Sahastradhara
Road are the best locations for small to medium-sized investments.
Here, investors can expect between 10 and 12 per cent appreciation
over the next three years.
* Indore - Madhya Pradesh
Indore's real estate star is on the rise, and offers good investment
opportunities in projects with low entry cost that are located in an
area with good appreciation potential.
Property rates:
- Vijay Nagar (3,000-10,000 rupees psf)
- Bypass, AB Road (3,000-10,000 rupees psf)
- Rau (600-1,200 rupees psf)
- Gulmohur Colony (3,500-6,500 rupees psf)
- Green Park Colony (800-3,500 rupees psf)
* Nashik - Maharashtra
Nashik is displaying an increasingly buoyant industrial scenario,
with considerable growth expected in the IT/ITES industry.
Overall infrastructure and connectivity to Mumbai and other regional
towns is improving rapidly, lending increased credibility to Nashik's
real estate market. It is the vertex of the Pune-Mumbai-Nashik Urban
Golden Triangle.
The upcoming suburbs of Anandwalli (Gangapur Road), Indiranagar,
Untwadi, Aadgaon (off Mumbai-Agra Road) and along Pathardi Link Road
bear watching.
Property rates:
- Gangapur Road (1,200-1,900 rupees psf)
- Mumbai Agra Road (800-1,600 rupees psf)
- Agra Road (600-1,000 rupees psf)
* Guwahati - Assam
The capital city of Assam has witnessed a population growth of over
40 per cent over the last 10 years. This extensive population growth
has been responsible for a quiet revolution in Guwahati's real estate
market.
There is an upsurge in the retail sector, and outskirt locations such
as Khanapara, Zoo-Narengi Road, Basistha and Beltola are emerging as
the new residential destinations.
Current rates are between 1,800 and 2,500 rupees psf. The upcoming
Games Village at Sarusajai will add a new flavour to the residential
market along NH-37.
* Chandigarh - Union Territory
Though there has been a lot of speculation in Punjab's real estate
market, this joint capital of Punjab and Haryana states is among the
emerging cities that are seeing very encouraging real estate trends.
Chandigarh is India's first planned city, and it conforms perfectly
to the key parameters by which we judge a city's growth - property
market, people, physical infrastructure, social infrastructure, and
business environment.
Chandigarh scores high on these counts, especially in terms of the
potential of its property market. Its boom derives from the rapid
development taking place on its outskirts.
Some of these areas are:
- Panchkula (2,500-3,000 rupees psf)
- Mohali (1,500-2,500 rupees psf)
- Dera Bassi (1,300-2,000 rupees psf); and
- Zirakpur (2,700-3,200 rupees psf).
The writer is chairman and country head, Jones Lang LaSalle Meghraj
This year's hot real estate destinations in India
For investment, emerging localities are preferable to established and
often saturated ones any time
By ANUJ PURI
IN Indian real estate today, the only constant is change. Hot
destinations of the last year are not assuredly the best options this
year, and the next year brings its unique set of emerging investment
destinations with it.
The reason for this state of flux is that the real estate boom is
causing many of the country's metros and even some of the previously
popular Tier II towns to saturate at an incredible pace.
Property prices there skyrocket beyond the reach of middle-income
home buyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyse the magnitude and
scope of activity, and identify one or the other new town as the next
destination.
Information technology (IT) companies, which are now the primary
drivers in the Indian real estate market, are not dependent on
central business locations.
The crux of the whole outsourcing boom is that it makes more sense
for foreign-based companies to offload back-office functions and even
research processes to India than to undertake these in their home
countries.
However, what would necessarily be a CBD-based business function in,
say, the US, can be a non-CBD-dependent function in India.
After all, both the sellers and final buyers of IT-based products and
services are based abroad anyway. This means that IT/ITES
(information technology enabled services) companies can operate from
anywhere in India, as long as there is access to skilled manpower and
necessary resources.
The fact that such companies can benefit from the advantage of
cheaper real estate prices in smaller towns has led to the Tier
II/III city boom. IT/ITES companies catalyse every other sector of
real estate wherever they go, so the retail, residential and
infrastructure sectors soon start perking up in those localities.
A fundamental real estate investment mantra is that emerging
localities are preferable to established and often saturated ones.
Established areas eventually reach a peak in terms of appreciation
potential, after which the growth rate either slows down or stagnates.
Moreover, there is little scope for new market drivers such as malls
to find a place in saturated localities - meanwhile, prices remain
high.
This is not the best of scenarios from an investment point of view,
since optimal investment requires low entry levels and appreciable
growth within a realistic time-frame. Therefore, as one or the other
destination reaches its peak potential on all these counts, new ones
come into the limelight.
It follows that in 2008, we will be looking at an entirely new set of
hotspots in the Indian real estate market.
A few of these are given below, along with some vital statistics and
the basic reasons for their emerging high profiles on the Indian
property landscape.
* Vizag - Andhra Pradesh
Vizag's growth drivers are availability of land at cheaper cost vis-
à-vis Hyderabad, relatively lower cost of skilled manpower (as
well as lower attrition rates), improving infrastructure, and
considerable demand. The market also has less competition and project
costs are lower, leading to increased margins.
Meanwhile, overall purchasing power in Vizag is high. The upcoming
commercial and retail destinations in Vizag are Dwarakanagar,
Seethamadhara, Gajuwaka, Rushikonda, Anakapalli, Bheemili and
Paarwada.
For residential investment, the best areas now are Madhurawada,
Pendurthy, Parawada, Bheemunipatnam and the areas towards the
Anakapalli Corridor.
Property rates:
- Seethammadhara (1,400-3,000 rupees per square foot)
- Murali Nagar (1,400-2,200 rupees psf)
- Beach Road, MVP colony (2,800- 3,500 rupees psf)
- Siripuram (2,500-3,200 rupees psf)
- Parwada (1,200-2,000 rupees psf)
* Vadodara - Gujarat
Vadodara definitely ranks high among the emerging investment
destinations.
The prime residential areas are Alkapuri, Race Course Road, Old Padra
Road, Jetalpur, Akota and Fatehganj.
Property rates:
- Old Padra Rd (1,200-1,500 rupees psf)
- Alkapuri (1,900-2,300 rupees psf)
- Race Course Road (1,500-1,800 rupees psf)
- Fatehganj (1,300-1,700 rupees psf)
* Dehradun - Uttrakhand
Dehradun is seeing a gradual but definite boom associated with the
rise of malls in the region. Land rates are rising and there is
considerable infrastructure development. Another driver is the growth
of the IT sector in the region.
The State Industrial Development Corporation of Uttaranchal is
setting up a high-tech software park on more than 1,000 hectares of
land in Dehradun. Chatrata Road, Mussoorie Bypass and Sahastradhara
Road are the best locations for small to medium-sized investments.
Here, investors can expect between 10 and 12 per cent appreciation
over the next three years.
* Indore - Madhya Pradesh
Indore's real estate star is on the rise, and offers good investment
opportunities in projects with low entry cost that are located in an
area with good appreciation potential.
Property rates:
- Vijay Nagar (3,000-10,000 rupees psf)
- Bypass, AB Road (3,000-10,000 rupees psf)
- Rau (600-1,200 rupees psf)
- Gulmohur Colony (3,500-6,500 rupees psf)
- Green Park Colony (800-3,500 rupees psf)
* Nashik - Maharashtra
Nashik is displaying an increasingly buoyant industrial scenario,
with considerable growth expected in the IT/ITES industry.
Overall infrastructure and connectivity to Mumbai and other regional
towns is improving rapidly, lending increased credibility to Nashik's
real estate market. It is the vertex of the Pune-Mumbai-Nashik Urban
Golden Triangle.
The upcoming suburbs of Anandwalli (Gangapur Road), Indiranagar,
Untwadi, Aadgaon (off Mumbai-Agra Road) and along Pathardi Link Road
bear watching.
Property rates:
- Gangapur Road (1,200-1,900 rupees psf)
- Mumbai Agra Road (800-1,600 rupees psf)
- Agra Road (600-1,000 rupees psf)
* Guwahati - Assam
The capital city of Assam has witnessed a population growth of over
40 per cent over the last 10 years. This extensive population growth
has been responsible for a quiet revolution in Guwahati's real estate
market.
There is an upsurge in the retail sector, and outskirt locations such
as Khanapara, Zoo-Narengi Road, Basistha and Beltola are emerging as
the new residential destinations.
Current rates are between 1,800 and 2,500 rupees psf. The upcoming
Games Village at Sarusajai will add a new flavour to the residential
market along NH-37.
* Chandigarh - Union Territory
Though there has been a lot of speculation in Punjab's real estate
market, this joint capital of Punjab and Haryana states is among the
emerging cities that are seeing very encouraging real estate trends.
Chandigarh is India's first planned city, and it conforms perfectly
to the key parameters by which we judge a city's growth - property
market, people, physical infrastructure, social infrastructure, and
business environment.
Chandigarh scores high on these counts, especially in terms of the
potential of its property market. Its boom derives from the rapid
development taking place on its outskirts.
Some of these areas are:
- Panchkula (2,500-3,000 rupees psf)
- Mohali (1,500-2,500 rupees psf)
- Dera Bassi (1,300-2,000 rupees psf); and
- Zirakpur (2,700-3,200 rupees psf).
The writer is chairman and country head, Jones Lang LaSalle Meghraj
Betting on retail assets
April 15, 2008
PROPERTY OUTLOOK
Betting on retail assets
Asia's retail and hospitality sectors are expected to benefit from
strong growth in intra-regional travel, reports UMA SHANKARI
DEVELOPERS are investing in the retail and hospitality sectors in
Singapore and the rest of Asia in a big way, banking on an expected
surge in retail spending and tourism.
Consumer spending in the region is supported by rising income levels
that are translating into retail sales and the development of the
shopping scene into something closer to that in the US and Europe.
One clear sign of positive retail sentiment is that many
international and luxury brands are expanding into major retail hubs
across Asia, CB Richard Ellis (CBRE) points out.
Some of the world's biggest names, including Bulgari and Giorgio
Armani, unveiled flagship stores in Tokyo in the fourth quarter of
2007 - despite Japan's overall sluggish economic recovery.
The rise in retail spending in Asia is also driven by growing intra-
regional tourism, industry players say.
Asia continues to benefit from its position as the world's second-
most visited region after Europe, achieving record growth in terms of
hotel occupancy and average room rates in 2007.
South Asia and South-east Asia in particular enjoyed double-digit
growth in revenue per available room, with South Asia seeing a 40.4
per cent increase and South-east Asia seeing 16.9 per cent growth,
according to data from industry body, the Pacific Asia Travel
Association (Pata).
Cushman & Wakefield (C&W) noted in a recent report: 'Inter-regional
in-bound visitors are expected to continue in the medium-term, but
the greatest growth will be intra-regional through the continuing
expansion of road and air routes throughout Asia, including budget
airlines, as well as the enhanced capacity of the new aircraft - the
A380 and B787.'
Intra-Asia travel is expected to be especially strong on two routes -
Hong Kong traffic into Japan is expected to grow 17 per cent from
2007 to 2009, while the number of visitors from the Chinese mainland
to Singapore is expected to grow 16 per cent in the same period.
In view of all this, it is perhaps not surprising that investors and
developers are forking out big bucks for retail and hospitality
property such as hotels, serviced apartments and malls, as well as
assets such as retail and hotel-based real estate investment trusts
(Reits).
The interest in retail assets is driven by expectations of a broad-
based increase in rents and capital values in Singapore, brought on
by increased retail spending.
Singapore's retail sector was especially active in 2007, with retail
sales totalling some $23.8 billion - 7.1 per cent higher than in
2006. This year, retail sales are expected to grow about 5-10 per
cent and demand for retail space is expected to remain strong.
In a recent report, Credit Suisse said it expects retail growth here
to be supported by benign economic indicators, high population
growth, increasing household income, tourism growth and other 'feel-
good' factors.
'This is expected to drive rentals up 5-10 per cent, translating into
10 per cent rental revenue growth for suburban malls and 20 per cent
for central malls in 2008 given strong reversions,' Credit Suisse
analysts Shirley Wong and Leng Chye Teo said.
The research team recently initiated coverage of three Singapore-
listed retail Reits: CapitaMall Trust, Frasers Centrepoint Trust and
Macquarie Meag Prime Reit, with 'outperform' calls on the first two
and a 'neutral' call on the third.
CBRE said similarly that retail rents are likely to increase in 2008,
albeit at a more moderate rate due to an abundance of choice for
retailers as a significant amount of new space comes on stream. 'We
expect both Orchard Road and suburban mall rents to increase 3-5 per
cent in 2008, down from our earlier estimate of 4-7 per cent for
Orchard Road and 3-6 per cent for suburban malls,' CBRE said.
However, the retail sector here will have to grapple with downside
risks such as rising inflation, the trickle- down impact of the US
sub-prime mortgage crisis and lacklustre global stock markets,
property analysts say.
The outlook for the hospitality sector is a bit more bullish. In
particular, Singapore, which enjoyed record growth in terms of both
occupancy and room rates in 2007, is expected to see more corporate
and meetings, incentives, conventions & exhibitions (MICE)
travellers. Industry players believe this segment will continue to
grow even if leisure tourism were to slow.
Hoteliers here have told BT they expect room rates to shoot up
another 25-40 per cent this year, driven by the Formula One Grand
Prix race and the tight supply of hotel rooms. Room rates rose 15-25
per cent in 2007.
One new trend that is expected to shake up both the retail and
hospitality sectors across Asia is the arrival of gaming in a big
way.
Right now, roulette wheels are spinning and jackpot machines are
whirring in casinos across a dozen Asian countries, C&W noted in a
report.
Investment in casinos is continuing apace in Macau - thought by many
to be Asia's gambling capital - where there are currently more than
20 casino complexes. Singapore is about to open its own two
integrated resorts, while Japan is moving closer to an overhaul of
its strict gambling laws - which could see luxury casino complexes
opening in Tokyo and on the southern island of Okinawa by 2012. Other
countries reportedly considering lifting bans on casinos include
Taiwan, Thailand and Indonesia.
Said C&W: 'Governments may not always be totally happy with the idea
of their citizens gambling, or tourists pouring in for slot machines
and blackjack, but Macau's US$7.2 billion in gaming income, US$15
billion in investment in just five years, 68.7 per cent surge in
construction investment, an 80 per cent rise in property
transactions, large-scale convention centre and hotel construction,
thousands of new jobs and 19 per cent per annum retail sales growth
are mighty powerful inducements - and most (governments) seem to
think these are numbers worth betting on.'
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
PROPERTY OUTLOOK
Betting on retail assets
Asia's retail and hospitality sectors are expected to benefit from
strong growth in intra-regional travel, reports UMA SHANKARI
DEVELOPERS are investing in the retail and hospitality sectors in
Singapore and the rest of Asia in a big way, banking on an expected
surge in retail spending and tourism.
Consumer spending in the region is supported by rising income levels
that are translating into retail sales and the development of the
shopping scene into something closer to that in the US and Europe.
One clear sign of positive retail sentiment is that many
international and luxury brands are expanding into major retail hubs
across Asia, CB Richard Ellis (CBRE) points out.
Some of the world's biggest names, including Bulgari and Giorgio
Armani, unveiled flagship stores in Tokyo in the fourth quarter of
2007 - despite Japan's overall sluggish economic recovery.
The rise in retail spending in Asia is also driven by growing intra-
regional tourism, industry players say.
Asia continues to benefit from its position as the world's second-
most visited region after Europe, achieving record growth in terms of
hotel occupancy and average room rates in 2007.
South Asia and South-east Asia in particular enjoyed double-digit
growth in revenue per available room, with South Asia seeing a 40.4
per cent increase and South-east Asia seeing 16.9 per cent growth,
according to data from industry body, the Pacific Asia Travel
Association (Pata).
Cushman & Wakefield (C&W) noted in a recent report: 'Inter-regional
in-bound visitors are expected to continue in the medium-term, but
the greatest growth will be intra-regional through the continuing
expansion of road and air routes throughout Asia, including budget
airlines, as well as the enhanced capacity of the new aircraft - the
A380 and B787.'
Intra-Asia travel is expected to be especially strong on two routes -
Hong Kong traffic into Japan is expected to grow 17 per cent from
2007 to 2009, while the number of visitors from the Chinese mainland
to Singapore is expected to grow 16 per cent in the same period.
In view of all this, it is perhaps not surprising that investors and
developers are forking out big bucks for retail and hospitality
property such as hotels, serviced apartments and malls, as well as
assets such as retail and hotel-based real estate investment trusts
(Reits).
The interest in retail assets is driven by expectations of a broad-
based increase in rents and capital values in Singapore, brought on
by increased retail spending.
Singapore's retail sector was especially active in 2007, with retail
sales totalling some $23.8 billion - 7.1 per cent higher than in
2006. This year, retail sales are expected to grow about 5-10 per
cent and demand for retail space is expected to remain strong.
In a recent report, Credit Suisse said it expects retail growth here
to be supported by benign economic indicators, high population
growth, increasing household income, tourism growth and other 'feel-
good' factors.
'This is expected to drive rentals up 5-10 per cent, translating into
10 per cent rental revenue growth for suburban malls and 20 per cent
for central malls in 2008 given strong reversions,' Credit Suisse
analysts Shirley Wong and Leng Chye Teo said.
The research team recently initiated coverage of three Singapore-
listed retail Reits: CapitaMall Trust, Frasers Centrepoint Trust and
Macquarie Meag Prime Reit, with 'outperform' calls on the first two
and a 'neutral' call on the third.
CBRE said similarly that retail rents are likely to increase in 2008,
albeit at a more moderate rate due to an abundance of choice for
retailers as a significant amount of new space comes on stream. 'We
expect both Orchard Road and suburban mall rents to increase 3-5 per
cent in 2008, down from our earlier estimate of 4-7 per cent for
Orchard Road and 3-6 per cent for suburban malls,' CBRE said.
However, the retail sector here will have to grapple with downside
risks such as rising inflation, the trickle- down impact of the US
sub-prime mortgage crisis and lacklustre global stock markets,
property analysts say.
The outlook for the hospitality sector is a bit more bullish. In
particular, Singapore, which enjoyed record growth in terms of both
occupancy and room rates in 2007, is expected to see more corporate
and meetings, incentives, conventions & exhibitions (MICE)
travellers. Industry players believe this segment will continue to
grow even if leisure tourism were to slow.
Hoteliers here have told BT they expect room rates to shoot up
another 25-40 per cent this year, driven by the Formula One Grand
Prix race and the tight supply of hotel rooms. Room rates rose 15-25
per cent in 2007.
One new trend that is expected to shake up both the retail and
hospitality sectors across Asia is the arrival of gaming in a big
way.
Right now, roulette wheels are spinning and jackpot machines are
whirring in casinos across a dozen Asian countries, C&W noted in a
report.
Investment in casinos is continuing apace in Macau - thought by many
to be Asia's gambling capital - where there are currently more than
20 casino complexes. Singapore is about to open its own two
integrated resorts, while Japan is moving closer to an overhaul of
its strict gambling laws - which could see luxury casino complexes
opening in Tokyo and on the southern island of Okinawa by 2012. Other
countries reportedly considering lifting bans on casinos include
Taiwan, Thailand and Indonesia.
Said C&W: 'Governments may not always be totally happy with the idea
of their citizens gambling, or tourists pouring in for slot machines
and blackjack, but Macau's US$7.2 billion in gaming income, US$15
billion in investment in just five years, 68.7 per cent surge in
construction investment, an 80 per cent rise in property
transactions, large-scale convention centre and hotel construction,
thousands of new jobs and 19 per cent per annum retail sales growth
are mighty powerful inducements - and most (governments) seem to
think these are numbers worth betting on.'
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
Some upside in failed en bloc deals
April 15, 2008
COMMENTARY
Some upside in failed en bloc deals
By ARTHUR SIM
LOOKING for a silver lining when nothing looms but storm clouds may
seem a futile exercise.
But recent events surrounding the failed collective sales of Tulip
Garden and Makeway View to Bravo Building Construction may just be a
ray of hope in an increasingly gloomy property market.
To be sure, when Bravo decided it could no longer proceed with the
collective-sale deals, some considered it yet another in a series of
ominous events signalling the end of 'irrational exuberance' in the
property market here.
Another was the pullout of Kuwait Finance House from a deal to buy 97
units at Goodwood Residence.
But putting a positive spin on the failed deals, Bravo has actually
helped the market by withdrawing almost 400 potential units from
future supply. If the Bravo deal to acquire another en bloc site
(Pender Court) falls through, the number of potential units removed
from future supply could be closer to 500.
This may be less than 3 per cent of the 17,800 new units CB Richard
Ellis estimates could be launched this year, but if more developers
were to follow Bravo's move, enough potential units could be removed
from the future market to mitigate a more serious oversupply
situation - especially in the light of drastically falling sales;
only 185 new private homes were sold in February.
* Emergency exit
Any developer considering the emergency exit that Bravo took will
have to ask itself - as Bravo probably did - whether it has the
holding power to build and hang on to units until it is profitable to
sell them.
Perhaps the pivotal number to emerge in the failed Tulip Garden deal
is the $25.8 million figure representing the 5 per cent deposit on
the $516 million transaction that Bravo will now forfeit.
While $25.8 million is no small sum to lose, it is probably less than
what Bravo could have lost had it proceeded.
Based on a loan quantum of 60-70 per cent of the land price, the loan
for the Tulip Garden project would have amounted to $310-$360
million.
While it is not unusual for a bank to extend loans to preferred
developers at interest rates close to Sibor, an interest rate of 5
per cent per annum would have been more likely, considering the
times. In which case the cost of the loan could have been between
$15.5 million and $18 million for the first year alone. This, also
allowing that banks still feel comfortable extending loans of over 50
per cent.
Another loan the developer would have had to take would have been for
construction costs. And based on a cost of $400 psf, this would have
amounted to about $200 million for the Tulip Garden project. The
quantum a bank will lend a developer varies. Assuming Bravo were to
have taken a 50 per cent loan, the cost of this would have been
around $5 million for the first year based on a 5 per cent interest
rate.
Bravo's interest payments for the first year could have totalled
$20.5-$23 million.
Developers do not generally borrow more because they expect progress
payments from the initial sale of units, which go into a project
account, to cover some of the costs.
But falling sales volumes would have made it difficult for Bravo to
depend on the project account to finance construction.
Lower selling prices would have been a concern too.
* Breaking even
When the market was at its most bullish last year, Bravo had hoped to
launch the new development on the Tulip Garden site at around $2,000
psf.
However, the US sub-prime crisis has taken its toll on the market,
with neighbouring developments Duet and The Cornwall peaking at
around $1,500 and $1,700 psf respectively last October.
It was estimated earlier that Bravo would have to sell all the new
units at Tulip Garden for at least $1,500 psf just to break even.
Developers who are likely to be swayed by this line of reasoning to
reconsider developing en bloc sites are more likely to be the
smaller, newer players in the field.
Based on available data, an estimate by Savills Singapore puts the
number of new units from en bloc sites bought by construction
companies in 2007 at more than 800, excluding Tulip Garden and
Makeway View.
If some of these potential units were to be removed from the future
market, supply pressure would be eased.
It would, of course, be much simpler if the potential units from a
large en bloc site like Gillman Heights or Tampines Court were
removed from the market.
But this is unlikely as it has become almost a mantra that big
developers have holding power, even if they are losing money at the
same time.
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
COMMENTARY
Some upside in failed en bloc deals
By ARTHUR SIM
LOOKING for a silver lining when nothing looms but storm clouds may
seem a futile exercise.
But recent events surrounding the failed collective sales of Tulip
Garden and Makeway View to Bravo Building Construction may just be a
ray of hope in an increasingly gloomy property market.
To be sure, when Bravo decided it could no longer proceed with the
collective-sale deals, some considered it yet another in a series of
ominous events signalling the end of 'irrational exuberance' in the
property market here.
Another was the pullout of Kuwait Finance House from a deal to buy 97
units at Goodwood Residence.
But putting a positive spin on the failed deals, Bravo has actually
helped the market by withdrawing almost 400 potential units from
future supply. If the Bravo deal to acquire another en bloc site
(Pender Court) falls through, the number of potential units removed
from future supply could be closer to 500.
This may be less than 3 per cent of the 17,800 new units CB Richard
Ellis estimates could be launched this year, but if more developers
were to follow Bravo's move, enough potential units could be removed
from the future market to mitigate a more serious oversupply
situation - especially in the light of drastically falling sales;
only 185 new private homes were sold in February.
* Emergency exit
Any developer considering the emergency exit that Bravo took will
have to ask itself - as Bravo probably did - whether it has the
holding power to build and hang on to units until it is profitable to
sell them.
Perhaps the pivotal number to emerge in the failed Tulip Garden deal
is the $25.8 million figure representing the 5 per cent deposit on
the $516 million transaction that Bravo will now forfeit.
While $25.8 million is no small sum to lose, it is probably less than
what Bravo could have lost had it proceeded.
Based on a loan quantum of 60-70 per cent of the land price, the loan
for the Tulip Garden project would have amounted to $310-$360
million.
While it is not unusual for a bank to extend loans to preferred
developers at interest rates close to Sibor, an interest rate of 5
per cent per annum would have been more likely, considering the
times. In which case the cost of the loan could have been between
$15.5 million and $18 million for the first year alone. This, also
allowing that banks still feel comfortable extending loans of over 50
per cent.
Another loan the developer would have had to take would have been for
construction costs. And based on a cost of $400 psf, this would have
amounted to about $200 million for the Tulip Garden project. The
quantum a bank will lend a developer varies. Assuming Bravo were to
have taken a 50 per cent loan, the cost of this would have been
around $5 million for the first year based on a 5 per cent interest
rate.
Bravo's interest payments for the first year could have totalled
$20.5-$23 million.
Developers do not generally borrow more because they expect progress
payments from the initial sale of units, which go into a project
account, to cover some of the costs.
But falling sales volumes would have made it difficult for Bravo to
depend on the project account to finance construction.
Lower selling prices would have been a concern too.
* Breaking even
When the market was at its most bullish last year, Bravo had hoped to
launch the new development on the Tulip Garden site at around $2,000
psf.
However, the US sub-prime crisis has taken its toll on the market,
with neighbouring developments Duet and The Cornwall peaking at
around $1,500 and $1,700 psf respectively last October.
It was estimated earlier that Bravo would have to sell all the new
units at Tulip Garden for at least $1,500 psf just to break even.
Developers who are likely to be swayed by this line of reasoning to
reconsider developing en bloc sites are more likely to be the
smaller, newer players in the field.
Based on available data, an estimate by Savills Singapore puts the
number of new units from en bloc sites bought by construction
companies in 2007 at more than 800, excluding Tulip Garden and
Makeway View.
If some of these potential units were to be removed from the future
market, supply pressure would be eased.
It would, of course, be much simpler if the potential units from a
large en bloc site like Gillman Heights or Tampines Court were
removed from the market.
But this is unlikely as it has become almost a mantra that big
developers have holding power, even if they are losing money at the
same time.
EastLiving.com.sg
Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg
EastLiving - Singapore Property and Real Estate DB
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