Fire sales in high-end market warned

CITY Developments Ltd (CDL) executive chairman Kwek Leng Beng has warned that the current subdued state of the Singapore housing market particularly in the high-end segment, if it continues, could ignite fire sales.

Mr Kwek made this point in CDL’s third quarter results statement. CDL posted net earnings of S$127.21 million for the third quarter ended Sept 30, 2014, up 4.7 per cent from the same year-ago period. Revenue rose 58.3 per cent to S$1.32 billion.

“The domestic residential real estate market will need to battle headwinds as sentiments remain subdued with little signs of property curbs being tweaked or removed in the near-term. Transaction volumes and prices continue to face downward pressures as homebuyers maintain a wait-and-see approach,” he lamented.

The high end market, in particular, remains subdued with prices still below their 2008 peak. “Average residential rents across all market segments, particularly the high-end . . . are on the decline, coupled with a weak secondary market.

“From the group’s experience, having gone through many property cycles, if this trend continues, with prices dipping more, some mortgage borrowers affected by lower rentals may have difficulty servicing their loans, possibly leading to forced fire sales,” Mr Kwek said.

On a more positive note, Mr Kwek noted that savvy investors who believe in Singapore’s prospects will continue to read positively into the property market with a medium to long-term perspective. “New launches that are priced carefully will continue to sell, as buyers only need to make progressive payments based on stages of construction, and they are confident that the market will recover over time,” he added.

The group can also count on two “shining stars” – the office and hotel markets. “Office and hotel properties have become most desirable assets. Demand for Grade A office space in Singapore is improving; and capital value for hotels has increased significantly, even though earnings have not caught up yet. With over 120 hotels globally, the group is able to counterbalance by geographical spread,” Mr Kwek said.

In the first nine months of this year, CDL’s net earnings shrank 17.1 per cent to S$384.74 million despite revenue surging 20.3 per cent to S$2.92 billion.

CDL said that the earnings drop was due to absence of significant divestment gains from non-core investment properties as compared to the corresponding period, which had accounted for gains largely from the sale of 100G Pasir Panjang and strata units in Citimac Industrial Complex, Elite Industrial Building I, Elite Industrial Building II and GB Building. “Excluding such divestment gains from YTD Sept 2013, on a like-for-like comparison, the group’s core earnings would have increased by 25.5 per cent for YTD Sept 2014,” CDL said in its results statement.

Mckinsey identifies 3 catalysts for Asean growth

Asean must ride on the waves of globalisation, urbanisation and digital technology to lift growth

ASEAN must double its productivity growth to make the most of globalisation, urbanisation and digital technology to lift its growth to a new level, said a study issued on the eve of the meeting of the leaders of the economic grouping here.

The study, released on Tuesday by the McKinsey Global Institute and titled “South-east Asia at the Crossroads: Three Paths to Prosperity”, noted that economic development in the 10-member grouping has so far been backed largely by an expanding labour force, in particular, the shift of workers from agriculture to industry.

But the drying up of Asean’s pool of workers will expose the economic grouping’s underlying weakness in productivity, an issue which needs to be dealt with urgently.

The McKinsey study predicts that when the Asean Economic Community becomes a reality next year, Asean’s productivity would get a boost with greater integration; the removal of inefficiencies related to export and improved logistics networks should shorten time to market and produce productivity gains of up to 20 per cent of the cost base in many sectors.

However, tangled custom procedures, differing standards of regulation and issues of investment and ownership remain big hurdles to greater integration, it said.

Asean stands to capture a bigger share of trade and investment flows, especially by providing an alternative manufacturing hub, now that multi-national corporations have been hit by rising labour costs in China.

But turning Asean into a unified powerhouse of manufacturing and trade will require both public and private efforts.

The first step is to raise awareness of Asean and the Asean Economic Community among the business community and members of the public.

The study said: “If the region hopes to maximise the benefits of integration by expanding manufacturing, it will need to maintain macroeconomic and political stability, build world-class infrastructure and intensify its focus on workforce skills.”

Tapping fully the opportunities from globalisation could yield US$280 billion to US$615 billion more in annual economic value for Asean by 2030.

Increasing urbanisation will also drive Asean’s economic growth. “No country has ever climbed from low-income to middle-income status without a significant population shift into cities,” the study said. “As people leave behind farms for urban jobs, they become more productive.”

However, to reap the benefits of urbanisation, Asean will have to invest US$7 trillion in infrastructure, housing and community space, and beef up its education system to facilitate that shift of people to the cities.

The study has calculated that urbanisation could add US$520 billion to US$930 billion to Asean’s annual Gross Domestic Product by 2030.

Then there is technology. The study noted that many Asean nations are starting from a relatively low base in terms of digital infrastructure, adoption and innovation, though the number of Internet users is growing fast.

“If the region can put the necessary backbone infrastructure in place, it could harness the power of technology to drive productivity improvements,” said the study.

Asean’s starting point suggests it has a bigger chance of making quick progress than more developed regions, “with possibilities for digital leapfrogging in multiple areas”.

The study identified five related digital technologies poised to create substantial economic growth for Asean: the mobile Internet, big data, the Internet of Things, the automation of knowledge work and cloud technology. These disruptive technologies can unleash US$220 billion to US$625 billion in annual economic impact by 2030, the study said.

The study identified five related digital technologies poised to create substantial economic growth for Asean: the mobile Internet, big data, the Internet of Things, the automation of knowledge work and cloud technology. These disruptive technologies can unleash US$220 billion to US$625 billion in annual economic impact by 2030.,d.c2E

UK chain to open its first Singaporean hotel in Beach Road

British-based Whitbread, which operates hotel brand Premier Inn, is set to open its first hotel in Singapore in the middle of 2016.

Designed to meet the needs of the “rapidly growing economy travel segment in the region”, the 300-room Premier Inn Singapore Beach Road aims to provide guests with a “value-for-money experience”, said the company in a statement on Tuesday.

It will feature amenities that cater to both business and leisure travellers, such as a swimming pool, a gym, and meeting facilities.

The hotel will be located near the cultural districts of Haji Lane and Arab Street as well as the bustling Marina Bay Central Business District. It will also be the only international hotel that within one kilometre of the Singapore Sports Hub.

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Rolling over debt keeps Singapore REITS in shape

Trusts have been tightening their belts on expectations that interest rates could rise over the next few years, which would have major repercussions as borrowing costs are a major component of their expenses, said S&P credit analyst Craig Parker.

“Trusts with sizeable debt exposure to floating interest rates are likely to suffer most.

“The severity of the impact will depend on the buffer that each Reit has relative to its financial policy,” Mr Parker noted.

“Still, we expect that rated Asia-Pacific Reits can largely shoulder the higher interest burden. The Reits are attempting to cut their interest costs and extending their debt tenors.

“They are also refinancing expensive debt incurred during the height of the global financial crisis at reduced rates.

“Furthermore, Reit managers are still holding back even though they have room to borrow substantially more.”

S&P upgraded CapitaCommercial Trust to A-/Stable due to an improving business profile and a more favourable view of its credit metrics. The ratings service also upgraded HongKong Land Holdings and HongKong Land Co to A/Stable due to its reassessment of their financial risk policies.

Growth in rental demand and rates here have been flat or slightly sluggish this year for properties in Reits rated by S&P.

“Nevertheless, we project a stable credit outlook for the Reits we rate,” said Mr Parker.

“The Reits have amassed high-quality portfolios that can withstand economic headwinds better than lesser-quality properties held by their competitors, sustaining their credit quality despite sluggish rental growth.”

Limited new retail assets in the near term will sustain high occupancy at most suburban malls in Singapore.

But retail rental growth has been subdued due to slowing tourist arrivals, he noted.

Meanwhile, office and industrial rents here are approaching peak levels, Mr Parker said.

Industrial rents have been strong and capital values have increased, with vacancy rates falling from a peak of 14 per cent in 2006 to 9.5 per cent this year.

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Keppel Data Centre (DC) REIT set for Dec listing

The first real estate investment trust comprising data centres will be listed here next month and promises to be one of the largest and most highly anticipated initial public offerings of the year.

Keppel Telecommunications and Transportation (Keppel T&T) aims to list Keppel DC Reit on Dec 12 once it has won shareholder backing at an extraordinary general meeting on Nov 25. The offering is estimated at $811 million, according to a circular released yesterday to the bourse.

Keppel T&T has received a letter of eligibility to list.

It will also ask shareholders to support a proposal to divest its interests in Keppel Digihub, Keppel Datahub 1, Gore Hill Data Centre and Citadel 100 Data Centre, and inject them into the Reit.

The divestment of these four properties is expected to raise $505.4 million in gross proceeds.

About half of this amount – $244.1 million – will be used to subscribe for units in the new Reit, in which Keppel T&T, a logistics, data-centre services and investment firm, will hold a 30 per cent stake.

The Reit will start with eight data-centre properties in the Asia-Pacific and Europe: Keppel Digihub and Keppel Datahub 1 in Singapore; Gore Hill Data Centre in Sydney, Australia, and iseek Data Centre in Brisbane, Australia; Basis Bay Data Centre in Selangor, Malaysia; GV7 Data Centre in London, Britain; Almere Data Centre in Amsterdam, the Netherlands; and Citadel 100 Data Centre in Dublin, Ireland.

It will be managed by Keppel DC Reit Management, a wholly owned unit of Keppel T&T.

News about the listing galvanised the company’s stock to a six-year high of $1.87 in January when it was first announced.

A data centre is a facility that centralises an organisation’s IT operations and equipment, and where it stores, manages and disseminates its data.

There has been a surge in demand for data centres, driven by growth in e-commerce, cloud computing and big data, said Keppel T&T chief executive Thomas Pang. The proposed mainboard listing “is poised to capitalise on these trends”, he added.

Keppel T&T will continue to look out for opportunities to develop data-centre assets across its target markets of the Asia-Pacific and Europe after the transaction, the company stated yesterday.

Keppel T&T has had to rely on its parent, Keppel Corp, for funding up to now, so the Reit would allow it to finance more of its own expansion, said CIMB analysts Jessalynn Chen and Kenneth Ng in a September report.

The listing would also allow the company to realise the full market value of its data centres. Still, the company “has been careful and measured in its expansion plans” so far, they noted.

Therefore, aggressive investments in the data-centre space are not expected even after the listing, though Keppel T&T may collaborate with other data-centre owners or managers to co-invest in new properties.

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London Chefs’ Battle for Restaurants Pays for Carnaby Street Owner

The dynamism of London’s food scene in recent years hasn’t only been good for chefs and diners.

It’s proved a boon for property companies such as Shaftesbury Plc, which owns real estate across the West End. A successful restaurant can become a destination, creating a buzz and boosting demand at neighboring stores.

“Restaurants have become increasingly important,” Julia Wilkinson, who is responsible for restaurant strategy at Shaftesbury, says in an interview.

The company owns clusters of properties, or “villages,” in areas such as Soho and Covent Garden. These usually feature stores, offices, homes, and restaurants. Care is taken with each component, so spaces don’t fall prey to the dull homogeneity of globalization. At Kingly Court, off Carnaby Street, it’s all about the food with fashionable outlets such as Pizza Pilgrims.

“Our decision to devote Kingly Court to restaurants and food-and-beverage operators we think is going to be a huge success,” says Wilkinson. She presents its first tenant, Rum Kitchen, as a key example of that success, making specific note of its first floor location (that’s second floor, for you Americans). “It’s not something that’s done outside covered shopping centers so we weren’t sure whether customers would be prepared to go upstairs to eat.

Eco friendly site to take root in Khatib

A non-profit group that has drawn thousands of volunteers with its philosophy of living in harmony with the earth and people, now has a larger space to do even more.

Ground-Up Initiative (GUI) has secured 26,000 sq m of land at the former Bottle Tree Park in Khatib for what it calls a “Kampung Kampus”, to nurture leaders through urban farming, craftsmanship, arts and heritage, and to build a kampung spirit.

When it is ready in about two years’ time, the eco-friendly site will include organic farming plots, camping grounds, an amphitheatre, a heritage centre and a prototyping zone for people to design useful technologies such as solar lamps.

The project is expected to cost GUI $6 million, which it hopes to raise from government grants and by offering its popular educational programmes to schools and corporations.

The group has 12 full-time staff and has attracted 35,000 volunteers since 2008 to help with farming, composting, carpentry workshops and making organic food, among other activities.

It had earlier looked as if GUI would have to move from its rent-free base in the former Bottle Tree Park, after the lease secured by the supportive former management expired this year.

But the group has been thrown a lifeline: Chong Pang Citizens’ Consultative Committee (CCC) is leasing the land from the Government for community use for six years, and is subletting it to GUI at a “very soft rental”, said Minister for Foreign Affairs and Law K. Shanmugam, an MP for Nee Soon GRC, at the site’s ground-breaking ceremony yesterday.

GUI founder Tay Lai Hock told reporters that the group is paying a monthly rent of “close to five figures”.

Mr Shanmugam said that to help keep the rental low, Chong Pang CCC offered to become the tenant on the basis that the area would be used for community projects.

He said that while letting the non-profit group use the site would mean less income is earned, and there were competing uses for the land, “you can’t put a money value” on how GUI’s work benefits people.

“We were impressed because of the amount of energy and enthusiasm that young people show for this,” Mr Shanmugam said.

“Beyond looking at things from a commercial perspective, it brings people very much in touch with something that they yearn for in an urban environment like Singapore – nature, doing things with your hands, a spirit of self-reliance.”

Mr Tay said: “In the past six years, I have seen so many families and young people come up to me to thank me for building a space like this. It provides a breathing space and safe place for many to experience their sense of purpose and empathy for Singapore, the earth and humanity. It makes us feel like human beings again.”

The former Bottle Tree Park had restaurants and a fishing pond, with tenants paying monthly rents of about $15,000.

The remaining land there will be leased by China-based Fullshare Group, which secured the lease in July with a tender bid of $169,000 a month. The company, which invests in health care and international trade businesses in Singapore, is expected to turn the area into a leisure park attraction, with restaurants and activities such as camping and fishing.

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Eco village to set up in Kallang Park

A BIODIVERSITY pond to teach students about nature, walls painted with murals of the old Kampong Bugis and bins in the shape of frogs or bottles will soon spring up at Kallang Riverside Park.

Founder and chairman of Waterways Watch Society (WWS) Eugene Heng has dreamt up an ecovillage on a 400m stretch of the park to ignite a green spark in park users.

The environmental group is the first non-governmental organisation to sign an agreement with the National Parks Board (NParks) to organise and run activities in a park.

Mr Heng, 65, a retired bank executive, said he mooted the idea of the society taking on more responsibility for the area about five years ago.

WWS, which has 380 volunteers, including two full-timers, has been patrolling and picking up litter there for the past 16 years. It also does clean-up and environmental activities in other places.

Its latest project is in line with Prime Minister Lee Hsien Loong’s announcement last Saturday that the Government will work with partners who want to do more for the environment.

NParks director of parks Kartini Omar said with WWS’s experience in developing programmes and outreach, the partnership will provide more recreational opportunities for all to enjoy.

NParks has previously joined hands with other environmental NGOs such as WildSingapore and the Toddycats on activities like guided nature walks, bird watching and nature photography.

Mr Heng said he plans to build a biodiversity pond, which will help students learn more about plants and wildlife. In addition, his society hopes to team up with institutes of higher learning to raise awareness of environmental issues such as littering.

“We may also hold exhibitions on recycling, repaint walls or redesign some of the rubbish bins to make them more appealing,” he added.

“The park is very quiet on weekdays, so we hope to enhance it so that people will come here to enjoy nature.”

Experts called the collaboration a win-win situation.

Chairman of the Government Parliamentary Committee for National Development and Environment Lee Bee Wah noted: “Non-government groups can sometimes be better attuned to the public’s needs, and can… be free from red tape (compared with) a government agency.”

NParks puts up the infrastructure and lays out policies while WWS does the ground work of engaging people, she added.

NParks will continue to own and manage the park, but WWS can develop and maintain other facilities in the village, such as a portable stage for water sports events and signboards to support its programmes, subject to NParks’ approval.

People who want to organise public events in the village will also have to go through WWS first, although NParks has the final say.

Said Mr Heng: “Over the years, we have seen more volunteers who are passionate and have the relevant expertise. I believe we can tap on that.”

But he acknowledged that more sponsorships and full-time staff will be needed.

Mr Leong Kwok Peng, the Nature Society (Singapore) vice-president, added that the partnership is a big step forward for civil society here.

“It breaks new ground… Hopefully more such partnerships can be done in nature conservation and heritage,” he said.

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JTC Chemicals Hub — a ready specialised premises for SMEs in the industry

SMALL and medium enterprises (SMEs) can soon access a suite of plug and play solutions at the JTC Chemicals Hub @ Tuas View, Singapore’s first multi-user and high-rise specialised development designed to house chemical companies involved in the manufacturing, blending and distribution of chemicals, including chemicals classified as dangerous goods.

The JTC Chemicals Hub, which is estimated to cost S$67 million, is designed with safety-compliant features, such as enhanced fire protection systems to facilitate safe handling of chemicals, and shared facilities such as fire-water retention tanks and a centralised foam system.

Strategically located near Jurong Island, Tuas Biomedical Park, Tuas Industrial Estate, Lube Park and the upcoming Tuas Port, the Chemicals Hub will bring chemical companies closer to their customers and will allow them to distribute their products and raw materials efficiently, said JTC.

The hub is situated on a 1.6 hectare site, and consists of 14 modular units of 1,200 square metres each.

The development comprises a three-storey production block and a five-storey annex block to cater to R&D activities. The annex block will also house light industrial and ancillary offices. By clustering the companies in a single development, companies can achieve land savings of up to 50 per cent, said JTC.

“We understand that a chemical company taking up just one unit of 1,200sqm of space in a normal factory for their manufacturing and storage operations would have to incur at least half a million dollars in capital investments to install such safety measures, and that will also increase the set-up time of about three more months. If they were to set up in JTC Chemicals Hub, they would be able to save this amount and shorten the set-up time correspondingly,” noted JTC chief executive officer Png Cheong Boon in his welcome address at the groundbreaking event on Friday.

Today, the chemical sector is the largest contributor to Singapore’s manufacturing output, accounting for about one third, according to 2013 figures.

The hub joins other infrastructure solutions such as the Jurong Island and the recently opened Jurong Rock Caverns. Separately, private sector players such as Vopak and SK Gas will be jointly developing the first LPG facility in Singapore, which will provide an alternative feedstock for companies on Jurong Island.

The construction of JTC Chemicals Hub @ Tuas View is slated for completion by the second quarter of 2016.

Amendment note: Quote has been amended to better reflect that SMEs enjoy these savings if they take up space in the chemical hub.

Singapore is China’s 2nd most popular investment destination after US

By 2017, China’s outbound direct investment could reach US$264B outstripping its FDI. According to a new report by the Economist Intelligence Unit (EIU), Singapore has remains its position as China’s second most popular investment after US in 2014. Its diverse industrial structure ranging from high-tech biomedical manufacturing, Petrochemicals and Liquified Natural Gas Trading, to infrastructure development propels the Republic’s position over Hong Kong’s, despite that the latter is at the door step of the economic giant sharing cultural threads. Hong Kong is still relying on a few sectors to drive its economy. The China Going Global Investment Index ranks 67 countries on their attractiveness to Chinese overseas investment, featuring 55 indicators or opportunity and risk.

EIU forecasts Singapore’s economy to expand by more than 4 percent annually in 2014-2018 compared to Hong Kong’s 2-3 percent in the same period.

The top 10 destinations according to the report includes:

1. US

2. Singapore

3. Hong Kong

4. Australia

5. Canada

6. Japan

7. Switzerland

8. Russia

9. Taiwan

10. Norway

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