Follow the Sine to Singapore Property Prices

A JOINT venture between insurance giant Prudential UK and Frasers Centrepoint has bagged Compass Point mall in Sengkang for $519 million after its tender bid was accepted by the seller.

The price works out to $1,925 per square foot (psf) based on the net lettable area of 269,546 sq ft and a net yield of about 5.6 per cent based on the mall's estimated net operating income of $29 million.

Earlier, entities linked to Prudential's Asia Property Fund (APF) formed an 81.01:18.99 joint venture with Frasers Centrepoint - Gemshine Investments - to bid in the tender for Compass Point, which closed on May 3.

Gemshine was either the highest bidder or sole bidder in the tender, reckon market watchers. In any case, it had the right of first refusal (ROFR) to buy the mall assigned to it by APF, as reported earlier in BT Weekend.

The five-storey mall, next to Sengkang MRT Station, is operating at nearly full occupancy. Anchor te-nants include Best Denki, Cold Storage, Metro, National Library Board and Kopitiam.

Frasers Centrepoint, formerly known as Centrepoint Properties, developed the mall at a total cost of about $210 million before securitising it in November 2002 for $335 million.

Under that exercise, $134 million of junior bonds and $201 million of senior bonds (the latter re-presenting pure debt) were issued. The junior bond holders get to keep the full upside of any capital appreciation when the property is eventually sold.

APF and Frasers Centrepoint jointly control all but $50,000 of the $134 million junior bonds; the split between them is 81.01: 18.99, exactly the same proportion as their ownership of Gemshine.

Under an arrangement announced on April 30, APF and Frasers Centrepoint transferred their respective holdings of the junior bonds as well as the attached preference shares issued by Sengkang Mall Ltd to Gemshine. Sengkang Mall Ltd controls five special-purpose vehicles which were set up to own Compass Point under the 2002 asset securitisation structure.

APF also assigned its ROFR, which was granted to Prudential under the securitisation deal, to Gemshine. This basically gave Gemshine the option of matching the highest price received at Compass Point's tender - in the event that it was not the highest bidder.

All the bonds are due in November this year and hence the tender - conducted by CBRE - was held to sell Compass Point and use sales proceeds for a full redemption of the senior and junior bonds.

Compass Point's $519 million sale marks the second major property investment sales deal this week. On Tuesday, Fragrance Group clinched Tower 15 at Cantonment Road for $360 million. The price works out to about $1,420 psf of gross floor area (GFA) based on the 29-storey freehold building's existing 253,455 sq ft GFA. No development charge would be payable for a new project on the site if it does not exceed this GFA.

Tower 15 - which incorporates Klapsons The Boutique Hotel on the second to fourth levels - is on land area of 39,336.67 sq ft. Offices are on the fifth level and upwards. Fragrance is said to be buying the property from a private vehicle controlled by the Lee family that controls listed Ezra Holdings.

Fragrance is exploring various development possibilities, including a commercial development with retail shops and offices or an integrated development with retail shops, offices and residential units.

The deal is said to have been sealed by a private treaty brokered by DTZ.

A MIXED development project at Clementi Town Centre has won a prestigious Fiabci Prix d'Excellence award. It clinched the runner-up award in the Master Plan category.

Developed by HDB, this is the first development in Singapore with public housing, commercial facilities and a bus interchange built in one complex.

Located opposite Clementi MRT station, the project comprises two 40-storey high residential blocks, Clementi Mall, Clementi Interchange, Clementi Public Library and a town council office. It was completed last November.

The annual Fiabci Prix d'Excellence award, considered the Olympics of the international real estate industry, recognises outstanding projects in various aspects of real estate development.

Entrants are evaluated on overall concept, architecture and design, and community benefit, among other factors. The awards ceremony was held on Tuesday in St Petersburg in Russia.

HDB said the project has injected new life into Clementi, a mature town, and made good use of the land by turning an old bus interchange site into a modern mixed development integrated with its surroundings and transport nodes.

Mr Fong Chun Wah, its group director of development and procurement, said: 'With good planning and design, we have added vibrancy and improved the living environments of residents residing in an established town like Clementi.'

Another eight projects from Singapore also won Fiabci awards this year.

They include Marina Bay Financial Centre in the Office category, Hillvista in the Residential (High Rise) category and 11 Tampines Concourse in the Sustainable Development category.

TAY SUAN CHIANG

[SINGAPORE] From boardrooms to treasuries and trading desks, a breakup of the eurozone is now looking like a distinct possibility. Singapore is certain to feel the impact of a Greek exit ("Grexit") from the eurozone - now seen by economists as something that could happen in the next 6 to 18 months.

Citigroup has raised the probability of a Grexit in the next 18 months from 50 to 50-75 per cent; Bank of America Merrill Lynch thinks it is likely to happen within the next six months.

How seriously the potential currency impact, trade disruptions and poor sentiment rock Singapore's economy and businesses will depend on whether a wider contagion sets in.

Global markets tumbled and the euro fell against the US dollar yesterday to 1.2711 - its lowest since January - as Greek politicians failed to form a coalition, forcing another round of elections. Parties opposed to the bailout deal are expected to win in June, making the prospect of Greece leaving the currency bloc more real.

"What was initially a tail risk is starting to look more like a catastrophic risk that cannot be ignored," said OCBC Bank's head of treasury research and strategy, Selena Ling.

Shocks from a Greek exit are likely to spread through financial markets first, she said. "Stock markets may reel from the shock, money markets may freeze up and short-term interest rates may spike should there be widespread panic over eurozone counterparty risk and mark-to-market losses etc."

Investment technology provider SunGard's latest simulations show that in the mildest break-up scenario where only Greece exits, eurozone equities and Asia-Pacific equities could both fall 5 per cent.

Singapore's real economy would feel the hit after. Bank of America Merrill Lynch economist Chua Hak Bin thinks that the risks of 2012 GDP growth coming in at the low end of the government's 1 to 3 per cent forecast are now higher. A deepening of Europe's debt woes may stall Singapore's growth recovery, he said.

A likely drop in the euro, while making imports from Europe cheaper, also makes Singapore's exports more expensive to Europeans. This would exacerbate already weakened export demand from a region facing recession, said Kelvin Tay, chief investment strategist of UBS Wealth Management Singapore.

The EU27, which includes UK, remains Singapore's largest non-oil domestic exports (NODX) market. It accounted for about 15 per cent of all NODX last year. Estimates have also shown that EU's share of Singapore's NODX rises above 17 per cent, once indirect demand for Singapore's exports to China that are re-exported to EU are accounted for.

Even though the BT-UniSIM Business Climate survey showed that firms do not expect Europe's economic performance to sway sales significantly this year, latest developments have had an impact on "already fragile" sentiment, said Singapore Business Federation chief executive Ho Meng Kit.

"Singapore companies are both directly and indirectly exposed to countries in the eurozone and the current impasse will have a bearing on businesses. These developments in Europe will introduce even more uncertainty to the global economic situation."

What ought to worry businesses here is if Greece's exit leads to a string of other vulnerable economies leaving the eurozone too. Though Greece may be "a small potato in the overall picture", its exit could set a dangerous precedent, said UBS's Mr Tay.

Peripheral eurozone economies, such as Portugal, Spain and Italy, if seen to follow Greece out, might then also face bank runs as their depositors flee. "In our view, a financial crisis is unavoidable, if Greece exits from the eurozone," said Mr Tay.

SunGard's results show that if both Greece and Portugal exit, the fall would be a sharper 15 per cent for eurozone equities and 10 per cent for Asia-Pacific equities. But a worst case scenario in which the currency bloc crumbles could see eurozone equities dive 40 per cent and Asia-Pacific equities, 30 per cent.

Views are divided on whether there will be contagion. Not everyone thinks so. SBF's Mr Ho thinks it unlikely that Greece's exit will trigger a breakup of the eurozone, though that is a situation businesses are wary of.

Citigroup economist Kit Wei Zheng thinks the cost of contagion will be too great for European policymakers not to take decisive action to limit the spread.

That is only possible if the European Central Bank, European Union and International Monetary Fund "pave the way for Greece to exit the eurozone but effectively pledge to fund it for a few more years and ringfences the other peripheral economies", Ms Ling said.

Without clarity over whether the euro as a currency will continue to exist and function if Greece exits, businesses may face settlement risks for transactions denominated in euros.

Companies such as The Ascott Ltd which book both revenues and costs in local currencies for operations in Europe will have it easier. "We do not see that there will be a major impact on Ascott should there be a change in the operating currency from euro to the respective countries' currencies," said Ascott managing director for Europe Tan Choon Kwang.

And SBF's Mr Ho sees "silver linings". "Emerging markets in Asia are still doing well and the EU-Singapore Free Trade Agreement which is in the final stages of negotiation, should provide our companies with new opportunities within the eurozone and EU when it comes to fruition," he said. That is, if the crisis doesn't get out of hand.

CHINESE companies listed here or S-chips are tossing up some nasty surprises in their earnings report cards.

Rising costs and waning demand have hit the profits of several S-chips for the first three months of this year. These headwinds are expected to persist for the rest of the year, analysts say.

"While cost pressure and the strengthening renminbi had been major concerns in 2011, demand uncertainty would be a key headwind for 2012," said DMG & Partners Securities analyst Tan Han-Meng.

Of the 81 S-chips that had reported results for the fiscal first quarter ended March 31 as at yesterday, 31 reported lower profits, while 19 reported higher profits.

Fifteen sank into the red from a year ago, while six companies reported bigger losses than previously and another six posted smaller losses. Only four companies swung into the black from a year ago.

Out of the nine S-chips covered by DMG, six came in below expectations, said Mr Tan.

Similarly, of the 10 S-chips covered by SIAS Research, most have performed either in-line with or below expectations, according to its lead analyst, Ng Kian Teck.

Cost pressures have been worsened by higher raw material prices and rising wages as provinces such as Guangdong and Shenzhen have hiked minimum wages, Mr Ng said.

Austerity measures by the Chinese government also continue to weigh on the real estate sector, with Yanlord Land Group reporting a 49 per cent year-on-year slump in net profit for the first quarter ended March 31 to 135.6 million yuan (S$27.2 million) as it delivered fewer units in the period.

Bund Centre Investment posted a 33.7 per cent fall in net profit for the first quarter to $6.3 million due to lower leasing income for its commercial and investment properties and higher marketing and promotion activities for its hotel operations.

Consumer plays were also not spared, with sportswear makers Eratat Lifestyle posting a 64 per cent fall in net profit to 13.45 million yuan and China Sports reporting a 70.7 per cent dive in net profit to 5.9 million yuan for the first quarter ended March 31.

Companies that provide consumption staples have been relatively more resilient, Mr Tan said.

At Sino Grandness, a manufacturer of canned food and beverages, net profit soared 82 per cent to 56.3 million yuan on the back of more orders. Mushroom grower Yamada Green had a 29.1 per cent rise in net profit to 81.5 million yuan for its fiscal third quarter ended March 31 as lower production rate caused by wet weather was offset by additional cultivation bases.

Vegetable producer China Minzhong reported a 7.8 per cent fall in net profit for its fiscal third quarter ended March 31 to 240.75 million yuan. The results fell short of estimates at some research houses, with CIMB downgrading the stock to "neutral" from "outperform" and Macquarie trimming its earnings forecasts and target price for the stock.

"With the omission of average selling price and volume disclosures in the third quarter and poor visibility of delayed revenue and cash flow, China Minzhong's earnings have become increasing difficult for us to forecast with accuracy," Macquarie analysts said in a note this week.

Yangzijiang remains the top earner among S-chips, with a 6.6 per cent rise in net profit to one billion yuan for the fiscal first quarter ended March 31 as it recognised more revenue from shipbuilding contracts and its ship demolishing business.

Its industry peer, Cosco Corp, however, continued its fourth straight quarter of year-on-year slide, with a 25 per cent decline in net profit to $27.8 million for the first quarter, dragged down by lower dry bulk shipping charter rates and slimmer construction margins.

While there could be more policy moves on the cards in China to boost consumption and GDP, Mr Ng said that he does not foresee a major impact on S-chips' earnings.

"The Chinese government just reduced the reserve requirement ratio but whether banks are willing to lend is another question."

Smaller companies in China are holding back their expansion or investment plans as they face credit constraints and find market conditions unfavourable for equity fund-raising, he added.

[SINGAPORE] Elevated sales figures for private homes may become the new norm given the sector's sustained record performance over the past few months, say industry watchers.

"When strong sales figures were released in February and March, many wondered whether those figures could be a short blip but now, with another month of robust sales in April, a new trend of elevated monthly sales may be appearing," said Credo Real Estate executive director Ong Teck Hui.

It was already no surprise when the Urban Redevelopment Authority (URA) announced a pick-up in April's private home sales volume following a temporary respite in March.

URA reported a total of 2,487 private homes - excluding executive condominiums (ECs) - being sold in the month of April, a 4 per cent jump from March, and slightly higher than the 2,417 units achieved back in record-making February. Sales volume for the month was also a generous 38 per cent higher than the same period a year ago.

Savills Singapore research head Alan Cheong pointed out that, excluding ECs, demand outstripped supply during the month, as the number of new homes launched in April only amounted to 2,386 units.

"May could well prove to be another bumper month. Whether new home sales (excluding ECs) can exceed April's will depend a large part on whether some larger projects can make it to the launch pad by the end of the month," noted Mr Cheong.

Things continued to be quiet in the EC launch scene with no new projects released for two consecutive months. In the absence of fresh stock, the segment's sales suffered, falling to 173 units, as compared to 639 units in March, bringing the total tally of new private homes (including ECs) to 2,660 for the month, 12 per cent lower month-on-month.

April also seemed to be a popular month among developers to launch their new projects, with names such as Barker 9, Eon Shenton, Hillsta, Katong Regency, Seahill, Sky Habitat, The Promenade @ Pelikat and Twentyone Angullia Park hitting the market.

Uptake for many of these new developments was also healthy with Katong Regency (244 units sold at a median price of $1,709 psf) topping the table for the most number of units sold in the month, among both new and older launches.

Notably, the UOL development which was sold out within a week was said to have been popular with buyers due to rising popularity of homes with a commercial component due to the added convenience it brings, said Lee Sze Teck, senior manager of DWG's research and consultancy arm.

Other new projects that were favoured by buyers in April included Hillsta (154 units sold at a median price of $1,054 psf), Sky Habitat (131 units sold at a median price of $1,583 psf) and Eon Shenton (87 units sold at a median price of $2,485 psf), though older launches such as Ripple Bay (174 units sold at a median price of $876 psf) and Palm Isles (153 units sold at a median price of $871 psf) also enjoyed healthy interest as well.

On the EC front, developments such as Twin Waterfalls and The Tampines Trilliant continued to sell well with both projects transacting 60 and 39 units respectively in April. For those with much deeper pockets, the most exorbitant unit sold for the month was an apartment at Hilltops (located at Cairnhill Circle) which transacted at $4,398 psf. However, the bulk of properties sold in April continued to hover in the $1,000 to $1,500 psf range.

Regionally, the core central region (CCR) reflected the sharpest pick-up in demand, with 106 units being sold in the area, up almost two-fold from March.

Sharing his views, Jones Lang LaSalle's head of SE Asia research Chua Yang Liang said: "Based on caveats lodged, the median prices of new sales in the OCR have been rising more than in the CCR resulting in the gap between OCR and CCR closing from 2.5 in June 2007 to 1.8 times in April 2012. This has motivated more Singaporean buyers to enter the CCR market as evidenced by the recent developer sales result and this trend of a bottom-up support of the high end segment can be expected to continue."

Homes in the rest of central region (RCR) also seemed to have gained favour with buyers, with the number of units sold rising 70 per cent month-on- month to 867 units. But mass market homes in the outside central region (OCR) bucked the positive trend, with sales declining 17 per cent to 1,514 after reaching 1,825 in March - though demand was still deemed to be healthy.

In the months to come, consultants expect buying momentum to continue with developers of mid and high-tier projects potentially testing the market with new projects in the CCR and RCR, borrowing confidence from the improving sentiment.

Said Chia Siew Chuin, director of research & advisory at Colliers International: "Barring any deterioration in the external environment and further policy risks, strong demand driven by abundant oncoming supply of private residential homes is likely to drive overall take-up for new private homes in 2012 to beyond 16,800 units, toppling 2010's record high of 16,292 units."

In the pipeline ahead, projects such as Riversails (920 units) and The Sorrento (131 units) are expected to be launched soon along with ECs such as Watercolors EC which comprises 416 home units.