KSH wins deal to build boutique hotel – The project will be part of Marina Bay’s newest lifestyle hub

KSH Holdings, a construction and property development group, yesterday said it has won a contract to build a luxury boutique hotel at Clifford Pier.

The contract, which BT understands is worth close to $120 million, is awarded by Hong-Kong listed property group Sino Land, the sister company of Singapore property giant Far East Organization.

The Clifford Pier hotel will be part of Marina Bay’s newest lifestyle hub, and will offer a wide mix of complementary uses, including F&B, retail and entertainment outlets, KSH said.

Work on the project will start this month and is expected to be completed within 20 months.

In December last year, Sino Land won the hotly contested site at Collyer Quay. The site also includes the single-storey Clifford Pier and the former two-storey Customs Harbour Branch Building.

Then Sino Land, which is controlled by the family of property magnate Ng Teng Fong, put in the two highest bids out of the three short-listed.

The winning tender of $165.8 million was anchored by a luxury boutique hotel featuring about 120 rooms with ‘full sea views’.

KSH said that under the terms of the contract, it will provide a range of services for the building of the six-storey hotel, including conserving Clifford Pier and the former Customs Harbour Branch Building.

The new contract brings the total value of construction contracts secured by the company since the beginning of this year to $279 million. The contract also brings the existing order books of the company’s construction business to a new high of $405 million.

‘Going forward, we are confident that this mega project will further enhance our track record and put us in an excellent position to secure prestigious projects of higher contract values,’ said Choo Chee Onn, KSH’s executive chairman.

The company also said that its fully owned subsidiary Kim Seng Heng Engineering Construction recently secured three new contracts with a combined value of $63.9 million.

KSH’s shares gained 3 cents to close at $1.12 yesterday.

Source : Business Times – 11 Sept 2007

Govt will continue to manage increases in construction costs

Trade and Industry Minister Lim Hng Kiang has urged developers and contractors not to price in expectations of increases in costs into their tenders for projects.

Speaking to reporters on the sideline of a groundbreaking ceremony on Friday, he said that the government would continue to manage the increase in cost of steel and other materials and try to mitigate the impact of higher costs.

He said: “The construction industry contributes about 4 percent of our GDP, and the construction cost itself is a very small part of the GDP, so the impact would not be that significant. But nevertheless, we don’t want to have a situation of it being built into expectations and contractors padding their tenders with very high expectations of continued cost escalation.

“This is something that we want to avoid, so Ministry of National Development is in constant dialogue with the Singapore Contractors Association to explain to them the situation, to make sure there isn’t this situation, that they don’t create a self-fulfilling prophecy. And they don’t have expectations built into their tender process. We must have a realistic view of the situation and know the measures that the different parties are taking to mitigate it.”

Mr Lim also touched on the need to make investing in hotel developments attractive.

He cited the increase in hotel rates, adding that these will continue to go up at a measured pace, and developers can factor this into their calculations.

Mr Lim said: “They can calculate the returns. We hope they will tender sensibly for the land price and then be in a position to build the supply that we need. If you look at the basic numbers, if we are practically doubling the number of tourist arrivals, simple common sense would say that you also practically double the number of rooms.” – CNA/ch

Source : Channel NewsAsia – 31 Aug 2007

Marina Bay IR to cost more than the US$2.4b Venetian Macao

GAMING and resorts operator Las Vegas Sands’ newly opened US$2.4 billion Venetian Macao in the Chinese territory may be the biggest single structure in Asia, and it may be the second biggest building in the world.
 
But its Marina Bay Sands (MBS) integrated resort in Singapore will be more expensive – especially now that costs could escalate by as much as 40 per cent to hit some S$5.2 billion, or about US$3.4 billion.
 
Speaking at a press conference here yesterday at the official opening of the Venetian Macao, Las Vegas Sands COO William Weid-ner said that it had been ’struggling to stay on budget’, but rising construction costs coupled with the refinement of design on the complicated curving structure of the hotel towers is likely to push up the overall cost of the Singapore project by between 20 and 40 per cent.
 
Sands beat three other bidders in a hard-fought campaign last year to clinch the licence for the Marina Bay integrated resort. The cost of MBS had previously been estimated at S$5.05 billion including S$1.3 billion for the land. Taking away the land value and factoring in a 40 per cent rise in project cost, the Marina Bay resort could come to about S$5.2 billion.
 
Mr Weidner was nevertheless optimistic about the opening date of the Singapore project. ‘If we keep our noses to the ground, we can open in late 2009,’ he said.
 
So far, Sands says it has awarded S$700 million in construction contracts for the Singapore project. A S$1 billion contract will soon be awarded to build the hotels.
 
Mr Weidner said that Sands was in discussions with the Singapore government on construction costs but did not disclose details. ‘The government knows where we stand,’ he said.
 
Unlike most casino business models, Sands will also depend on the meetings, incentives, conventions and exhibitions (Mice) business.
 
Giving an update, Mr Weidner said it has currently 20 major events booked at MBS up to the year 2013. For the Venetian Macao, 44 major events have been booked for the next two years, with the largest expected to attract 30,000 visitors.
 
But Mr Weidner does not expect the North Asia market to eat into the South Asia market. He added: ‘When they see what is available (at the Venetian Macao), it will be much easier to sell Singapore.’
 
Selling Macau as more than just a casino destination has not been tested in the Chinese territory but Sands hopes to attract visitors to extend their stay with attractions that include a 15,000-seat arena, a US$150 million Cirque du Soleil show and a one million sq ft mall with 350 shops.
 
The number of visitors to Macau has been increasing; up to 26 million people are estimated to visit the territory this year.
 
Indeed, demand for travel to Macau has become so intense that the Chinese government decided to place some travel restrictions on its nationals earlier this year.
 
Macau has benefited from a surge in mass market players from China and, interestingly, Sands’ first casino in Macau – the smaller Sands Macao – was targeted largely at this market. It was so successful that it recouped its investment within a year. 
 
The much more expensive Venetian Macao will be targeted at the leisure and Mice segment. Although Mr Weidner would not say when it would break even, he said it expects a yield of over 20 per cent per year on its investment. He added that Sands could sell some of its assets, including the mall.
 
Sands will also be looking to grow its premium-play segment which currently makes up 60 per cent of its gaming revenue.
 
Another strategy is to expand within Asia.
 
Also speaking at the press conference, Sands CEO and chairman Sheldon Adelson said that it would open other integrated resorts in Asia if allowed. But he added: ‘This is not a race.’
 
Noting that China alone hosted 60 million Mice delegates in 2003, Mr Adelson said, ‘There are only so many events you can hold in one building.’
 
Source : Business Times – 29 Aug 2007

Granite situation better so quarrying on Ubin put off

The Government has deferred plans to begin quarrying for granite on Pulau Ubin.

This follows a significant improvement in the granite supply situation in the last two months, the Building and Construction Authority (BCA) said in a statement yesterday.

There is adequate granite supply coming in from both nearby and new distant sources in the region.

As a result of this diversification of supply, there has not been any drawdown from the national stockpile since May.

The BCA said granite prices are now stabilised between $23 and $29 a tonne.

In January, Indonesia imposed a ban on land sand exports and detained barges shipping granite to Singapore.

Plans to reopen Pulau Ubin’s former granite quarry – Kekek Quarry – were announced in April.

Over the past few months, the BCA had been carrying out preparatory works to reactivate the Kekek Quarry.

These included conducting an environmental impact study as well as carrying out water quality tests and regulatory reviews.

BCA said it has gained useful experience and has a better understanding of the process for reactivating a quarry.

And as the industry is able to diversify and import adequate granite from many sources, there is currently no need to begin quarrying in Ubin, the BCA said in its statement.

It added, however, that ‘we are still keeping all our options open, including reactivating our own quarries if necessary’.

BCA said: ‘The reactivation of our local quarries remains part of our contingency plan to ensure supply resilience of essential construction materials.’

The news was well received by nature groups.

Dr Ho Hua Chew, chairman of the conservation committee of the Nature Society, said: ‘A quarry is quite disturbing to wildlife, so this is definitely good news. I hope this decision is infinite.’

Source : Sunday Times – 5 Aug 2007

Forecast for ‘07 construction demand raised to $19b-$22b

Construction demand continues apace, resulting in Building and Construction Authority (BCA) revising its forecast for construction demand for 2007. It now expects building contracts to reach between $19 billion and $22 billion in value, up about $3 billion from its earlier estimate of between $17 billion and $19 billion.

In a press statement released yesterday, BCA also said that for the first five months this year, construction demand reached about $7.6 billion in terms of contracts awarded.

It also said that the upward revision in construction demand could be attributed to the rise in residential and commercial demand stemming from the current property boom as well as higher construction costs.

Making reference to the revised figures last night, Minister of State for National Development Grace Fu added: ‘This buoyant outlook offers both opportunities and challenges for the building sector.’

Speaking at the anniversary dinner of the Singapore Institute of Valuers and Surveyors (SISV) last night, Ms Fu also emphasised the need for sustainable development.

In March, Ms Fu announced that the government was considering amending the Building Control Act to impose minimum requirements on environmental sustainability that are equivalent to BCA’s Green Mark certified standards for new buildings and existing ones that undergo major retrofitting.

Last night, Ms Fu added that this initiative was making progress. She said: ‘BCA has started consulting the industry players, including SISV, on the proposed legislative requirements.’

Ms Fu also reiterated that the government is aiming to reduce the reliance on sand and granite by 30 to 50 per cent over the next five years and that SISV members can play a key role in influencing consumption or construction materials and methods.

The private sector will, however, have a larger role to play.

According to BCA, of the forecast construction contracts to be awarded this year, private sector construction is expected to make up about 70 per cent of the demand.

Some major projects that are due to be awarded later this year include the Khoo Teck Puat Hospital in Yishun, construction parcels for the two Integrated Resorts, the redevelopment of Ocean Building and some private residential developments, including Reflections at Keppel Bay, a condo at Quayside Collection, Sentosa and The Seafront On Meyer condo.

Source : Business Times – 4 Aug 2007

Hor Kew to strike while property market sizzles

PROPERTIES and construction are some of Singapore’s hottest buzzwords right now, which is just fine for Hor Kew Corporation.

The construction company which has also been involved in property development expects to expand further into development while demand – and prices – remain strong.

Hor Kew was founded in 1979, and prior to the surge in growth which has brought prosperity to construction sector the company survived many recessions and a dip in the industry that lasted almost a decade.

The company has had to battle with falling revenue, narrowing profit margins and rising costs, but its managers see this year as marking a turnaround for Hor Kew, with the property markets and other companies in the construction industry seeing a strong upswing.

Hor Kew, which is involved in construction, prefabrication and property development, reported a decrease in revenue of 52 per cent from $75.8 million in 2005 to $36.3 million. This was caused mainly by a substantial revenue decrease in its construction business. Despite this, Hor Kew recorded a decrease in net loss of 76 per cent over the year, from $10.6 million to $2.5 million in 2006.

Hor Kew’s careful cashflow management and cost mitigation efforts have helped it minimise losses. ‘Over the past few years, there were too many contractors in the market, therefore the industry faced very cut-throat prices. Furthermore, there was only a small demand for contractors due to the country’s economy,’ said deputy managing director Dennis Aw. ‘Since 1996, the market for construction sector never fully recovered until last year.’

Prudent cost-saving measures

In order to better manage their costs, Hor Kew introduced cost-saving measures such as consolidating more bulk purchases. It ventured into manufacturing its own building materials and pre-cast to lower costs and save time.

At the same time, this allowed Hor Kew to improve quality control. ‘Even during those years which were very bad for most contractors, we managed to be very prudent, and our cash flow position is still very strong,’ Mr Aw said.

As a result of these cost control measures, the company reported a net profit of $1 million after tax in 2006 for its general construction division, a turnaround from a net loss of $9.4 million the year before. Hor Kew’s cautious approach to management policies during difficult years have helped it tide over the difficult periods. Even in today’s bullish property sector, the company still views the market with caution.

The fact that Hor Kew does not rely solely on one area is also a strength and competitive advantage for the company.

‘Last year, most pure contractors were hit badly by the supply of concrete. As we are not pure contractors, we can depend on other sectors to generate profits,’ Mr Aw said. While revenues from its general construction unit dropped 66 per cent to $20.3 million over 2005 and 2006, turnover from prefabrication remained consistent at $16 million, helping Hor Kew to sustain its earnings.

Being quick to adapt to changes has also helped the company survive decades of fierce competition in the industry. ‘The products that we manufacture are a result of the company adapting to changes. Our integration business in pre-cast and metal works are good examples,’ Mr Aw said.

When HDB opted to change most of their building projects to use pre-cast, Hor Kew was one of the first few contractors that took on pre-casting to suit the growing changes in the construction industry.

The company, which is familiar with building Singapore’s public housing projects, won the CIDB Best Building design Award in 1994 for a housing project in Pasir Ris. In 2002, Hor Kew received the highest A1 rating in the construction industry. Besides handling projects in public housing, the company has also done a diverse range of residential, commercial/industrial, institutional and upgrading works.

Mr Aw is optimistic about the outlook for the construction and property industries for the coming years, especially with the current trend in en bloc sales and the upcoming integrated resorts.

Move to venture overseas

To tap the boom in the property market, Hor Kew expects to launch more property developments. It counts One Oxley Rise among its developments, and recently announced the developments for two new projects Kallang Pudding Road and East Coast Road.

‘We plan to expand into properties because of the boom. Our company will find benefits to be contractors-cum-developers instead of being just either one,’ said Mr Aw. ‘Market price for construction is better now. When the market goes up, both the developer and contractor makes money. That’s two ways of cushioning the project as the contractor and developer gains.’

Other than moving into the surging property market, Hor Kew, which as yet has no operations overseas, will also explore opportunities to expand overseas into regional markets. ‘We’re always on the look out for opportunities. Now that we’ve gathered track record in our field, we will venture out either on our own or with partnerships,’ Mr Aw said.

He sees the company’s strength in design and building for public housing as a further reason for Hor Kew to bring its expertise to other markets overseas.

The expansion into properties is not intended to be at the expense of Hor Kew’s core business. ‘We will continue to concentrate on being main contractors, while looking more into property development. At the same time, Hor Kew will also look into new products and technologies,’ Mr Aw said.

Source : Business Times – 17 Jul 2007

Builders agree on plan to share higher costs

Six months after Indonesia abruptly banned the export of land sand to Singapore, the construction industry appears to have come to grips with the disruption caused.

Prices for sand, which shot up initially, have stabilised, and an agreement has been reached by key industry players on how to share the cost increases.

The Construction Industry Joint Committee (CIJC) – which represents eight industry associations – has worked out a 75-25 per cent formula for private projects.

Under the agreement, developers will bear 75 per cent of the cost, with the other 25 per cent to be shared between contractors and concrete suppliers, according to a note sent out by the committee.

This is similar to the government’s position of paying 75 per cent of the increase in construction costs of public sector projects affected by the ban.

CIJC chairman Chang Meng Teng said the formula is not a legal requirement but a recommended guideline that industry players should follow.

Most developers and contractors have already worked out arrangements on a case-by-case basis, said Mr Chia Hock Jin, executive director of the Real Estate Developers Association of Singapore.

In February, Indonesia’s sand ban also caused a disruption in granite supply when its navy detained several Singapore-bound barges carrying granite on suspicion of sand smuggling.

The prices of sand and granite rocketed as a result of shortages in supply, pushing up concrete prices from $70 to $200 per cu m. Sand and granite is used to make concrete, which is used heavily for construction here.

Contractors – especially those with private contracts – faced losses of millions of dollars as they had to absorb the price increases to continue with their projects.

Since then, prices of sand, granite and concrete have dropped as suppliers diversify their sources to neighbouring countries such as Malaysia, Vietnam and Cambodia.

The recent note from the CIJC follows lengthy negotiations between the developers, contractors and suppliers, and comes after a period of uncertainty over who should bear the costs.

Mr Desmond Hill, president of the Singapore Contractors Association, said he was delighted with the agreement, noting that it ’sets some ground rules’ for future negotiations.

Meanwhile, the surest sign the construction industry is back on its feet came last week when it recorded growth of 17.9 per cent in the second quarter – the fastest pace in 10 years – according to preliminary figures from the Ministry of Trade and Industry.

But industry players noted that the surge in demand for construction materials and equipment is pushing overall costs up.

Source : Straits Times – 16 Jul 2007

Building costs climb with industry boom

The construction sector may be hitting the high notes but the simple truth is that one can’t get building materials for a song. Their price has climbed with the boom in the industry.

While the cost of concreting sand came under the microscope earlier this year, a detailed study has revealed that, away from the headlines, the cost of other key materials like structural steel, clay bricks and ready mix concrete has also been going up.

Bundling the numbers together, construction cost consultancy Rider Levett Bucknall (RLB) has estimated that costs for Q1 2007 – captured by its in-house Tender Price Index (TPI) – were 15 per cent higher year-on-year (YOY).

The index registers changes in the cost of both, materials and labour. Labour costs, incidentally, have risen 15-20 per cent over the past six months.

RLB, formerly Rider Hunt Levett & Bailey, noted the ‘considerable pressure on construction resources, given the current volume of construction demand as well as the anticipated demand over the second half of 2007.’ In fact, it estimates that the previous construction demand peak of $24.4 billion achieved in 1997, ‘will be tested and possibly surpassed based on a projection of current trends’.

The costs have climbed, in part, on account of Indonesia’s decision in February to ban the export of sand. Even though concreting sand comprises only a small portion of the overall construction costs, the move also caused some disruption in aggregate supply, it noted.

Other materials also became dearer. The cost of structural steel, for example, has risen by 17.8 per cent. The price of copper, meanwhile, has fluctuated sharply, rising by almost 80 per cent over two years before registering a YOY decrease of 1 per cent in May 2007.

RLB says the prices of many materials are largely determined by the global commodities market which may react to speculation, foreign exchange fluctuations and geopolitical factors. Such gyrations, however, make life difficult for contractors who hope to tender for construction contracts.

A recent Goldman Sachs report, which was bullish on the industry in general highlighted certain investment risks, including execution risks, given the very tight project schedules and capacity, and the possibility of default of main contractors.

So far, at least one redevelopment project – Safra Toa Payoh – has been put on hold due to rising costs.

The government’s e-procurement portal, GeBiz, also revealed recently that the Housing and Development Board did not award at least four recent public tenders for building contracts. One industry player claimed that this was on account of the prices quoted.

Nevertheless, industry players are confident that, given the overall climate, they can weather the rising costs. Property developer United Engineers Group, which also has construction capabilities, believes the outlook will be positive for the next two to three years.

United Engineers group managing director and CEO Jackson Yap added: ‘In a booming property market where property prices are steadily rising, there would still be sufficient or additional margins to buffer against rising costs.’

Woh Hup director Eugene Yong said: ‘There’s uncertainty, but that’s the normal situation. That has not changed. The uncertainty is whether you have correctly priced in the risks,’ he said. The concern, he added, was not with new projects: ‘It’s existing contracts that are the issue.’

The construction boom has given contractors more bargaining power. UE’s Mr Yap says: ‘(Contractors) are able to bargain for more margins from developers as there is currently a shortage for contracting resources. However, due to this shortage in contracting resources, projects will also take a longer time to complete.’

Mr Yap also points out that construction materials are just one component of construction cost. The industry faces other challenges too.

Labour resources are tight particularly for supervisors and project managers, and dormitories and transportation resources for workers are also a constraint, he said. Equipment like cranes and piling machines is also witnessing shortage, and therefore sale and rental prices have also gone up.

Other developers are monitoring prices closely. A spokesman for CapitaLand said: ‘We will continue to review the impact of the increase in materials costs on a case by case basis with the respective consultants and contractors.’

If the rising construction costs have not been met by much alarm, it is probably because the returns from construction and property development are high.

Knight Frank director, research and consultancy, Nicholas Mak notes that the prices for new developments have risen faster than the construction costs.

Indeed, the latest official figures reveal that overall private home prices rose 20.6 per cent YOY with the high-end sector rising even higher. When compared to an estimated 2 per cent increase in development cost due to price hikes in sand and granite, increases in construction cost do seem negligible. Mr Mak added: ‘In a booming property market, there is a lot more opportunity to pass on increases in construction costs to buyers.’

Source : Business Times – 7 Jul 2007

Building material suppliers in crunch too

Singapore may be just in the nascent stage of the current construction boom but the strain on resources is becoming a concern even for suppliers.

TV Narendran, deputy president (operations) of NatSteel Asia, said: ‘In Singapore, the industry practice is to hold prices for seven to twelve months and this means that the steel supplier has to bear the risk of fluctuating input costs and market prices.’

So far, the steel price increases alone have not had much impact on property prices. ‘Steel accounts for about 5 per cent of the project costs. So even a 15-20 per cent increase in steel prices has an impact of less than one per cent on project cost,’ explained Mr Narendran.

Wee Piew, chief executive of mainboard-listed HG Metal Manufacturing, notes that price increases have been ‘more pronounced’ since the first half of this year. ‘Global demand is very strong, especially from the Middle East and Russia. Steel from Turkey and the Ukraine, which used to come here, is now being channelled to those markets.’

The supply of Chinese steel is also ‘much more controlled now’ due to a cut on export tax rebates, he added. With pressure on both demand and supply, prices are high. The price for deformed bars for construction has risen 35 per cent to US$540 per tonne since January, he said.

Even construction companies which are not directly affected by rising material prices are seeing a strain on resources.

Mainboard-listed Tat Hong Holdings’s share price has appreciated 75 per cent since the begining of the year on the back of the construction boom.

Tat Hong supplies construction machinery including cranes, and its CEO, Roland Ng, said: ‘We believe that rates will continue to be driven by strong demand conditions and tight supply for cranes in this region. We continue to observe a long lead time required for crane manufacturers to deliver on new orders and are not aware of any factors that will drastically alter the situation in the near future.’

Mainboard-listed Tiong Woon Corporation Holdings, a crane and transport services supplier, has also benefited from the boom and its share price has more than trebled since the start of the year.

And Tiong Woon executive director Tan Swee Khim expects crane rates to keep rising by 10 per cent year-on-year for the next two to three years at least.

‘Demand is not really coming from the intergrated resorts in particular, but across the industry, including private projects, infrastructure and refineries. The situation on the supply side is not likely to improve much.’

There is some uncertainty of how the construction boom will play out. An industry player said: ‘Given the limited pool of contractors, subcontractors and suppliers in the local market, it is not surprising that developers may not be able to secure tendering commitments from the larger established contractors who may already have ongoing projects and tendering commitments with existing clients.’

Source : Business Times – 7 Jul 2007

Granite levy on Singapore shipments ‘not set in stone yet’

The proposed 20 per cent levy by Indonesia’s Karimun province on its granite bound for Singapore may not come to pass, a senior Indonesian official told The Straits Times yesterday.

Mr Muhammad Lutfi, who chairs Indonesia’s Investment Coordinating Board, said he would meet Karimun’s governor and mayor next Monday specifically to thrash out with them the levy, which could amount to S$9.50 a tonne at the current price of S$60 a tonne here for granite.

He said: ‘Let me put it this way – we would like to give our investors good, smart policies.

‘We would also like to maintain the 3,000 workers working in the granite mines of Karimun.’

So, he stressed, it would not be smart if such a levy lost his country a vital market for the rock.

After all, he added, the whole point of Indonesia’s new pro-business drive, which he is steering, was to create jobs and lift at least 19 million Indonesians out of poverty by 2010.

Ironically, news of the levy came just a day after he told reporters at the World Economic Forum here that he was looking to ease Singapore’s importing of granite, perhaps even scrapping checks on Singapore-bound shipments.

Singaporean investors had queried him on the levy during a closed-door meeting at the Economic Development Board’s headquarters here yesterday morning.

Karimun’s planned levycame to light recently in a statement from building materials supplier Hong Leong Asia to the Singapore Stock Exchange.

Indonesia banned Singapore from buying its land sand in February and, in April, detained 12 of its granite-bearing barges on suspicion of sand-smuggling.

But on Monday, the Building and Construction Authority said all 12 barges had been released.

Source : Straits Times – 28 Jun 2007