CityDev to sink $580m into Sentosa Cove project

City Developments will spend $580 million in total development cost for a 99-year leasehold hotel, commercial and condo project called The Quayside Isle on Sentosa Cove, the group’s executive chairman Kwek Leng Beng said yesterday.

This sum includes the $255 million land price that the listed property group will pay for the 523,246 sq ft plot, called the Quayside Collection, to Sentosa Cove Pte Ltd. The latter is the master developer of the upscale housing district coming up on Sentosa island.

CityDev has appointed Starwood to operate the 320-room hotel in the development under its Westin brand, confirming an earlier report by BT. The seven-storey Westin Quayside Isle Resort & Spa will have about 320 rooms and is expected to be operational in 2008. It will mark the return of the Westin brand to Singapore after an absence of about seven years. Westin Hotels & Resorts used to manage the two hotels in the Raffles City complex until its contract expired at the end of 2001.

The six-storey condominium in The Quayside Isle development will have up to 236 units and is expected to be launched in the second half of next year.

Asked how the development is likely to be priced compared with the slightly over $1,300 psf average currently being achieved for the group’s 15-storey The Oceanfront @ Sentosa Cove condo which sold like hot cakes recently, Mr Kwek said pricing for the new condo would depend on demand at the time of launch.

The entire Quayside Isle development is slated for completion by end-2009. ‘Our plan is to develop The Quayside Isle along the lines of Balboa Island in Newport Beach, California,’ Mr Kwek said.

He also touted The Quayside Isle as ‘another golden opportunity not to be missed’ for those who want a piece of high-end, exclusive real estate.

The Quayside Isle’s three-storey commercial component will have 61,702 sq ft of gross floor area. The lower two floors will be for retail use while the top floor will be for small office, home office (Soho) units. The entire commercial component is likely to be held for rental income although CityDev officials did not discount the possibility of the group selling this portion en bloc to a single buyer if the price is right.

The Quayside Isle development can have a maximum gross floor area of about 718,588 sq ft. Based on this, the $255 million price that CityDev is paying for the site reflects a composite unit land price of $355 psf per plot ratio. This was slightly higher than the $343 psf ppr minimum reserve price that Sentosa Cove had set for the plot.

The hotel and commercial plots are mandatory components of the Quayside Collection sale. And while the condo plots are optional, their inclusion in the package has been seen as the sweetener to draw bidders to develop the hotel and commercial plots.

Sentosa Cove Pte Ltd chairman Jennie Chua said the decision to award the site to CityDev was based on a combination of creative concept and price. The expression of interest for the site attracted five bids in all. The other four bids are understood to have come from Pontiac Land, Far East Organization, Marriott, and Lippo. Interestingly, Lippo too had named Westin as the proposed operator of the hotel component.

Source : Business Times – 25 Jul 2006

‘Iconic’ homes cost more but make worthy buys

AS PRICES of recently launched luxury condos continue to go through the roof, home buyers may well ask: Is it worth paying so much for an ‘iconic’ property?

To some extent, property consultants say, such swanky projects do make better investments.

The premium commanded by an iconic development – which experts define as a prominent, stylish building with a unique design that stands out from its landscape – tends to last through the years and often helps the project better weather market storms.

Take one of Singapore’s better-known iconic condominiums, Wheelock Properties’ luxurious Ardmore Park, as an example.

During the 2001-03 property market decline, the average unit price for Ardmore Park proved more stable than that of a typical freehold condo in District 10, falling only 8 per cent versus an average drop of 12 per cent for comparable projects, according to figures from Knight Frank.

And when prices in District 10 recovered slightly – by about 3 per cent – in 2004, Ardmore Park prices rose about 8 per cent.

At its launch in mid-1996 when the private housing market was at its peak, Ardmore Park units were sold for historically high prices of between $1,600 and $2,000 per sq ft (psf). It still costs just above $5.2 million for a 2,885 sq ft apartment or $1,808 psf.

Mr Colin Tan, head of research at Chesterton International, said:

‘Certain developments will always cost more than their neighbours as people recognise the grandeur of their architecture.’

Added Mr Vincent Chong, associate director of residential sales at Colliers International: ‘It’s easier to market a popular iconic development everyone talks about than an unknown condominium in the same area.’

The theory holds for other iconic buildings too, such as SC Global’s exclusive Boulevard Residence (BLVD) at Cuscaden Walk, which was launched in January 2003 at an average of $1,500 psf but now exceeds $2,000 psf.

The project’s price increases have also been consistently higher than those of any other freehold condo in the same district. When prices in District 10 remained flat from 2004 to last year, BLVD prices rose 11 per cent from $1,559 psf to $1,728 psf.

Another SC Global project, the architectural award-winning The Ladyhill off Orange Grove Road, has seen its annual average unit price regularly beat the market even in a downturn – sliding by a mere 2 per cent as the market fell 12 per cent from 2000 to 2001.

But looks are not the only factor determining the success of an iconic development, said property consultants, who pointed to other important aspects as location and tenure. Projects in prime areas tend to command higher prices, as do freehold properties.

Ardmore Park, BLVD and The Ladyhill are freehold. For most 99-year leasehold projects, prices tend to fall as their leases run out.

Far East Organization’s leasehold The Bayshore in the East Coast area, for instance, now goes for an average of $479 psf, a far cry from the $800 psf it commanded at its launch in 1994 – despite winning the prestigious international FIABCI Prix d’Excellence Award in 1999 for design and construction excellence.

Knight Frank’s director of research and consultancy, Mr Nicholas Mak, said: ‘Design and exclusivity are important, but taken alone, they may not be able to prevent the property’s price from going against the market.’

Source : Sunday Times – 23 Jul 2006

How can I reduce number of fire insurance policies?

Q MY QUESTION relates to the insurance of private properties such as condominiums.

The management corporation (MC) is required by law to insure the property, excluding the interior of the individual units.

The bank that we obtained a mortgage loan from also requires us to buy fire insurance for structural damage to protect its interests.

We also buy fire insurance to protect the contents and the structure of the house. I find all this a complete waste of money.

Why can’t the insurance bought by the MC be used to protect the bank’s interests?

Is it some scheme by the banks and insurance companies to cream more money from the consumer?

Also, some banks ask for a ridiculous amount of insurance on a property.

What is the extent of the cover of the insurance purchased by the MC? If there is damage caused by a fire, is this insurance bought by the MC meant to restore the unit to its original condition -that is, its condition prior to any renovation being done after the unit was first purchased?

If so, and if we have not done any renovation to our home, does it mean that it is sufficient for us just to buy insurance for the house contents only?

A The MC’s fire policy covers the structure and the common property, and will pay for the reinstatement of the building structure and the common property after a fire.

Structure refers to the building. This includes the common areas, pillars, columns, party walls, windows, external doors, floors, ceiling and roof.

The MC’s policy will cover and restore the structure to its pre-fire condition. Improvements made by the home owner will not be covered.

There could be some overlap between the MC’s and the home owner’s fire insurance policies.

If there was no improvement to the unit, buying a house contents policy would be sufficient.

NTUC Income’s home insurance policy covers structure/building, renovation and contents against various perils.

It is possible for home owners to buy cover for house contents only. The premium for a $50,000 household contents cover is only $105 a year. There is a 15 per cent discount for a longer term cover of three years.

If the property has been renovated and substantially improved, it is prudent to purchase a policy to cover the renovation as well.

As a result of the renovation, there may be an increase in the value of the property as well as a higher amount of bank loan taken up by the home owner.

The home owner’s coverage should take that into account.

It is important for the bank, which is the mortgagee, to continue having good security after a fire. For this reason, the bank requires at least an insurance pay-out to reinstate the property to its pre-loss condition.

Freddy NeoGeneral ManagerNTUC Income

Q WHY must tenancy agreements be stamped?

As I understand it, a lot of people do not have it done. Does it mean that they run foul of the law? Does a stamped agreement become a more legitimate document before the court?

Or is it something we pay good money for nothing?

A Stamp duty is a tax imposed on documents or instruments, and such duty is imposed by a statute, the Stamp Duties Act (Chapter 312). By section 52 of the Act, an unstamped tenancy agreement would not be admissible as evidence in court.

An unstamped tenancy agreement is not void or ineffective; it is simply disregarded by the courts. Such an agreement may become admissible as evidence only on payment of the prescribed duty and penalty, which could be four times the amount of the original duty.

When you need it most, you will not be able to enforce the termsof the tenancy  agreement in court. There are also offences under the Act dealing with evasion and intent to evade duty.

In short, a prudent landlord would have the tenancy agreement stamped at the appropriate time and stay on the right side of the law.

Chew Mei ChooPartnerShook Lin & BokAdvice provided in this column is not meant as a substitute for comprehensive professional

Source : Sunday Times – 23 Jul 2006

CapitalMall Trust looks to buy more malls

CAPITAMALL Trust (CMT), which currently owns about 14 per cent of private retail property stock in Singapore, is gunning for a bigger share of 30 to 40 per cent. However, it did not give a timeframe for achieving this.

The trust owns nine malls here and is in the midst of acquiring 40 per cent of the Raffles City retail, office and hotel complex.

It yesterday posted a 26.2 per cent year-on-year increase in Q2 distributable income to $38.3 million, on the back of a one-third jump in gross revenue to $76.5 million, due largely to contribution from four new malls.

First-half distributable income rose 26.1 per cent to $75.85 million.

The latest Q2 performance was also 0.3 per cent better than the trust manager’s forecast in a circular last month.

CMT is paying distribution per unit of 2.77 cents for Q2, which works out to 11.11 cents on an annualised basis, reflecting a 5.1 per cent distribution yield based on CMT’s $2.19 closing price yesterday

‘Today, we are the most dominant player in the Singapore marketplace and I am not buying enough (malls). We have only 14 per cent stake of the total private retail stock in Singapore and, and there’s still scope for us to grow,’ CapitaMall Trust Management Ltd CEO Pua Seck Guan said yesterday.

When asked later about the target share he’s eyeing for CMT, Mr Pua said: ‘If you look at a successful dominant retail Reit operator in established overseas markets, its share could be anywhere from 30 to 40 per cent.’

With the Raffles City acquisition, CMT’s asset size will grow from $3.5 billion to $4.3 billion by next month, and it is on target to further increase this figure to $7 billion in Singapore by 2009.

The trust is preparing equity and debt raising to help fund its nearly $890 million share of the more than $2 billion joint acquisition of the Raffles City complex with CapitaCommercial Trust.

CMT will use debt to invest up to $100 million for a stake of up to 20 per cent in parent CapitaLand’s China retail Reit. The latter, which will own seven assets totalling more than $800 million, is slated for listing here by the year-end.

Asked about the impact of recent measures by the Chinese government to tighten property investment by overseas investors in China, Mr Pua, who is also CEO of CapitaLand Retail, said the measures are aimed at eliminating speculation and, in the process, will reduce competition for CapitaLand when buying China malls. In any case, CapitaLand has been complying with the rules in investing in retail malls in the country, he added.

Mr Pua also revealed that three malls owned by CapitaRetail Singapore – a private fund set up by CMT’s parent CapitaLand and in which CMT has a stake – are likely to be injected into CMT in the first half of next year. CMT has the right of first refusal to buy the three malls – Lot One in Choa Chu Kang, Bukit Panjang Plaza, and Rivervale Mall in Sengkang.

CMT also revealed it had been successful in securing an increase in Jurong Entertainment Centre’s plot ratio – which specifies the maximum gross floor area permitted to be developed on a site – from 1.85 to 3.0. Likewise, for Hougang Plaza, the plot ratio has been raised from 1.4 to 3.0. These pave the way for asset enhancement works.

Highlighting CMT’s track record since its listing in July 2002, Mr Pua said annualised distribution per share payouts to shareholders have grown nearly 64 per cent – from 6.78 cents in 2002 to 11.11 cents for this year.

Yield-accretive acquisitions accounted for 49 per cent of this growth, followed by asset enhancement/reconfiguration (22 per cent) and ‘active leasing’ efforts (19 per cent).

The trust is expected to invest capital expenditure including asset enhancement works of more than $160 million in total for this year and next year.

Source : Business Times – 22 Jul 2006

More big en bloc sites in wake of Gillman launch

Earlier this week, Gillman Heights made the headlines as the biggest collective sale site to hit the market. But an en bloc sale now in the works for another privatised HUDC estate – Farrer Court – could top that.

The Farrer Court site is expected to cost its potential developer nearly $1 billion in total. This comprises around $650 million payable to the owners, and a further $320 million or so payable to the state to tap a higher plot ratio and for topping up the site’s lease to 99 years.

Based on these figures, the unit land price for developers works out to slightly over $400 per square foot of potential gross floor area. The site, in District 10, is a stone’s throw from an upcoming MRT station under the Circle Line. The site can be redeveloped into a new condo with about 1,900 units averaging 1,200 sq ft.

The big question is whether developers will have appetite for such large sites given the huge outlay involved.

Gillman Heights, in the Depot and Alexandra roads area, was launched for tender this week and has a reserve price of $529 million. In addition, developers will have to pay the state a further sum of about $89.5 million to raise the plot ratio and top up the site’s lease to 99 years, bringing the total unit land price to $352 psf per plot ratio.

Farrer Court’s land area of 838,488 sq ft also pips Gillman’s, at 836,425 sq ft. Also, Farrer Court has a total of 618 units currently, again higher than Gillman’s 608.

But another collective sale in the works – at Pine Grove in the Ulu Pandan and Mt Sinai area – has an even bigger number of existing units at 660. The all-in price (including payments to the state) to deve lopers keen on the 893,178 sq ft leasehold site is said to be around $700 million, or about $380 psf per plot ratio.

Besides these privatised HUDC sites, there are biggish private condominiums, some of whose owners are looking at collective sales. These include Ridgewood (land area of about 672,000 sq ft) and Pandan Valley condo (417,000 sq ft), both near Pine Grove.

Other potential biggish en bloc sites could include Mandarin Gardens in the east coast (with a land area of slightly over a million sq ft) and The Waterside in Tanjong Rhu (706,000 sq ft).

‘Many of these private condos, as well as privatised HUDC estates, were developed in the 1980s, when it was fashionable to build big developments on huge sites,’ says DTZ Debenham Tie Leung’s director Tang Wei Leng. ‘Very often, the developers even introduced phases within the projects.’

She notes that some of the huge projects involved foreign funds from the Middle East and Japan, who did a few projects here before withdrawing from the local market. These days, foreign funds that have been investing in the Singapore residential sector include the likes of AIG and Lehman Brothers, of the US. The latter has teamed up with Chip Eng Seng to redevelop the Venus Mansion site in Cairnhill.

‘There are many other funds waiting to partner local developers. So there just may be takers for even the huge sites. It depends on whether the prices being sought by the owners make investment sense for the developers and funds, considering the risks they would be taking of parking huge sums in one site, in a single location,’ reckons Ms Tang, whose firm was appointed earlier this year to handle the collective sale of Pine Grove.

Property agents, too, have some serious reckoning to do in terms of deciding which jobs to pitch for when they are invited by sales committees of huge estates thinking of doing a collective sale.

Credo Real Estate, which clinched the job to market Farrer Court’s en bloc sale a few months ago, studied the matter from several angles. ‘We looked at the various privatised HUDC sites and picked Farrer Court. It’s in a prime district and one side faces Leedon Heights. And based on the prices we’re working on, the collective sale premiums for owners look attractive, at almost 100 per cent.

‘Most importantly, we spoke to potential bidders who said that in principle, they would be prepared to make the huge investment involved, possibly as part of a consortium, to reduce the risk,’ says Credo’s managing director Karamjit Singh. He declined to comment on Farrer Court’s reserve price. Farrer Court is zoned for residential use with a 2.8 plot ratio and a 36-storey height limit.

Source : Business Times – 21 Jul 2006

Cornwall Garden bungalow sold for $11m at auction

A GOOD Class Bungalow (GCB) at 27 Cornwall Garden which once belonged to one-time Alfa Romeo’s Singapore franchisee Kenneth Chow was sold for $11 million at an auction by Knight Frank yesterday.

The buyers are believed to be a prominent doctor couple who live in the same estate. The buyer, or buyers, bid through a nominee.

Knight Frank declined to confirm the identity of the buyer, or buyers.

Bidding for the freehold property began at $10 million. The $11 million sale price works out to nearly $396 psf of land area.

The property was sold by its mortgagee bank, which BT earlier reported to be Standard Chartered.

The mortgagor, Mr Chow, also goes by the name Wira Tjakrawinata. He ran foul of the Malaysian Securities Commission a few years ago in connection with a reverse takeover bid for Omega Holdings.

Two other GCBs – 15 Ford Avenue and 29-C Ridout Road – were withdrawn at yesterday’s auction. No 15 Ford Avenue, once occupied by a British couple until they died, was withdrawn at $9.4 million. Bidding for the property began at $8 million.

The third GCB, 29-C Ridout Road, was put up for sale by its owner, listed Fraser & Neave group.

Bidding started at $7.5 million and the property was withdrawn at $7.7 million. All three bungalows are freehold.

Knight Frank, however, was more successful with two other properties at the auction.

It sold a 334 sq ft shop unit at Orchard Plaza for $300,000 and a JTC workshop with office at 20 Sungei Kadut Avenue for $770,000.

Source : Business Times – 21 Jul 2006

K-Reit distributable income 17.5% higher than forecast

KEPPEL Land’s real estate investment trust, K-Reit Asia, announced its maiden financial results yesterday and its distributable income of $2.8 million was 17.5 per cent higher than its forecast.

K-Reit was listed on the Singapore Exchange on April 28 following a distribution in specie of units to KepLand shareholders.

Unitholders will be entitled to a distribution per unit (DPU) of 1.16 cents for the period from April 26 to June 30. The annualised DPU of 6.42 cents is 18 per cent above its forecast DPU of 5.43 cents for the period from Jan 1 to Dec 31, 2006.

The Reit manager, K-Reit Asia Management, attributed the performance to higher rental income from its property portfolio as a result of higher occupancy and achieved rental rates, as well as lower property expenses.

Net property income for the period came to $4.3 million.

In a statement yesterday, the Reit manager said: ‘With limited supply over the next few years and shrinkage in existing inventory, strong demand for prime office space has spilled over to the broader market.’

K-Reit has an initial portfolio worth $630.7 million which includes Keppel Towers, GE Tower, Bugis Junction Towers and 44 per cent of the strata area of Prudential Tower. Committed occupancy reached 98.4 per cent as at end-June, compared to 89 per cent as at Sept 30, 2005.

The Reit manager said that it hopes to benefit from the upward rental cycle as a total of 37.4 per cent of lettable area will be up for renewal in 2007 and 2008, with another 23.6 per cent due for renewal in 2009.

Source : Business Times – 21 Jul 2006

K-Reit distributable income 17.5% higher than forecast

KEPPEL Land’s real estate investment trust, K-Reit Asia, announced its maiden financial results yesterday and its distributable income of $2.8 million was 17.5 per cent higher than its forecast.

K-Reit was listed on the Singapore Exchange on April 28 following a distribution in specie of units to KepLand shareholders.

Unitholders will be entitled to a distribution per unit (DPU) of 1.16 cents for the period from April 26 to June 30. The annualised DPU of 6.42 cents is 18 per cent above its forecast DPU of 5.43 cents for the period from Jan 1 to Dec 31, 2006.

The Reit manager, K-Reit Asia Management, attributed the performance to higher rental income from its property portfolio as a result of higher occupancy and achieved rental rates, as well as lower property expenses.

Net property income for the period came to $4.3 million.

In a statement yesterday, the Reit manager said: ‘With limited supply over the next few years and shrinkage in existing inventory, strong demand for prime office space has spilled over to the broader market.’

K-Reit has an initial portfolio worth $630.7 million which includes Keppel Towers, GE Tower, Bugis Junction Towers and 44 per cent of the strata area of Prudential Tower. Committed occupancy reached 98.4 per cent as at end-June, compared to 89 per cent as at Sept 30, 2005.

The Reit manager said that it hopes to benefit from the upward rental cycle as a total of 37.4 per cent of lettable area will be up for renewal in 2007 and 2008, with another 23.6 per cent due for renewal in 2009.

Source : Business Times – 21 Jul 2006

Gillman Heights tender draws big players

THE long-awaited tender of Gillman Heights, a privatised HUDC estate in the Depot/Alexandra roads location, was finally launched yesterday.

Its marketing agent is pitching the massive site of 836,425 sq ft not only for residential redevelopment but also potentially for mixed development options, including serviced apartments, small office home office (Soho) and commercial components.

However, the latter options – which will involve a change of use for the site, which is zoned ‘residential’ – is subject to approval by the Urban Redevelopment Authority (URA).

The site is the biggest to be put up for collective sale yet and that pretty much restricts interest in the site to big developers with deep pockets given the huge outlay involved, say market watchers.

The launch of the tender for the site yesterday was attended by representatives from Frasers Centrepoint and MCL Land. Gillman Heights marketing agent NRA Real Estate says the likes of GuocoLand and Wheelock have also shown interest in the site.

The $529 million reserve price set by the owners works out to $352 psf of potential gross floor area inclusive of two payments developers will have to make to the state – an estimated $46.7 million development charge to maximise the site’s 2.1 plot ratio plus a land premium of about $42.8 million to top up the site’s lease to a fresh 99-year term from the remaining 78 years.

A new condo on the site would break even at about $600 psf, estimates a seasoned developer.

The site is zoned for residential use with a maximum height of 24 storeys. This is big enough for a new development with 1,464 units averaging 1,200 sq ft.

If developers get approval for a change of use involving commercial elements, the payment to the state would be higher although URA was not able to indicate by just how much since that would depend on the scheme the successful bidder has in mind.

Market watchers note that the $352 psf per plot ratio based on Gillman Heights’ $529 million reserve price and assuming a residential development scheme, is similar to the $350 psf ppr that CapitaLand and Lippo paid for a 99-year leasehold condo site next to Redhill MRT Station at a state tender which closed in November last year. The tender for Gillman Heights closes on Aug 31. Gillman Heights was completed 21 years ago and comprises 607 apartments and maisonettes plus one shop unit.

Based on the $529 million reserve price for Gillman Heights’ collective sale, existing owners stand to receive about $850,000 per apartment and around $900,000 per maisonette. These sums are about 60 to 70 per cent more than if the units were sold individually.

Source : Business Times – 20 Jul 2006

Former Ponggol Marina and Ubin resort up for tender at $20m

MARINA Country Club – once known as Ponggol Marina – and a 106-room resort on Pulau Ubin have been put up for sale by tender.

The owners Marina Country Club, the former PM Marina Holdings, hope to get about $20 million for the two facilities, which sit on a combined area of 9.7ha.

Mr Lim Kien Kim of marketing agent Knight Frank said potential buyers could be existing clubs without marina facilities, those keen to run a holistic entertainment centre or investors. They can buy the marina and resort separately or as a package.

The marina has endured a rocky few years. It had been developed at a cost of about $100 million in 1997 by a small group of investors, but was then swamped by financial woes.

PM Marina bought it for $10.8 million in 2003. At the time it was burdened by debts of $18 million and offloaded by its chief creditor First Commercial Bank.

The firm relaunched the 275-berth facility later that year, slashing the one-time membership fee from the $30,000 charged in the late 1990s to just $1,500.

Then, early last year, it did away with the membership system entirely to lure more users.

‘We changed the whole format then because there was no critical mass,’ said Mr Eric Low, the marina’s adviser and former chief executive yesterday.

He said $1.4 million was spent to refund people who had joined the club after its relaunch.

Facilities were then rented out and services outsourced.

‘My concept is like a kopitiam,’ said Mr Low. ‘It’s a profitable operation but if there are people who can run it better, why not?’

The marina, which has 18 years left on its lease, was opened to the public on a pay-as-you-use system.

The company Marina Country Club struck another deal in 2003. It bought Ubin Lagoon Resort for $8.5 million. The resort, renamed Marina Country Club Pulau Ubin Resort, has a remaining lease of about six years.

Documents for the tender, which open today, show that the marina and resort have a steady rental income of about $127,000 a month. A company search showed that the firm Marina Country Club has three directors and counts as its shareholders K Box KTV, Marina Investment Holdings and Mr Quek Ngak Yeong.

Ms Fion Phua of club membership broker Tee-Up Marketing Enterprises said a club needs to be exclusive in order to be sustainable.

‘Nowadays, every condo has a pool and gym. There is no reason to go to a club unless it has unique facilities such as golf courses, a marina or stables,’ she said.

The tender closes on Sept 20.

Source : Straits Times – 20 Jul 2006