Gearing improves as developers pare borrowings, increase cash held from divestments

Developers have entered the latest slump in much better shape than they were in during the last property downturn in 2001, a comparison of their cash positions and debt-to-equity ratios then and now shows.

In fact, between the second and third quarters this year, some developers worked to better their gearing ratios. ‘Among the larger-cap developers we track, most reported stronger balance sheets at end-Q3 2008,’ said OCBC Investment Research analyst Foo Sze Ming.

‘On average, the net debt-equity ratio had come down from 0.52 times in Q2 to 0.49 times in Q3. And the improvement was generally attributable to a stronger equity base, paring of borrowings and an increase in cash held from divestments.’

CapitaLand, City Developments and GuocoLand all cut their debt-to-equity ratios in Q3, OCBC’s data shows.

The same trend holds true when comparing developers’ financial positions at end-2001 and Q3 2008. Data gathered by DMG & Partners on selected developers shows most companies now have smaller debt-to- equity ratios. They also have more cash on hand. ‘They are definitely stronger this time around,’ said DMG & Partners analyst Brandon Lee.

Singapore’s big three listed developers - CapitaLand, City Developments and Keppel Land - exemplify this trend. At end-2001, CapitaLand had $1.9 billion of cash and a gearing of 0.87 times. Now, it has a whopping $4.2 billion in cash and a gearing ratio of 0.51 times. Similarly, City- Dev has increased its cash holding from $701.8 million to $813.3 million and cut its gearing from 0.8 times to 0.46 times. KepLand has also increased its cash holding, from $120.9 million to $663.4 million, and cut its gearing from 1.33 times to 0.54 times.

Property companies are expected to continue to try to improve their cash balances and reduce gearing over the next few quarters. SC Global Developments, for example, recently drew $100 million from reserve facilities to boost cash on hand. But the pace of divestment is expected to slow as buyers get cold feet in the poor economic climate.

Analysts reckon things do not look as bad as feared for developers for another reason - in the Q3 earnings reporting season, much- feared provisions for landbanks acquired at high prices, which analysts had predicted, did not materialise.

Analysts have changed their tune and now expect developers to make provisions only in the second half of 2009, or even later. Some also reckon the provisions could be less than what the market has already priced in.

In 2001 and 2002, several developers, including CapitaLand, CityDev and Keppel Land, made massive write-downs on their Singapore residential landbanks, which hit their results badly. But this time around, the write-offs may be smaller, some analysts say.

Keppel Land was one of the first developers to make provisions in 2001, announcing $455 million of write-downs in the value of its residential landbank in November that year.

But the risk of a landbank write-down in the current downturn is lower for KepLand because the company did not buy any land in Singapore last year and its current landbank is carried in its books at relatively low cost, said OCBC’s Mr Foo.

CIMB analyst Donald Chua said: ‘We are not seeing provisions yet because prices have not fallen that much yet. Developers are probably waiting to see how the market pans out next year.’ In light of this, provisions are unlikely for Q4 unless things take a turn for the worse, Mr Chua said.

In the 2000-2003 property downturn, the residential price index for private homes recorded a quarter-on-quarter drop in Q3 2000. However, the provisions and write-offs only came towards the end of 2001. This time around, the quarter-on-quarter dip in the price index appeared only in Q3 2008, so provisions are only expected around end-2009.

Downward revaluations of investment properties are still expected in Q4 2008 when developers do their yearly valuations. And for many developers, landbank write-downs will definitely take place at some point in time if ‘things keep going this way’, an analyst said.

Source : Business Times - 4 Dec 2008

Proposed A$117.5m investments part of move to become a property player

AS PART of its bid to reposition itself as a pan-Asian property player, consumer electronics distributor Thakral Corporation has signed a memorandum of understanding (MOU) with an Australian developer for investments totalling up to A$117.5 million (S$115 million).

The proposed transactions with Australian-listed Payce Consolidated came after Hong Leong Asia (HLA) failed in its bid against the MOU. Board representatives from HLA’s indirect subsidiaries had opposed the MOU resolution but were outvoted.

Of the proposed investments of up to A$117.5 million, some 13 per cent or A$15.73 million will be funded in cash; 63 per cent or A$73.55 million in debt; and 24 per cent or A$28.22 million through the issuance of new shares and share options to Payce, possibly making it a strategic shareholder.

Of three proposed transactions, the first involves Thakral acquiring a A$32.5 million warehouse from Payce. The Bay Park property, with a remaining tenure of seven years, is currently leased out on a net lease rental of A$2.12 million per year.

The purchase will be 60 per cent funded by borrowings but Thakral expects Bay Park to be yield-accretive after servicing the debt. There is also redevelopment potential when the lease expires.

Under the second proposed deal, Thakral will invest A$77 million in property-linked notes with a special purpose vehicle owned by Payce. The notes are structured upon 179 completed residential units in Sydney, which will be sold over the next four to five years.

From the notes, Thakral will receive a running yield and deferred interest calculated based on sales revenue received.

As for the third proposed transaction, Thakral will obtain from Payce an option and a last right of refusal to jointly develop a residential site in Sydney. Thakral will have the right to purchase up to 49.99 per cent of the underlying economic interest for a maximum price of A$8 million.

In all, Thakral could be issuing shares and options to Payce at an issue price of S$0.002 above its net tangible assets as of Oct 31, after allowing for all reasonable provisions. Assuming that new shares are issued at S$0.085 and no options are exercised, Payce could gain an 11.3 per cent stake in Thakral.

Thakral said that this would help it gain a ’strategic shareholder with property expertise’ to help it become ‘a pan-Asia property vehicle’.

The execution of the MOU is subject to several conditions. For instance, Thakral has to first obtain shareholder approval to move away from its core business of consumer electronics distribution. Until definitive agreements have been reached, ‘there is no assurance that any of the transactions contemplated in the MOU will be completed,’ said Thakral. Shareholders ‘are advised to exercise caution in their dealings in the shares of the company’.

Payce is a property investment and development firm that is 14.99 per cent owned by Babcock & Brown. Babcock has a stake of about 8.9 per cent in Thakral.

Source : Business Times - 4 Dec 2008

Citigroup fired most employees at its real estate investment banking team in Asia after slumping property prices stifled share sales and acquisitions in the industry, three people familiar with the matter told Bloomberg News.

The New York-based bank dismissed at least five people two weeks ago, the people said, declining to be identified because they aren’t authorised to discuss the matter publicly. Departures included Edmund Ho, a managing director who headed the team, and Director Edward Yeh, they said.

On the local front, Citi Singapore clarified that real estate investment banking is carried out by the local investment banking and corporate banking arms, which are separate from the company’s real estate investment banking division based in Hong Kong.

“In Singapore, we maintain active real estate coverage teams through our local investment banking and corporate banking teams that continue to work closely with our clients in the real estate sector,” said Mr Adam Rahman, director of Citi Singapore corporate affairs.

“We have a long-term partnership and relationship with all of our real estate clients in Singapore and remain committed to serving their financial needs.”

Citi, however, declined to reveal the number of employed real estate staff in Singapore.

Citigroup, which in November embarked on a plan to shed 52,000 jobs worldwide, will serve property clients through its country and corporate bankers after closing down Ho’s team, the people said.

Singapore, Hong Kong and China accounted for most of Citigroup’s real estate investment banking transactions in Asia excluding Japan in the past two years, according to data compiled by Bloomberg.

Source : Today - 4 Dec 2008

RECLAIMED land in Singapore will soon be made available to industrial companies much more quickly and cheaply.

This is thanks to a joint initiative of the Singapore Land Authority (SLA) and industrial landlord JTC Corp to streamline the building of shore protection.

Cutting edge analysis of wave erosion patterns will mean up to $16 million in savings for every kilometre of reclaimed shoreline. The wait for the land could be cut by up to eight months.

Currently, rock embankments costing $12.5 million per km are erected on the shoreline of newly-reclaimed land to prevent soil erosion, SLA said.

But once this land is leased to industrial tenants, they often need to spend about $5 million to tear down the embankment and erect shore protection to suit their operational needs. This is a time-consuming, costly process.

Under the SLA-JTC initiative, the impact of waves on different stretches of the coastline and reclaimed land will be analysed scientifically.

Engineers will then determine the appropriate level of shoreline protection to be put in place for three months until an industrial lessee takes over the land.

The cost of putting in and removing the new shore protection is only about 10 per cent of the one-size-fits-all rock embankment used previously.

Said SLA’s assistant chief executive, Mr Simon Ong: ‘This pro-enterprise initiative helps to attract investors to develop land in Singapore and enhances the economy’s competitiveness.’

SLA is the gatekeeper for all land reclamation projects in Singapore.

The first test case for the new approach is the reclamation that has been done for a mega shipyard in Tuas.

For every kilometre of shoreline of land reclaimed under the new approach for the shipyard, the Government saved five months in construction time and about $11.25 million in costs. The shipyard owner saved nearly three months in construction time and about $4.5 million.

‘Time is money to investors and timely availability of the land for development will affect the investors’ decision of whether or not to establish in Singapore,’ said Mr Ong.

As land is scarce here, many parts of Singapore’s waterfront are being reclaimed for residential, commercial, recreational and industrial purposes.

JTC reclaims land for industrial purposes and then leases it to industrial firms. Waterfront industrial sites, for example, are highly sought after by shipbuilding and marine-related industries.

Mr Ong Geok Soo, JTC’s assistant chief executive, said: ‘At the operational level, this new procedure allows our customers to occupy the reclaimed land quickly to catch their business cycle once the land is formed without having to wait for shore protection works to be completed.’ He said when investors are building a plant, JTC does shore protection work, which cuts the handover time.

There are no updated figures on the extent of land reclamation here.

A 2006 article in The Straits Times stated that Singapore’s land area had grown about 17 per cent from 581.5 sq km in 1960. It said by 2030, another 50 sq km is set to be added - so the island will have expanded by a quarter altogether.

Source : Straits Times - 4 Dec 2008

Going by past recessions, it could take nine more months before prices fall

FOR first-time flat seekers like Mr Neo Tze Siang, the economic downturn was meant to provide some respite from HDB prices pushed skyhigh by the property boom last year.

But despite the raft of job cuts and the gloomy economic forecasts trotted out, HDB prices are showing few signs of sliding.

“We hear about private property prices falling substantially but the current prices of new HDB flats do not seem to reflect the market realities. When the tide goes down, you would expect all ships to move down. But it seems that new HDB flats are not part of the ocean,” lamented Mr Neo, a 28-year-old salesman.

According to industry players, the wait could be at least another nine months - if prices do come down at all - no thanks to the slew of foreigners and private property downgraders eyeing the HDB rental and resale markets respectively, which indirectly pushes up the prices of new HDB flats.

Said Dennis Wee Group director Chris Koh: “Whenever you have a recession, the first to be hit would be the private property market. So, a lot of people will start downgrading from private homes to HDB flats.”

HDB’s “market-based” pricing approach for new flats takes into account several factors, including a project’s location, its individual attributes and the prevailing market conditions. The new flats are sold according to the prices they would fetch on the resale market minus the Government’s subsidy.

And in the first nine months of the year, HDB’s resale price index rose 12.4 per cent, rising by 4.2 per cent in the third quarter.

While HDB resale prices are expected to stabilise in the year ahead, the recession has yet to hit the man-in-the-street, said Mr Koh. A case in point: The latest Built-To-Order project Punggol Arcadia was more than three times oversubscribed, despite having five-room flats going for as much as $356,000 to $416,000.

Still, ERA Asia-Pacific’s assistant vice-president Eugene Lim noticed in recent weeks that prospective home buyers are now trying to get more bang for their buck. Said Mr Lim: “If your house is not near an MRT station, people are offering you prices that match the valuation or even lower.”

National Development Minister Mah Bow Tan explained in 2002 that prices of new HDB flats rise and fall more slowly than do resale flat prices. This was necessary to maintain a stable property market and protect the value of the flats, the minister said.

Prior to last year’s property bull-run, which saw HDB’s resale price index matching its previous peak of 1996, resale flat prices fell by 30 per cent in the aftermath of the 1997 Asian financial crisis. But prices for new flats dropped just 10 to 15 per cent.

Some market experts believe it could be the same story this time round - with prices of new flats in the outlying areas expected to fall faster.

But Mr Lim, for one, doubted that prices of new HDB flats would fall at all, given the perpetually high demand for housing here.

Reiterating how HDB “followed the market and moved prices downwards” in the aftermath of the Asian financial crisis a decade ago, a HDB spokesperson reiterated that the Government “remains committed to ensure that HDB flats are affordable to the vast majority of our citizen families, especially young married couples and the lower-income households”.

Still, in view of the current economic climate, the spokesperson advised flat seekers to “buy a flat within their means, bearing in mind how their future earnings may be impacted”.

The spokesperson added: “Given the current economic climate … They may have to start off with something more modest in size or less than ideal in location if prudence calls.”

Source : Today - 4 Dec 2008

MND: Move made to relieve overcrowding from housing shortage

THE Ministry of National Development has announced that 10 new sites will be made available to build temporary foreign worker dormitories.

They comprise three vacant state properties and seven vacant state lands, which could yield around 20,000 bed spaces. The sites are not within close vicinity of public housing.

The dormitories are part of a government effort to provide proper housing for foreign workers while more purpose-built dormitories come on stream over the next few years. The move will help to relieve the current overcrowding in residential premises arising from a shortage of foreign worker accommodation, which could pose public health and fire safety risks.

The vacant state properties are: the former Queenstown polyclinic building, the former CAAS office, and the existing CPG Corporation Airport Development Division. The seven vacant state lands are at Mandai Road, Old Chua Kang Road, Hougang Avenue 3, Seletar West Farmway, Jurong Road Parcel 1, Jurong Road Parcel 2 and Kim Chuan Road. The dormitories on the Queenstown and former CAAS premises will be operational in 3-6 months.

There has been an influx of foreign workers involved in building important infrastructural projects. National Development Minister Mah Bow Tan, referring to the burgeoning foreign worker population here, has said before that Singaporeans must ‘be prepared to see them (foreign workers) and share with them our common spaces’.

Meanwhile, MND has consulted the respective advisers and grassroots organisations on each of the temporary dormitory sites over the past two months, and will implement measures to address any issue arising from the dormitory developments.

Furthermore, the Singapore Police Force will adopt the necessary measures to prevent and detect crimes in the neighbourhood. It will also work with community stakeholders to initiate safety and security projects where appropriate.

Source : Business Times - 4 Dec 2008

Ten sites are identified, but most of them are in remote areas

THE authorities have identified 10 more sites for temporary foreign worker dormitories, with the Queenstown Polyclinic site in Margaret Drive being the closest to residential areas.

The building is across the road from three blocks of HDB flats, a hawker centre and the Queenstown library.

Once it begins operating, in three to six months’ time, the dormitory will hold 150 construction workers. The Ministry of National Development (MND) said the site was chosen for its smaller capacity and its proximity to Dover Crescent, where the workers will be building a public housing project.

This site is one of three state properties that will be converted into temporary dormitories.

The remaining seven sites are on vacant state land and will be released for tender as demand develops in the future.

The 10 sites will hold up to 20,000 foreign workers and tenures will range from three to six years.

The majority of the sites are in remote areas like Mandai, Seletar West and Choa Chu Kang, which house industrial estates, farms and army camps.

Three sites, two of which are situated in Changi and a third in Hougang Avenue 3, are near residential areas but are at least a 10-minute walk away.

The MND said various measures will be put in place to minimise disruption caused by the new dormitories. For example, dormitories must have adequate facilities on site so that workers will not have to leave the premises.

A liaison officer will be required as a contact point for grassroots organisations and workers will be educated on the social norms and laws of Singapore.

This announcement comes months after news of a planned foreign worker dormitory in Serangoon Gardens caused an uproar among residents.

Grassroots leaders were consulted over the last two months regarding each new site and the leaders understood the need for new foreign worker housing, said the MND.

Margaret Drive residents who spoke to The Straits Times said that they are not overly concerned about having foreign workers in the neighbourhood, as long as they do not cause trouble.

Many also pointed out that they will be leaving the area soon as the blocks of flats opposite the polyclinic are being demolished over the next two years.

Madam Tan Gek Ling, 70, who has lived in Margaret Drive for 48 years, said she is already used to the sight of foreign workers gathering on the void deck.

‘They tend to leave their rubbish behind but they don’t cause any trouble,’ said the housewife.

Besides, she added, she will be moving out of her flat within two years.

However, some residents are concerned about their safety.

Madam Sim Bee Huay, 39, the mother of two primary school children, said the neighbourhood might not be as safe or as quiet.

The area’s MP Baey Yam Keng acknowledged that this is a concern among residents. ‘The police are well aware of this and there are plans to step up patrols. We also plan to increase the lighting in certain areas,’ he said.

Mr Baey said that the workers would be Chinese nationals and able to communicate with the mainly Mandarin- or dialect-speaking residents in the area.

Mr Kenneth Loo, the general manager of Straits Construction, which is building the Dover Crescent project, said it will help to have the workers close by.

The MND said the 10 sites will help meet Singapore’s construction needs over the next five to six years.

Contractors and dormitory operators believe that they will ease the shortage of space for such housing.

Mr Simon Lee, the executive director of the Singapore Contractors Association, said that as the sites are offered by the authorities, workers are guaranteed a better standard of housing.

‘This will help in addressing the welfare of the foreign workers,’ he said.

Sites best placed to house workers

IN IDENTIFYING sites for foreign worker dormitories, factors such as site availability and technical feasibility are considered, said a National Development Ministry spokesman.

The sites are also generally spacious and allow for amenities to be included for the workers, he added.

The 10 new sites for the development of temporary foreign worker dormitories are:

1. The former Queenstown Polyclinic building at Margaret Drive. It can house 150 workers.

2. The former Civil Aviation Authority of Singapore office at Upper Changi Road North. It can house 150 workers.

3. The existing CPG Corporation Airport Development Division at Upper Changi Road North. It can house 800 workers.

4. A site near the junction of Mandai Road and Mandai Link. It can house 2,000 workers.

5. A site near Old Choa Chu Kang Road, close to the junction of Jalan Lekar and Jalan Tapisan. It can house 2,400 workers.

6. A site along Hougang Avenue 3, near the Singapore Girls’ Home. It can house 3,000 workers.

7. A site along Kim Chuan Road, near Kim Chuan Depot. It can house 3,000 workers.

8. A site along Seletar West Farmway 6. It can house 3,000 workers.

9. A site along Jurong Road, near Track 22. It can house 2,300 workers.

10. A site along Jurong Road, near Track 18. It can house 2,300 workers.

Source : Straits Times - 4 Dec 2008

Residents react, as 10 new sites for temporary housing unveiled

AS THE Government unveiled 10 more sites for temporary foreign worker accommodation, some lessons appear to have hit home for residents, their representatives and policymakers alike from the Serangoon Gardens episode two months ago.

In the Serangoon Gardens case, homeowners tipped off before any official announcement had opposed the idea of housing workers in their estate, complaining of a lack of consultation and a possible spike in crime rates and congestion.

This time round, the Ministry of National Development (MND) said it had spent the past two months consulting with grassroots leaders and advisers to identify and manage concerns.

Measures to “minimise disamenities” will be put in place. For instance, developers will have to ensure there are adequate facilities set up, and a worker in each dorm will be appointed as a liaison officer for grassroots groups in the area.

Only two of the 10 sites named yesterday are near residential areas the former Queenstown Polyclinic on Margaret Drive, and an empty plot close to Tai Keng Gardens along Hougang Avenue 3. The other sites are near industrial areas.

Ten Queenstown residents told Today they had not known of the plans, but only one objected.

Member of Parliament Baey Yam Keng said residents were not consulted beforehand as “the lesson learnt from the Serangoon Gardens episode is that the news was leaked out prematurely” and it had led to misunderstanding among the residents.

“This time, we made sure there is a proper study and engagement of grassroots leaders and the MP, and now also the residents,” he said.

The former polyclinic will be turned into a temporary dorm for some 150 construction workers in three to six months’ time.

Mdm Tan Gek Ling, 70, a retiree who lives in the HDB block opposite the vacant building, said “No one asked for my opinion. But it is okay, the workers are here to work and anyway, we will move out after two years because of en-bloc redevelopment.”

Mr Goh Seng Theng, 67, a bus-driver, said “Some of the shophouses below my block rent the space to foreign workers. The workers have been fine and didn’t create any trouble. With 150 more of them here, though, it’s hard to say.”

Mr Farah Fadil, 21, was less sanguine. “I will feel unsafe because they may get drunk at the void decks and make noise,” said the barista. “There are many children in Queenstown. What if the foreign workers create trouble with them?”

To gather such feedback, Mr Baey will visit one of the blocks near the dormitory on Friday.

“We will also be having a dialogue session on Dec 20 and it will most likely focus on this issue,” said the MP, who has held three discussions with the authorities and two with community leaders over the past two months.

Plans to ensure residents’ lives aren’t affected

Over at Hougang Avenue 3, the piece of vacant state land will be put up for tender, in tandem with demand for dormitories over the next few years.

Grassroots leader Eric Wong said some residents were “naturally concerned” about issues like security. But most were comfortable with the idea after community leaders explained the safeguards to be taken, he added.

Indeed, most residents at Tai Keng Gardens that Today spoke to said they were not worried.

Mrs Cindy Ho, a clerk in her 50s, said “It will be more than 500m away. And the dormitory will be separated from our estate by a thick forest, so I don’t think it will pose any real problems for us here.”

Mr Lim Kee Chye, 60, said “As long as the measures are implemented and things are kept under control, I don’t see any issue with having a dormitory nearby. If things are managed properly, such as having a dorm curfew, there shouldn’t be many incidents of littering or disorderly behaviour.”

Member of Parliament Dr Fatimah Lateef, who oversees the area, said she had visited the site several times with key community leaders to spot potential concerns.

They also held dialogue sessions with MND to come up with solutions, such as security and traffic arrangements.

“We have very detailed plans on how to make sure the dormitory will not affect the lives of our residents,” she told Today.

“We discussed things like curfews, where the workers’ transportation will come in and other issues.”

But, she conceded, it was “not possible to please everyone and there are bound to be some complaints”. They would monitor the situation “very closely” after the dorms are set up, and work with the authorities to address any issues that crop up, she added.

Source : Today - 4 Dec 2008

Building sector, the biggest driver of China’s growth, employs 77m people

House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 per cent in October after rising 32.5 per cent a year earlier, according to Macquarie Securities Ltd. That’s squeezing an economy already slowed by recessions in the US, Japan and Europe that have cut demand for exports. Building is the biggest driver of China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said ‘forceful’ measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 per cent of global growth Merrill Lynch forecasts for next year, further slowing the world economy.

‘China is now at the heart of the global slowdown,’ said Jim Walker, chief economist at Asianomics Ltd, an economic advisory firm in Hong Kong. ‘It means that global growth is probably going to be dragged down close to zero next year.’ Mr Walker, voted best regional economist in an Asiamoney magazine brokers’ poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 per cent next year, with a 30 per cent chance of a contraction.

In 2005, China vaulted past the UK to become the world’s fourth-largest economy, after expansion averaged 9.9 per cent annually for the previous 30 years. GDP has increased 69-fold since Deng Xiaoping began free market changes in 1978. China accounted for 27 per cent of global growth last year.

‘The real estate sector has seen a particularly pronounced slowdown,’ said Louis Kuijs, a senior economist at the World Bank in Beijing. ‘Real estate investment growth is now close to zero.’ China’s export orders and output shrank in November by the most since records began as the global financial crisis sapped demand for the nation’s toys, textiles and computers.

Exports and property together have contributed about half of the expansion in China’s GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley’s chief Asia economist.

‘That growth is gone,’ he said. ‘Can the government make it up with something else? It’s going to be tough.’

Merrill’s forecast of 1.5 per cent global growth next year is based on an 8.6 per cent expansion in China. The prediction on Nov 21 came 12 days after China announced a 4 trillion yuan (S$888.6 billion) stimulus plan, mostly for public works projects.

The government is trying to limit fallout from the slowdown for fear that rising unemployment may lead to social unrest. Police and security guards last week attempted to break up protests by fired workers in Guangdong province.

A second stimulus package to boost consumption may be imminent, the Beijing-based Economic Observer reported on Nov 24. Measures being considered include raising income-tax thresholds, higher salaries for state workers and increased subsidies for low-income groups, the newspaper said, citing people involved in discussion of the plan.

Shanghai house prices fell 19.5 per cent in the third quarter from the previous three months, according to real estate broker Savills. Declines in apartment values are accelerating in Shenzhen and Guangzhou, two of the fastest growing cities in Guangdong province, which produces 30 per cent of China’s exports.

Construction will contract 30 per cent next year after expanding 9 per cent in the first three quarters of 2008, according to Macquarie Securities.

‘The global financial crisis won’t get China to zero per cent growth and neither will recession in developed economies,’ said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. ‘If there’s a collapse in the property market that might do the job.’

Source : Business Times - 3 Dec 2008

Southeast Asia’s largest developer, CapitaLand, said on Wednesday it will cut staff pay between 3 to 20 per cent in light of a slowing domestic economy.

CapitaLand said in a statement that the firm-wide measures will affect mostly management and executive level employees, with its chief executive, Liew Mun Leong, bearing the maximum cut of 20 per cent.

The cuts will take effect in January 2009.

‘We felt that the proactive measures demonstrate the Group’s disciplined capital management and prudence during these global financial and economic uncertainties,’ Mr Liew said.

Some Singapore firms have started laying off staff and cutting salaries in light of the tough economic conditions.

State investor Temasek Holdings said last month it will cut staff pay between 15 to 25 per cent while DBS Group and Neptune Orient Lines said they will be cutting jobs.

Source : Business Times - 3 Dec 2008

Property developer CapitaLand said on Tuesday it will not be laying off staff for now.

Instead, executive-level staff will take pay cuts of between three and 20 per cent as part of the company’s cost management measures.

In a statement, CapitaLand said the cuts are due to the deteriorating global financial environment and economic uncertainties.

President and CEO Liew Mun Leong will bear the maximum salary reduction of 20 per cent.

According to CapitaLand’s annual report, Mr Liew earned S$1.15 million in base salary in 2007, and was paid S$5.35 million in bonuses.

All salary reductions will take effect in January 2009.

CapitaLand said the salary reduction exercise is one of several cost management measures it has taken.

In the last crisis from 2001 to 2003, CapitaLand had also implemented a salary freeze for management and staff.

Management subsequently took a significant pay cut when the recessionary environment persisted.

Despite the latest pay cuts, CapitaLand said it will continue its training and development efforts and review its business operations for future growth opportunities.

Source : Channel NewsAsia - 3 Dec 2008

THE former Seh Chuan High School has received healthy responses under the Ideas Tender Scheme by Singapore Land Authority (SLA).

Teo Cher Hian, SLA’s director of land operations (private), said yesterday: ‘The response to this property was encouraging. From our experience, we note that those in the education business take a longer-term view and react less to short-term fluctuations. This market sector has remained active with strong bids.’

The highest bid of $90,058 came from Dimensions Commercial School. Other bidders were existing SLA tenants such as Etonhouse International Holdings and Chatsworth International School.

Mr Teo added: ‘We believe that school operations are likely to take up new premises either for expansion or new operations in anticipation of demand when the economy improves.’

The site has a gross floor area of 4,222 sq metres and will be used for educational purposes. It was offered for use as a commercial or foreign system school in October, on a three-year tenancy with an option to renew.

The Ideas Tender Scheme was launched in 2005, and aims to recognise and encourage businessmen and entrepreneurs to pursue innovative ideas on the use of state properties. Between January and October this year, SLA has awarded 11 properties with education as one of the approved uses up about 50 per cent from the year-ago period.

The former Mee Toh School opens for tender under the Ideas Tender Scheme today.

Source : Business Times - 3 Dec 2008

KOH Brothers Group’s order book has climbed to $549.7 million after it clinched a major contract, the company’s chief executive Francis Koh said yesterday.

The company, with French joint-venture partner Soletanche Bachy, recently won a $582 million deal from the Land Transport Authority (LTA) to build the Downtown Line’s Bugis interchange station and associated tunnels.

Koh Brothers owns 45 per cent of the JV and Soletanche Bachy the other 55 per cent. Construction is scheduled to begin in the first quarter of 2009 and is expected to be completed in 2013.

It is the single largest contract ever won by Koh Brothers.

It is also the single biggest contract awarded so far for the $12 billion Downtown Line, which will open in stages between 2013 and 2016.

Koh Brothers’ current projects include the $166.9 million Common Services Tunnel at Marina Bay. It also completed work on the $226 million Marina Barrage in October.

The latest contract is not expected to have a material impact on the group’s performance for the financial year ending Dec 31, 2008.

‘We are confident our reputation and proven expertise will serve us well as we continue to bid for projects of higher value and deliver quality services,’ Mr Koh said.

The proposed tunnel under the latest contract runs under Rochor Road from Beach Road to Queens Street, crossing four road junctions.

Koh Brothers aims to minimise inconvenience to vehicular and pedestrian traffic during construction.

Koh Brothers stock shed half a cent yesterday to close at 9 cents.

Source : Business Times - 3 Dec 2008

As long as the banking systems of the major economies don’t freeze up, China will resume growth, writes Minister Mentor Lee Kuan Yew

AFTER the dramatic drops in the New York Stock Exchange following the collapse of Lehman Brothers, stock markets and property values in eastern Asia declined significantly. China’s Shanghai index has fallen about 70 per cent this year. Property prices have also dropped, varying in levels among different cities. Visiting Beijing and Shanghai in late October, I found political leaders and businessmen were apprehensive about the coal and iron ore stocks piling up at their wharves as export demands fell.

Asian banks have not been snagged by dealing in securitised derivatives they didn’t understand. Their bankers learnt their lessons from the 1997 Asian financial crisis. The fundamentals of eastern Asia’s economies are sound. With the exception of South Korea, eastern Asia’s central banks have substantial foreign currency reserves, limited leverage and low indebtedness, so their governments have the flexibility to use fiscal policies to promote growth and recovery.

China has the largest reserves, with about US$2 trillion - US$500 billion in US Treasuries and US$1.3 trillion invested in US assets. Interbank lending in China continues. However, China’s banks have become cautious and lend only to high-quality companies.

As long as the banking systems of the major economies don’t freeze up, eastern Asia, led by China, will resume growth earlier than other regions. On Nov 6, the International Monetary Fund (IMF) forecast China’s growth at 9.7 per cent for 2008 and 8.5 per cent for 2009 (down from 11.9 per cent in 2007), and India’s at 7.8 per cent and 6.3 per cent, respectively. Both nations’ fundamental growth drivers are increasing labour productivity, urbanisation and the growth of capital stock. The IMF’s forecasts for developing Asian countries in 2008 and 2009 are 8.3 per cent and 7.1 per cent.

China’s inland provinces need infrastructure, and Beijing has announced a stimulus package of four trillion yuan (S$884.4 billion) by 2010. China is extending its railway network, rebuilding earthquake-damaged areas in Sichuan, increasing export tax rebates, lending more to small and medium-size enterprises and spending more on social welfare systems. To revive the housing market, it is reducing taxes on housing transactions and unwinding property-tightening measures introduced earlier to counter speculation. For first-time home buyers, the minimum down payment has been reduced from 30 per cent to 20 per cent, and banks are allowed to offer interest rates as low as 70 per cent of the standard lending rates for such mortgages. The demand for residential housing remains strong, and China’s construction companies are capable of meeting it.

Personal consumption in China should be encouraged; it is only 35 per cent of gross domestic product (GDP), compared with America’s 70 per cent. Beijing is introducing rural land reforms, increasing government funding for low-price housing and basic medical services, and reducing interest rates in order to boost domestic consumption. China is determined to grow by at least 8 per cent, to create enough jobs to sidestep large-scale unemployment and social unrest.

Shanghai and Guangdong, two major exporting provinces, are experiencing declines in export orders.

The 10 countries in the Association of South-east Asian Nations (Asean) have free trade agreements or comprehensive economic partnerships with China, India and Japan. Asean’s growth for 2009 is projected to be between 2 per cent and 5 per cent, depending on how heavily each country relies on exports to the US and the EU. Singapore, whose external trade is more than three times its GDP, will dig into its reserves and survive the downturn because of its economy’s strong fundamentals.

Intraregional linkages that have increased during the past two decades will help fuel growth. They will partially offset the reduced demand from the US, the EU and Japan, and will buffer eastern Asian countries against a severe recession.

China’s economy will continue to grow. Its leaders have stated that the best contribution they can make to offset the current crisis is to keep their economy growing. They can go beyond that by constructing positive policies and not shifting out of US assets or pushing exports via competitive devaluation of China’s currency. If China plays an active part in multilateral measures to help alleviate the global crisis, it will be seen as a responsible stakeholder whose rise will strengthen the world’s financial system. The signs for this are good. On Oct 21 in New York, Treasury Secretary Henry Paulson said: ‘It is clear that China accepts its responsibility as a major world economy that will work with the United States and other partners to ensure global economic stability.’

India’s foreign reserves - US$251 billion - are modest compared with China’s. India’s stock market is 50 per cent below its January levels. The government can cede needed infrastructure projects for roads, railways, container ports and airports to Korean, Japanese and other international companies, which would increase foreign investment in India. If party leaders can overcome interparty politicking when deciding on policies to strengthen their economy, India will be in a position to make a difference internationally. Its leaders have demonstrated that when India musters its resources for strategic projects, such as its moon-probe rocket, it can succeed.

But the health of the US economy is still a major factor in global growth. The economic policies of President-elect Barack Obama will determine how long the global economy takes to recover.

Mr Lee’s article first appeared in the issue of Forbes magazine dated Dec 8, 2008

Source : Business Times - 3 Dec 2008

YONGNAM Holdings has secured an $88 million contract for the construction of the Integrated Civic, Cultural, Retail and Entertainment Hub (Integrated Hub) at Vista Xchange at one-north.

A structural steel contractor and specialist engineering solutions provider, Yongnam will supply and erect steelworks for the building structure.

This project, together with Yongnam’s recent contract win from the Marina Bay Sands Integrated Resort, has bumped up Yongnam’s current order book by $111.8 million, the company said.

Yongnam’s involvement in the building of the Integrated Hub will help to strengthen its brand name, and build on its portfolio of local and regional mega projects such as Suntec City, Fusionpolis, the Ion Orchard in Singapore, Dubai Metro Rail in Dubai, and the Delhi International Airport in India, said chief executive officer Seow Soon Yong.

‘Yongnam’s consistent involvement in such notable developments, including the Integrated Hub, further proves the confidence in our expertise in structural steelworks and specialist civil engineering solutions,’ he said.

Situated at one-north, the Integrated Hub is poised to be an iconic new landmark.

one-north is a 200-hectare development located at Buona Vista designed to provide an intellectually and creatively stimulating environment for creative minds to live, work, relax and learn.

Construction of the Integrated Hub will commence at the end of this month and is expected to be completed by January 2011.

Source : Business Times - 3 Dec 2008

Construction and property group, Koh Brothers Group Ltd, has won a contract worth S$582 million from the Land Transport Authority (LTA) to build the Downtown Line 1 Bugis station and its associated tunnels.

Koh Brothers said this is the single largest contract it has ever clinched.

The 4.3-kilometre section of the Downtown Line 1 runs from Bugis station on the East-West Line to Chinatown station on the Northeast Line. It will serve the upcoming developments in the Marina Bay area.

The Downtown Line 1 has six stations – Bugis, Promenade, Bayfront, Landmark, Cross Street and Chinatown. Construction is scheduled to start in the first quarter of next year and complete by 2013.

Koh Brothers said the latest contract is not expected to have any material impact on its earnings for the current financial year ending December 31.

Source : Channel NewsAsia - 2 Dec 2008

Singapore construction firm Koh Brothers said on Tuesday it won a S$582 million (US$380.1 million) contract to build an underground metro station.

The firm said the contract for the Bugis Station and associated tunnels from Singapore’s Land Transport Authority, won together with its French joint venture partner Soletanche Bachy, was the largest single contract the firm had clinched.

Construction will start in the first quarter of 2009 and is targeted for completion in 2013. The firm said the contract is not expected to have any material impact on its 2008 results.

Source : Business Times - 2 Dec 2008

Yongnam Holdings on Tuesday said that it has won a S$88 million contract for the construction of the Integrated Civic, Cultural, Retail and Entertainment Hub at Vista Xchange at one-north.

The a 200-hectare project at Buona Vista is being jointly developed by CapitaLand and New Creation Church’s Rock Productions. The entire hub is expected to cost some $976.3 million.

Yongnam will be involved in the construction of the integrated hub and will supply, fabricate, deliver and erect structural steelworks for the building structure. The project will commence at end of this year and is expected to be completed by January 2011, Yongnam said.

The contract is not expected to have any material impact on the group’s financial performance for the financial year ending December 31, 2008, Yongnam said.

Currently, Yongnam is also engaged in several other local and regional mega projects, including the Marina Bay Sands Integrated Resort, the Dubai Metro and the Delhi International Airport. Adding on Yongnam’s recent contract win from the Marina Bay Sands Integrated Resort, Yongnam has increased its current order book by S$111.8 million, it said.

Yongnam shares gained 0.5 cent to close at 7.5 cents today.

Source : Business Times - 2 Dec 2008

Construction group Yongnam Holdings has won an S$88 million contract to build the Integrated Civic, Cultural, Retail and Entertainment Hub at one-north.

The integrated hub is part of a 200-hectare development at Buona Vista known as Vista Xchange.

The area aims to integrate living, working, relaxation and learning facilities when fully operational.

Under the deal, Yongnam will construct the integrated hub and supply its necessary structural steelworks.

Work will start at the end of this year and is expected to be completed by January 2011.

Yongnam said the contract is not expected to have any material impact on its earnings for current financial year ending December.

Source : Channel NewsAsia - 2 Dec 2008

A dispute between property developer Lee Tat Development and Grange Heights residents over a strip of land came to an end on Tuesday as the Court of Appeal ruled in favour of Lee Tat, overturning an earlier appeal decision.

It is extremely rare for the Court of Appeal to re-look a case that it has passed judgement on.

Since the 1970s, Lee Tat has been trying to stop the residents from using a pathway, which is surrounded by land owned by the developer, as a shortcut to nearby shopping centres and bus stops.

After four court proceedings over many years, the Court of Appeal has finally given the right of way to Lee Tat.

In the ruling, it is noted that for more than 30 years, residents have not used the pathway often.

Source : Channel NewsAsia - 2 Dec 2008