Straits Times: Is the worst over?

Oct 3, 2007
Is the worst over?
Investors and analysts clash over whether the global sub-prime mortgage crisis has turned the corner

Yes, say investors

POSITIVE OUTLOOK

Banking giants disclose sub-prime related losses on Monday but investors take the disclosures as a sign that the worst may be over.

DOW’S RECORD CLOSE

- Investors push US stocks to its highest-ever close on optimism that the sub-prime crisis is nearing its end.

Key index ends Monday up 1.4 per cent at 14,087.55.

Stocks recover all of the nearly US$2 trillion (S$2.98 trillion) lost in July-August rout.

CITIGROUP AND UBS DISCLOSURES BRING RELIEF

- Bad news from two banking giants but investors choose to focus on the positives.

Citigroup to write off US$5.9 billion (S$8.8 billion) in third quarter. Profit to drop 60 per cent. Citi chief executive Charles
Prince says profits will return to normal in fourth quarter. Investors choose to focus on this healthy forecast.

UBS to write off US$3.4 billion and suffer a loss in the same quarter. But it indicated that the current period might see a return to normal earnings levels.

GREENSPAN UPBEAT

- ‘Is this August-September credit crisis about to be over? Possibly,’ says former US Federal Reserve chairman Alan Greenspan. He cites signs that lenders are seeking to buy longer-term assets of lower quality.

ANOTHER RATE CUT

- Investors still expect another rate cut from the Fed to boost the US economy.

Maybe not, say analysts

NOT ENOUGH ASSURANCE

- Conditions in the credit market are still fragile. Many problems remain for the United States economy, especially in the housing sector.

‘The question really is, ‘Is this the end of it or not?” Mr Axel Merk, portfolio manager of the Merk Hard Currency Fund told the Washington Post. ‘For whatever reason, the market wants to see the glass as half full. I just think we need to see more,’ he said.

MORE PAIN FOR BANKS

- Banks cleaning up their balance sheets only solves half the problem. Going ahead, they are likely to generate less income as the buyout boom slows.

Banks must find ways to replace the income from sub-prime mortgages, a market that could take years to recover.

HOUSING RECESSION NOT OVER

- The US consumer spending is being hit by falling home prices, higher mortgage rates and foreclosures. Thus lower spending will adversely affect the economy in the long run.

Most US adjustable-rate home loans will reset over the next several years at higher rates. This could lead to more foreclosures and a fall in home prices.

FALSE RALLY?

- Analysts caution: Do not read too much into the Dow’s rally.

This is because the rally was achieved on low trading volumes.

Shares of large companies recovered because of investments in strong economies overseas and a weak US dollar.

Many mortgage companies, banks and home builders are still trading far below their highs.

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Straits Times: New en bloc rules kick in today

Oct 4, 2007
New en bloc rules kick in today
Changes meant to make sale process more regulated and transparent
By Fiona Chan, Property Reporter

NEW collective sale regulations will kick in today – a few weeks earlier than many in the industry had expected.

The rules, which were passed in Parliament two weeks ago, were expected to take effect this month, but a date had not been specified.

The much-anticipated announcement, which came yesterday, took some en bloc players by surprise.

‘We thought it was going to be later, and expected the Government to give more lead notice as well,’ said Mr Jeremy Lake, executive director of investment properties at property firm CB Richard Ellis (CBRE).

He added that ‘initial indications were that they were likely to kick in only at the end of the month’.

The changes are aimed at making the sale process more regulated and transparent.

They require more conditions to be fulfilled, such as adhering to stricter requirements on setting up a sales committee and providing a five-day cooling-off period for owners to change their minds after signing the collective sale agreement.

The changes will apply to all developments that, as of today, have not obtained consent from enough owners to go en bloc – 80 per cent of owners by share value, or 90 per cent for estates less than 10
years old.

It will be back to the drawing board for the owners of these developments, who will have to start the collective sale process all over again and do so by the new rules.

Most property firms said they each had ‘two or three’ en-bloc estates that will be affected by today’s changes.

But CBRE’s Mr Lake expressed relief that there was clarity on when the rules would finally kick in.

Indeed, for the last few weeks, a few projects had been suspended because no one knew when the changes would take effect, said Mr Tan Hong Boon, executive director of Credo Real Estate.

‘Most lawyers were also not prepared to quote their fees for new en-bloc projects because they didn’t know how much more work they would have to do under the new rules,’ added Mr Tan.

Some consultants scrambled last night to get the last one or two signatures.

Mr Steven Ming, director of investment sales at Savills Singapore, said he had expected to have ‘one or two more weeks to get the last few signatures’.

‘I guess I will have to work overnight,’ he joked.

Other consultants, such as Jones Lang LaSalle’s head of investments, Mr Lui Seng Fatt, said they have been advising would-be en-bloc sellers to follow the new rules since last month.

‘Fortunately, none will have to start all over again,’ he said.

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Straits Times: Minority owners make their case for Horizon Towers

Oct 3, 2007
Minority owners make their case for Horizon Towers
By Fiona Chan, Property Reporter

HORIZON Towers minority owners said yesterday that the Strata Titles Board (STB) was right to throw out the estate’s collective sale application over a paperwork glitch.

Mr Ramesh Kannan, who is representing some minority owners, told the High Court that rules should be followed particularly strictly, because they involved compulsory acquisitions of assets.

‘The approach must be strict compliance…when it comes to the forced acquisition of people’s homes,’ said Mr Kannan, adding that the STB had consistently advocated strict compliance in previous cases. The sellers argued on Monday that the glitch – three missing pages – was a technicality that STB could overlook.

They want the court to reverse the STB’s August decision to abort the deal. This would allow the $500 million sale to a group headed by Hotel Properties to go ahead.

But Mr Kannan and Senior Counsel K.S. Rajah, who is representing another group of minority owners, argued that the STB had no powers to disregard the missing pages.

Mr Kannan also noted that upcoming changes in legislation will give the STB the power to ignore technical irregularities, as long as no owner’s interest is prejudiced.

The introduction of this rule proves that Parliament recognises that the STB now has no such powers, he said.

Mr Kannan, Mr Rajah and Senior Counsel Michael Hwang are acting for different groups of minority owners but all argue that the STB’s decision be upheld.

But while the floor was largely given over to the minority owners’ lawyers yesterday, Senior Counsel K.Shanmugam – acting for Horizon Towers buyers – made a brief appearance.

He told Justice Choo Han Teck that his clients’ only interest was to see the sale through. If this happens, the buyers will withdraw their suit against the sellers for breach of contract, without claiming costs, he said. The buyers are claiming up to $1 billion in lost profits.

‘We are not in the business of suing,’ he added, to sneers from the public gallery, where about 40 residents of Horizon Towers were sitting.

The hearing ends today, with the sellers’ lawyer responding to yesterday’s arguments. A decision is expected from Justice Choo in about a week’s time.

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Straits Times: Big developers lose bidding for prime Kovan plot

Oct 3, 2007
Big developers lose bidding for prime Kovan plot
By Fiona Chan, Property Reporter

BIG gun property developers who lined up for a prime residential site in the Kovan area were pipped in the bidding by a firm hardly anyone has heard of.

Duke Development placed the top bid of $290 million for the 190,000 sq ft site in Simon Road, trumping high-profile rivals Far East Organization, Hong Leong Holdings, Frasers Centrepoint and Allgreen Properties.

Duke is believed to be a group of private investors with a pair of top dealers as shareholders.

A company search turned up Mr Han Seng Juan and Mr David Loh as Duke shareholders. They are former executive directors at UOB Kay Hian, the brokerage arm of United Overseas Bank.

Both Mr Han and Mr Loh, who are believed to be related, also hold shares in Cybertech Communications and Healthstats International, among other companies.

Their winning bid works out to about $437 per sq ft (psf) per plot ratio, and is a ‘reasonable bid’, said CB Richard Ellis Research executive director Li Hiaw Ho.

Mr Li believes this offer can break even at about $800 psf for the finished condominium units, which are likely to sell at between $850 psf and $950 psf.

Nearby Kovan Melody has sold out all 778 units, a testament to the strong demand for homes in the area. The units are now being resold in the secondary market for more than $800 psf, said Mr Li.

He added that part of the area’s attraction are the good schools in the vicinity, such as Rosyth School and Maris Stella High School.

A condominium with about 555 units can be built on the Simon Road site, which has a maximum gross floor area of 664,337 sq ft.

Apart from homes, the plot can also host service apartments, said the Urban Redevelopment Authority.

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