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Sunday, August 31, 2008

'Good initiatives for people but more can be done for REITs'

BUDGET 2009 is announced amid very challenging times in view of the rising food and energy costs.

The government has introduced various measures to help increase disposable income to mitigate the impact of the higher cost of living, thus demonstrating that it is a caring government.

Ngian Siew Siong Managing Director Sunway City Bhd (property development division)

* Enhancing training and skills programmes is a timely move by the government to attract more locals into the industry and avoid being too dependent on foreign labour.

However, the current incentive of giving 50 per cent waiver of the CIDB levy to encourage use of the Industrialised Building Systems (IBS) is inadequate.

We urge the government to seriously consider providing additional incentives.

* Reducing the withholding tax rate on real estate investment trust (REITs) for foreign institutional investors to 10 per cent from 20 per cent puts us on par with Singapore.

However, we are still not competitive as local and foreign corporations are still subject to 26 per cent tax compared with 18 per cent in Singapore.

As for domestic and foreign individuals and domestic institutions, we are still subject to 10 per cent tax. In Singapore, REITs are exempted from tax.

As such, more can be done to make Malaysia more competitive regionally where REITs are concerned.

* The benefit of the tax exemption on interest subsidy for housing loans by employers is insufficient, taking the market average of two per cent subsidy. To encourage home ownership, we prefer that mortgage interest be fully tax-deductible.

* While it is good that the government is putting more emphasis on greater use of renewable energy and energy efficiency, there could be more incentives for the local property industry to incorporate "green" building designs and construction.

This could be achieved by abolishing taxes and duties, not only for local but also imported materials and equipment such as low E glass (to reduce heat emission) and inverter air-conditioners (which regulate thermal power flow).

We applaud the government's efforts to promote use of renewable energy and energy-efficient products. However, we hope the government will extend further incentives to the property industry to promote green building designs for sustainable developments that reduce long-term operation and maintenance costs.

By New Straits Times

Capital market perks

SHARE prices of real estate investment trust (REITs) are likely to rise when market starts on Tuesday as investors may rush in after the government cut tax on dividends received by them.

Foreign funds especially will find Malaysian REITs a bit more attractive now that their withholding tax is halved to 10 per cent, as announced under the Budget 2009 yesterday.

Local retail investors will pay a smaller tax of 10 per cent on their REIT dividends, compared with 15 per cent previously.

Other measures aimed at boosting the capital market include a tax exemption on fees that local investment banks get from helping to list foreign companies or investment products on Bursa Malaysia.

Fees and profits earned by deal-makers from non-ringgit sukuks issued in Malaysia and distributed abroad will also be exempted from tax for three years.

Malayan Banking Bhd's president and CEO Datuk Seri Abdul Wahid Omar welcomed the tax incentives for promoting international sukuk issuance out of Malaysia.

"The incentive will encourage more capital market players to conduct, arrange and invest in Islamic non-ringgit issuance," concurred Standard Chartered Bank Malaysia's head of Islamic banking Azrulnizam Abdul Aziz.

Meanwhile, both Axis REIT Managers Bhd chief executive officer Stewart LaBrooy and Am ARA REIT Managers Sdn Bhd chief executive officer Lim Yoon Peng are convinced that investors will buy more shares of REITs, since their after-tax returns are now higher.

"Share prices of REITs have been depressed under the soft market, which pushed dividend yield to around 8.5 per cent to nine per cent. I believe many foreign investors will rush in on Tuesday morning to lock in this high yield," Lim said.

Chan Say Yeong, who manages Quill Capita Trust, said the reduction in withholding tax will make Malaysia REITs more attractive to investors, especially foreign pension funds that are looking for long-term investment.

A lower withholding tax of 10 per cent for foreign institutional investors puts us on par with Singapore, Sunway City Bhd managing director Ngian Siew Siong said.

However, Malaysia REITs are still not competitive as local and foreign corporations are subject to 26 per cent tax compared to 18 per cent in Singapore, Ngian said.

Retail investors and domestic institutions are also still subject to 10 per cent tax, whereas REITs are tax-exempt in Singapore.

Yesterday's move was a good start and a step towards the right direction, but more can be done to make Malaysian property trusts more competitive regionally, industry players concurred.

"The tax cut will create some excitements. But I'm a little disappointed that individual investors are still being taxed on their dividend. At a time when real interest rates have turned negative, their investment in REITs should be encouraged as an alternative for positive yields," LaBrooy said.

By New Straits Times (by Chong Pooi Koon)

Singapore properties remain much sought after

IN most economies, while land and buildings generally form a significant portion of national wealth, the situation is more acute in land scarce Singapore and Hong Kong.

Although Singapore offers a plethora of investment instruments, property continue to be a much sought after asset to have.

Says an observer: “The government wants every Singaporean to have a home. That is why we have HDB (Housing Development Board) homes for everyone. There are the lower end HDB apartments and the more expensive ones. Then there is private housing.”

Malaysians today make up the city state’s third largest investors, says a property consultant.

Be it by marriage or Malaysians seeking permanent resident status or economies, the two countries share close ties.

To appreciate the dramatic hike in Singapore’s property sector today, there is a need to go back a decade.

Says a Malaysian hotel owner: “A decade or more ago, I was offered a hotel in Singapore at S$180mil. Today, it has gone up to S$350mil. I’ve made some good moves, but I lost that one.”

In 1998, parts of Asia were grappling with the Asian financial crisis and sentiments were poor, as with today. Over in Malaysia, property prices were also tumbling after a heady 1995-96 era when prices peaked.

While Malaysian properties were hit by the credit crunch, the Singapore property sector rolled with a certain level of resilience. Then came the severe acute respiratory syndrome (SARS) and the good times came to an end. The pain was short and intense, on every front.

By early 2005, prices began to escalate again, says sdb Asia Pte Ltd sales and marketing executive Jean Tan.

At the end of 2005, the Singapore government announced the setting up of the integrated resorts with casinos on Marina Bay and Sentosa Island.

Investors sat up and began pouring money into Singapore real estate one year later, especially Orchard and the surrounding areas like Tanglin, Bukit Timah Road, known as district 9 and 10.

“In 2007, the en bloc sale of apartment units resulted in prices going overboard. What was bought for S$800,000 went up to S$1.3mil during that period,” she says.

Prices reach a peak in August/September 2007. The tumble came in December after the government did away with the deferred payment scheme.

The scheme essentially requires a buyer to pay 20% upfront on signing of the sales and purchase agreement and paying the remaining 80% on completion.

This was done away with and buyers took this negatively, says CB Richard Ellis team director Dave Peh. There were also the measures by the government to cut down on supply.

“But these are not the only reasons. The world is going through a global economic crisis. It may take longer to sell, unlike the time when all the units were sold in two weeks,” he says.

By The Star (by Thean Lee Cheng)

Jia is SDB’s first Singapore development

JIA. Short, simple and chic. The meaning is even more profound. It means home in Chinese. There is something within each of us that is drawn to a place called home. It does not have to be something at the upper end, although in this case, it is.

It is on this premise that SDB Properties Sdn Bhd, the property arm of Selangor Dredging Bhd, has named its first residential development in Singapore ... Jia. The project was launched about a month ago.

Located at 65, Wilkie Road, on Mount Sophia, about 10 minutes from the republic’s shopping haven Orchard Road, Jia represents more than just another development for the former tin-mining company Selangor Dredging under the helm of its managing director Teh Lip Kim.

With an eye to establish the group as a regional property player, this is Teh’s first foray beyond Malaysian shores. She has also set her sights on Australia.

Teh is setting many firsts as she enlarges her property portfolio, both in Malaysia and Singapore. A single thread runs through each of the projects she has thus far launched – niche.

When Teh launched her first development in Kinrara, Puchong in Selangor in 2004, AmanSari was among the first semi-detached and bungalow development in a gated and guarded environment, and by far, the most upmarket, targeted at upgraders.

With Ameera in SS2, launched last year, it was the most high-end condominium in that location. What else can be said of Park Seven in the KLCC area, which started at RM2mil when it was launched three years ago.

In her last chat with the media early August, Teh emphasised that the company was not into township developments, which would take years to materialise and a lot of resources. Rewards from small niche developments come in faster, if not greater. Small developments also tend to need more attention and Teh and her team are pretty hands-on in that respect.

Jia comprises only 22 units in a seven-storey development on 17,000 sq ft with an average price of S$1,637 per sq ft. Prices begin at S$2.1mil for a two-room apartment and goes right up to more than $S5mil for a duplex (exchange rate: S$1 to RM2.4). There are also three-bedroom units. Three of the 22 units come with private gardens of varying sizes. The two-room unit with garden is priced at S$2.8mil.

Says SDB senior sales and marketing manager Leon Kim Yoke: “The garden units work out cheaper on a per sq ft basis.”

She says most city apartments are in the 500-700 sq ft range. There will be a group of buyers who will want larger units of 1,200 sq ft and above.”

The group bought the land in December 2006 for S$20.8mil. A sales value of S$64mil is expected from that project.

All the units will come fitted out with the latest quality built-in cabinets and kitchen appliances. The team went as far as to change the materials that will be used after a trip to a Milan furniture fair.

Leon says there will be an emphasis on details like design and materials to be used as these will be the differentiating factor compared with other mass market projects in that area.

SDB is not the only one building on Mount Sophia. In that vicinity, there are several Singapore developers who have already completed their projects or in the midst of building.

Besides Jia, the company will also be launching No. 2 Gilstead later this year. While Jia is small, niche and cosy; 2 Gilstead is a 33-storey development with 66 units of three-bedroom units located off Bukit Timah Road near Newton Circus, off Scotts Road. While Jia is in the centre of the city, the Gilstead project is in a suburb popularised by several schools.

Leon says most Singaporeans buy into a project because of the proximity of well-known schools. Places are allocated according to how close one lives.

The Gilstead project comprises a single tower block with an indicative price of S$2,200 per sq ft. That piece of land of 37,000 sq ft was bought in May last year for S$96.5mil.

That project is a 50:50 joint venture and its share of revenue will be around S$110mil based on its 50% stake in Chedstone Investment Holdings Pte Ltd. The other 50% is shared on a 30:20 basis between privately held Teh Wan Sang & Sons Sdn Bhd and Teh Wan Sang & Sons Housing Development Sdn Bhd.

Last month, the group purchased a third property – Balstier Complex in Balstier Road – in an established township the likes of Kuala Lumpur’s Jalan Ipoh, for S$47mil.

Currently tenanted, that complex offers potential redeployment when the time is right.

Other Malaysian companies that have gone to the Lion City are IOI and YTL group. While both of these have bought land on Sentosa Cove, all three properties belonging to Selangor Dredging are in the city or established suburbs.

Besides its interest to tap the Singapore market, the group has also invested RM24.6mil in Penang’s famed Batu Feringgi. It bought three pieces of beach-front land located between the Lone Pine and Casuarina hotels where it plans to develop a “good, villa-type resort development” sometime in late 2009 or 2010.

The group is also developing controversial Damansara 2 in Damansara Heights, where it plans to build 21 luxury bungalows on a hillslope, which has drawn a lot of flak from nearby residents.

By The Star

IOI Corp agrees to buy owner of Menara Citibank

PLANTATION group IOI Corp Bhd has agreed to buy Inverfin Sdn Bhd (ISB), the owner of 50-storey Menara Citibank in Kuala Lumpur, for RM586.7 million cash.

Inverfin, which is owned by US lender Citigroup, Singapore's CapitaLand Ltd and Amsteel Corp Bhd, also has a RM160 million debt from the sale of seven-year bonds.

IOI said the proposed acquisition presents a rare opportunity and strategic move for them to acquire a Grade A investment property located at a very prime area within the vicinity of Kuala Lumpur City Centre.

"Menara Citibank is presently enjoying close to 100 per cent occupancy rate with quality tenants consisting of multinational companies and reputable companies in their respective industries," IOI said in a statement to Bursa Malaysia yesterday.

ISB recorded a net profit of RM20.37 million for the financial year ended December 31 2007.

The net book value of the Menara Citibank based on the latest audited accounts is RM458 million and the gross rental revenue is about RM43.3 million. This excludes a RM3.3 million revenue from the car park.

The proposed buy is due to be completed within the fourth quarter of 2008.

By New Straits Times

Malaysia to chair rail project meeting

SINGAPORE: Malaysia will chair a special working group that oversees the implementation of the multi-billion rail project connecting Singapore to Kunming in China.

The group's meeting will be held on November 22 in Putrajaya.

These were among the resolutions adopted during the 10th Asean-Mekong Basin Development Cooperation (AMBDC) meeting held in conjunction with the Asean Economic Ministers and other related meetings here since Monday.

A conference and exhibition on the massive rail project will also be held early next year to promote the project.

The railway will link eight of the AMBDC countries, which includes the 10 members of Asean and China. Some 550km of missing links costing about US$2 billion (RM6.78 billion) still needs to be built.

At present, the "missing links" are at various stages of development.

Apart from this project, there are 44 other projects in various stages of implementation. Of these, 13 projects still need funding worth US$26.5 millon (RM90 million).

In a statement, Asean ministers said the AMBDC process needs to be realigned and synchronised with the Asean Economic Community.

By New Straits Times (by Kamarul Yunus)