Timber prices fall on global housing slump

PETALING JAYA: Timber prices in the United States had fallen to their lowest levels since early 1990s, as the worldwide housing slump dries up wood demand for use in construction.

The drop in timber prices was less severe for tropical hardwoods, local players said, but prices were expected to head lower as key markets the US, Europe and Japan fell into recesssion.

“We are still getting good volume from Japanese buyers, but prices had gone down quite substantially compared with a year ago,’’ a company official at Sarawak-based Ta Ann Holdings Bhd said.

Ta Ann exports timber logs mostly to India, while Japan is its biggest market for plywood products.



The official said bad weather in Sarawak in the past few weeks had somewhat limited logging activities in the country’s biggest timber-producing state and this might help keep prices in check in the coming months.

Lumber prices, however, are worst hit in the US. On the Chicago Mercantile Exchange, lumber contract for March delivery fell US$3.40 on Tuesday to close at US$172.30 per 1,000 board feet.



The contract had dropped 32% over the past six months and is now down to its worst level since 1991.

Home prices in 20 major cities in the US declined at their sharpest rate on record in October, depressed by rising foreclosures and weak sales. Bloomberg, quoting a Morgan Stanley report, on Monday said house prices in the US were likely to drop until mid-2010 because of growing unemployment, an excess of unsold homes and low levels of lending.

The US is Malaysia’s top timber export market, behind Japan and Europe.

Dwindling demand from traditional export destinations was compounded by the loss in new export markets. Eksons Corp Bhd said exports of plywood to the Middle East had almost dried up, as the construction boom in the oil-rich region came to a sudden halt as crude oil price tumbled.

Analysts said local plywood prices were likely to head lower this year from mid-November levels after an uninterupted gain in the past nine consecutive months.

The downturn had already prompted some timber firms, especially the smaller ones, to curb logging activities - at least in their own timber concession areas.

Recent filings on Bursa Malaysia showed that Perak-based Leweko Resources Bhd’s log production in November was zero. This was due to the company’s shift in strategy to log in forest areas belonging to third parties to supply its sawmills.

“We will start logging in our own area when prices recover,’’ a company official said.

By The Star (by Izwan Idris)

TA Ent on lookout for distressed assets

MALAYSIAN financial-to-property group TA Enterprise is still in talks to place shares of its TA Global unit despite weak markets, and is also looking to buy distressed property assets overseas, its deputy chief executive said.

“We are currently talking to underwriters for the placement of our (TA Global) shares and exploring the best way to structure the IPO so that the market will be able to absorb the listing,” Deputy CEO Tiah Joo Kim said today.

“In the event we do have to delay the IPO due to whatever reasons, we can always apply for an extension,” Tiah said in an email interview to Reuters.

TA Enterprise said last September it would spin off its property assets for a separate listing on the local bourse.
The property business will be housed under TA Global, a newly formed company to facilitate the listing. TA Enterprise, which houses the stockbroking and unit trust businesses, will remain listed on the exchange.

Tiah said TA is still on the lookout to buy more property assets after a string of acquisitions last year.

TA Enterprise’s cash and short-term investments stood at RM822.8 million (US$230.5 million) by the end of October, according to Thomson Reuters data.

“The current economic downturn presents many great opportunities to acquire assets. We are on the lookout to acquire prime assets that are undervalued or distressed,” said Tiah.

But the company will focus on markets outside Malaysia such as the hospitality industry in Australia, Canada and Hong Kong.

“Local property prices haven’t fallen enough to excite us, Tiah added.

The company’s earnings are unlikely to fall this year despite a weak operating environment, he said.

By Reuters

CIMB: Mah Sing’s sell call largely due to bearish property outlook

CIMB Research has downgraded Mah Sing Group Bhd to a sell (previously a hold) at RM1.55 as the counter had been a big performer and earnings growth had been gradually revised to single digit only.

The research house said while the sell call was largely driven by its bearish outlook for the property sector, it still had the highest regard for the company and might upgrade it sometime later when prospects for the overall sector improve.

It said the derating catalysts included continued delays in wrapping up the en bloc sale of Icon Mont’Kiara and the overall weak market sentiment on properties.

CIMB Research said it made no changes to its earnings forecast but had lowered Mah Sing’s RNAV (revised net asset value) to RM1.66 from RM2.10 after accounting for the gradual exhaustion of its landbank and stripping out the development value of Icon Mont’Kiara as a result of the delay in the completion of the en bloc sale.

“As a result, we have lowered our target price from RM1.78 to RM1.41 based on an unchanged 15% discount to RNAV,” it said.

The research house said Mah Sing was the best performer in the property sector last year as it fell 17% compared to the sector’s plunge of 50%.

CIMB Research, however, said the fundamental outlook for the property sector for 2009 remained tricky and this could weigh down the stock.

“While it is true that construction costs have eased due to the fall in steel prices and transport costs, our overriding concern is demand which will remain soft due to weak sentiment. 2008 was mostly a washout year for property sales, particularly after the March 2008 general elections.

“But earnings may come under even more pressure as another year of depressed sales in 2009 will gradually exhaust unbilled sales,” it said.

The research house said while prices of physical properties had held up relatively well, developers’ sales continued to deteriorate, adding that many builders had postponed launches in 2009 while some have offered discounts to clear unsold stock.

“The strategy adopted by many property companies is clearly a defensive one aimed at conserving cash in order to snap up bargains offloaded by weak landowners.

“Although we believe prices of physical landed properties will remain firm, we are concerned about the condo glut in KLCC and Mont’Kiara. Mah Sing is fortunate to have locked in gains for its KLCC office buildings but it still has exposure to Mont’Kiara,” it said.

On the outlook for the company, CIMB Research said Mah Sing’s prospects remained better than for most other developers due to its strong management and marketing savvy.

The research house said despite the tough conditions in 2008, Mah Sing managed to chalk up respectable sales of RM367 million in the nine months to September 2008, adding that its Southgate commercial project was also a success and the group was close to securing an en bloc sale there.

“Mah Sing has been consistently adding to its landbank, acquiring three parcels of land last year — one in Johor and two in the Klang Valley. It is eyeing more plots of land in Malaysia and is dipping its toes in Vietnam and China. That said, it is not in a hurry and will buy carefully,” it said.

Mah Sing ended yesterday’s trading unchanged at RM1.55.

By The EDGE Malaysia

BCorp partners Ritz-Carlton to woo the rich

Berjaya Corp Bhd and The Ritz-Carlton Hotel Company plan to develop luxury condominiums that would sell for RM2 billion, as they bet that the rich will continue to splash on high-end property.

Berjaya will build some 300 condominiums, to be managed and sold by Ritz-Carlton. A standard 3,000-sq-ft condominium unit could be sold for RM7 million.

"With Ritz-Carlton's expertise in luxury hospitality and management of high-valued real estates, we're confident of attracting well-heeled customers. We're looking at offering these units at between RM2,000 and RM2,500 per sq ft," said Berjaya Corp Bhd chairman and chief executive officer Tan Sri Vincent Tan Chee Yioun.

Kuala Lumpur's current most expensive address is The Binjai by KLCC Holdings, located along the intersection of Persiaran KLCC and Jalan Binjai. It was reported that the indicative selling price is at RM3,000 per sq ft.

Troika, a project by Bandar Raya Development Bhd, also along Jalan Binjai, had recently seen transaction almost doubling to RM1,800 per sq ft, from its launch price of RM1,000 per sq ft three years ago.
Tan said he would be happy if Ritz-Carlton could sell half of the units and BCorp will keep the rest for rental.

BCorp and Ritz-Carlton expect to start marketing these luxury units in September 2009.

So far, BCorp has invested some RM200 million in the sub-structure of this development. Another RM800 million worth of job packages will be tendered out.

"We hope to complete construction by 2011," Tan told reporters in Kuala Lumpur yesterday.

Housing & Local Government Minister Datuk Seri Ong Ka Chuan witnessed the signing of the management agreement of the new Ritz-Carlton Residences Kuala Lumpur at Jalan Sultan Ismail.

The new Ritz-Carlton Residences Kuala Lumpur at Jalan Sultan Ismail will be built on a 1.216ha site beside the Concorde Hotel and opposite Renaissance Hotel in Kuala Lumpur.

It replaces the RM700 million Berjaya Central Park, launched in 2005 with the small-office-home-office concept in mind. It was to consist of a 51-storey services suites with hotel blocks and three levels of basement car park.

By Business Times (by Ooi Tee Ching)

Mall retailers keen to expand, but cautious

RETAILERS still want to expand their businesses despite the challenging economic outlook this year, said a property consultant.

"They are cautious, but are pursuing expansion. The main concern is whether the (mall) developer has the capability to complete the project," DTZ Nawawi Tie Leung Property Consultants senior director Adzman Shah Mohd Ariffin said.

DTZ has been appointed the leasing agent and retail mall manager by Pramerica's Asian Retail Mall Fund (ARMF), the investor of four malls managed by DTZ.

The malls are SSTwo and Ampang in the Klang Valley and two malls in Penang, 1st Avenue and Island Plaza, which are currently undergoing refurbishment. All four malls offer a total net lettable area of about 1.8 million sq ft.
ARMF is an investment arm of US-based Prudential Financial Inc. As at June 30 2008, it has managed US$5.1 billion (RM18.21 billion) of group assets throughout Asia.

"Retailers are well prepared to expand despite the economic downturn. They want fresh loca-tions, which is the advantage we have with the four malls. So far, during our roadshow, we have received overwhelming response," he said in an interview recently.

Malls today are no longer just a shopping destination. The upcoming malls are adopting the edutainment and entertainment features by offering a wide variety of eatery outlets, karaoke centre, cinema and bowling alley, among others.

"This trend encourages people to spend a much longer time in the mall and browse around the shopping area," said Adzman.

"Edutainment and entertainment-trend malls attract shoppers from all walks of life. Thus, it's crucial for us to ensure the setting offers the right mix of products at every corner of the building."

SSTwo and Ampang are located within a residential and commercial area. Aimed at upper and middle class families and those with children under the age of 12, the malls offer 462,800 sq ft and 580,000 sq ft of nett lettable area, respectively.

Targeted to open by the fourth quarter of this year, SSTwo offers a dedicated kid's loft with children's fashion and toys and maternity goods in addition to other merchandise. Ampang key anchor tenants, meanwhile, include a department store, hypermarket and cineplex. The mall will be ready in the first quarter 2011.

The 1st Avenue mall in Penang offers 428,000 sq ft of nett lettable area with a dedicated youth level. The mall should be completed by fourth quarter this year. Its main target markets are young adults aged between 20 and 35 years old and middle to upper middle class professionals.

Established in 1996, the Island Plaza has an occupancy rate of about 70 per cent with Metrojaya and Cold Storage as anchor tenants. Since Penang draws huge tourist arrivals with many expatriates, Adzman said, both malls in Penang hope to cater to this market.

By Business Times (by Zurinna Raja Adam)

Ritz-Carlton Residences to be completed on time

KUALA LUMPUR: Berjaya Corp Bhd (BCorp) is confident of completing The Ritz-Carlton Residences on time despite the current economic slowdown, says chairman/CEO Tan Sri Vincent Tan.

“With our experience during the economic crisis in 1997, we are ready to face the current crisis and go through with our project,” he said yesterday during the signing ceremony between BCorp subsidiary Wangsa Tegap Sdn Bhd and the Ritz-Carlton Hotel Co LLC.

Tan said the 300 luxury residences would be launched in August or September, targeting the high-end market.

“We expect more than half of the potential buyers to be foreigners and, with the collaboration of leader of luxury lifestyle company Ritz-Carlton, it may help boost sales,” Tan said.

The Ritz-Carlton Residences is located at the junction of Jalan Sultan Ismail and Jalan Ampang. It will comprise two high rise towers with 150 units each priced at RM6mil to RM7mil.

The gross development value of the project is RM2bil while completion is expected in two years.

By The Star

Bull run over for Singapore property

SINGAPORE: The Year of the Ox begins later this month but the bull run is already over for Singapore's property sector, described as the world's hottest market just two years ago.

Prices of private homes fell 5.7 per cent in the fourth quarter, following a 2.4 per cent drop in the preceding period, according to the latest data from the Urban Redevelopment Authority (URA), the state agency responsible for land use planning.

The fourth quarter marked the sharpest drop in home prices in a decade, the URA said.

"Further contraction is on the way," analysts from the Hong Kong-based CLSA brokerage and investment group said in their outlook for the property sector. "We continue to expect the URA in-dex to see an accelerated fall in the next quarter."

Local home prices have not fallen so far since 1998 when Singapore was stung by the Asian financial crisis that pushed the local property sector into a slump lasting until 2005, when the government approved the construction of two multi-billion-dollar casino complexes.

By 2007, real estate giant Jones Lang LaSalle was describing Singapore's market as the world's hottest, and the city-state's property prices surged 31 per cent overall.

Rents at condominium units favoured by the many expatriates here also dramatically increased, and in some cases doubled.

While fourth-quarter data is preliminary, analysts say the casino-inspired property boom is history now that the economy is in recession.

Analysts said the duration of the current property slump was difficult to predict but they agreed it will hinge on when Singapore pulls out of the recession.

"A lot of it depends on the economy," said Ong Choon Fah, executive director for consulting and research with DTZ real estate consultancy.

"The economy really underpins the market... People have to feel safe about their jobs. That is the first thing," she said.

Serious buyers see pockets of opportunity in the current slump but are being unusually cautious because of the recession, Ong added.

Property agents at a show flat for a yet-to-be built condominium, located less than 20 minutes' drive from the main Orchard Road shopping belt, said they were hopeful, despite the dismal market.

"There will always be buyers even in a tough market and our prices are rather attractive," said one agent, who did not want to be named.

A two-bedroom unit at the condominium, which will come with a heated swimming pool and a gym, sells for about S$860,000 (S$1 = RM2.40).

In good times, the 915 sq ft apartment could fetch at least US$915,000 (US$1 = RM3.54), the agent said.

Until the economy recovers, prospective property buyers are likely to hold out in hope of better bargains, said Song Seng Wun, a regional economist with CIMB-GK brokerage.

By AFP

Metro Kajang plans RM1.6b projects

METRO Kajang Holdings Bhd (6114) plans to launch at least three new projects with a gross development value (GDV) of RM1.6 billion this year.

Group managing director Datuk Eddy Chen Lok Loi said the company will focus on the medium-to-high-end properties that are resilient even in recession.



The company is the biggest property developer in Kajang and Semenyih and is keen to strengthen its position.

It bought a 110ha of prime freehold land close to the Kajang town centre for a mixed development project. The land will be turned into a high-end integrated township with a GDV of RM1.4 billion.
"This new township project will have six phases and will keep us busy over the next eight years," Chen told reporters after receiving the QLASSIC award for quality construction from the Construction Industry Development Board Malaysia in Semenyih on Saturday.

Metro Kajang will launch a new housing project in June this year, spread over 47.2ha in Bandar Teknologi Kajang.

The gated and guarded community will comprise 500 units of landed properties with a GDV of over RM100 million.

It also hopes to launch semi-detached homes and bungalows at its Sentosa Villas project The total GDV for the Sentosa Vilas project will come to RM83 million when combined with the launched three-storey link houses.

Plans to build 523 units of serviced apartment at Desa Melawati worth RM140 million project are also put on hold.

"We will assess the economic situation first before deciding to launch the project," Chen said.

Nevertheless, Chen is optimistic on the property market and is scouting for more land.

At present, the company holds 200ha of undeveloped land in the Klang Valley.

On the award, Chen said Metro Kajang will not cut corners in its projects although the economic condition may be tough.

By Business Times (by Rupinder Singh)

Metrojaya: New stores will drive up sales

RETAILER Metrojaya Bhd expects sales to grow by five per cent this year, driven by new stores and ongoing marketing and promotion activities.

Last year, it made some RM400 million in sales.

The group operates seven department stores which account for 60 per cent of its revenue, three specialty stores and a new venture called MJ Outlet, which sells off-the-season products from its department and specialty stores.

"The idea to operate MJ Outlet is to provide a proper avenue to market our off-the-season products instead of having a warehouse sale all the time," chief executive officer Robert Heng said.

Metrojaya had launched an MJ Outlet and a Reject Shop at Brem Mall in Kepong on Saturday. Covering 46,000 sq ft of retail space, the stores offer men, ladies and children apparels and household items.

Well-known brands like Somerset Bay, East India and household items from Laura Ashley and Living Quarters are all available at MJ Outlet where prices are reduced by up to 70 per cent.

Heng said since its soft launch on December 20 last year, MJ Outlet has received positive feedback from customers who shop for quality products at lower prices.

"Our customers appreciate the move especially during challenging times like now," he adds.

Metrojaya has signed an 18-year lease with Brem Holdings Bhd and spent a total of RM4 million or RM2 million each to open MJ Outlet and Reject Shop.

Depending on the response, Heng said the group may open more MJ Outlets but it has not set any targets or budgets.

"It depends, as we move along, since our main focus is still department stores. If we do open more MJ Outlets, it will be at the edge of town," he said.

Meanwhile, Metrojaya will open a 125,000 sq ft department store in Sabah by the third quarter this year.

By Business Times (by Zurinna Raja Adam)

RM200mil projects lined up

Artist’s impression of OSK Property’s condominium project in Jalan Yap Kwan Seng, Kuala Lumpur.

OSK Property Holdings Bhd has lined up a few residential property and commercial projects worth RM200mil for launch in the Klang Valley, Seremban and Sungei Petani this year.

For the current financial year ending Dec 31, the company hopes to clinch sales of between RM120mil and RM130mil. Last year, it launched RM180mil worth of properties and recorded sales of RM153mil.

OSK Property executive director and chief operating officer Gerard Tan says that amid the current market slowdown, house buyers comprise mainly owner occupiers who are looking to upgrade into more prestigious addresses. “Developers have lowered their profit margin from 25% to 30% previously to about 20% now and it is certainly a good time to buy property for their good value. The onus is on developers to ensure their projects are properly planned and meet the needs of the buyers,” he tells StarBizweek.


Gerard Tan in front of a Sutera Damansara show house

OSK Property’s latest project in the Klang Valley is the 100-acre Sutera Damansara in Bandar Sri Damansara, Petaling Jaya. Scheduled for launch around March for completion in seven years, the project comprises 617 landed residences, 936 apartments and 24 shop houses with a total gross development value (GDV) of RM800mil. Tan says only 80 acres of the 100-acre project will be developed initially and the remaining 20 acres, for high-rise dwellings, will be undertaken after five years.

The initial phase will comprise terrace houses of around 2,305 sq ft priced from RM478,000. Since the project’s soft launch last month, RM52mil sales have been recorded.

In Kuala Lumpur, OSK Property is looking to launch a high-end condominium project in Jalan Yap Kwan Seng in October. The 108 condominiums, ranging from 703 sq ft to 4,152 sq ft, would be priced from RM1,000 per sq ft. The project with GDV of RM150mil is targeted for completion in three years.

The company also owns a 0.65-acre plot in Jalan Raja Abdullah and hopes to tie up with the adjoining land owner to develop the land into a condominium project later this year.

Tan says the company’s 12-acre plot in Bangi will be developed into 74 units of 2- and 2½-storey Bangi Lake Hill Villa. The building plans for the project have been approved and it will be launched in May. The units will be priced from RM880,000 to RM1mil.

In Seremban, the Mont Jade residential enclave comprising 243 semi-detached houses and bungalows will be launched in March.

The semi-detached houses will be priced from RM450,000 and bungalows from RM500,000.

OSK Property’s joint venture with Menang Development Sdn Bhd to develop 80 acres in Seremban 3 is at its tail end with a total of 547 units built to-date and another 147 units remaining units.

In Sungei Petani, the company has completed half of the 2,500 acres of land it owns in Bandar Puteri Jaya. A total 25.000 housing units worth a GDV of RM1bil have been completed. The balance RM1bil in property units will be undertaken over the next five years.

Meanwhile, on the company’s plans for Atria Damansara in Damansara Jaya, Tan said: “Our plan is to redevelop the property into a more upmarket retail and commercial destination for Petaling Jaya folks. The modern shopping mall will have gross lettable area of 1.3 milion sq ft and also some low-rise shop offices.

“The development order has been obtained last year and the redevelopment is expected to kick off late next year. The potential GDV of some RM1bil will be realised by 2012,” he adds.

Last February, OSK Property sealed the deal to purchase Atria Damansara shopping complex located on 5.48 acres for RM75mil.

Currently some 68% of the space in the complex have been leased out for a monthly rental income of more than RM8mil.

“We will retain some of the property for lease to generate recurring income while the rest will be for sale. The oroject is expected to revive the vibrancy of the Damansara Jaya commercial area into a more happening destination,” Tan says.

By The Star (StarBizweek - by Angie Ng)

Analysts mixed on cement price outlook this year

Although major construction material costs have come down recently, analysts are mixed on the outlook for the price of cement this year.

An analyst said that theoretically, the cement price in 2009 should increase given that the prices of coal and electricity, which are vital for cement production, would be higher than last year.

“But we expect cement price to remain the same this year, as the global economic uncertainty and external factors were pressuring the local manufacturers from increasing the price,” she tells StarBizWeek.

However, another analyst from a multinational firm predicted otherwise. He opines that cement price will fall because its raw material costs had come down.

He says the price has not declined like other products because the cement industry is more localised and, therefore, domestic manufacturers have more control.

After the cement price liberalisation on June 5 last year, he says import volumes have remained small due to the high logistic costs.

Currently, he adds, the local price has risen about 27% to RM280 per tonne from RM220 early last year.

Cement Industries of Malaysia Bhd chief financial officer Rozahan Osman says demand for cement in the region will grow 1% to 2% this year if major infrastructure projects progress as planned and residential projects recover as predicted.

“Cement demand contracted in the second half of 2008, while the full year growth rate is expected to be around 3% compared with 8% growth in the first half. We expect demand to recover in the second half of 2009.

“Cement price could only be lowered when prices for major production input, such as coal and production consumable prices, are lower,” he says.

Meanwhile, Cement and Concrete Association of Malaysia executive director Grace Okuda says market forces of supply and demand will determine the price of cement.


Grace Okuda

She says unless the government speed up the implementation of the stimulus packages, especially on infrastructure projects, cement demand will continue to slow down.

“However, we expect demand to recover latest by the fourth quarter. Currently, there is no cut in production yet and as there is no retrenchment in the cement industry. Manufacturers are looking for new markets to mitigate the domestic slowdown,” she says, adding that presently, only a small percentage of the domestic production is for export.

According to Okuda, cement price had not risen from 1995 to late 2006. In December 2006, it rose only 10% although production costs had risen by 31%.

Since then, its price had gone up twice - 15% to 20% in June and about 8% in August last year. The increases were due to an unprecedented 63% hike in diesel price and 26% rise in electricity tariffs.

She says the association has informed the Government of the industry’s concern and hopes it will reduce electricity tariffs.

By The Star (by K.C.Law)

REITs’ high yields and risks

Investors are spoilt for choice in their search for yield as many shares and most of the real estate investment trusts (REITs) offer dividend yields in the high single digit to low teens.

Like their counterparts in the developed markets, however, they are also scared and uncertain if both the yield and capital value of REITs will hold.

A sell-down in REITs that intensified in December have pushed their unit prices lower and, therefore, lifted their yields. Axis REIT, for instance, fell from a 52-week high of RM2.00 and from RM1.20 in late November to RM1.00 less than two weeks later. It has since recovered to around the RM1.20 level.

Such price fluctuations may be the norm in these volatile markets but retail, and even institutional investors, did not expect prices for REITs to swing like that. Typically, REITs have tenancies leased for a number of years in contrast with trading businesses in which revenue varies from day to day or contract to contract.

REITs, of course, face the property market risk of tenants moving out and in the global credit crunch, the risk in rolling over their loans. Prices of REITs also fell in the general sell-off of securities by investors going into cash.

As a result, Axis REIT was carrying a historical yield of about 13% for 2008, annualising its nine-month income distribution.

REITs in Singapore and Hong Kong showed similar, or even higher, historical yields as their unit prices fell further, reflecting the greater risks in the property markets there.

Starhill Global REIT, the former Macquarie Pacific REIT, listed in Singapore, shows a historical yield of 13.6% with its units traded at 52 cents. That is still much lower than the 82 cents a unit that YTL Corp Bhd paid for a 26% stake in the REIT. Furthermore, the REIT now has the support of the very large YTL group.

On Dec 23, Starhill told the Singapore Exchange it is consulting its legal advisers to assess Future Revolution’s and Futuregement’s ability to meet their obligations to the REIT’s properties in Japan.

Future Revolution and related entities directly occupy 33% of the space in Starhill’s Japanese properties. The bulk of Starhill’s properties are, however, in Singapore.

Fortune REIT, with retail properties in Hong Kong but listed in Singapore, was yielding as high as 18% for 2008, one of the highest in the sector. The REIT is sponsored by Cheung Kong (Holdings) Ltd, the flagship company of Li Ka-shing. Interestingly, a report by Macquarie Research forecasts Fortune REIT’s high yield will be sustained this year.

A yield of even 10% is very high for any asset class and if the Malaysian REITs can sustain their current yields, this is a rich field for investors in search of income.

High yields prevent expansion

The window of expansion for real estate investment trusts (REITs) has closed for the time being as their high yields preclude the possibility of any yield-enhancing acquisitions.

When the stock market was buoyant last year, prices for the units of REITs were higher and their yields were thus lower, at around 7% and even as low as 3%.

With that, it was possible for REITs to purchase properties that yield 8% to 9% and that would increase the yield of the trust.

With current yields of about 10% in the REITs, any purchases of properties with yields below that would reduce the trust’s yield.

It appears that even where the REIT promoter thinks it will be fruitful to purchase a property with a yield lower than the trust’s, shareholders may reject it.

That happened at Atrium REIT which proposed to purchase an industrial property for RM17.8mil cash from a related party. This is not unusual because sponsors provides a pipeline of properties for many of their REITs.

However, as the property offered a yield of 8.75%, lower than Atrium’s own yield that was then about 10%, minority unitholders rejected the purchase resolution at an EGM in November.

The financing window for REITs is also, for the moment, closed. REITs need to issue new units to raise capital now and then so as to raise their borrowing capacity and to repay loans.

REITs are regulated to maintain borrowings below 50% of their total assets but they do not retain the cashflow to repay their loans. They normally pay out 90% of their income so as to qualify for tax exemption, which leaves very little for loan repayment. Some REITs have a policy of distributing 99% of their income.

With the units of some the REITs trading below their par value and a lack of institutional interest, REITs will have to wait for markets to improve before they can substantially expand their asset size.

Fundamental flaws in trusts

Real estate investment trusts (REITs) are pitched to retail investors, including moms and pops and retirees, that they are a handy alternative to owning a house or condomium for rental income.

In a REIT, maintenance and tenancies for the properties are handled by a manager whereas an individual, buying a house to rent out, has to look for a tenant, ensure rents are paid and done so on time, and he has to take care of repairs and maintenance himself. REITs are, therefore, appealing to busy investors and retirees who do not want the drudgery of that work.

The price performance of REITs last year, however, show it does not mirror that of real properties. While a house of RM500,000 has held up its value so far, the value of REITs would easily has lost 50% in the last 12 months.

The first difference is that REITs are listed in stock markets and, like all listed securities, are subject to a sell-down whenever there is fear.

Secondly, REITs in most markets finance their property purchases with short-term loans. This exposes them to risks of banks willing to refinance and higher interest rates. This is an aspect not considered by many retail investors even if the facts were made known by the REITs in their prospectuses.

Would they buy a house with a loan repayable in five years or less? Probably not, but that’s the characteristic of a REIT. In some cases, a REIT may have its borrowings due within the year.

The reason for a preference for short-term debt could be that interest costs are lower than long-term debt, which boosts the bottomline. If REIT prices move up, they can issue more units to pare down debts, or make more purchases.

Last week, investors in Singapore heaved a sigh of relief that CapitaCommercial Trust, a REIT managed by the CapitaLand Ltd group, obtained a three-year loan of S$580mil at a very favourable rate of about 4% a year to refinance a loan coming due in March. Earlier, there were concerns that banks might charge 7% or 8% which would knock off a lot of its income.

In the US, some REITs have even failed altogether. By now, retail investors are aware that investments in REITs have to be managed the same way as their equity investments, with potentially the same risks.

By The Star (by C.S.Tan)

Sliding out of disasters

Although a new year has dawned on us, coming to terms with the Dec 6 landslide in Bukit Antarabangsa will not be easy for the aggrieved parties.

There is a need for more cohesive and concrete measures to mitigate the losses and sufferings brought on by such calamities.

Various calls have been made by concerned groups, including members of the public and non-governmental organisations, for proper guidelines on hillslope management to be in place.

With vast tracts of hilly terrain dotting the whole country, Malaysia certainly needs top-notch hillslope management expertise and guidelines to ensure they are properly managed and are sustainably maintained for future generations.

Prudent hillslope management to adhere to slope-safety management and warning system should involve all relevant parties – the local authorities, landowners, developers, and residents. Unsafe slopes must be rectified on a timely and regular basis.

Although landslide-related disasters are not a daily occurence, there is a possibility of more such mishaps and there is simply no time to lose. The sooner we come to terms with the seriousness of the problem and seek ways to address it the better.

The changing weather conditions in the country, prolonged heavy downpours and rampant clearing of land and felling of trees to make way for development, have all contributed to the current deterioration in our hill slopes.

The landslide in Bukit Antarabangsa was not the first time that such a muishap had happened in the country and it would certainly not be the last.

In the last 15 years, there were 13 major landslides in the Hulu Kelang area, of which five were in Bukit Antarabangsa. Studies by the Public Works Department predict that more will occur.

Some say the increasing number of such incidences is Mother Nature’s way of venting its wrath on mankind for failing to take care of the environment.

Chairman of The Hillslope Development Task Force of the Real Estate and Housing Developers Association (Rehda) Selangor branch, Datuk Eddy Chen has called for a dedicated federal agency that is empowered to issue and enforce guidelines and standards for hillslope management, approve hillside development and monitor slopes.

Stressing that a blanket ban on all hillslope developments is not a sustainable long-term answer, he said

such a ban will affect many landowners and developers as the provisions for contingency losses will have serious consequences for many public-listed companies.

A survey conducted by Rehda Selangor branch estimated that 4,500 acres of hillside land, valued at about RM1.4bil, are involved.

Besides getting property owners to seek insurance coverage of their property from damages caused by landslides, it is also worth considering the setting up of a special fund where developers of approved hillside developments will make regular contributions based on sales of their projects.

Like the cess contributed by palm oil industry players to ensure the industry’s stability, such a fund will provide financial resources to property industry players for recovery work in the event of any potential disaster or accidents.

If the fund is properly structured, property buyers will also have to pay a nominal contribution to the fund which will be built into the purchase price.

As shown in the massive damage caused by the latest landslide in Bukit Antarabangsa, it will be a small price to pay for developers and property buyers to have such a fund in place for a more orderly recovery scheme for victims of other future development-related mishaps.

To return buyers confidence in the property market and ensure the success of such a fund, industry players should take up the initiative to promote it.

Angie Ng is deputy editor of The Star and she believes that the authorities, industry players and the people have a responsibility to care for the environment and ensure sustainable development.

By The Star

Dubai building boom cooling?

The cancellation of a massive contract awarded to a joint-venture company in which WCT Bhd participated is prompting some analysts to take a closer look at Dubai.

At least three research houses issued early despatches on the emirate's super hot property sector yesterday.

Although ECM Libra Investment Research, Citigroup and Aseambankers did not issue blanket warnings in their reports, they pointed out the emerging risk of a property downturn in Dubai.

Several Malaysian companies are currently undertaking huge construction projects in Dubai. They include WCT, Gamuda Bhd, IJM Corp Bhd, Muhibbah Engineering Bhd and Sunway Holdings Bhd.

On Monday, the WCT joint venture to build a RM4.6 billion racecourse was cancelled, with the principal Meydan LLC saying that the job had fallen behind schedule.
WCT is contesting the cancellation.

ECM Libra said it was as surprised as WCT, adding that in its engagement with the company, WCT had said that its projects in the Middle East were on schedule.

While indicating that the dispute between the joint venture and Meydan could be project-specific, ECM Libra noted that the Middle East, too, was not being spared the negative impact of a global economic slowdown.

"It is likely to see slower construction activities as the property sector in the region cools down," ECM Libra said.

As a region, the Middle East has benefited enormously over the past few years from the unprecedented rise in crude oil prices.

However, as the commodity bubble burst amid a contracting global economy, the region seems to be feeling some pain from the credit crunch as well.

Citigroup, focusing its report on Gamuda, said the latter's projects in the Gulf states face low risk of cancellation as they are government-funded.

However, it added that Gamuda's Gulf infrastructure projects have low profitability owing to the high prices of raw materials.

Still, in view of the construction and property down-cycle risks, the medium-term earnings outlook remained unexciting, Citigroup said.

Meanwhile, ECM Libra said that based on conversations with companies under its coverage, collection of progress billings was still generally on time, except in Qatar where it now takes between three and four months compared with two months previously.

Aseambankers analyst Vincent Khoo's report yesterday was of a similar tone, reminding clients that Moody's Investor Services had issued last October a caution on Dubai's soaring debt of at least US$47 billion (RM165 billion) more than gross domestic product.

"The cancellation of the Meydan Racecouse contract raises speculation of Dubai's weakening financial position being the real reason for the cancellation," Khoo wrote.

By Business Times (by Mustapha Kamil)

Daewoo gets RM665mil job from KLCCP

PETALING JAYA: Daewoo Engineering & Construction Co Ltd has secured a RM665mil project from KLCC Property Holdings Bhd (KLCCP) for the latter’s mixed development project in Kuala Lumpur.

KLCCP said yesterday that its unit Arena Merdu Sdn Bhd had awarded the contract to Daewoo for the construction and completion of the superstructure main contract works of the project at Lot C, which is next to the Suria KLCC mall.

“The contract sum will be funded through internal reserve and external borrowings. The contract completion period is Oct 6, 2011 for the whole works,” it said.

According to KLCCP’s latest annual report, the Lot C development would provide an additional 1.4 million sq ft of gross floor area, made up of retail and office space.

The development was scheduled to be delivered in phases, starting from 2010.

KLCCP was also scheduled to start work to develop the adjacent Lot D1, which was envisaged to be a commercial development comprising both serviced apartments and prime office space.

By The Star

Becoming a millionaire

Enroling in a property investment programme may save you needless anxiety when you are ready to buy property when bargains come up.

When done correctly, property investment can yield huge returns. However, in order to reap the benefits of such investments, it's important that investors first learn how to invest right before spending their hard-earned cash towards the purchase of a property.

To avoid wasting good money, a property investor needs to have an understanding of the dynamics of property investment, and one can learn through Renesial Leong.

Renesial, who has over 20 years worth of experience in property investment, has a proven track record. She is the author of one of Malaysia's first property investment guidebooks and a national best seller, ''Property Jewels''.

Her second book, ''Your Tenants, Your Jewels'' is also a must-read for every landlord. Renesial is an avid believer in sharing her experience and expertise with anyone interested in property investment.

She said, ''Looking back at those 20 solid, long years and especially recalling how lost I was when I started, I feel that there is so much I can share with people who want to venture into property investing.''

Renesial has successfully conducted various seminars on property investment locally as well as in Singapore and Hong Kong.

So don't miss her seminar titled ''The Property Mastery Programme — Road Map to Profitable Residential Property Investment'' happening on May 16 to 17 in Kuala Lumpur. The main objective of the programme is to help people understand property investment inside out, the rewards and the risks.

''I hope through the programmes, I can help shorten investors' learning curve by at least five years, while comprehensively guiding them to understand the formula for success,'' she explained.

The programme is designed to help property investor to map out a sure path to gain financial independence and ultimately achieve financial freedom.

''It is easy to get into properties but difficult and costly to get out. Wrong property investments may take years of undoing the damaged done.

''That is why this programme is designed to ensure participants get it right the first time and every time.''

Many past participants of the programme have successfully bought properties with low to zero down-payment and are now enjoying a positive cash flow every month from rental returns.

Participants of this seminar stand to gain indispensable knowledge of all aspects of property investment, including learning how to cut their mortgage repayments by half and leverage on property loans for other investments and gain valuable insight on tenant and property management.

Owning properties is an excellent long-term investment vehicle to fund your children's education and retirement needs.

In property investment, inflation works for the investor, whereas in other portfolio investments, such as stocks, bonds, mutual funds or endowment policies, inflation will erode returns.

''The Property Mastery Programme — Road Map to Profitable Residential Investment'' is organised by Real Property Mastery Sdn Bhd, a joint venture between MasteryAsia (M) Sdn Bhd and Renesial Leong to provide the best in education and mentorship programmes in the area of Property and Real Estate Investment.

The two-Day programme will be held on May 16 to 17 in KL. Seats are limited. Call Liew at 03-9059 6488, toll free line: 1800-88-1426 to register.

By The Star

High-end landed property still in demand

Property developer Mah Sing Group Bhd group president and chief executive Datuk Seri Leong Hoy Kum gives his views on the future direction of the company and the outlook for the industry

WHAT are some project launches that can be expected from Mah Sing in the coming months?

We believe this year will see continued demand for medium- to high-end landed products and we have planned our launches accordingly.

For example, we will have Garden Bungalows in Hijauan Residence and designer bungalows in the re-branded One Legenda in Cheras.

The 30 Garden Bungalows come with a land size of 45’x80’ and a built-up area of about 3,407 sq ft and will be priced from RM1.1mil per unit.

One Legenda will offer only 26 limited-edition bungalows with a generous land size of more than 8,000 sq ft and a built-up area of about 5,000 sq ft. They will be priced from RM2.5mil each.

Kemuning Residence in Shah Alam is reaching completion and there will be a few last bungalows which we are offering on a build-and-sell concept.

We will also continue to launch semi-detached houses and bungalows in Aman Perdana, where the take-up rate has been very good.

For our commercial projects, we are optimistic about Southgate Commercial Centre which has done very well, with 90% of Vivo and 80% of Vox & Vertex blocks sold at about RM1,100 per sq ft (psf) for retail and RM550 psf for office suites.

We will also launch our new project, StarParc Point, a freehold commercial project in Setapak directly opposite the upcoming Parkson.

In Penang, we are offering medium- to high-end homes with Residence @Southbay, where there will be some 288 super-link homes with land size from 22’x75’ and built-up from about 3,000 sq ft, priced from RM755,000.

We also have 88 resort bungalows in Legenda @Southbay, which offers land size from 5,000 sq ft to more than 10,000 sq ft, as well as built-up areas of 3,800 to 8,000 sq ft.

These bungalows are priced from RM2mil to RM5mil.

In Johor, we plan to launch more phases in Sierra Perdana and Sri Pulai Perdana 2. Sierra Perdana is enjoying more visibility now as the construction of the upgraded six-lane coastal highway, which will cut through Sierra Perdana, has reached an advanced stage.

With the highway, we are only a few minutes to Permas Jaya and Johor Baru city centre. Sri Pulai Perdana 2 will ride on the success of Sri Pulai Perdana and the spill-over demand from this matured township where UTM is one of the key attractions for people moving into this area.
In your opinion, how has the global financial meltdown impacted the performance of the local property market?

We can still see transactions, albeit at a slower pace, as the medium- to high- end segment has a pool of buyers who are higher income earners. These people have a wider savings/expense ratio, and generally look to invest their excess funds in properties as there are limited investment options right now.

What is the impact on the company’s property sales and new project launches?

We achieved RM367mil in sales in the first nine months of 2008, against our sales target of RM450mil for the year. During the period, we launched properties worth RM399mil against our 2008 target of RM484mil.

For 2009, we are looking to maintain our sales and launch numbers. Besides that, we have pre-constructed projects worth some RM282mil for sale and launch, which will allow us to ride out these challenging times.

How is Mah Sing riding out the current property market slowdown?

Our balance sheet is very healthy with RM143mil cash as at Sept 30. We shall receive an additional RM213mil this year when our The Icon project at Jalan Tun Razak is completed by June.

We still have about RM3.9bil in outstanding gross development value and unbilled sales to last us for the next five years, of which RM282mil is pre-constructed products locked in at old construction costs. Our strong research and development, unique business model of quick turnaround and the right product mix have put us in a better position to ride through these challenges.

What is your outlook for the local property market in the next 12 months?

We expect the medium to high-end landed property segment to continue to yield decent long-term positive capital appreciation going forward.

By The Star

Top Investment

Empowered: Recent participants of the workshop. Photo courtesy of the Entrepreneur Action group.

Over the years, real estate has proven time and again its stability, attractive returns and ability to hedge against inflation. Thus, it is not surprising that most of the rich invest substantially in properties.

It is an expert opinion that most people's Asset Allocation Model and Investment Portfolio should look something like this (give or take 5%):

Assuming you have RM100,000 set aside for investment purposes, at least RM60,000 should be invested in properties. Less than RM30,000 go directly into the stock market and the balance (less than RM5,000) into high risks, highly leveraged, volatile investments such as Options, Futures or Foreign Exchange (Forex).

Many people make the mistake of concentrating too much of their time and money into the upper levels of the pyramid, as their portfolio returns are highly volatile and unpredictable.

First, it's extremely important to build up a solid investment base using real estate before venturing into other investments to give your portfolio regular and predictable rental income and to enjoy capital appreciation.

If you have an hour per day to look after your various investments, you ought to be spending 60% of that time for properties, 30% for equities and less than 5% for high risk investments.

Some trainers mention that you only need less than 20 minutes a day.

Yes, only if you have invested at least two hours per day over the next three years mastering the subject - a hidden fact many are unaware of.

In Malaysia, two main direct investment vehicles are real estate and stocks. Properties are stable and long term in nature, whereas the stock market is volatile and short term.

Hence one needs to practice Tactical Asset Allocation between these two.

Another mistake is buying investment products giving single digit returns with high upfront charges.

You should only take the risks and invest when you see the opportunity to make more than double of what you can save with minimal risks.

For real estate, it is advisable to have a portfolio of various property types.

Whichever way the property cycle goes, you will be able to enjoy benefits either from Rentals or Appreciation.

Your foundation must be solid. For beginners, start investing for rental returns beginning with medium cost apartments.

The risks are minimal as long as your chosen location is strategic. ''Using creative financing techniques, many of our graduates have even bought properties with little or zero Down Payment and achieved a positive cash flow.

It's extremely easy to earn long term compounded returns from both Rental Yields and Capital Appreciation of 10-12% p.a.'' according to Milan Doshi, best-selling author and independent financial trainer.

Once you have built a firm base, move up and invest in landed houses for capital appreciation.

The risks here are higher as landed properties will give you negative cash flow if you put in the minimum down payment.

Your ultimate goal in property investments is to eventually move to the commercial sector once your budget grows to RM1 million.

* Milan Doshi will be conducting a three-hour Financial Workshop on ''How YOU can become a Multi-Millionaire Property and Stock Investor... with Little or No Money Down!'' on Sun, Jan 11. Call 019-2263262.

By The Star

2011 launch for Resorts World at Sentosa

RESORTS World at Sentosa Pte Ltd, a unit of Genting International Ltd, says its integrated resort may be fully completed and officially launched in 2011.

The casino, the Universal Studio Singapore theme park, the Festive Walk and four hotels (namely Hotel Michael, Maxim Towers, Hard Rock Hotel and Festive Hotel) are due to be launched in the first quarter next year.

However, the world's biggest oceanarium, Marine Life Park, the Spa Villas and the Equarius Hotel will be launched later.

"It will be launched after the first quarter of 2010, it may be end-2010, it may be 2011. We are working closely with the Singapore government on it. We will be able to have a clearer picture on the launching and opening dates after a few months," said Resorts World at Sentosa vice-president and head of communications Krist Boo during a company visit yesterday.
When completed, the integrated resort will offer six hotels comprising over 1,800 rooms, two major attractions, a casino, a six-star spa and wellness retreat, and a Maritime Xperiential Museum, among others.



Currently, the resort is under construction and is about 60 per cent completed.

It is expected to generate about 45,000 jobs, of which 10,000 people will be staff of Resorts World at Sentosa.

By Business Times

ARA plans China, India, Japan property funds

SINGAPORE: Singapore property fund manager ARA Asset Management said yesterday it plans to launch country-focused funds for China, India and Japan to take advantage of declining real estate prices that it expects will bottom in late 2009.

ARA, partly owned by Hong Kong tycoon Li Ka-shing's Cheung Kong (Holdings), would also consider taking its listed real estate investment trusts (REITs) private if share prices remained weak, group chief executive officer John Lim said in an interview.

"In terms of deal flows, we see more opportunities coming up," he said in reference to properties that are being offered at reduced prices. Credit markets have also loosened from October-November last year in that bankers were now willing to consider proposals from investors such as ARA, he added.

Asian property prices have fallen sharply since the middle of last year, and listed developers and property trusts in Asia excluding Japan are now trading around 30 per cent below net asset values, JPMorgan said in a report on Monday.
Suntec REIT, which owns office and retail space in Singapore's central business district and is the largest of four listed property trusts managed by ARA, was last traded around S$0.815 (S$1 = RM2.38) a unit - less than half its value at the start of 2008.

"As a responsible manager, we always explore all options (and) privatisation is one of the options," Lim said when asked about the fall in REIT prices.

Besides Suntec, ARA also manages Fortune REIT in Singapore, Prosperity REIT in Hong Kong and AmFIRST REIT in Malaysia along with several privately held funds.

Lim also said that although office rents in Singapore have fallen from the highs reached in the middle of 2008, most tenants renewing leases this year would have to pay higher rates as current rents are still more expensive than three to four years ago.

"It has to be. Most of the leases were signed in 2005, 2006. Our average passing rent is S$6.50 per sq ft and rentals in the Suntec area are still achieving S$10 psf," he said.

Looking ahead, Lim said ARA hoped to launch country-specific closed-end funds that will invest in China, India and Japan to buy assets near the bottom of the property cycle.

The firm hoped to raise a minimum of US$500 million (US$1 = RM3.50) for each fund, he said.

ARA's flagship Asia Dragon Fund, which on Monday bought a 51-storey office-cum-retail building in Nanjing, China, for about S$340 million, has more than US$1 billion available for new investment.

The fund plans to focus on China, Hong Kong and Singapore, fund director Ng Beng Tiong said.

By Reuters

AEON to open two Jusco stores

AEON Co (M) Bhd, which operates the Jusco department store chain, expects to open two retail stores this year.

Its general manager of the corporate affairs division, A. Rashid Adam, said one of the new stores will be located in Malacca and the other in Cheras in the Klang Valley.

There are now 26 Jusco stores, all located on the west coast of Peninsular Malaysia.

“We will continue with our strategy of capturing strong market share in the retail industry through our J-Card loyalty programme which provides discount price privileges and gift redemptions,” Rashid said during a prize-giving ceremony for outstanding employees at the Setiawangsa Jusco store yesterday.
Consumers are expected to be cautious in spending this year but Jusco is confident of generating strong sales through attractive sales promotions and its J-card loyalty campaign, he said.

Stating that 2009 will be a challenging year for retail operators due to the economic conditions, Rashid said the company remains confident of at least maintaining last year’s sales with its strong branding.

“Due to the economic downturn, spending especially on electrical products and apparels has slowed down. However, the spending on food items has remained relatively unchanged,” he said.

By Bernama

Penang hotel projects on, Unesco guidelines awaited

The four hotel development projects on Penang island, which have been in question for allegedly contravening height restrictions in George Town's heritage zone, have not been scrapped.

Chief Minister Lim Guan Eng yesterday said the state authorities and affected developers are awaiting guidelines from the United Nations Educational, Scientific and Cultural Organisation (Unesco) on whether any changes should be made to the project plans.

"The developers fully understand that legally, the projects can still proceed, although Unesco needs to state if any modifications are needed. Penang needs these projects (investments) to offset the oncoming economic recession," he told a press conference at his office in George Town.

Lim said the four project developers - Boustead Holdings Sdn Bhd, Asia Global Business Sdn Bhd, E & O Bhd and the Low Yat Group - were unhappy when they heard in November that George Town's place on Unesco's World Heritage List was in jeo-pardy due to their projects.

The four projects were approved before George Town was inscribed on the heritage list. Two are AGB's Rice Miller boutique hotel in Weld Quay and the Boustead Royale Bintang Hotel project behind the General Post Office in Lebuh Downing, both lying in the heritage core zone.
The other two are E & O Hotel's extension and a 23-storey hotel in Jalan Sultan Ahmad Shah by the Low Yat Group in the buffer zone, both of which will be 84.4m high.

The World Heritage Committee (which administers Unesco's World Heritage programme) stipulates in its guidelines that a maximum height of 18m (or roughly five storeys) have been set for buildings on the island's heritage core and buffer zones.

"Since the approval for all four projects were based on Unesco's guidelines," noted Lim, "either all four projects stay or none at all".

Several property developers in Penang have already announced plans to defer their projects in the state, in the face of uncertain economic times.

E & O Bhd last month announced that it is reviewing its property development launches amid the current economic slowdown, and will delay the launch of the first phase of the Seri Tanjung Pinang condominiums in Penang.

The first phase was to have been launched during the company's current fiscal year ending March 31 2009. The new targeted launch date has since been pushed to the third quarter of next year.

Hunza Properties Bhd is also delaying the construction of its Gurney Paragon shopping mall in Pulau Tikus, while awaiting prices of construction costs and material prices to come down.

By Business Times (by Marina Emmanuel)

Manhattan housing up in 4Q, but luxury market down

NEW YORK (AP) - In what seemed like a New York-minute, prices of luxury homes in Manhattan are suddenly falling.

One penthouse owner on Central Park West repeatedly slashed the asking price down to $9.9 million from an original $16.5 million - and still no takers.

"Up through the end of this summer, there were almost two markets in Manhattan, the high-end and everything else,'' said Jonathan Miller, president and chief executive of Miller Samuel Inc., a real estate appraisal and consulting firm.

That all changed after Sept. 7 when the government seized control of Fannie Mae and Freddie Mac, the mortgage finance giants.

"People started thinking the high-end market is just as vulnerable as the rest,'' Miller said.

The median sales price of a luxury apartment slipped nearly 4 percent to $4,022,000 between October and December compared with the same period a year ago, according to Prudential Douglas Elliman's quarterly report released Tuesday.

The report defines the luxury market as the upper 10 percent of sales prices.

The market held up better for the merely somewhat-rich.

The median price for all Manhattan apartments - $900,000 - gained almost 6 percent in the quarter, the report said.

Another report from Brown Harris Stevens, also released Tuesday, showed the median sales price rose nearly 8 percent during the quarter.

But each report shows a weakening market overall.

Inventory has soared and sales volume has slowed. And this is likely just the beginning.

"Most of these (fourth-quarter) sales were negotiated before Lehman Brothers collapsed. The anxiety has intensified. We'll see more of an effect in the upcoming quarters,'' said Gregory Hyman, chief economist at Brown Harris Stevens.

The luxury market started to totter in September when the stock markets tanked and major Wall Street firms started to vanish.

Wealthy homeowners have since cut their asking prices, trying to move properties before the bleeding gets worse.

"You've got a market where suddenly people don't have the wealth they had before.

Those who helped to build Wall Street to the stratosphere don't know what their futures look like now,'' said Rick Goodwin, publisher of Ultimate Homes and its parent publication Unique Homes.

Nearly 42 percent of the 259 Manhattan homes currently listed for $10 million or more were dumped on the market since September, according to StreetEasy.com, a New York City listings web site.

Flippers at 15 Central Park West, dubbed the "Hedge Fund building,'' and other new condo buildings like The Plaza and Trump Park Avenue are trying to unload their investments.

Last year, 69 sellers with properties listed for $10 million or more cut their prices - 59 of them were in September or after.

There were only 17 price increases last year, according to StreetEasy.com.

But the reductions could be in vain.

"Those who can afford to buy these properties, they're thinking it doesn't feel right to put $20 million into real estate right now,'' Goodwin said.

Wall Street's weekend homes are also feeling the pinch.

More homeowners in the posh Long Island towns known as the Hamptons are pulling their properties off the market and booking summer renters for cash flow, said Judi Desiderio of Town & Country.

She estimates the summer rental supply has increased 10 percent over last year.

Sales volume in the Hamptons has also slowed this year, but the Wall Street turmoil in September "broke the logjam'' of the buyer-seller standoff, said Gary Persia.

A flurry of sales between $2.5 million and $8 million closed in the weeks following Lehman's bankruptcy as sellers decided it would be better to negotiate on price than to wait.

"No one walked away with a wash,'' Persia said.

"But were they at prices that (the sellers) anticipated in the spring? No.''

But both Persia and Desiderio see opportunity for the superrich to snap up Hamptons homes at favorable prices.

The so-called "East End dirt'' is safer to put money into than investing cash in the stock market or depositing it in major banks, which could disappear overnight, they point out.

The luxury home market, which is loosely defined depending on locale, is showing cracks nationwide.

While prices held steady at the end of the year, according to ILHM Luxury Housing Report released late last month, the number of days a property stays on the market, an average of 147 days, has shot up since September.

Ronna Brand, president of Brand Realty Inc. in Beverly Hills, California, said home sales over $10 million in the swanky neighborhoods of Beverly Hills and Malibu are slowing and luxury buyers are taking more time to consider their purchases.

She noted that some of her clients took big hits to their stock portfolios recently and quickly got into cash positions.

"Even the rarified atmosphere of the superrich,'' she said, "is a little thinner.''

By The Star

Resorts World at Sentosa to open in 2010

PETALING JAYA: Genting International plc’s unit Resorts World at Sentosa Pte Ltd will embark on an aggressive marketing campaign to build awareness about its integrated resort in Sentosa Island slated to open in 2010.

Assistant vice-president Robin Goh said the company would be “casting its net far” and aggressively promoting the resort to Malaysia, China, India, Indonesia and Thailand.


Robin Goh

“It will be robust as we have one year to the opening of our doors,” he told StarBiz.

While he did not elaborate on the amount allocated for the awareness campaign, he said it would be a “sizeable amount running into the millions.”

He said the advertising blueprint was still being reviewed.

“We will be heavy on advertising, be it basic or supporting media. We will organise roadshows and take part in trade shows organised by ourselves or parent company Genting.

“Of course by the second half of 2009, we will reveal our hotel and ride rates,” he said.

Goh said the company was forging ahead with confidence despite the lacklustre economy. “We need good reason for people to come to this part of the world,” he said.

The 49ha mega resort is on track to welcoming 15 million visitors in its first year of operations. The S$6bil Resorts World at Sentosa, developed by Genting International, will boast the first and only Universal Studios theme park in South-East Asia, Marine Life Park, Maritime Xperiential Museum and six world-class hotels.

Goh said the first four hotels to open would be Hotel Michael, Maxims Tower, The Hard Rock Hotel and Festive Hotel.

By The Star (by Eileen Hee)

Dubai dream turns sour as job cuts rise

DUBAI: Dubai's rapid expansion in recent years provided jobs for millions. But the global financial meltdown has abruptly ended the dream for many people as more and more firms sack staff to cut costs.

Spectacular economic growth, spurred by a robust construction sector, lured people from far and wide to the booming city on the shores of the Gulf, tempted by high pay, low tax and - for many Europeans - the year-round sunshine.

Foreigners form most of the population in Dubai and with residency permits linked to employment many of the people who are losing their jobs face the added upheaval of leaving the country.

"I don't feel that I was wronged. This is business... But I would have preferred a cut in my salary rather than being sacked," said an Arab man who was let go by government-controlled property group Nakheel.

Another former Nakheel employee: "Only four days before we were given the termination letter, our director told us in a meeting that the situation was difficult and that the budget for our project had been cut by three quarters.

Nakheel has its fingerprints on most of Dubai's iconic projects, including three palm-shaped artificial islands and a cluster of islands in the shape of a world map.

It unveiled in early October another gigantic project to erect a 1km high tower, which, if ever built, would dwarf the unfinished Burj Dubai, currently standing around 700m high.

Property sold like hot cakes for the past few years but demand has slumped amid the global credit crunch as panicking investors and creditors fled the market.

All of sudden, the viability of the grandiose property projects has become questionable.

Nakheel's job cuts programme is one of the largest so far in the United Arab Emirates, but is far from the only one.

Damac Properties, Dubai's largest private property developer, cut 200 jobs, or 2.5 per cent of its workforce, in October.

Al-Shafar General Contracting said a few days ago it was laying off up to 1,000 workers as its order book has dropped by US$817 million (US$1 = RM3.47) since September.

Emaar, the other local property giant, said recently that it was revising its recruitment strategy and reportedly laid off 100 workers last month.

Omniyat has shed 69 jobs out a 350-strong workforce and Tameer has notified 180 employees that December 31 will be their last working day.

The job losses have spread beyond property jobs to the financial sector.

Shuaa Capital investment bank, for instance, has cut 21 jobs, or nine per cent of its manpower.

Companies in Dubai and the rest of the United Arab Emirates were until recently on a hiring spree. Some 640,000 work permits for foreigners were issued in the first quarter of this year, 306,000 in Dubai alone, according to a study published last week.

By AFP

HwangDBS positive on construction sector

HWANGDBS Vickers Research Sdn Bhd said it sees the outlook for the local construction sector in 2009 as positive, boosted by the government's expenditure on infrastructure projects.

The high-profile jobs include extension of the Klang Valley light rail transit system and the inter-state water transfer.

"We expect 2009 to be the year for the government to play catch-up (after 2008's more muted allocation of construction projects) as pump priming efforts appear vital to ensure its internal Gross Domestic Product (GDP) growth target of 3.5 per cent is met and the economy does not slip into recession," it wrote in its market focus report recently.

"The (government's) development expenditure of RM53.7 billion for 2009 is a hefty 16 per cent increase from 2008 estimates of RM46.3 billion. An additional RM7 billion was announced as part of a stimulus package in November," it said.
The foreign research firm also sees improved outlook for the construction sector's margins, as building material prices have corrected sharply.

The price of steel bars at RM1,900 per tonne has dropped from a peak of above RM4,000 per tonne.

"When material prices were at the peak, the government planned to delay some projects given the higher cost. The lower cost now will allow more projects to be implemented," it said.

HwangDBS Vickers said it expects bigger construction players with good execution track records such as IJM Corp Bhd and WCT Bhd to emerge as winners given the increased focus on timely delivery.

"Apart from potential government jobs, we believe IJM will be eyeing projects in India, the Middle East and private sector jobs in Malaysia. For WCT, we expect the group to leverage on their Middle East presence for order book replenishment," it said.

Meanwhile, its 12-month target for the Kuala Lumpur Composite Index is 950 points, based on 12 times 2010 earnings.

"In the near term, concerns about growth may continue to weigh on the market. In this environment, we like stocks with relatively resilient dividend flows.

"Utility-type/concession earnings at YTL Power Bhd, PLUS Expressway Bhd and Lingkaran Trans Kota Holdings Bhd should sustain high-dividend payouts," it added.

For 2008 and 2009, DBS expects the country's GDP to grow by 5.5 per cent and 3.3 per cent respectively. This estimate factors in another 50 basis points cut in the Bank Negara Malaysia's policy rate to 2.75 per cent by end first quarter of 2009.

By Business Times

Property: Investing in something tangible

Embattled investors singed by the performance of the equity and financial markets in 2008 may want to look at more tangible assets to invest in going forward.

In such an unpredictable environment, one of the most tangible of assets is property, especially for more conservative investors who are looking for steady but unexceptional returns.

That leaves the question of when and at what price point investors should acquire properties, assuming that more gloomy economic and business data are still on the way which may have an effect on consumer sentiment and therefore, negatively impact property prices.

Those in the property industry, from developers to agents, will tell you that any time is a good time to buy property, especially if purchasing to stay because there is a probability that postponing a purchase may result in that particular property becoming unavailable or becoming pricier.

On the other hand, now may be the time to conserve cash and wait for opportunities, even for those who are looking to upgrade. For those who are investing for returns, that is a more difficult question to answer because launch prices have not plateaued although secondary market prices have fallen.

Property industry experts will tell investors that prices have not risen by much in the country compared with Singapore while falling secondary market prices may be due to any number of factors including location, accessibility, amenities and the number of new units coming into the market in any particular location.

iProp Realty Sdn Bhd managing director Victor Lim says investing in commercial property is always a safe bet. “If you look around, there are fewer good commercial properties compared with residential properties, so they can command a premium,” he tells StarBizWeek.


Victor Lim

He says compared with residential properties, business tenants are a more stable source of income. “Tenants in residential properties have a tendency to move whereas business tenants will stay longer,” Lim says.

He says the general rule of thumb is that the investment must yield at least 6.0% gross return before it can be considered. However, prime locations will also have better capital appreciation.

“I’ve a client who invested RM1.6mil in a shopoffice in the early 2000s in Desa Sri Hartamas and sold it last year (2008) for RM3.2mil,” Lim says.

He says investors may not wait even when times are bad. “Another client who has been eyeing a plot of land in Puchong bought it for RM2mil cash, sometimes investors just have to seize the opportunity and wait it out,” he adds.

Lim says another way to diversify a property investment portfolio is through purchasing real estate overseas. “Those who buy abroad do so for a number of reasons, maybe they’re buying with an eye to migrating or maybe it’s for their children’s education,” he says.

“I know a number of my clients have started to look at properties in the US and Australia because of their attractive prices. They cashed out of the local property market early this year and are now looking at the US and Australia, at least one of them is serious about the US,” Lim says.

On the other hand, Hartaemas Real Estate Sdn Bhd marketing manager Bernard Yong says that for the year ahead, condominiums in prime locations are still a top pick.

However, he says a good time to invest in property is probably at the beginning of the second quarter of 2009. “I’m looking at Mont’Kiara condominium units, at prices between RM500 psf to RM600 psf,” Yong says, adding that Bangsar is another alternative.

He says launch prices have not come down but developers have become more creative at selling. “They’re giving more incentives or more creative financing,” Yong says.

He says secondary market prices for residential properties in Mont’Kiara, KLCC and KL Sentral have been affected with the KLCC location being the most speculative.

“From next year till 2011, there are between 8,000 to 9,000 condominium and serviced apartment units becoming available in the KLCC location where demand for units of 1,000 to 1,600 sq ft has been healthy but the larger units are unsold,” Yong says.

He says that while properties closer to the Petronas Towers may not see any drop in prices, there may be a stagnation of prices for newer projects.

“Those looking to buy into the location may see opportunities there,” Yong says.

By The Star (by Fintan Ng) Posted on 3th Jan'09

Best way to invest RM50,000 now

Have some cash to invest? Three experts were asked what would be the best way to invest RM50,000 and below are their responses.


Andy Tang
Executive Director
Head of Performance Development
Great Vision Advisory Group

First of all, we need to know what is the purpose of the savings? Is it for short-term use? Medium or long-term usage?

Our money should be allocated into three portions: liquidity, profit and security. Usually, money in the liquidity portion is meant for short-term use. The money allocated for the profit portion is mainly for investment, hedging for higher return (either to re-invest in business, the share market, etc.), whereas money allocated for security purpose is meant for long-term use such as retirement, long-term care, education and lifestyle.

For liquidity purposes, which is mainly for the short term, it usually involves savings accounts, current accounts, fixed deposits or short-term income funds.

The ideal ratio of funds to be utilised is 20% for liquidity, 35% for profitability and 45% for security. Of course, the ratio is different from time to time and from one individual to another.

While making the allocation, it is a must to re-visit or review other essential planning such as a healthcare plan, family income protection plan, future income protection plan, critical illness coverage plan, debt cancellation, mortgage protection plan and mortgage review, life insurance and estate planning.

Before making any decision on the RM50,000, we need to identify the end in mind to avoid any disappointment.

First, we have to review and identify what other financial resources we have and only then proceed with the plan.

In conclusion, after checking and reviewing your personal cashflow, this is not only the RM50,000 that we should plan for but it could involve the ongoing securing of wealth from your yearly surplus in order to ensure wealth preservation and accumulation for the future. For a better picture of the entire planning, it is always advisable to look for the capable financial adviser.


Reginald Yoganathan Hunt
Senior Group Sales Manager
Great Eastern Life Assurance (Malaysia) Berhad

Investing RM50,000 over a period of six to 10 years. There are a number of financial instruments that yield higher than the fixed deposit and give a reasonable return of 7%–9% a year.

·Investment-linked single premium with a reputable life insurance company. Equity funds have shown to generate 8% to 10% return over a period of seven to 10 years but there is also the danger of a market crash where you may end up poorer. Bond funds give a lower return and are safer.

Real estate investment trusts (REITs) have recently sprung up and with quality buildings and high rental rates, a fair income can be assumed and reasonable returns could be expected.

·Unit trusts have been in the scene for quite some time. Most of them are life insurance or bank-backed organisations and they have also shown consistent returns.

·Structured products have recently come into the scene. Insurance companies and banks have moved into cash on low fixed deposit rates. As the experience is still in its infancy stage, we will have to wait to see if they perform well.

My recommendation would be to invest in investment-linked single premium product. Half of the RM50,000 can be invested in bonds and the other half in equities.


Robert Foo
Managing Director and Principal Consultant
MyFP Services Sdn Bhd

We should aim to get real returns of about 5% to 6% after deducting the inflation rate if our objective is to protect of our savings value from being eroded in times of high inflation.

In the long term, however, we expect interest rates to moderate to about 2% to 3%, hence we would target to obtain about 7% to 8% in gross returns.

The financial instrument to achieve this would be unit trusts of different asset classes.

We would usually invest with about four to five different fund managers as well as varying asset classes as a form of risk diversification.

Despite the volatile market situation, it is possible to achieve notable returns in these investments provided we invest for the long term, generally more than five years.

It is also important to review our investment portfolio every six months and restructure according to the market’s performance.

Depending on one’s life stage, it would be necessary to plan for expenses as well as insurance before investing.

It is also crucial to have a timeframe in mind when investing.

For example, if we are planning for our retirement in 20 years’ time, we would target higher returns at the beginning by investing in riskier asset classes.

We would then gradually move to less riskier forms of asset classes as we near our retirement.

By The Star (by StarBizWeek)