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13-10-14, 18:59
http://www.straitstimes.com/archive/saturday/premium/money/story/debt-crunch-property-industry-20141011
Debt crunch for property industry
80 firms, Reits listed here have total of $23.5b in loans due within a year
Published on Oct 11, 2014 1:21 AM
SINGAPORE'S listed developers and real estate investment trusts (Reits) face their heaviest burden of near-term maturities on record just as home prices drop.
The 80 property companies on Singapore's stock exchange reported a combined $23.5 billion of borrowings that have to be repaid within a year in their latest filings, Bloomberg-compiled data shows.
The looming debt wall comes as the vacancy rate for condominiums soared to the highest since 2006, pushing prices to the lowest in almost two years, according to data from the Urban Redevelopment Authority (URA). Savills predicts refinancing for homebuilders and Reits will be more challenging as Singapore's economy slows, with expansion cooling to 2.4 per cent in the second quarter, from 4.8 per cent in the previous three months.
Population growth on the island is at a 10-year low and Standard & Poor's (SP) expects home prices have further to fall.
"We're at that point in the cycle when every quarter, you're seeing selling prices come down a little bit and secondary market transactions aren't very active," said SP property analyst Chan Kah Ling. "I suspect we haven't seen the bottom yet."
Developers of residential homes are suffering not so much from lower selling prices than "collapsed" sales volumes, said Savills senior director of real estate research Alan Cheong. Secondary home sales plunged to the lowest since 2003 in the first quarter, according to URA data, and as business slows, builders with less pre-sales money to finish projects have to rely on loans, boosting short-term borrowings.
Despite the weaker demand, the number of residential dwellings being built remains high. Units under construction reached a record in the second quarter of last year and URA data shows some 65,270 apartments were in the pipeline as of June 30. Regulatory measures have been introduced to dampen the market.
Between 2009 and mid-2013, the Monetary Authority of Singapore implemented eight rounds of property cooling measures to address its concerns that the low interest-rate environment would lead to a property price bubble, Moody's Investors Service said in an Oct 6 report. "Appetite to buy is already curbed" and rents could fall further, Ms Chan said. "We haven't seen the full impact yet."
The 42 listed developers on Singapore's exchange reported $13.4 billion of short-term borrowings in their latest filings, 42.5 per cent more than a year earlier, data compiled by Bloomberg shows.
City Developments posted debt of $1.66 billion in the second quarter, 48.6 per cent more than at the end of last year. Second-quarter profit fell 33 per cent, it said in August, and the company is looking to expand overseas to offset declining demand in Singapore. City Developments' $500 million of bonds due next September and sold to investors at par in August 2010 are trading at 101.2 per cent of face value, down from 101.25 per cent at the end of last year, DBS Bank prices show. It sold $100 million of 10-year 3.78 per cent notes on Thursday.
A spokesman for City Developments said the company has a strong financial position, noting its cash of $3.4 billion and 33 per cent net gearing ratio.
The three-month swap offer rate, a measure of borrowing costs in Singapore, touched 0.2561 per cent on Sept 16, the highest since June last year. Reits are in better shape than listed developers because they started refinancing with longer-tenor debt ahead of rising interest rates, according to SP.
"For the Reits, I don't see a major problem yet," Ms Chan said. "The bigger players are still getting good rates and valuations haven't fallen dramatically," she said.
Starhill Global Reit, which has $124 million of notes that mature in July, reported $129.1 million of short-term borrowings as of June 30, more than double the amount it had in December last year. Retail occupancy rates at the trust's flagship Wisma Atria mall slipped to 98.5 per cent in June, from 99.5 per cent at the end of 2012, company data shows. Office occupancy rates are 100 per cent.
Starhill spokesman Jonathan Kuah said the company has already refinanced its debt due within the coming 12 months. The "leverage situation hasn't worsened", he said.
Fund manager Danny Tan of Eastspring Investments, which managed $115 billion of assets as of June 30, said: "In 2008, when the refinancing situation was quite bad, the Reits still managed to pull through. There's a high probability these Reits will be able to refinance, especially because the loan market is also open to them."
Hiap Hoe, which recently started selling apartments in its prestigious Skyline 360 building, reported short-term borrowings of $287.6 million for the quarter to June 30, 94 per cent more than the $147.9 million for the three months to December. It raised $115 million selling three-year 4.75 per cent notes at par in September last year, which now trade at 100.317. A spokesman for Hiap Hoe declined to comment.
Developers on the island are changing their business models and reducing exposure to the local market, according to Singapore-based Tim Gibson, who helps run Henderson Global Investors' global property equities fund.
"By buying Singapore developers now, you're really buying exposure outside of Singapore and into markets like China," he said in an interview. It "doesn't give you a huge amount of confidence that a turnaround in the residential market is coming anytime soon", he added.
BLOOMBERG
Debt crunch for property industry
80 firms, Reits listed here have total of $23.5b in loans due within a year
Published on Oct 11, 2014 1:21 AM
SINGAPORE'S listed developers and real estate investment trusts (Reits) face their heaviest burden of near-term maturities on record just as home prices drop.
The 80 property companies on Singapore's stock exchange reported a combined $23.5 billion of borrowings that have to be repaid within a year in their latest filings, Bloomberg-compiled data shows.
The looming debt wall comes as the vacancy rate for condominiums soared to the highest since 2006, pushing prices to the lowest in almost two years, according to data from the Urban Redevelopment Authority (URA). Savills predicts refinancing for homebuilders and Reits will be more challenging as Singapore's economy slows, with expansion cooling to 2.4 per cent in the second quarter, from 4.8 per cent in the previous three months.
Population growth on the island is at a 10-year low and Standard & Poor's (SP) expects home prices have further to fall.
"We're at that point in the cycle when every quarter, you're seeing selling prices come down a little bit and secondary market transactions aren't very active," said SP property analyst Chan Kah Ling. "I suspect we haven't seen the bottom yet."
Developers of residential homes are suffering not so much from lower selling prices than "collapsed" sales volumes, said Savills senior director of real estate research Alan Cheong. Secondary home sales plunged to the lowest since 2003 in the first quarter, according to URA data, and as business slows, builders with less pre-sales money to finish projects have to rely on loans, boosting short-term borrowings.
Despite the weaker demand, the number of residential dwellings being built remains high. Units under construction reached a record in the second quarter of last year and URA data shows some 65,270 apartments were in the pipeline as of June 30. Regulatory measures have been introduced to dampen the market.
Between 2009 and mid-2013, the Monetary Authority of Singapore implemented eight rounds of property cooling measures to address its concerns that the low interest-rate environment would lead to a property price bubble, Moody's Investors Service said in an Oct 6 report. "Appetite to buy is already curbed" and rents could fall further, Ms Chan said. "We haven't seen the full impact yet."
The 42 listed developers on Singapore's exchange reported $13.4 billion of short-term borrowings in their latest filings, 42.5 per cent more than a year earlier, data compiled by Bloomberg shows.
City Developments posted debt of $1.66 billion in the second quarter, 48.6 per cent more than at the end of last year. Second-quarter profit fell 33 per cent, it said in August, and the company is looking to expand overseas to offset declining demand in Singapore. City Developments' $500 million of bonds due next September and sold to investors at par in August 2010 are trading at 101.2 per cent of face value, down from 101.25 per cent at the end of last year, DBS Bank prices show. It sold $100 million of 10-year 3.78 per cent notes on Thursday.
A spokesman for City Developments said the company has a strong financial position, noting its cash of $3.4 billion and 33 per cent net gearing ratio.
The three-month swap offer rate, a measure of borrowing costs in Singapore, touched 0.2561 per cent on Sept 16, the highest since June last year. Reits are in better shape than listed developers because they started refinancing with longer-tenor debt ahead of rising interest rates, according to SP.
"For the Reits, I don't see a major problem yet," Ms Chan said. "The bigger players are still getting good rates and valuations haven't fallen dramatically," she said.
Starhill Global Reit, which has $124 million of notes that mature in July, reported $129.1 million of short-term borrowings as of June 30, more than double the amount it had in December last year. Retail occupancy rates at the trust's flagship Wisma Atria mall slipped to 98.5 per cent in June, from 99.5 per cent at the end of 2012, company data shows. Office occupancy rates are 100 per cent.
Starhill spokesman Jonathan Kuah said the company has already refinanced its debt due within the coming 12 months. The "leverage situation hasn't worsened", he said.
Fund manager Danny Tan of Eastspring Investments, which managed $115 billion of assets as of June 30, said: "In 2008, when the refinancing situation was quite bad, the Reits still managed to pull through. There's a high probability these Reits will be able to refinance, especially because the loan market is also open to them."
Hiap Hoe, which recently started selling apartments in its prestigious Skyline 360 building, reported short-term borrowings of $287.6 million for the quarter to June 30, 94 per cent more than the $147.9 million for the three months to December. It raised $115 million selling three-year 4.75 per cent notes at par in September last year, which now trade at 100.317. A spokesman for Hiap Hoe declined to comment.
Developers on the island are changing their business models and reducing exposure to the local market, according to Singapore-based Tim Gibson, who helps run Henderson Global Investors' global property equities fund.
"By buying Singapore developers now, you're really buying exposure outside of Singapore and into markets like China," he said in an interview. It "doesn't give you a huge amount of confidence that a turnaround in the residential market is coming anytime soon", he added.
BLOOMBERG