http://www.businesstimes.com.sg/real...mp-to-s17b-18b

OUTLOOK 2015: PROPERTY

Watershed year as investment sales slump to S$17b-18b

Uptick for bulk sales of high-end residential units seen; Blackstone said to have completed purchase of 18 units at Paterson Suites for S$2,100 psf. But 2015 could see an extension of the lacklustre performance in overall market

By Kalpana Rashiwala

[email protected]@KalpanaBT

18 Dec


INVESTMENT sales of property - big-ticket transactions of at least S$10 million - so far this quarter are at their lowest quarterly level since the global crisis.

The year-to-date tally is about S$17 billion-S$18 billion and while this figure is expected to be higher by year-end, the full-year number will still be a big drop from around S$30 billion for each of the past four years.

Ian Loh, head of investment and capital markets at Knight Frank, blamed the slide on expectations of rising interest rates and the enduring dent on overall property market sentiment left by the total debt servicing ratio framework (TDSR) introduced in late-June 2013. Moreover, investors continue to be distracted by overseas property.

CBRE head of research, Singapore and South East Asia, Desmond Sim said: "There was also a pullback in the number of residential sites on the confirmed list of the Government Land Sales (GLS) Programme this year. This also dampened the contribution of investment sales deals from the public sector.

"Moreover, not many big-ticket properties were put up for sale in the second half of this year. With the investible universe shrunk, buyers do not have many deals to choose from, let alone to meet most of their lengthy investment checklist."

Steven Ming, deputy managing director at Savills Singapore, said: "2014 is a watershed year for investment sales and in the absence of new drivers, 2015 could see an extension of the lacklustre performance."

For next year, Mr Ming expects investment sales of S$17 billion-S$20 billion. Year to date (up to Dec 11), Savills estimates the tally at S$17.3 billion. In the fourth quarter (up to Dec 11), the figure was S$2.99 billion - down from S$5.58 billion in Q3 this year and S$3.89 billion in Q4 2013. The Q4 2014 to-date figure would be the lowest since Q3 2009's S$2.94 billion.

Mr Sim of CBRE forecasts that excluding property transactions arising from IPOs such as Reit and business trust listings, 2015 could see investment sales of S$12 billion-S$14 billion. The property consulting group's figure so far this year (up to Dec 9) is S$16.2 billion excluding IPOs.

Including IPOs, the YTD transaction value is S$18.1 billion, inclusive of about S$2.25 billion since the start of this quarter. The latter figure is down 62 per cent from nearly S$6 billion in Q3 and about half the level in Q4 last year. The Q4 to-date figure would be the lowest since Q2 2009's S$1.3 billion.

Savills' figures include IPOs.

Despite the lacklustre showing this year and which is expected to continue in 2015, Mr Ming said: "Singapore remains of interest as a real estate investment destination for both local and global capital. Many investors and developers are well capitalised and keen competition can still be expected for quality assets that become available."

One bright spot in the market this year is the resilience of the office sector. Based on CBRE's analysis, office transactions from Jan 1 this year to Dec 9 have reached S$4.8 billion, and the final number could be higher. Last year, the figure was slightly over S$4 billion. The performance of the office sector is even more impressive if one zooms in on deals originating from the private sector, principally sales of office buildings and strata units, at S$4.2 billion YTD - a big jump from S$2.4 billion last year. Major office transactions this year include Anson House, Equity Plaza, Straits Trading Building, Westgate Tower, a 92.8 per cent stake in Prudential Tower, and a one-third stake in Marina Bay Financial Centre Tower 3.

A repeat of this performance in 2015 is unlikely as there are not many office buildings for sale, noted CBRE executive director Jeremy Lake. "Most of the office buildings earmarked for sale have already been sold, so investors will be faced with fewer choices." However, there may be investment sales opportunities arising from the new owners recycling their assets via strata sales, capitalising on the current positive sentiment in this segment, he added.

Already, the new owners of Prudential Tower have sold half a floor of the 19.5 floors they bought from Keppel Reit earlier this year. Half of the 11th floor was bought by Shanghai Tunnel Engineering Co for S$2,750 psf. A bulk sale of five floors in the same building (leased mostly to Prudential) is said to be available with an asking price of S$2,850 psf.

Market watchers expect the new owners of Equity Plaza and Anson House to also hit the strata sales trail.

"A number of office transactions this year have been underpinned by confidence that buyers have in the strata office market. Moreover, the office rental market has made a strong recovery and sentiment has been very positive," Mr Lake noted.

Mr Loh of Knight Frank also highlighted that older office developments may present investment opportunities via potential enhancement or redevelopment.

Savills' analysis of the Q4 data also uncovered another potential bright spark: residential sales originating from the private sector rose about 50 per cent quarter on quarter to around S$460 million in Q4 (up to Dec 11), suggesting that there are opportunistic market players out there despite an uncertain global economy and volatile stock markets.

Agreeing, a seasoned agent commented that some investors may judge that it is time to enter the luxury residential sector, pointing to bulk transactions. A few months ago, Indonesian philanthropist Tahir picked up 12 units at the completed, freehold Grange Infinite.

Word on the street is that Blackstone has just completed the purchase of the balance 18 units in Paterson Suites held by a fund in the Real Estate Capital Asia Partners (Recap) series managed by SC Capital Partners. The pricing is S$2,100 psf, totalling around S$83 million. (Savills' S$460 million tally for private residential deals does not include this sale).

Bulk sales are also said to be in the midst of being stitched at 21 Anderson Royal Oak Residence (with Blackstone again tipped as the buyer) and the remaining 16 units at 111 Emerald Hill.

Savills also reported a big jump in private-sector sales of industrial properties from S$180 milion in Q3 this year to S$1.01 billion so far this quarter. This was largely due to a few big deals including the collective sale of Irving Industrial Building to Nanshan Group, the sale of an industrial building at 7 Bulim Street in Jurong and the IPO of Keppel DC Reit, which saw two Singapore data centres being acquired.

Looking ahead, Knight Frank's Mr Loh said: "The anticipated hike in interest rates in the near term could make it increasingly difficult for institutional investors to secure yield-accretive acquisitions."

Agreeing, Savills's Mr Ming said that with "yield compression for commercial and hotel assets continuing and running counter to expectations of interest rates rising, funds may be more compelled to sell rather than buy these assets". Buyers on the other hand may turn cautious for the same reason, which may result in a slowdown in transactions in this segment, he added.

As for the residential sector, assuming cooling measures stay in force, end-buyer demand will remain tepid. "However, land bids for GLS sites are likely to remain sticky given the relatively few sites on offer vis-a-vis the number of developers in the market wtih the financial wherewithal to bid," said Mr Ming.