Home loans go under hammer online

The Internet is proving to be an exciting new frontier for property transactions. Going beyond websites that highlight the best buys, homebuyers can now take a virtual seat and participate in real-time auction happenings over the worldwide web.


Some of these sites are so creative that houses are even offered to the lowest, unique bidder! Thus, by law of natural progression, it comes as little surprise now that home loans too are being put under the hammer in cyberspace.


Believed to be the first scheme of this kind in the world, and not just over the Internet, New Zealandbased website Fundit.co.nz has hundreds of Kiwis rushing online to auction their mortgages to the best home loan financial institutions can offer. Put simply, lenders compete directly for the borrower’s business.


According to the site’s webmasters, Fundit aims to help borrowers, first-time homebuyers and property investors by arranging online auctions and attracting banks and other lenders in the market to bid for their business.

And the website says it has already conducted more than 500 such auctions since it was launched last year, all of which have proven successful.

The financial institutions currently bidding online with Fundit include established names such as the Bank of New Zealand, Kiwibank, First Mortgage Trust, Loan and Building Society, Southern Cross Finance and Southland Building Society.

The Bank of New Zealand, which has been a significant participant in these auctions, reported a surge in its share of the mortgage market since the website was launched.

Property experts in the country are also giving the concept the thumbs up, saying the scheme challenges mortgage brokers as New Zealand’s property market continues to tighten.

Fundit arranges the auction process at no charge to the borrower, and online, they can see lenders compete directly for their business.

A former chairman of finance agency Mike Pero Mortgages, Abigail Foote, described Fundit as “a fresh approach to finding a home loan at a testing time in the property market”.
“The housing market is becoming tighter and I believe this will give homebuyers an edge they need to get the best mortgages out there... lenders who aren’t on emerging websites such as Fundit may shut themselves out of a key part of the home loan market.” - Chris Prasad

Singapore REITs may merge as Credit Squeeze Tightens

Singapore's once booming real estate investment trusts (REITs) may face a round of mergers to weed out the weak who find it increasingly tough to raise funds and refinance loans because of the global credit crisis.

At least six of Singapore's 20 listed REITs are valued below what their properties are worth, as are many trusts in Japan and Australia, which means expansion is hampered by higher financing costs and investor returns are limited.

Some of the trusts will face higher interest payments when they need to refinance their debts in coming months, leading to lower earnings and distribution to unitholders.
"I would expect consolidation to gather pace in the course of the next 6-12 months," said Tony Darwell, head of Asian equity research at Nomura. "The cost of debt has risen and it is impacting everyone, especially entities that are highly geared."

For investors, many of whom are already steering clear of property and other assets that rely on debt financing, the takeover speculation means some REITs such as Macquarie MEAG Prime may get bid up to prices closer to book value.

But others such as Mapletree Logistics Trust could see their shares fall further, due to large amounts of debt on their books.

"Singapore's REIT market is still young and shouldn't have reached the stage for consolidation, but the situation now is quite conducive (to that)," said Credit Suisse analyst Tricia Song.
Singapore's market for property trusts, Asia's third largest, has grown rapidly since 2002 when the first REIT, CapitaMall Trust, went to market. The industry has since grown to 20 REITs worth US$19 billion (US$1 = RM3.19), although that number may shrink as at least two players are up for sale.

Acquisition targets include REITs trading at high yields, at large discounts to book value, or with quality assets that bigger funds could be interested in, Song said.

Industry experts say the first Singapore REITs that may be taken over will be those that have ties to firms or property funds in Australia, Asia's biggest property trust market.

Macquarie MEAG Prime REIT, which owns two large properties on Singapore's Orchard Road shopping belt, said it may sell assets or go private after main shareholder Macquarie received unsolicited offers for its 26 percent stake.

Allco Commercial REIT, which owns office properties in Singapore and Australia, is being closely watched as its Australian parent, Allco Finance, is trying to sell assets to meet debt repayment deadlines.

"The yield is so high at 9 per cent; Allco REIT can't raise capital and their debt is due soon. They need to do something soon," said a hedge fund manager.

Allco in November dropped plans for a S$150 million (S$1 = RM2.29) share sale due to weak markets. In January, Moody's cut its credit rating to "Ba1", or junk, from a "Baa3" investment grade rating, citing potential problems in refinancing S$550 million in short-term debt due in July.

Other REITs downgraded or placed on review for downgrade this year include MMP, Mapletree Logistics Trust and Suntec REIT, on concerns of refinancing risks.

Suntec REIT last week closed a five-year convertible bond issue worth S$250 million at a 4.25 per cent yield to maturity, much higher than its average financing cost of 3.13 per cent as of end-December.

"Credit spreads have widened significantly over the past month. We believe this is likely to place pressure on both the cost and availability of future debt," Merrill Lynch analyst Melinda Baxter said in a note to clients last week. - Reuters

The RM312mil land deal with the country’s most reputable university, University Malaya

After long speculations, finally University of Malaya (UM) announced that the university through its investment arm, UM Holdings Sdn Bhd, has agreed on a joint venture with a consortium, PPC-Mint and Glomac, to develop a parcel of land measuring 11.13ha. The land is located within the UM’s main campus and adjacent to the thriving and flourishing area of Damansara/Bangsar.

In a statement released by the university last week, it revealed that the joint venture will generate the university with a minimum income of RM312 million or the land value of RM200million plus a share of the developer’s profit, whichever is higher. The UM deputy vice-chancellor (academic and international relations) Prof Datuk Dr Mohd Amin Jalaludin also highlighted the land would be developed to benefit staff and students.

The development of University Malaya’s main campus is not something out of the blue. In fact, many developers have had their eyes on this strategic land. However, the development of the university land seems to be quite sensitive and controversial. Some developers had denied that they were keen on it, and tried to distant themselves from being involved. Goucoland, a subsidiary of Hong Leong Group is one of them. So when the university announced the joint venture proposal, it actually shocked several parties.

A few interesting points here on this deal:

a. There is no explanation or clarification from UM’s statement about the mode of payment on how the university will receive their profit.

b. No justification on how the most reputable educational institutional in the country make its decision on the development proposal. Simple question arise, why Glomac? Why not Sunrise, IOI, SP Setia, YTL, IGB, IJM, etc? The decision process is not transparent.

c. According to the statement, eight developers were invited to submit development proposals but only five did. The question arising here is who were the eight shortlisted?

d. The students from the university are facing problems of accommodation shortage. Is it advisable to dispose the university’s land for development or build more hostels for the graduate?

The Location Plan of the UM Land

Note:
The members of UM Holdings are Prof Amin, Prof Emeritus Tan Sri Dr Augustine Ong, Anuar Mohamad, Azhar Haron and Prof Dr Muhamad Zakaria.

The Oval – A good deal for GuocoLand?

GuocoLand (formerly known as Hong Leong Properties Bhd) will launch its high-end condominium, The Oval, in the Kuala Lumpur City Centre (KLCC) enclave by mid of the year. The Oval is located on a 2.14-acre land along Jalan Binjai. It comprises two 41-storey blocks, East Tower and West Tower, with 70 units in each block. The estimated saleable floor area or net floor area is approximately 586,356sq.ft.

The Oval is an interesting project whereby it was formerly owned by a private developer, Titan Debut Sdn Bhd. The project was thence sold to tycoon Tan Sri Quek Leng Chan, for RM475.58 million or RM811psf when it was almost 30% completed. According to the Chief Executive of Guocoland, Paul Poh, approximately 30% of East Tower had been sold after a sales preview in Hong Kong last month. Most of the units are Sky Villa, offering a built-up area of 3,750 sq ft. Each block also offers eight Mansionary Villa, measuring 7,500 sq ft each. The price ranges from RM1,200 to RM1,900 per sq ft.

With this new selling price range, the estimated Gross Development Value generated by this project is approximately RM800million. The resale price is about double of what Tan Sri Quek has invested! Is this, then, a great deal by Guocoland? It is still too early to comment. The move by Tan Sri Quek reflected the confidence in the city’s luxury residential sub-sector. However, investors should not forget that the current rental market within the KLCC is experiencing a tremendous slowdown. Furthermore, there are a few more high-end condominiums such as Troika, Park 7, etc. which will crowd the market when they are completed.