Monday, August 27, 2007
More and more land is hitting Singapore markets.
Singapore's government owns and controls the country's land... and it keeps a tight hold on the rate of development.
However, even in a government-controlled country, the issues of supply and demand dictate policy. Consequently, the government releases development sites in two forms: confirmed sites and reserve sites.
A confirmed site is just what it sounds like: a site the government will release for development at a set date. In contrast, reserve sites are a little less organized. They're always on-deck and available for development, but a developer has to approach the government with a plan in place.
In June 2007, the Singapore government unveiled its Government Land Sales (GLS) program for the second half of 2007. Altogether, the program calls for 41 sites to be developed: 14 confirmed sites and 27 reserved sites.
It's not hard to see that demand is red-hot and growing. For the first half of 2007, the government listed seven confirmed sites. The confirmed sites for the second half of 2007 is double that: 14. It's the highest number of confirmed sites the Ministry of National Development has released since it began the program in 2001.
The 14 sites that will be released before 2008 could yield as many as 8,000 private homes (including 620 executive condos), 3.8 million square feet of gross floor area (GFA) for commercial use, and 6,500 hotel rooms.
There are several key players in Singapore real estate markets. The ones trading on U.S. exchanges or through American Depository Receipts (ADRs) are: CapitaLand, City Developments, Singapore Land, and UOL Group.
The closest thing to a pure play on Singapore is Singapore Land (SINPY.PK)... or "Singland" as it's commonly called. Singland was the first property company to list on the Singapore stock exchange. It owns or has interests in 468,000 square meters of floor space in Singapore. The largest is Marina Square, a 92,000 square-meter space consisting of three hotels, shops, a supermarket, a food court, a cinema complex, and other features.
Singland's holdings are primarily office or retail-oriented. But the company also has stakes in two condominium projects with a combined 737 units scheduled for completion in 2010.
Singaporean real estate is booming, but I would be hesitant to place my money in a Singapore-only real estate play. I always prefer more diversified land holdings. That way, should a particular region slow, you're still positioned to do well.
CapitaLand (CLLDY.PK) is one such play. It's a globally focused blue-chip property company. CapitaLand owns commercial, residential, and retail space in 90 cities in 20 countries. It specializes in buying up assets and then placing them into real estate investment trusts (REITs). A perfect example is its CapitaRetail China Trust: a REIT that focuses strictly on Chinese retail space.
In Singapore, CapitaLand owns or has interests in 13 office properties, 14 retail properties, and 18 condominium properties worth a combined $5 billion. It also has $2 billion worth of property in China and $1.1 billion in Australia.
Perhaps the highest selling point of CapitaLand is the fact that the Singaporean government's investment branch, Temasek, owns 40% of the company. In a government-controlled country like Singapore, those who are government-backed tend to do better than others.
In no way am I recommending you go out and buy these stocks. Shares have outpaced property values, so there's plenty of optimism priced in already. But if you're interested in ways to play the growing prosperity in Asia, CapitaLand and Singland are well worth having a look at.
Stock market leadership... Fertilizer, Food, Heavy Construction, and Oil & Gas Equipment show strongest gains.
Stock market laggership... Department Stores, Home Furnishings, Finance REITs, and Newspapers post weakest returns.