cutting and running

[bad news]

This property group is taking a $60 million loss ( 40%)to exit the Singapore property market read on.

Singapore property sales to cut $90m from Allco debt pile
Washington
July 9, 2008

ALLCO Finance Group will post a book loss of at least $58 million on its listed Singapore property trust, it emerged yesterday, as Allco announced the sale of its stake in the business.

Allco said it would sell its 18 per cent stake in Allco Commercial REIT for about $80 million to the Singapore property developer Frasers Centrepoint. The price represents a $58 million shortfall on Allco's December 31 valuation of the real estate investment trust, which it put at $138.3 million

[chaos theory]

The trend for the housing price collapse is quite clear. It is starting from the top down with prime property taking the first wave of the correction. Allco walking away from 42% of its asset value of just 6 months ago is vindication of the Credit suisse report predicting of 40% drop.

Other indicators such as the Kuwait investment in Goodman shows that foreign investment is contracting rapidly.

The only demand at the momment seems to be local buyers upgrading from HDB in low end property. Once the price correction from the prime property flows down, these buyers will wish they had shown some patience.

[Chaotic thinking]

The trend for the housing price collapse is quite clear. It is starting from the top down with prime property taking the first wave of the correction. Allco walking away from 42% of its asset value of just 6 months ago is vindication of the Credit suisse report predicting of 40% drop.

Other indicators such as the Kuwait investment in Goodman shows that foreign investment is contracting rapidly.

The only demand at the momment seems to be local buyers upgrading from HDB in low end property. Once the price correction from the prime property flows down, these buyers will wish they had shown some patience.

Chaos Theory - hold your excitement for time being. If things were so predictable, you would not be wasting your time in this forum. Oil prices just need to collapse which could happen anytime and the whole scenario for the world economy, property investments will change overnight.That is how unpredictable and fluid things can be.

[chaos theory]

No excitement. I was just making a comment based on an actual fact that a foreign company had realised a 42% correction in its asset valuation that validated the CS report of a 40% correction.

The big companies like Allco and Kuwait Investment know what is happening and always act first cutting their losses and running which often leaves the man in the street holding even bigger losses.

[Needs brain check-up]

No excitement. I was just making a comment based on an actual fact that a foreign company had realised a 42% correction in its asset valuation that validated the CS report of a 40% correction.

The big companies like Allco and Kuwait Investment know what is happening and always act first cutting their losses and running which often leaves the man in the street holding even bigger losses.

So just because one company sold out at 42% discount(most probably due to some urgent need to redploy the funds)does it mean that ALL , HALf, ONE THIRD or even ONE QUARTER of properties will have their prices reduced by 42%?.

Chaos - please get your chaotic brain checked up.

[chaos theory]

Every crash needs to start somewhere. It is not a lite decision for a public company to write off 42% of an asset. These guys know what is happening.
Put that together with the Kuwait investment withdrawal and what we are seeing here is the beginning of a contraction of foriegn investment in Singapore property which is starting at the prime end.

This will have a downward flow on effect down the market. Foreign capital is critical but it will continue to disappear as:

1. Overvalued Assets depreciating
2. Net returns on property 2% while inflation rate is 7.5% sees the capital depreciating 5%+ pa.

Capital will flow to countries which can preserve value eg Government bonds in Australia are returning 7%. It doesnt get any safer than Govt bonds.

If MAS just increases the value of the SING dollar to fight inflation then that will makes its exports more expensive at a time when the world is moving into recession cycle would be a very risky strategy.

Therefore, the only way out I can see is to take the correction hit on the books of the property companies ( which is starting to happen) and increase interest rates to combat inflation.

Dont hold your breath waiting for the oil price to collapse because the global economy is going through structural change as India and China come on line. Here is a sobering thought. At current global per capita consumption rates we have 50 years left of oil.

If China and India increase their per capita consumption to the same level as USA then we have 5 years left of oil reserves. Get the picture. Oil can only go up in price long term.

[get your checked]

No excitement. I was just making a comment based on an actual fact that a foreign company had realised a 42% correction in its asset valuation that validated the CS report of a 40% correction.

The big companies like Allco and Kuwait Investment know what is happening and always act first cutting their losses and running which often leaves the man in the street holding even bigger losses.

So just because one company sold out at 42% discount(most probably due to some urgent need to redploy the funds)does it mean that ALL , HALf, ONE THIRD or even ONE QUARTER of properties will have their prices reduced by 42%?.

Chaos - please get your chaotic brain checked up.

What makes you think it was a forced liquidation you idiot.

Oh, your vested interest.  Unlucky.

[chaos theory]

and if you think this will all turn around overnight because the oil price dips then read this....

Sub-prime will take 1-2 years to sort out: Wee
Posted on July 8, 2008 by lushhomeonline
UOB head calls it the worst crisis he has seen in 48 years

FOR those caught up in the sub-prime crisis, the light at the end of the tunnel is going to take one to two years to emerge, according to United Overseas Bank (UOB) chairman Wee Cho Yaw.

Mr Wee spoke at the start of the National University of Singapore (NUS) Commencement 2008 yesterday, during which he received an Honorary Doctor of Letters degree from the university.

The honorary title was conferred in recognition of his accomplishments in the banking, education and community leadership areas.

Mr Wee had strong words about the current financial crisis and the myopic nature of the players in the financial industry.

‘During these past 48 years, I have seen many economic crises, but I believe that this current financial crisis is the worst I have encountered.

‘As I see it, the crux of the problem lies in the transformation of the financial industry and a corporate culture that encourages financial players to focus on short-term gain.

‘I am very concerned about the current situation. I hope I am wrong, but my view is that this crisis will take one to two years to stabilise,’ he said.

Mr Wee also pointed out the ambiguous extent of the fallout from exotic lending instruments.

‘According to media reports, financial institutions have written down close to US$400 billion so far. But this is what frightens me most - no one can tell me how much more will be written off because no one really knows the size of the collaterised debt obligations (CDO) market before its collapse,’ he said.

According to him, a tighter rein is needed to ensure recovery.

‘The liquidity crunch can only be resolved by concerted efforts of the world’s major central banks.

‘Regulators around the world will also need to take steps to ensure close supervision of financial institutions and the exotic trades that have sprung up over the past decade,’ he said.

Yesterday was the first of a series of commencement ceremonies being held for NUS’s graduating class of 2008, which will continue until July 15.

It was presided over by the university’s chancellor, President S R Nathan, and the commencement address was given by Professor Shih Choon Fong, the president of NUS.

Also present was Dr Ng Eng Hen, Minister for Education.

Source : Business Times - 8 Jul 2008

[CEO JP Morgan]

JPMorgan's Dimon says credit crisis could worsen 
 
 
Wed, Jul 09, 2008
Reuters 
       
 
 
ARLINGTON, US - JPMORGAN Chase Chief Executive Jamie Dimon said some problems in the credit markets have been resolved, but that does not mean market conditions will not deteriorate further.


'I do think we have some very serious issues to face,' Mr Dimon said on Tuesday at a mortgage lending forum sponsored by the Federal Deposit Insurance. 'Things could actually get worse.'

Wall Street investment banks should not be considered too big to fail, he said, adding the United States regulatory response to the credit crisis has been appropriate.

 

[kaki11]

Don't confuse the Aussie part of Allco, which is in the total mire and partly in administration, with the Singapore listed REIT.
FCL's purchase of a 18% stake in the REIT (to include a renaming of Allco) is positive in that it affirms the grip of Temasek linked companies on the SG property market (don't want any foreigners screwing up the SG market do we?).
For those anticipating the consolidation of the SG REIT market, this was expected. As for the transaction value's discount to the REIT's NAV - this is pretty standard in the sector and in fact a small premium to the depressed stockmarket value was recorded.

[chaos theory]

The point here is that a foreign investment company, Allco is exiting the Singapore property market at a 42% discount to its value in December 31.

I am not sure how anyone can put a positive spin on that, but hey its message board, so go ahead. We are all eyes.

[kaki11]

Allco Financial Group in Australia was carrying its 17% interest in Allco REIT as an equity accounted investment despite having less than a 20% interest. It therefore recorded the value of its investment in Allco REIT in its interim (December) balance sheet at cost, plus changes in net profit. As Allco REIT had not itself lost money, AFG did not have to recognise any impairment to its investment despite the loss in value of the stake.
AFG also decided to equity account some other investments, previously held as assets for sale, possibly to avoid such assets needing to be recorded at fair (market) value.
AFG supplied mark to market calculation for its investment in Allco REIT but this value is not brought on balance sheet. AFG and smart investors were well aware that the value of the Allco REIT stake was $73m at 31 Dec 07 and not the balance sheet value of $138m.
While AFG must now record a loss on disposal, the "damage to value" happened way back and compared to the loss of $58m now, they would have lost slightly more by selling at 31 December market value.
Agree it's not great news, but this is office property not the residential sector with which most board readers are concerned. Also some Aussie REIT managers may be without jobs shortly, which might drive down rentals in Singapore.
A key driver for the deal is possibly FCL's desire to reverse into Allco and obtain a stockmarket listing for its own REIT without testing the appetite of the IPO market - which is probably nil at present for a transaction priced at the value FCL would like to see. Alternatively, it could be seen that a TLC is bottom fishing for assets in the belief that conditions will not further deteriorate.

[half full]

I am not sure how anyone can put a positive spin on that, but hey its message board, so go ahead.

Fraser Centrepoint just spent SGD 80m on Allco's stake. Are they expecting the crash you're predicting?

[Pink slip for Chaos]

I am not sure how anyone can put a positive spin on that, but hey its message board, so go ahead.

Fraser Centrepoint just spent SGD 80m on Allco's stake. Are they expecting the crash you're predicting?

"Chaos Theory" is desperately seizing on any piece of news that could be made to sound negative  that  would make him feel good after having missed the boat.

Well by the time prices do crash to a level he can afford a condo, he will get a pink slip and be heading home for good. So near yet so far.

[chaos theory]

Fraser Centrepoint just spent SGD 80m on Allco's stake. Are they expecting the crash you're predicting

Yes Fraser Centrepoint were predicting the crash, thats why they bought the shares at 42% discount to to their December valuation.

I call a 42% discount a crash. There is no doubt that Allco exited this investment because it was a stress sale.

But if you look around thats the market at the momment at the top end. Everyone is retiring debt and moving to cash.