Daily Archives: 3 Sep 2009

Cluster homes aren’t as large as buyers think

Posted on 3 Sep 2009 | Comments Off on Cluster homes aren’t as large as buyers think

THE current property boom may highlight a hidden fact about cluster homes that escapes the attention of many buyers and which agents and developers do not highlight.

The area sold for cluster landed property is very different from that used in condominiums. In condominiums, if you buy 1,500 sq ft, you get 1,500 sq ft. In cluster landed property, if you buy, for example, 5,000 sq ft of built-up area, you will not get 5,000 sq ft because the 5,000 sq ft includes a lot of ‘void area’ or ‘air space’ which is unusable.

Such air space can comprise as much as 20 per cent of the total area.

Many agents are either genuinely ignorant of this or will not tell buyers unless they are asked.

The problem arises from the ‘box up’ method of calculating floor space. A cluster landed property is typically built upwards with four or five levels (including basement and attic). In the box up method, developers take the largest floor area and multiply it by the number of levels, including one for the roof. Continue reading →

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Reits bank on placement, rights issues for now

Posted on 3 Sep 2009 | Comments Off on Reits bank on placement, rights issues for now

BANKS may have loosened their purse strings but many real estate investment trusts (Reits) here are sticking to rights issues or private placements for funds – despite their dilutive effects. Since June, another five Reits have conducted such exercises to raise more than $1.23 billion. Investors were not too pleased in some cases and sold out, driving unit prices down. Why would some Reits rather incur the wrath of unitholders than turn to banks?

For Reits looking to trim gearing, there are few other fund raising options. While credit conditions have certainly improved, ‘leverage’ remains a dirty word and many would prefer to repay debt than to refinance or borrow more. Frasers Commercial Trust was one which made a cash call in June for this. ‘Peer pressure’ keeps Reits particularly disciplined. With many paring down debt in the last few months, those with relatively higher leverage ratios would start drawing the wrong kind of attention from watchful analysts and investors. Just two out of 13 Reits have gearing levels exceeding 40 per cent, a CIMB report this week shows. While refinancing may have become easier, there is no saying if credit might tighten again.

Banks are still exposed to the recession – the default rate on commercial mortgages held by US banks, for instance, more than doubled in the second quarter from a Continue reading →

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