Tag Archives: NTUC Income

Govt still studying reverse mortgage scheme

The Ministry of National Development (MND) is studying several countries that have established reverse mortgage plans, revealed National Development Minister Khaw Boon Wan and reported in the media.

He made the statement in Parliament in response to a query from Nee Soon GRC MP Lee Bee Wah.

“We are studying several countries with established reverse mortgage plans, and to learn from their experiences,” he said.

Notably, a reverse mortgage is a “loan taken up by a property owner using his property as collateral. However, unlike a traditional mortgage, the borrower need not make cash repayment during the loan tenure. He only needs to repay the loan with accumulated interest upon termination or death, typically from the sales proceeds”, said Mr Khaw.

This allows the property owner to unlock some equity, while still retaining the financial upside from any appreciation in property value, he added.

But the Minister noted that the reverse mortgage scheme also has its risks since it does not require periodic cash payments such that the loan grows with interest, and the owner has to bear property risks.

“If the market value of the property becomes less than the outstanding loan, the owner may have to sell the property to repay the loan.”

He also pointed out the NTUC Income offered reverse mortgages for HDB flats in 2006, but decided to stop offering the product due to low take-up (only 24 households signed up).

In fact, the countries being studied also posted low take-up rates for the product.

“As the reverse mortgage is a complex financial product, we need to study it carefully, consult our people, before we decide whether to introduce it as an additional option for our seniors.”

SPH-led venture puts in top bid for Clementi mall1

A joint venture involving Singapore Press Holdings (SPH) subsidiary Times Properties, NTUC FairPrice Co-Op and NTUC Income Insurance Co-op placed the top bid of $541.898 million for a mall being developed in Clementi Town Centre by the Housing & Development Board (HDB).

The top bid was 41.9 per cent above the next highest bid of $382 million, made by a joint venture involving Keppel Land’s fund management unit Alpha Investment Partners and Guthrie.

HDB is building only the core structure and facade of the mall, which it aims to hand over to the winning bidder in August next year. The new owner will then finish the project internally, with flexibility to plan the theme and layout.

Clementi Mall – the working name for the property – comprises two basement levels and five storeys above ground with a maximum net floor area of 18,000 square metres or 193,750 square feet of retail space.

An air-conditioned bus interchange will be on the first level and the third level will be connected to Clementi MRT Station.

The SPH-led consortium’s top bid works out to $2,797 per square foot (psf) based on the maximum allowable retail net floor area (NFA), says Stella Hoh, head of investments at Jones Lang LaSalle, which handled the tender exercise for the mall for HDB.

Including an estimated fitting-out cost of about $50 million, the unit price works out to $3,055 psf of retail NFA, she added.

Knight Frank managing director Danny Yeo, using a lower fit-out expenditure assumption of $40 million, says the top bid works out to about $3,003 psf of retail NFA.

‘To achieve a 5.5 per cent to 6 per cent net property yield that most investors would want today for such an asset, an average gross monthly rental of about $18 psf would be required. Right now the average rental at the best suburban malls is about $15-16 psf,’ he said.

‘If they get their tenant mix right, it would not be a problem to grow the mall’s rental level in a few years,’ he added.

When contacted, a spokesman for SPH said: ‘We intend to optimise the usage efficiency of the mall.’

He added that ‘the joint venture parties have evaluated the business case for the project and believe that it is a reasonable bid’, citing several factors, including the good catchment area.

Besides its location in Clementi Town, the property is in close proximity to the Holland, Bukit Timah and West Coast areas with key tertiary institutions such as the National University of Singapore, Ngee Ann Polytechnic, Singapore Polytechnic and UniSIM.

‘There are not many malls in the area. The property is in a high-traffic area due to integrated transport amenities and the business will provide solid and steady income stream to the JV parties,’ he added.

SPH is leading the joint venture with a 60 per cent stake, with FairPrice and Income taking 20 per cent each.

FairPrice will operate a supermarket and Income is also considering taking up some space in Clementi Mall, said SPH’s spokesman.

The other bidders at yesterday’s tender were Frasers Centrepoint Ltd ($352.1 million), the trustee of CapitaMall Trust, and Australia’s Lend Lease group.

Source : Business Times – 11 Nov 2009