Is a commercial real estate bust in the US inevitable?

The government hopes to restore lending via cheap financing. Skeptics say programs aimed at restarting the market haven't worked yet.

Bank lending has slowed, but securities issuance has fallen off a cliff.

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NEW YORK - Bailout watchdogs have something new to growl about: the lack of financing in the commercial real estate markets.

Elizabeth Warren's Congressional Oversight Panel is scheduled to hold a hearing Thursday morning on the effectiveness of federal plans to restart the markets for commercial and industrial loans.

The five-member panel, which reports monthly on Treasury's Troubled Asset Relief Program, is scheduled to hear testimony from witnesses including Rep. Carolyn Maloney, D-N.Y., the chairman of Congress' Joint Economic Committee, and three banking executives.

The panel comes as financing for commercial real estate projects has slowed to a trickle with the sharp downturn in the economy. Meanwhile, a huge supply of commercial loans is coming due for refinancing, adding to potential stress on banks and other lenders.

The government has responded with programs such as the Federal Reserve's Term Asset-Backed Loan Facility, which aims to spur asset-backed lending. But there are few signs that these efforts are succeeding in restoring the health of markets that collapsed in 2007 after years of breakneck growth.

Developers say they are confident the administration and Congress understand that they need more help.

"There is a lot of recognition that commercial real estate is a core component of this economy," said Adam Ifshin, president of developer DLC Management in Tarrytown, N.Y. "There's a chance here to help this situation before it gets any worse."

Bank lending for commercial projects in the first half of 2009 is on track to hit about $25 billion, according to Matt Anderson at research firm Foresight Analytics in Oakland, Calif.

By way of comparison, commercial loan origination was at pace of $33 billion a quarter at the peak of the market.

Still, loan volume looks positively healthy next to the action in the commercial mortgage-backed securities (CMBS) market, the packaging of loans into bundles sold to investors.

There has been no U.S. issuance of CMBS this year -- just two years after bond issuers sold a record $221 billion's worth of those types of securities, according to data from research firm Dealogic.

Meanwhile, Anderson said that about $178 billion in commercial mortgages are due to mature in 2009. That would be the biggest-ever slug of refinancing demands ever to hit this market.

"We're going to have to get some liquidity in these markets before we see a wave of bankruptcies," said Bob Toothaker, who helps run a property management firm in Indiana and is chairman of the Realtors Commercial Alliance.

In response, the government has rolled out plans such as TALF and the Treasury's Public-Private Investment Program, which seeks to remove troubled assets from bank balance sheets.

Investors have had particularly high hopes for TALF, which provides financing to holders of asset-backed securities. The Fed rolled out TALF in November to bolster the markets for installment loans like student and auto borrowings.

The Fed has since extended the program to CMBS -- and tailored the terms to the industry's liking, by making previously issued securities eligible and extending the terms of TALF financing to five years from three.

But would-be users of both TALF and PPIP remain leery of interacting with the government, which has changed the terms of previous programs and generally acted capriciously in the eyes of some investors.

And while a five-year loan is better than a three-year one, some real estate investors would like to get 10-year financing. The Fed is reluctant to commit to such long-term loans with inflation fears growing.

With financing still absent, one strategy being pursued by many lenders is to extend maturing loans by a year for borrowers who are current in their payments. Ifshin calls this a sensible approach in many cases, and one that limits the damage to the economy from the locked-up credit markets.

But others warn that this tactic, dubbed "extend and pretend" by skeptics, will only add to the backlog of mortgages needing to be refinanced later - and put off the reckoning from hundreds of billions of dollars of loans written in the middle of this decade -- a time when underwriting standards were poor.

"What the lenders are saying is we all hope things will be better a year from now," said Joel Ross, a longtime real estate investor who runs the Citadel Realty investment bank in New York. "But prices are down 25%-40% from 2007, and those prices aren't coming back."

Source: Fortune 28 May 2009

Malaysia's E&O posts loss on lower property contribution

It seeks to raise RM500mil to fund new launches, reduce gearing

KUALA LUMPUR: Niche property developer Eastern & Oriental Bhd (E&O) has posted a RM44.6mil net loss for its fourth quarter ended March 31 compared with a net profit of RM9.27mil a year ago.

For the full year, the group saw a RM37.7mil net loss versus a RM128.9mil net profit in FY08, while revenue also fell to RM302.6mil against RM516.4mil previously.

A lower contribution from the property division, as well as provision for impairment loss on investments of RM10.24mil and loss of RM19.976mil on disposal of 50% stake and preference shares in associate Puncak Madu Sdn Bhd to Selangor Properties Bhd were the reasons for the lower full-year earnings, the group said in a statement. The property division accounted for more than 80% of total revenue in FY09.

While the company slipped into the red in FY09, it is looking at strengthening its balance sheet and reducing its gearing with a rights issue that is expected to raise RM200mil.

E&O executive director Eric Chan told StarBiz the severity and suddenness of the economic downturn in 2008 necessitated “pre-emptive balance sheet management strategies”.

E&O announced yesterday a renounceable rights issue of irredeemable convertible secured loan stocks (ICSLS) 2009/2019 on the basis of one new ICSLS for every two shares held. The nominal value 10-year ICSLS of 65 sen each come with a coupon of 8% per annum.

E&O has the option to call for conversion of the ICSLS into new E&O shares after two years of issuance and if its share price exceeds RM1.

E&O’s share price has been penalised since its merger with and delisting in July/August last year of E&O Property Development Bhd which left it with high gearing.

Chan said the rights issue was only part of a two-pronged approach to address the gearing concerns and funding needs.

In total, the group aims to raise RM500mil. In addition to the RM200mil from the ICSLS issue, E&O is raising another RM300mil from the disposal of non-strategic landbank.

“This programme started in January. To-date, we have raised just under RM100mil from our asset disposal including from the unwinding of the joint venture with Selangor Properties,” Chan said.

At present, E&O’s gearing is high at 0.8 times but the group’s loans are not due immediately having been extended to 2014.

According to Chan, with the RM200mil from the ICSLS scheme, E&O’s gearing falls to 0.46 times.

A further RM300mil from the disposal of non-strategic landbanks would bring gearing to a low 0.16 times.

Together with new property launches that would generate even more cashflow, gearing would be slashed to a negligible level in two to three years, said Chan.

Source: The Star 27 May 2009

Damansara Perdana to see new wave of development

MK LAND Holdings Bhd (8893) is planning a new wave of development at its integrated Damansara Perdana township in Selangor and this includes the launch of more than RM5 billion worth of properties over the next decade.

While the company is targeting purpose-built buildings to enhance its margins, its focus for the next 10 years will be to develop Armanee Terrace Condominium and Rafflesia for RM3.5 billion, its chief operating officer for central region, Fatimah Wahab, said.

Launches at Damansara Perdana have been slow since 2007, as MK Land was consolidating its position to focus on other key aspects of its operations.

Since July 2008, a repositioning was carried out with the view to bring the company to a better strategic and financial position to meet the challenges ahead.
The township, which is 44 per cent developed, has accumulated sales in excess of RM2 billion since its launch in 1996.

Fatimah told Business Times that she is optimistic that the luxurious Armanee Terrace and Rafflesia projects, which are supported by a high-end integrated security system and surrounded by greenery, will be the main driving force for growth at Damansara Perdana.

The township has received encouraging response from home owners and investors due to its offerings and location, being in the prime area of the Damansara Perdana enclave amid a primary forest - best of the best location in Damansara Perdana, Fatimah said. 

The Balinese-inspired Armanee Terrace features homes with sky gardens and broadband-ready features. It is the first high-rise development in Damansara Perdana with a garden in every unit. 

Rafflesia is MK Land's first landed residential property at the township. 

"We did a market survey on what people want and upon conclusion, learnt that they are looking for properties like Armanee Terrace and Rafflesia which has, among others, high returns on investment," Fatimah said. 

She added that properties in Damansara Perdana would usually appreciate by 25-30 per cent upon completion, making them appealing to buyers.

Armanee Terrace will feature several condominiums in a horseshoe offering various designs of exclusive units. 

The first block has been constructed and handed over to buyers in 2007, while the second block, comprising 518 units, is under construction and being offered for sale.

Fatimah said the last two or three blocks may end up as boutique developments or duplexes where it will offer less units but with bigger built-ups. 

On Rafflesia, MK Land will offer a total of 460 units of triple-storey semi-detached modern homes. 

It launched the first batch of 56 houses, priced from RM1.4 million each in 2007 with 60 per cent sold. 

Fatimah said the company will launch 60 new units in July, each priced from RM1.8 million.

Source:  Business Times 26 May 2009

YNH plans condo project atop Genting Highlands

PETALING JAYA: A rare piece of land on Genting Highlands has been snapped up by YNH Property Bhd which will build holiday condominiums amid the rarefied air there.

It is believed most of the land on the highlands is owned by the Genting group.

YNH itself was surprised that there was land available and offered by a company. It completed the land purchase at the end of last year but did not announce it as the sum involved is not substantial relative to its equity.

YNH paid RM16mil for 95 acres which an official described as being on the same level as the casino. “If it’s on the Awana or Gohtong Jaya level, we wouldn’t have bought it,” a company official told StarBiz yesterday.

The Awana hotel and resort and Gohtong Jaya township are some distance below the peak of Genting Highlands and therefore, less cooling. The land that YNH bought is near the top where the temperature is around 15 to 16 degrees Celsius, he said.

Although the land YNH bought is sizeable, only 30% to 40% is suitable for development as the slope on the rest is too steep. “We’ll use the rest of the land for a golf course and jungle trekking,” the official said.

As for the development portion of the land, the official said the company estimated the gross development value (GDV) at up to RM2bil over 15 to 20 years.

It is working on a GDV of about RM50mil an acre, which it considers achievable as high-end condominium projects in the suburbs of Kuala Lumpur can have a GDV of about RM100mil an acre.

The official said the land had been converted from agricultural use to that of mixed property development. The company is preparing layout and building plans for approval from the Pahang state authorities, and hopes to launch sales next year.

Beside the cool weather, a feature that led YNH to buy the land is that there is good road infrastructure that was built by the Genting group. The land YNH bought will also be accessible by the main Genting road.

On YNH’s other projects, the official said the retail area of Kiara 163 had been sold for a total of RM200mil. Sales for the apartment units of this project in the Mont’ Kiara area of Kuala Lumpur have not been launched yet.

Meanwhile, it has also sold the retail units in the first phase of Menara YNH, near Shangri-La Hotel in Kuala Lumpur. The units in the retail podium were sold for RM300mil and the company expects to start construction of that in three months’ time.

Analysts, however, were disappointed at a recent briefing when they were informed of a further delay in the sale of one of the twin towers of Menara YNH to Kuwait Finance House. The sale and purchase agreement for that might not be signed till next year, they were told.

Source: The Star 26 May 2009

Malaysian Resources Plans 1.8 Billion-Ringgit Office Projects

Malaysian Resources Corp., developer of the nation’s biggest transport hub, will build two office projects valued at 1.8 billion ringgit ($517 million), gauging that property markets will revive as the global recession eases.

Malaysia’s biggest office supplier expects to sign up a foreign oil company to anchor the 1 billion-ringgit tower at the 348 Sentral project in Kuala Lumpur by taking up as much as 60 percent of the building’s office space, Malaysian Resources Managing Director Shahril Ridza Ridzuan said. The project also includes serviced apartments.

“The global recession is not going to last forever,” Shahril said in a May 22 interview. “It’s a good time to start building now. Materials prices are at a fairly low ebb of the cycle.”

The company, whose shares surged 90 percent since Jan. 1, plans to return toprofit this year and expects to expand its order book by 50 percent to 3 billion ringgit as a government stimulus package spurs domestic demand. The two office projects in Kuala Lumpur Sentral, an urban center built around Malaysia’s largest bus and rail hub, will generate an average of 600 million ringgit a year from 2010, based on the project’s total expected revenue.

The 348 Sentral development covers 1.1 million square feet (102,000 square meters) of office space. The second office project, worth 800 million ringgit, is about half the size. The Kuala Lumpur Sentral development is already home to the Hilton and Le Meridien hotels. A St Regis hotel is also planned for the area.

Shares Surging

“Once we have our office deals signed up, then that seals our pipeline for the next three years in term of revenue and profits,” Shahril said. “When you are willing to take the view that we’re going to come out of this, a three-year timeframe is well within striking distance of putting your office on the market.”

Shares of Malaysian Resources, controlled by the country’s biggest pension fund, are the fourth-biggest gainer on the Kuala Lumpur Construction Indexthis year. The stock has outpaced the benchmark Composite Index’s 20 percent gain.

Loans approved for buying Malaysian residential property surged 49 percent in March from a month earlier, the second monthly gain, according to central bank data, adding to signs the industry may be rebounding.

Malaysia Resources expects to win 1 billion ringgit of new orders this year, with 30 percent of that coming from projects to clean up the country’s rivers, Shahril said. The company won two building contracts valued at 239 million ringgit over the past two months, its first construction jobs secured this year, increasing its order book to 2 billion ringgit, Shahril said.

New Projects

One of the projects includes upgrading road networks in Kuala Lumpur Sentral, funded through the government’s stimulus package, he said. The government has unveiled 67 billion ringgit of planned spending to help revive economic growth.

“We’ve definitely turned a corner from the fourth quarter last year,” he said. “The rest of the quarter will show business strength.”

The construction division is leading the turnaround for Malaysian Resources, after surging building material prices and the economic slowdown pushed the company to losses in 2008.

On May 6, RHB Research Institute Sdn. raised its profit forecast for Malaysian Resources by 34 percent for 2010 and 36 percent for 2011 to reflect higher construction earnings. Malaysian Resources reported a 39.3 million-ringgit loss in the fourth quarter of last year as sales slid and building materials including steel surged.

Source: Bloomberg 25 May 2009

Relaxed rules set to boost Malaysia My Second Home scheme

The Government’s move in February to further liberalise the Malaysia My Second Home (MM2H) programme has been well received by foreigners and industry players, especially MM2H licence operators.

Currently, there are about 200 such operators nationwide.

Several amendments to the MM2H criteria were made by the authorities, including the lowering of entry age (below 50) as well as employment opportunities for foreigners in selective industries.

MM2H Agent Association president Kirby Lim said the programme had undergone significant improvement every year since it took over from the Silver Hair scheme, which began in 2002.

A file picture shows John Jones, a retired firefighter, and his wife Samantha who have moved to Malaysia under the Malaysia My Second Home programme. MM2H has so far attracted about 12,000 participants

“It shows that the Government, particularly the Tourism Ministry, is fully aware of the importance of MM2H as a key driver to economic growth, bringing in billions of ringgit, which is why it (MM2H) has been promoted heavily as a national agenda,” he told StarBiz.

Lim said while there might be some “hiccups” along the way, generally, most players or those who benefited from the programme were satisfied with the progress made.

“Of course, more can be done and there will always be issues that need to be ironed out, but we are making good progress and the association is in close contact with top officials from the Government, especially the Tourism Ministry,” he said.

Lim said the association would convey the concerns of the licence operators and MM2H participants to the relevant authorities.

It would also keep them abreast on the effectiveness of the policies in attracting foreigners under MM2H, and the changes needed to improve the logistics and marketing and promotions undertaken currently.

On the success of the MM2H so far, Lim said despite not being well marketed in its early years, the programme had been fairly successful.

Kirby Lim ... Despite not being well marketed in its early years, MM2H has been fairly successful

“However, the Government has recently been very aggressive in promoting it and under the stewardship of Tourism Minister Datuk Seri Ng Yen Yen, we believe the programme will gain significant momentum,” he said.

Currently, there are about 12,000 MM2H participants from countries such as China, South Korea, Britain, Bangladesh and certain parts of Europe and the Middle East.

Lim said the Tourism Ministry had recently embarked on a blitz to promote Malaysia, particularly in China and Japan, as a favoured destination to visit as well as to stay and retire (under the MM2H).

“We understand the Tourism Ministry is now looking to promote MM2H in other countries like Canada through exhibitions and other promotional activities,” he said.

Currently, Ng is in Britain to woo more tourists to Malaysian shores. She is targeting at least 10,000 Britons under MM2H. So far, 1,551 Britons have signed up for the programme.

On Malaysia’s advantage in attracting foreigners compared with other countries in the region, Lim said: “We are not trying to be arrogant but Malaysia offers foreigners quite a high standard of living at a relatively low cost, coupled with good infrastructure and a politically stable environment where English is widely spoken.”

Lim said foreigners also had the opportunity to own properties and would not be subjected to real estate property gains tax should they sell their assets.

“Moreover, the Malaysian hospitality is second to none as many foreigners have remarked that the locals are extremely warm and friendly,” he noted.

Lim is optimistic that the number of MM2H applicants will be higher this year.

“This is following the liberalisation of the entry level as well as the strong promotions made by the Tourism Ministry, Immigration and Home Affairs Ministry and other government departments,” he said.

Source: The Star 25 May 2009

New CEO at the helm for Kuala Lumpur Pavilion

Kuala Lumpur Pavilion Sdn Bhd has appointed Joyce Yap as its chief executive officer for retail from May 1. 

Yap joined the company which manages lifestyle mall Pavilion Kuala Lumpur in May 2002 as director of leasing and marketing after which she was promoted to acting chief executive officer for retail. 

She has more than 20 years of retail, sales and marketing experience covering among others, the marketing, sales and management of properties ranging from residential to shopping centres. 

Upon graduating in business studies in London, Yap stayed on and embarked on her career with the international trade division of the Gestetner Group in 1979. Since then, she has taken on senior sales & marketing and property management roles in large corporations such as Lion Properties Sdn Bhd, MBF Properties Sdn Bhd, General Corporation Berhad and Berjaya Ditan Sdn Bhd.

As a testament to her achievement and contribution, Yap was awarded Winner of Distinction of Distinguished Lifetime Contribution to Management of Shopping Centres in 2008. 

She is also a founding member of the Council of Asean Shopping Centres, President of the Association for Shopping and High-rise Complex Malaysia (PPKM), vice president of FIABCI (International Real Estate Federation) Malaysia as well as a committee member of the Malaysian Association of Convention and Exhibitions, an active think tank committee of the Malaysian and Kuala Lumpur Tourism councils.

Source: The Edge Magazine 22 May 2009

S P Setia’s Setia Eco Gardens, Pavilion clinch Fiabci awards

S P Setia Bhd’s Setia Eco Gardens project in Johor and Pavilion Kuala Lumpur have emerged winners in the Fiabci Prix d’Excellence Awards 2009 international property awards. Fiabci is the French acronym for the International Real Estate Federation.

S P Setia won in the Master Plan category while Pavilion KL won in the Retail category. Fiabci International announced the winning projects in a press release on May 21.

The awards presentation ceremony was to be held during the 60th Fiabci World Congress in Beijing. However, the entire Congress was called off three days before it was to due to begin on May 19 due to concerns over the spread of the A (H1N1) influenza.

This is S P Setia’s second win as it won in the same category in 2007 for its Setia Eco Park residential development in Shah Alam. The Group has been ranked the nation’s top property developer in The Edge Top Property Developers Awards for the past four years.

S P Setia president and CEO Tan Sri Liew Kee Sin attributed the win to the Group’s continous efforts in striving for excellence. “We are heartened that our efforts over the years to differentiate ourselves as the developer of choice have been rewarded with such a well-respected award in the property industry,” said Liew who is currently in Beijing together with about 100 other delegates who were already in Beijing when the Congress was called off including Lisa Kurrass, the new Fiabci World president.

“Setia Eco Gardens was developed in line with the Eco Concept due to the existing environment and the intention is to make the Eco concept available to both high-end customers (lavish eco villas priced from RM800,000) and the mass market (eco homes priced from RM200,000),” added Liew of the homes in the 948-acre township development.

Among the common features of the Eco homes and villas are energy conservation features such as rainwater harvesting, water recycling and solar panels.
The provision for green zones in the development master plan includes a 18.5-acre Eco park, a 16-acre rainforest, smaller landscaped parks as well as rivers, lakes and canals.

Meanwhile, Joyce Yap, CEO-Retail of Kuala Lumpur Pavilion Sdn Bhd said winning the award in the Retail category could mean that the lifestyle mall has led the country’s retail industry to new levels particularly in the growth of retail brands in Malaysia. It has a total of 450 tenants across 1.3 million sq ft net of retail space and has received about 48 million visitors since opening in 2007.

Residential project Lake Edge Puchong by YTL Land & Development Bhd was runner-up in the Master Plan category.Other runners-up from Malaysia was YTL's condominium project The Maple at Sentul Park which came in second runner-up in the Residential category while the 1 Sentral office building in KL Sentral by Malaysian Resources Corporation Bhd and G Hotel in Penang were first runners-up in the Office and Hotel categories respectively.

Orchard Scotts and Newton Suites from Singapore took the top two spots respectively in the Residential category while St Regis Singapore was the winner in the Hotel category.

Last year, Mulpha International Bhd's Pinggiran Bayou Village Homes which is part of its Leisure Farm Resort development in Johor was tops in the Residential category while four other Malaysian developers were runners-up in various categories. 

This year’s awards saw several first-time winners from China, India and Russia. The two China projects that won were Huaming Model Town in the Rural & Suburban category and the Nanjing Riverbank Family affordable housing project which won a special award called the Beijing Congress Award. Russia’s tallest building the Federation Tower won in the Office category.

Source: The Edge Magazine 21 May 2009

Mubadala to invest $1.8bn in Malaysia property JV

A luxury condominium is shown standing in front of Kuala Lumpur’s iconic Petronas Twin Towers in this April 28, 2009 file photo. Malaysia’s property market continues to attract investors such as Abu Dhabi’s Mubadala Development Co.  Mubadala Development Co, the investment arm of the Abu Dhabi government, will invest about $1.8 billion (Dh6.6 billion) in a property development project in Malaysia, a local newspaper reported on Saturday. The project involves the construction of hotels and villas on a 1,200-hectare site in Terengganu state on the east coast of the Southeast Asian country, the Edge Weekly reported, citing Shahrol Azral Ibrahim Halmi, CEO of the Terengganu Investment Authority (TIA). Mubadala will invest the amount over seven years while TIA will buy the land from the state government and inject it into the joint venture, said Shahrol. TIA has been set up and labelled as Malaysia's first sovereign wealth fund and is modelled on similar concepts in the Gulf with the aim of investing oil revenues for the long term. The Malaysian fund this week said it is to sell 5 billion ringgit ($1.43 billion) of bonds guaranteed by the federal government. Shahrol of TIA said the fund aims to raise another 6 billion ringgit later this year by forward selling the oil royalty to be received by the oil-producing state over the next few years. Mubadala, which manages over $10 billion in assets, is also developing a $600 million city in a planned economic zone in Malaysia's southern Johor state, near Singapore. Source: Reuters 23 May 2009

Key investor factors in Dubai real estate

Dubai's property sector has gone from boom to bust in less than nine months. Motionless cranes in desolate building sites are a stark reminder of the seaside emirate's dramatic property bust.

The following are issues investors are watching closely:

HOW LONG WILL DUBAI'S PROPERTY SLUMP LAST? Property prices in Dubai soared after the emirate opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

But the bubble has burst, developers are cancelling or delaying projects and thousands of jobs are being cut.

Slumping demand would drag residential real estate prices down 50-60 percent this year from 2008 peaks, EFG-Hermes said in a research note this month. The market is unlikely to begin to recover before some time in 2011, it said.

GREATER CLARITY ON PROPERTY LEGISLATION ? The United Arab Emirates said earlier this month it would grant expatriate homeowners multiple-entry visit visas allowing them to stay six months at a time if they own properties worth at least 1 million dirhams ($272,000).

Property buyers have been waiting for legislation for years to clarify their residency rights.

But more clarity is needed as it remains unclear how expatriate buyers living in the emirate will be affected by the new resolution. It is also unclear whether the 1 million dirham tag is at the time of purchase or the current selling price.

Many units are now selling for less than 1 million dirhams, according to real estate brokers.

WHO IS GETTING GOVERNMENT CASH ?

Dubai sold $10 billion of bonds to the United Arab Emirates central bank in February to raise funds to support state-linked companies suffering from the crisis. But authorities have said they do not intend to reveal the recipients.

Nakheel, the state-owned developer of the emirate's palm-shaped islands, said it is receiving funds.

Emaar Properties EMAR.DU, the largest-listed developer, said it had no need for financial support.

Nasser al-Shaikh, former Dubai Department of Finance director-general, said key beneficiaries were real estate companies in which the Dubai government holds some ownership states.

Source: Reuters 20 May 2009

Donald Trump on His Business Operations

Donald Trump described his business operations in a December 2007 deposition as part of his legal case against author Timothy L. O'Brien. Mr. O'Brien's book, "TrumpNation: The Art of Being the Donald," cited anonymous sources close to Mr. Trump that his net worth was around $250 million, not the many billions that Mr. Trump claims. Mr. Trump sued Mr. O'Brien and his publisher in Camden, N.J., state court claiming defamation and lost business.

Trump on Trump: Testimony Offers Glimpse of How He Values His Empire

Here are some additional details that emerged from the case:

Trump on Brand Value
The 62-year-old developer told Mr. O'Brien that he was worth $6 billion. But it emerged during the deposition that Mr. Trump had told his bankers and New Jersey Casino officials that he was worth around $3.6 billion. This all occurred around the same time period in 2004 and 2005.

Mr. Trump said the $3.6 billion figure that he told the banks didn't "include anything having to do with branding," he said in the deposition. "There are those that say the value of the brand is very, very valuable," he said. Asked if he keeps his net worth documents nearby, he said: "I do keep one actually on my desk, hidden." In an interview Sunday, Mr. Trump said his net worth is now above $5 billion, not including the brand value.

Trump on Being 'Sold-Out'
Mr. Trump told The Wall Street Journal in November 2007 that he sold all 1,282 units at his Las Vegas condo project that he owns with casino and hand-truck magnate Phil Ruffin. There were $1.3 billion in proceeds coming from that project, he told The Journal and other news outlets, including CNBC.

In the deposition one month later, he said he had deposits for around 900 units. Mr. O'Brien's lawyer, Andrew Ceresney, asked whether Mr. Trump was caught in a lie?

"That's not a lie," Mr. Trump said. He said that he was holding on to the rest of the units as an investment. "I'm a buyer also, essentially."

On Sales per Square Foot
At the condo and hotel project in Las Vegas, Mr. Trump had told reporters on several occasions that the project sold for $1,300 a square foot on average.

At the deposition, the lawyer, Mr. Ceresney, asks if that sales figure is true.

"For some units it is, yes. We got some -- we sold -- we got 1,300 -- I averaged on some units $1,300 a foot," Mr. Trump said.

Mr. Ceresney then asked: "Do you understand the concept of an average, Mr. Trump?

Mr. Trump's lawyer objected to the form of the question. Then Mr. Trump said: "Well, I'm saying on certain units I averaged $1,300 a foot."

Trump on Accounting
Asked if he understands the concept behind GAAP, or generally accepted accounting principles, the set of rules used by businesses, he said, "No. I'm not an accountant."

At one point a lawyer asked Mr. Trump: "Are you familiar with the concept of net present value?" Net present value is a key measure used in real estate to estimate the worth of an asset in today's dollars based on its future cash flow and the time-value of money.

"The concept of net present value to me would be the value of the land currently after debt," Mr. Trump said. He added, "Well, to me, the word 'net' is an interesting word. It's really -- the word 'value' is the important word. If you have an asset that you can do other things with but you don't choose to do them -- I haven't chosen to do that."

In an interview Sunday, Mr. Trump says that he stands by his answers and that he leaves financial reporting to his accounts.

On Trump Tower
One of Mr. Trump's most prominent buildings is Trump Tower, the black glass skyscraper he built in the 1980s on Fifth Avenue and 57th Street in Manhattan.

According to the deposition, in 2006 a Forbes magazine reporter calculated that Mr. Trump's portion of the tower was worth $288 million. To do that, the reporter estimated the building generated $17.5 million of cash flow a year. The deposition shows, according to Mr. Trump's internal financial statements presented by Mr. O'Brien's lawyer that the building had a net loss of $587,730 that year. And including depreciation, amortization and interest expenses, the financial statements showed the operating income was about $4 million.

Asked if he knows how to calculate operating income, he said: "I don't do that. I really don't." Mr. Trump said in the interview Sunday that he stands by his answers and that he leaves financial reporting to his accounts. With regard to Trump Tower, he says a recent lease he signed with luxury retailer Gucci is one of the most lucrative in the world.

In the deposition, he also pointed out in the discussion of Trump Tower's income statement that the statement didn't take into account that he occupies two and half floors there for his headquarters. "I pay no rent, which you have to put a value on too, I guess; right?" Referring to his three adult children -- Ivanka, Eric and Donald Jr. -- who work for him in Trump Tower : "Maybe I'll move my children into a less expensive location."

Trump on Using Email
Asked if he uses computers or personal electronic devices, Mr. Trump told Mr. O'Brien's lawyers he doesn't own a computer at work or at home. Nor does he have a BlackBerry. He relies on his staff to send emails. "I generally would write letters or make telephone calls," he said. "Sometimes I'll just write a note to somebody. I don't do the email thing."

Source: Wall Street Journal 18 May 2009

IOI bullish on RM1bil development project in Iskandar

JOHOR BARU: IOI Properties Bhd is banking on the strategic location of its newly launched Taman Kempas Utama within Iskandar Malaysia as the project’s main selling point.

Senior general manager (property division) Simon Heng said the project’s location in the Kempas-Tebrau growth corridor augur well for the company.

The Kempas-Tebrau corridor is currently the hottest spot for property development in south Johor with more than 10 ongoing projects.

Heng said the project was also easily accessible from the North-South Expressway after the Skudai toll plaza, Jalan Kempas Lama and Jalan Senai-Seelong.

Simon Heng (left) with senior manager, marketing and sales department Kelvin Tang at the Taman Kempas Utama showhouses. “We are looking at RM1bil in gross development value and the project will keep us busy for the next 10 years,’’ Heng told StarBiz.

“We are looking at RM1bil in gross development value and the project will keep us busy for the next 10 years,’’ he told StarBiz.

Located on 101.17ha, Taman Kempas Utama will have about 2,000 residential and commercial units, while 20.2ha has been allocated for light industrial buildings.

Heng said Tesco Stores (M) Sdn Bhd, the operator of Tesco hypermarkets in Malaysia, would also set up the township’s first standalone hypermarket on 4.04ha next year.

The project is the company’s second mixed property development project in Johor after its 2,023.42ha flagship project, IOI Bandar Putra Kulai.

Besides upgraders and existing house owners in the vicinity, the project is also aimed at Malaysian professionals working in Singapore, Singaporeans, and pensioners and expatriates based in the republic.

“Demand for high-end houses is still positive in Iskandar Malaysia despite the current economic situation as there are still buyers out there with money,’’ said Heng.

He said the commitment shown by stakeholders of Iskandar to ensure that the development of the economic growth corridor continued despite the slowdown would also benefit the property sector.

Under the Ninth Malaysia Plan (9MP), the Government has allocated RM6.83bil for infrastructure projects in Iskandar and all the projects will be completed between 2011 and 2015.

Projects approved under the 9MP include road improvement packages, drainage works, river cleaning and public housing.

These projects are in five flagship development zones in Iskandar – Johor Baru City Centre, Nusajaya, Eastern Gate Development, Western Gate Development and Senai-Kulai.

Heng said the continuous inflow of local and foreign investments and the creation of some 800,000 jobs over the next 15 years in Iskandar would boost demand for houses there.

He said the company planned to expand its IOI Mall shopping centre in Bandar Putra Kulai next year to cater for the growing number of shoppers.

The RM50mil shopping centre, spanning 55,742 sq m, opened in 2001 with 80 tenants and was the only standalone shopping centre in the Kulai-Senai area, he said.

Heng said the new wing, to be known as IOI Mall II, would be built on a 4.04ha site beside the existing shopping centre and would have 100 tenants.

Source: The Star 22 may 2009

BIA's Mega Project Begins In KL

Bandar Seri Begawan - The Brunei Investment Agency yesterday announced that its Malaysian subsidiary Bahagia Investment Corporation (M) Sdn Bhd is constructing a 42-storey mixed-use development project in Kuala Lumpur, consisting of a five-star hotel facility with 361 guest rooms, 38 serviced apartments, approximately 18,000 square metres of office space, restaurants and meeting facilities. 

Global Hyatt Corporation will manage the hotel and service apartments under its Grand Hyatt brand, while Bahagia Investment Corporation (M) Sdn Bhd will manage the office space. The development is located along Jalan Pinang in the heart of Kuala Lumpur City Centre (KLCC) and is scheduled for completion by the first quarter of 2012. A foundation laying ceremony was held yesterday to mark the start of the construction of the project. Pehin Orang Kaya Seri Kerna Dato Seri Setia Haji Awang Abu Bakar bin Haji Apong, Minister of

Communications, acting in his capacity as the Chairman of the Board of Directors of the Brunei Investment Agency, was present at the event. Also present were Awang Haji Bahrin bin Hj Abdullah, Permanent Secretary at the Ministry of Finance and a member of the Board of Directors of the Brunei Investment Agency, and Dr Haji Mohd Amin Liew bin Abdullah, Permanent Secretary at the Ministry of Finance and Managing Director of the Brunei Investment Agency. Other attendees included the Directors of Bahagia Investment Corporation (M) Sdn Bhd and representatives of the Brunei High Commission in Malaysia, Dewan Bandaraya Kuala Lumpur, Global Hyatt Corporation, project consultants and the main contractor. Following the foundation laying ceremony, the minister toured an exhibition displaying plans and a building model for the project. One of the more notable design features of the project will be the hotel lobby, which will be at the top level of the building. Guests checking into the hotel will be whisked to the top floor lobby, via dedicated express elevators and upon arrival in the lobby will be greeted by an impressive 360-degree view of downtown Kuala Lumpur.    Source: Courtesy of Borneo Bulletin

WATG-Designed Grand Hyatt Kuala Lumpur Under Construction

Grand Hyatt Kuala Lumpur, a 40-story five-star hotel and mixed-use development in downtown Kuala Lumpur, Malaysia, has begun construction. The Seattle office of international destination design firm WATG is the design architect for the project. It is scheduled to open in December of 2010.

One of the more notable design features of the project will be the hotel lobby. Instead of being on the ground level, it will be at the top of the building. When guests enter the building to check in, they will ride the express lifts to the lobby where impressive 360-degree views of downtown Kuala Lumpur will greet them. 

“We are thrilled to be a part of this exciting urban-core hospitality project,” said Cynthia Jacobs, vice president of WATG and lead architect on the project. “The upside-down hotel concept will truly enhance the guest experience.” 

The building will also hold service apartments and offices. The architect of record is Kuala Lumpur-based GDP Architects and the interior design is done by Bilkey Llinas Design Ltd. out of Hong Kong.  

WATG has a legacy of environmentally sensitive planning, architecture and design. A hallmark of WATG is its sensitivity to the influences of the local culture, the natural resources, the people and the spirit of the place. From its offices in Seattle, Irvine, Honolulu, Orlando, Singapore and London, WATG has designed hotels and resorts in 160 countries and territories across six continents. For more information, visit www.watg.com.

Source: Hotel Interactive 20 May 2009

Grand Hyatt Kuala Lumpur, a 40-story five-star hotel and mixed-use development in downtown Kuala Lumpur, Malaysia, has begun construction

The Seattle office of international destination design firm WATG is the design architect for the project. It is scheduled to open in December of 2010.

One of the more notable design features of the project will be the hotel lobby. Instead of being on the ground level, it will be at the top of the building. When guests enter the building to check in, they will ride the express lifts to the lobby where impressive 360-degree views of downtown Kuala Lumpur will greet them. 

“We are thrilled to be a part of this exciting urban-core hospitality project,” said Cynthia Jacobs, vice president of WATG and lead architect on the project. “The upside-down hotel concept will truly enhance the guest experience.” 

The building will also hold service apartments and offices. The architect of record is Kuala Lumpur-based GDP Architects and the interior design is done by Bilkey Llinas Design Ltd. out of Hong Kong.  

WATG has a legacy of environmentally sensitive planning, architecture and design. A hallmark of WATG is its sensitivity to the influences of the local culture, the natural resources, the people and the spirit of the place. From its offices in Seattle, Irvine, Honolulu, Orlando, Singapore and London, WATG has designed hotels and resorts in 160 countries and territories across six continents. For more information, visit www.watg.com.

Source: Hotel Interactive 20 May 2009

‘Sell then build’ has worked well

By CHRISTOPHER BOYD

IN London last week I found the weather to be similar to the residential property market – mostly cloudy, with some bright patches.

Values of central London property have dropped 25% in a year.

When coupled with a drop in the value of the pound against the ringgit, this reduction in cost, to a Malaysian, is about 40%.

Of course, values are still high by our standards, ranging between £1,000 and £2,000 per sq ft.

A million pounds wouldn’t buy you much, but many Londoners had become quite blasé about the big numbers.

I met one “small time” operator who had accumulated about seven apartments to renovate and sell.

He was personally indebted to his bank for over £45mil and there was some doubt about whether his assets could cover that amount.

It was, he explained, so easy to borrow money until the crunch came.

He showed me one of his apartments currently let at £33,000 per week.

When I left England in the late sixties, that was the amount a blue-collar worker might expect to earn in his entire lifetime.

An interesting feature of the London market is that there is not much stock available.

Sellers, including the banks, are holding off until prices perk up, and there are already some early signs of recovery.

A prolonged upturn might persuade more owners or people with mortgages to liquidate, confirming my belief that a recession always has a sting in its tail.

While I was winging back to KL, a gentleman in Australia was penning a letter to the press accusing me, in one of my articles, of “obfuscation, irrelevance and mumbo jumbo.”

The less confused bits of his letter appear to deal with the issue of “sell then build.”

I am grateful to him for bringing this up and would like to clarify what I believe is confusion over terminology.

The traditional delivery system for developers in Malaysia – and in many other parts of the world including Singapore, Spain and occasionally in England – is to buy “off the plan” and pay progressively during the development period.

This is known as “sell then build.” My antipodean correspondent is of the view that this is grossly “unfair.”

I’d like to be present when he takes possession of a new apartment in Shanghai.

Customarily developers over there deliver a bare shell and all “extras” such as doors and sanitary fittings are added by the purchaser.

My friend from down under went on to add that my act of buying a Proton Exora by signing an order, paying a deposit and taking delivery when it was built, was somehow not “sell then build.”

My view is that we have a locally accepted housing delivery system that has worked phenomenally well and has put a roof over the heads of millions of Malaysians post independence at a rate that the Government alone could never emulate.

It has taken care of the needs of the low-income sector and stands as a shining tribute to private endeavour.

However, in response to potential interest from the market, a second delivery system has been introduced, popularly known as “build then sell” or, “BTS 10:90.”

I believe this is seen as offering the consumer better protection against default by the developer.

As the name implies, the system provides for the buyer to pay a 10% deposit and the balance upon issuance of the Certificate of Completion and Compliance.

In an ideal world, the buyer only risks 10% and he can withhold the balance if there are substantial defects, or if the developer absconds.

In reality, a developer is unlikely to offer this delivery system unless the buyer has lined up a bank loan for payment of the balance 90%.

This seems sensible to me because it discourages speculation.

The developer will normally draw down this 90% during development and bear the interest costs, so in most cases, the arrangement is still essentially a “sell then build” system.

Nothing has changed very much, including the right of the bank to seek redress from the buyer if, for any reason, the developer fails.

In Britain, house buyers have the protection of the much-vaunted National House Building Council 10-year Buildmark warranty and insurance cover for new home buyers.

Despite this self-important title, its effectiveness has been called into question.

The British press recently carried a story of a disgruntled buyer’s letters of complaint to the developer being returned with the endorsement “moved to Iraq.” One wonders who deserves the most sympathy.

In response to the problem, the Council assured the buyer that it is “committed to resolving the problems as soon as possible.”

Critics call the Council a toothless tiger and blame the local authority for signing off on the property in the first place.

All this has some resonance in Malaysia and it is so reassuring to see that delivery problems will persist no matter where.

Finally a little perspective. Last year, 216,702 houses changed hands in Malaysia. 80% were sold in the secondary market.

That means they were mostly completed and available for inspection.

Only 20% of transactions were sales from developers.

By a large margin the majority of purchasers get to see, smell and feel their property before purchase.

Amongst those who do not, there is undeniably a small percentage who suffer from the default of the developer.

The Ministry of Housing and the Bar Council are working on enhancing the current legislation.

Enhancement is always desirable; fundamental change would be a mistake.

As the saying goes, “if it ain’t broke, don’t fix it.”

Chris Boyd is executive chairman of Regroup Associates Sdn Bhd property consultants. We welcome your feedback on this article. Please write to starbiz@thestar.com.my

Source: The Star 21 May 2009