The sale of the first plot, which is Dragon Mansion, is simply an extension of all the craziness of dozen bids in the public tenders and the queues outside the show room in the past two quarters.  But the fact that Dragon Mansion site is sizeable and at a decent location seems to point to a start of appetite of developers for those pricey pieces. But not much of a surprise, though.

The second sale is indeed an interesting one involving a over-stretching local player and a eager-to-expand foreigner. And prices raised all the eye brows. Land price at 2000+ per sq.ft and expected launching price at 3500!!! I admit the fact that this is just off orchard but back in the height of the last boom, in 2007, the collective sale which I was involved, Char Yong Garden, was only sold at 1800+. Have we gone too far?

Apparently media people was also shocked by the price and running around their usual speakers to interpret, justify the price. One famous fellow in the industry publicly commented on the Business Times that the HK based developer could simply made its profit in the home market and got the muscle to spend!!!!

This could indeed be the truth given the fact that HK residential market delivered a sharp V recovery and now government is openly saying how worried it is about the bubble.

My boss has an interest theory of how HK money supports the Singapore property market. He says the absolute value of property is still 4 to 5 times more expensive in HK than Singapore. And according to him, the unbelievable high price is supported by ultra rich mainlanders. And HK capital that are released from transactions with mainlanders find Singapore attractive given the very low base.

Whether this theory works or not, it seems the Singapore residential market is moving nowhere but north and the start of another land acquisition spree will benefit all parties in this big game until another crisis came.

The question is, is it too late for me to participate?

Definitely, this morning when I watched the Bloomberg seeing Dow for the first time this year closed above the 10,000 mark, the second pain is almost unbearable.

Of course no one will deny the pain associated with the first as where the conventional wisdom sits with. This is particularly true with mark to market investments not so much with real estate. After all, valuation and market price is still fairly subjective for real estate assets and one can choose to avoid or reduce such pain by not exposed to the market and say, “hey, market is bad but there is no direct comparables!”

Unfortunely, this is quite not true with the market moving the oppsite direction. One cannot but exposed to all the media outcry of new record price, housing shortages and neighbors and friends excited about their increasing net worth on a daily basis and even take out cash (refinance or flip) to enjoy the luxury of life… The feeling of left behind and losing lost is just as unbearable as when Dow soaring across 10,000.

Certainly, capital markets have been unexpectedly responsive. Billions of dollars have been raised through rights issue in Singapore & Australia with developer and REIT prices recovered spectacularly. Even the new listing front is getting started. CapitaLand last week made a surprise move to announce its plan to spin off its retail arm and list in SGX and later in Chinese board , most likely for a dual listing. Even a 20% float will mean S$ 1 billion proceeds from that.

On the debt side, developers such as CDL and large institutional investors like Countrywide have also managed to issue bonds through private placement, private banking channels as well as the long dead CMBS market. This scale of recovery is indeed amazing and should tell more than just “every boat floats in a rising tide”.  Thanks to the low funding cost in the interbank market (a benefit of pouring trillions of tax payers money?), the total funding cost is rather acceptable. Most of the issue proceeds are believed to used to reduce gearing (that was the only topic in June’s REIW meeting), however I do see funds starting to flow into construction or acquisition, at least on the lips of the players.

Direct real estate acquisition is a rather different story. There has been some bargain fishing in Q2 mostly, sub $ 100 million dollar deal by private money (no or less dependent on debt) but Q3 we don’t really see much activities. Reasons being:

1) Less sellers forced to sell to reduct debt (as they have got funding from capital markets). And the last thing bankers in Asia want to do is foreclosing. They could do anything from asking for top-up, parent support to revise some of the covenants but not pull the plug. No fire sale, no distress…….

2) Bright economic outlook brought hope and hence less willingness to sell at a loss or less profit

3) Although most markets (except Korea), capital value of commercial properties are still more than 20% lower than the last peak, they are not exactly cheap compared to 2 quarters ago; hence no hurry to rush

4) Sentiment does play a role but direct acquisition always come down to rents, sale price to determine the return the entry price. With the continuous weakening job market, any meaningful rebound in demand is will be 2nd half of 2010 and beyond.This real downside risk cannot be rightly priced in given the positive mood; hence the persistent pricing gap.

5) Credit towards direct acquisition (especially acquisition by SPV without back-up from strong parentage) is still very much tight. Generally, banks are still trying to reduce its real estate exposure, or at best rebalance its exposure to reduce risk concentration. LTV is still by any means, low and various credit enhancement is taken for granted provided bankers will loan.

6) High target return rate and low risk tolerance makes hard to identify right assets. Who now have a deep pocket to shop around? Those who are lucky enough to raise committed capital pre-Lehman and very few who actually got out the market to compete for money post-Lehman. The latter will definitely have an opportunistic mandate (if not distressed, special situation) and the former, I will say, very good chance to have shifted to opportunistic play already. That means, we are looking at 20% IRR. Without a low debt funding at reasonable LTV, IRR of 20% is anything but easy to go buy in matured markets. And remember we don’t have fire sale, at all…

With all the above factors adding together, I figure we are not going to see much activities going forward unless any of these factor unwind. But how much can the capital markets go? Mounting cautiousness on the one hand and stocks still edging up on the other. Uncertainty, uncertainty and uncertainty. One thing for sure, there is still plenty of liquidity in the private banking channel, but only reserved for highly rated good name papers.

Put down my prediction: direct acquisition and capital markets activities will converge in 2010. The question is then, which direction?

This is how Wall Street, the spiritual center of world finance or simply money flow shapes itself along its brutal history starting with that Tree Agreement. From the very first, one thing is absolute and cannot be breached during the next few centuries, that is no matter how, the purchase/sale must be delivered at the price fixed in the contract.

During the life span of Wall Street so far, speculation and human nature never changes. Just as precisely depicted: “Nowhere does history indulge in repetitious so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics, the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change neither does human nature.”

Wall Street is a group of bankers and brokers self regulated, at the same time player & referee which inevitably builds its own disaster. Morgan saved the street twice and finally in the post Morgan era, the gangsters had to have a central bank which unfortunately was so week to perform until the Great Depression began. Reform only took place when stocks slumped day and night. From then deposit bank (commercial bank) and investment back departed each other. We got JP Morgan and Morgan Stanley now. A once insider was appointed leader of reform of the long-time elite group of traders and managed to prohibit them from setting pools and taking advantages of knowledge at least officially.

Unfortunately cheating and manipulating never ends, now it just looks like a little bit more civilized. For example, in the pre- Great Depression time, brokers can sell a shit like a gold, now at least they need to register what they say about the stock with the regulatory body. In this little prospectus book, there are several sectors these brokers need to be careful to cover their ass in case there is a lawsuit. However ‘clever’ insiders never give up. In the risks section, in order to have their ass covered and to confuse the reader and distract them from the real risk, they put everything related or not related.

In the height of the crisis earlier this year, people in the real estate saw nothing but mounting debts, ballooning yield, penny REIT, foreclosures and dangerously growing shadow commercial space almost worldwide. It seems the concensus that the industry is gone for, well, as short as we would otherwise wish, but realistically no light at all at the end of the fundemental and psychological tunnels.

Just a mere 6 months later… Look at the headline around us:

In Shanghai, Beijing, new land price records have been refreshed in days time;

In Singapore, people queue up even two days before the launch of the condo and Government has banned with immediate effect the interest only loan;

In Seoul, commercial price back to and even over the pre-crisis level in recent tender process that attracts two dozens of local and foreign buyers;

In Hong Kong, the luxury apartment market delivered a perfect sharp V recovery;

In Sydney, major players raised billions of fresh equity and even a new CMBS has been issued;

In UK, finally monthly housing index delivered postive growth after two years’ continous dipping;

In US, where all the trouble believed to have come from, waited its turning point out, the new housing starts jump.

While we were overwhelmed by the tragedy that we might become a lost generation in the industry, the industry has recovered itself, at least by reading the headlines!

We are caught by the recovery unprepared and this unprepareness requires reflection indeed.

I have been long pondering over the opaque nature of real estate, indeed the beauty of it.

It could have contracted cash flow (with some sort of collateral), yet not seen as a stable income source as  a conventional corporate bond (purely based on the damn-it credit rating).

It has substantial capital upside and respond decisively to interest rate expectations, yet not seen as a good supplement to equity when it comes to total return play.

It is classified as illiquid asset, yet nobody wants to underestimate those unnamed individual who queue up for the new project launches with cheque in hand and a lot of the times do not require financing!

It, by nature, imeant to be human capital intensive, yet it gets increasingly passive in the era of professional real estatate fund management, to an extent it is dangerously financialized.

The last point, may be the most relevant pertaining to this overwhelming come-back, is that, real estate is an asset human beings command  a strong feeling of possession.

As an individual, real estate means home and probably the single biggest asset one can even own; as a corporate, real estate is the operating platform, the coporate budget and fixed assets item.

After all, equity, debt and derivatives papers can be worthless, in the dashes after the crisis, we, who own real estate, still owns the piece of land that can never be recreated.

I feel half wrong when I pick up this story of Steve Jobs and his and now the world’s Apple. He is a wierd man, frankly speaking. But his story of building Apple I believe is a typical of the relationship between a business founder and a CEO.

Unlike a CEO, a business founder does not need a good education background (and in fact usually it is the lack of education push the man to start his business because he cannot get a job elsewhere), he does not need PR or other relationship skills, or even does not need much money, the only thing that defines a business founder is his idea and his belief in this idea. The rest just leave it to your CEO. He can manage the business, imaging the company, raising the money and all the other operation stuff.

But as a potential business founder, how to kick start? Remember you don’t need two strategic investors, one is enough. Be persistent, knocking out the door of the one, make him your and your baby business’s firm believer. This is the magic Steve told me.

1. I do not at all believe in human freedom in the philosophical sense. Everybody acts not only under external compulsion but also in accordance with inner necessity. “A man can do what he wants but not want what he wants.” This has been a continual consolation in the face of life’s hardships and an unfailing wellspring of tolerance. This realization mercifully mitigates the easily paralyzing sense of responsibility and prevents us from taking ourselves and other people all too seriously; it is conductive to a view of life which in particular gives humor its due.

A man cannot want what he wants. Humor is the only way out. After all, the truth is not what happened, but what he observes, feels and believes what happened.

2. I am absolutely convinced that no wealth in the world can help humanity forward, even in the hands of most devoted worker in his cause.

Druker is wrong. He claims ” there are many demerits of capitalism, but it is the best ever way to a freedom and equality of people. We can try to amend the system along the way.” Profit chasing money destroys the world a lot speedier than its self examination if any.

3. The Nuremberg Trial of the German war criminals was tacitly based on the recognition of the principle: criminal actions cannot be excused if committed on government orders; conscience supersedes the authority of the law of the state.

Conscience prevails, the way man defines it.

4. A contemporary has said, no unjustly, that in this materialized age of ours, the serious scientific workers are the only profoundly religious people.

The reason being they worship not because they hopes the benefit, fears the punishment, but because of the deep admiration of the harmony of natural law.

5. The highest principles for our aspirations and judgments are given to us in the Jewish-Christian religious tradition. Take the goal out of its religious form and look merely at its purely human sisde, one might state it perhaps thus: free and responsible development of the individual, so that he may place his powers freely and gladly in the service of all mankind. One can also take these as words that express the fundamental of democracy.

I like the way Einstein put it. How people should act inwardly and outwardly. Wise sayings can be tested in different perspectives, this is one of them.

Is the emperor responsible for the war? Despite Chief Prosecutor Keenan’s pronouncement that the emperor will not be called before the court and his demise in 1989, this question worths digging in because it provides one of the most important, if not the most important of the perspective of Japan as a state and a nation, more specifically the relationship between the emperor and Japanese people.

The question can be explored in two sub-questions: the emperor’s ability to affect the war and peace decision and his intention on that.

After 1945 surrender, the emperor himself and conservatists claimed repeatedly that the emperor as a constitutional monarchy is totally groundless and politically driven. The Meiji Constitution established a dual system where the elected cabinet holds the authority over domestic affairs while the ultimate military decision resides with the emperor and the mperor only. Further, May 15 Incident (1932) in which the then prime minister was ssisinated by military terrorism abolished the party politics and established the emperor’s overall absolute power at least superficially. However this can work both way. In the September 18 incident, the emperor failed to punish the military who staged such a serious incident without his knowledge, which made the emperor worry whether he would be taken seriously by the military thereafter. This concern could be strengthened after the military took a further step to abolish the party government. Even though it could be partially true, the emperor admitted that “If I had gone against the advocates of war, the public would no doubt have thought that we were surrendering to US when our army and navy had superior forces and a coup would have been staged. ” This linked the second question: his intention on war and peace decision and the motives behind that.

The emperor was not strenuously opposed the war or even for the war with China as in his eyes there was little chance that Japan could lose, in which case his throne and emperor system could be threatened. His focus was more on strengthening his absolute power as a living God and ensuring that the ever growing military power in Japan was not out of control. This was exactly why he was annoyed after the September 18 incident. Thus, it will be more interesting to look the emperor’s complicated intention at some critical moments during the war against US and England which the emperor believed that there was only 50 % chance to win if not lower. The emperor endorsed the war in a situation which he thought not going to war would 100% lead to an overall defeat. The oil embargo quickly deteriorated the national economy which was by then already half dried up by the war with Asian countries and not too long the warships and planes that Japan long took pride in would become rubbish without oil supply. On the other hand, he was afraid his opposition could trigger a coup with the “fight until death” emotion prevailed across the country. In both situations, his throne would be in trouble. So why not give it a try? The emperor was trying the luck  for his selfish purpose by pushing the entire nation into the hell. Like all autarchy in the long history of human beings, the emperor valued his destiny more than the lives of hundreds of thousands of Japanese people. In the desperate stage of the war, the emperor apparently openly encourages anything that could give US a blow in order to negotiate a peace including suicide attacks. To avoid a surrender, the emperor was even willing to give southern akhalin and Manchuria to the Soviet Union in exchange for supplying Japan with oil. When the time came that the only way out was surrender, the emperor’s top priority was still how to defend the emperor system.

Shockingly, after the noble decision to surrender, no hatred was found in oridnary Japanese who sacrifice everything for the emperor. An old man cried out in despair “This is stupid. If the war could be stopped by the emperor simply raising his hands and surrendering, why didn’t he end the war sooner for us?” The logic behind is we Japanese are ready for death for you but your noble decision makes all the sacrifice made meaningless.

It was completely increditable that Japanese peole stayed irrelvelant when the big secret was released that their emperor handed over Okinawa to US in exchange for his name being excluded from the Tokyo war crime trial.

The support for the emperor could fall a little bit during the high inflation and extreme shortage of food period right after the war with the lefist and communist gained remarkable popularity among the starving Japanese. However, the emperor quickly regained his popularity by conducting the country tour, meeting people who never believe their living god would be in places like a mine. However, the tour was initiated by GHQ and the purpose was to take advantage of the emperor’s impact to smooth their occupation. As a reward, the GHQ agreed that the emperor system be retained.

All were nothing but deals. The emperor successfully saved himself from the hang stage by riding on people’s will (people’s support to him as the emperor) as a shield. Now we know “100 million people repenting together” is just one out of a package o strategies of defending the emperor system. The emperor should also thank God for the Cold War coming at the right time which made he and his loyal people more valuable to US occupiers.

My feeling about Japanese people’s loyalty to the emperor is a complex. I do not deny sometimes I am even moved by amazing stories like Onoda’s return from jungle almost 20 years after the surrender. He refused to put down guns unless he got the command from this superior. He kept fighting as a one-man Japanese army. That question that haunted China and other Asian nations was whether this kind of absoluate loyalty and power might be revived which could potentially pull the region into another war disaster.

The answer from younger generations give us some relief. When asked why they signed up the memorial register at the imperial palace when the emperor lay ill, they replied ” I might by chance appear on TV”. Further asked if the emperor system is necessary, the answer was somewhat brilliant “It’s not necessary to get rid of it.”

Conclusion. The emperor was responsible for the war as he got the enough if not absolute power over the war/peace decision and his intention to go to war for the selfish purpose of defending the emperor system. Hence, the emperor should not only be punished by the international community but also be overthrown by Japanese people. Just as the UK paper put it after his death, “there is a place reserved for him in the hell.”

The author of “The Age of Hirohito” claimed that “The greatest paradox of Showa political history resides in the fact that the emperor who had the absolute support of the Japanese people did not use people’s power. Instead, he as manipulated by a small group of militarist and bureaucrats all the while.” The author actually shares the same base as mine that assuming the emperor firmly believed that in no event he would be overthrown, it would be more likely that he embraced peace. The point here is not whether the emperor had the absolute support or not but whether the emperor believed so or not. Apparently and unfortunately, the emperor was in constant fear that he could be overthrown.  I would say that this fear which resided with every and one emperor in any autarchies is one of the fundemental driver of most wars and other disasters in human history.

EHM invade other nations, expand the US empire by destorying the financial indepedence of the nation and corrupting the existing ruler. Under the name of modernization, EHM trap the target nation in huge debts (US dominated international agency like World Bank are tools used) that it can never repay and thus has to open its critial resources to US including nature (oil etc) and labor as well. The so-called alliance of US is actually puppet authority backed by US.

For those cash rich country (mainly oil rich), the strategy is basically the same. US will buy the oil that God grants you but the dollars flow out of US must flow back. How? Make sure the puppet ruler awards all major infrasture projects and related maintance service contracts to US companies. Saudi is a typical example. Can imagine that before 1980′s the nowadays desert golden rose relyed on goat to decompose the rubbish of the entire country? Modernization of Saudi was an expected result of the 1978 Oil Embargo which significantly impact the way the world towards in the next 30 years.

Hardly remember what triggered the 1978 Oil Embargo but surely it hurt US badly, a shock just next to 911 in a pro-911 era. I believe this nationwide hurt long dominates the direction of US worldwide strategy. Oil safety is among the top priority of the politicians which in another perspective are puppets themselves, puppets controlled by “the company”, or say corporatecracy. Corporatecracy’s ultimate target is profit, is cashflow which is market driven. So who forms the market? Big players, the elite class, small player, the mass population represented by pension funds. The ironic point here is that people endorse the idea of wealth management by entering capital markets for bigger financial freedom to enjoy their lifes, however it is their money that indirectly or directly build up the evil of corporatecracy that will ultimately destory the freedom of the whole world, an inevitable end that have been proved once and again in the long human empire-building history.

EHM works for corporatecracy and US, which one is more fundemental? EHM serves the US interests by securing revenues of corporates. The money generated then fund the political play and make sure the puppet politicians on the stage work for the corporates’ interests. Another step forward, these corporates that dominate the world’s super power become increasingly diversified not only in terms of their business, but only the stakeholders. This is critical; money flow breaks the boundry of nations and are beyond the control of traditional government. The answer is clear, CORPORTECRACY. But who built and is keeping building up the corportecracy? The money of the mass population that is always chasing higher return. To put it in another way, human beings as a whole is after further liberation and freedom by a way that is inevitably towards the contrast. EINSTEIN said in 1934 “I am absolutely convinced that no wealth in the world can help humanity forward, even in the hands o fhte most devoted worker in this cause”. The next 80 over years world history tested his words true. Capitalism does a great job in putting the money in the most effective hands but unfortunately as EINSTEIN said it didn’t help humanity forward, worse it dragged us backward.

Back to Saudi, in the shock wave of 1978 Oil Embargo, EHM successfully struck a deal with the Royal family. By assisting the construction of a modernized country, US secure the safetly of oil as well as other benefits in this then Middle East giant, one which is setting up its militarty base in the heart of this strategic region. Simply, EHM lured the Royal family with the US ensurance of their continuous ruling of the Isamic nation.

Like EHM’s other success stories, in some extent, they did help speed the modernization and at the same time serves the US corporates’ interest, in a way it could be called mutually beneficial. However, a closer look will clearly tell us that in exchange for the so-called modernization, the underdeveloped countries sold out not only the crucial resources, part of their sovereignty, not also the future of the nation. Take a look at the devastated enviornment, the increasingly widening gap between the few rich and the vast poor. What is modernization? The infrastructure, the skyscrapers, automobiles?

EHM cannot replace traditional fighters and wars. If it could, then at least it contributed to the peace of the world. There are times that EHM does not work and then CIA and even war step in. We all know that in 1990 the late Saddam invaded the neigboring oil rich Kuwait and days after old Bush conquered the country in the name of world peace. We do not know is EHM has long worked on Saddam trying to make it the second Iran. They funded Saddam which in turn funded Osama Bin Landen. What we also don’t know is that just a year earlier, in 1989, US invaded Panama, the country managed to take back its own Panama Cancal from the previous US President hand, for nothing. The excuse US government used here is just funny;they claimed the then leader of Panama involved in drug trafficing. US soliders killed hundreds, if not thoUSnds civilians.

I recalled in my childhood and schoolhood, US was labelled by textbooks and state-controlled media as an evil of combined imperialism and capitalism. I refused to accept this and instead admire the modernization, the freedom, the democracy at the other end of the Pacific. Now slowly and reluctantly I find out those textbooks and media seem to be right although they don’t mean to be right.

911 could be a bloody opportunity or alarm given by the God. It was a cross road and unfortunately US, the superpower picked the wrong direction- it goes even further on its global empire building hoping desperately this can bring back the security to US people. But it won’t, the Iraq dilema clearly indicated the answer already. Some US people realize and begin to face the difficult situation of US as well as the world as a whole. Ground Zero is a symbolic place to think about the future of human beings. You got Federal Hall where Washington swore to be the first president of US, a great start of democracy and Wall Street, the spiritual and material heart of world capital markets that directly boosted the Corporatecracy in the vicinity. Cross road…