Property
Our Property Division’s growth is expected to be underpinned by the robust office and high-end residential sectors in Singapore.

Major developments in 2006 Sold over 1,200 residential units in Singapore and about 2,500 residential units overseas Completed One Raffles Quay in October 2006. Building was fully pre-committed prior to its completion Embarked on a re-branding exercise for Evergro Properties Limited (formerly known as Dragon Land Limited) after raising its stake in the company to 71% Sponsored the establishment and listing of K-REIT Asia, a commercial real estate investment trust, in April 2006   Focus for 2007/2008 Capitalise on the development of the new downtown and Keppel Bay as the next phase of growth Selectively launch residential and township projects in Singapore and overseas to meet continued demand for quality homes Seek to widen its footprint in the region and explore new potential markets such as the Middle East Continue to explore potential acquisition of commercial properties through K-REIT Asia to reach its target Assets Under Management of $2 billion within the next few years Work on the launching of two new funds in 2007 by Alpha Investment Partners Vision The Division aims to be a leading property developer in the region and a premier manager of property funds.

K-REIT Asia owns about 44% of the strata area of Prudential Tower Villa Riviera, Ho Chi Minh City, Vietnam		Significant Events March The final closing of Alpha Core Plus Real Estate Fund by Alpha Investment Partners exceeded initial targets by raising $720 million. April Evergro Properties sold its wholly-owned subsidiary for a book profit of about $24.2 million to unlock greater value from its assets. K-REIT Asia was listed on the Main Board of the Singapore Exchange by way of introduction. Luxurious waterfront development in Ho Chi Minh City, Villa Riviera was unveiled for public viewing. June Keppel Land broadened its foothold in India with a joint venture to develop a 1,670-unit condominium project in Kolkata. July Keppel Land increased its stake in Equity Plaza to 64.6% to consolidate interests in its office portfolio. October Keppel Land divested its entire 30% stake of a joint-venture company holding a 98% stake in Ocean Towers, Shanghai, booking an estimated net profit of $28 million. November Keppel Land unlocked the value of Bugis Junction through the divestment of its interest in Hotel InterContinental Singapore for a profit of about $57 million. Evergro Properties’ new corporate identity was unveiled along with plans for its first project under the new brand – a 1.2 million sm luxury villa and golf resort in Tianjin’s Hangu District. December Marina Bay Residences was completely sold out even before the public launch of its 428 apartments.

One Raffles Quay

Earnings review The Property Division registered a $308 million, or 36% improvement in revenue over 2005, backed by higher sales from both Singapore and overseas residential properties. Rental income from investment properties was higher as a result of the tight supply of prime office buildings in the Singapore Central Business District. Despite lower contribution from Keppel Bay, the Property Division posted profit before tax of $233 million, 5% above the previous year due to the higher revenue from trading projects and profit from the sale of a piece of land in Tianjin and an equity interest in a property project.

Market review
The Singapore economy grew by 7.9% in 2006, higher than the 6.6% growth in 2005. Growth was driven mainly by improved global economic conditions and business sentiments, which led to positive growth in all three sectors of manufacturing, services and construction.

Driven primarily by new and expansionary demand for prime office space from the financial and business services sector, the Singapore office market continued to strengthen throughout 2006 with a take-up of 2.4 million square feet (sf), up from 1.96 million sf for 2005 and 1.07 million sf for 2004.

According to CB Richard Ellis (CBRE), Grade A office occupancy rose to 99.2% as at end-2006 compared with 92.5% a year ago. In contrast to rising demand, office availability is tight, which is further compounded by the reduction of over 1 million sf in existing supply due to redevelopment plans of some offices within the Central Business District.

The continued surge in demand, coupled with increasingly tight supply availability, pushed up Grade A office rent by 53.2% year-on-year to $8.73 per square feet (psf) per month as at end-2006 from $5.70 psf as at end-2005 (source: CBRE). Based on CBRE’s Global Market Rents survey in November 2006, Singapore is still competitive relative to other key Asian cities such as Tokyo, Hong Kong, Mumbai, New Delhi and Seoul.

2006 saw residential prices increase by 10.2%, the highest gain since 1999. Total take-up of new homes surged to 11,147 units for 2006 compared with approximately 9,000 units in 2005. Demand for high-end projects continued to remain strong. Based on Urban Redevelopment Authority’s statistics, new launches for high-end and luxury-end properties in 2006 increased by 25.4% over 2005.

Strong economic growth, urbanisation, a growing middle class and rising home aspirations continue to spur demand for quality housing in Asia.

Operating review
Singapore
Demand for high-end projects continued to remain strong as evident from Keppel Land’s launch of the Marina Bay Residences (MBR). MBR experienced 100% sales during its preview with an overall achieved average selling price of approximately $1,950 psf. One of the penthouses achieved a record price of $3,450 psf.

Similarly, sales were brisk for other high-end projects. The Sixth Avenue Residences was sold out in two weeks from its preview. The project achieved an average selling price of about $1,000 psf.

Three other of the group’s existing launches – Caribbean at Keppel Bay, The Belvedere and The Callista – also achieved 100% sales while 98% of the 393 units released at Park Infinia at Wee Nam were sold as of end-February 2007. Urbana, The Linc and Freesia Woods were also substantially sold.

In total, Keppel Land sold over 1,200 homes in Singapore in 2006, more than double its sales from 2005, positioning it among the top three listed developers in residential sales in Singapore.

One Raffles Quay (ORQ), which was jointly developed with Cheung Kong (Holdings) and Hongkong Land, was 100% pre-committed even before its completion in October 2006. Setting a new benchmark when it achieved rental of $10 psf per month, ORQ attracted many blue-chip tenants such as ABN AMRO, Deutsche Bank, UBS, Ernst & Young, Barclays Capital and Credit Suisse.

Keppel Land also commenced construction of Phase One of Marina Bay Financial Centre (MBFC) which is jointly developed by the same consortium partners in ORQ and designed by internationally-renowned architects Kohn Pedersen Fox. Scheduled to be ready in 2010, Phase One of MBFC will provide about 1.6 million sf of net lettable office space and 428 units of luxury homes at MBR, with complementary retail facilities.

Encouraged by the strong rebound in the office market, the consortium exercised its option in the first quarter of 2007 to purchase the remaining land for Phase Two of the development with a balance gross floor area of over 2 million sf.

Overseas
Keppel Land’s overseas residential developments continued to achieve good sales in 2006, riding on sustained demand for quality homes in Asia’s growth cities. In 2006, the group sold a total of about 2,500 residential units, mainly in China, India and Vietnam.

In China, The Seasons in Beijing sold about 97% of the 1,775 units launched as of end-February 2007. Over at Chengdu, The Waterfront achieved sales of about 97% for the 1,098 units released while The Botanica sold more than 91% of the 1,150 units launched under Phase Two. As buyers of Keppel Land’s projects are mainly locals, the anti-speculation measures have not affected the group significantly. Keppel Land remains
optimistic about China’s market potential in the long run. It has increased its stake of its China-focused subsidiary Evergro Properties to 71% as an additional platform for the group’s expansion into second-tier cities in China. With the re-branding, Evergro Properties will be in a better position to inject more value to grow its brand and strengthen its portfolio with choice residential developments.

In India, Elita Promenade in Bangalore continued to make favourable progress, with about 72% of the 1,263 launched units sold as of end-February 2007.

All 101 units at Villa Riviera in Ho Chi Minh City had been sold, helped by the recent stock market bull run in Vietnam.

Fund management
Alpha Investment Partners (Alpha) continued to deliver good returns to its investors and shareholders. All the funds under Alpha’s management exceeded returns expected by investors. This strong performance was the result of active management to achieve higher income from its portfolio of properties and gains from divestments, as well as appreciation in property value.

In 2006, Alpha made 18 acquisitions, bringing the total value of assets under management (AUM) to $2 billion as at end-2006, up from about $980 million as at end-2005. AUM is expected to reach $4 billion when all the funds are leveraged and fully invested.

Alpha Core Plus Real Estate Fund concluded its final closing in March 2006 with a total equity of about $720 million, exceeding its target of $412 million. Alpha also secured its first Shariah compliant fund in 2006.

With continued strong investor interest in Asian real estate, Alpha is working on establishing local platforms and launching new products, and has identified Australia, China and India as potential markets to establish local platforms for fund raising and investing. A platform in China is planned for 2007 to better serve investment needs in this fast-growing Asian economy.

Business outlook
Singapore
For 2007, the Ministry of Trade and Industry expects Singapore’s economic growth to remain healthy albeit at a slower pace of between 4.5% and 6.5%. The government’s planned increase in the goods and services tax from 5% to 7% with effect from 1 July 2007 is not expected to add much pressure to inflation. A cut in the corporate tax rate to 18% from 20% effective from Year of Assessment 2008 will enhance Singapore’s competitiveness in the region.

With continued economic growth and business expansion, office demand is expected to remain strong going forward. As no significant new supply is forecast between 2007 and 2009 until MBFC (Phase One) is ready in 2010, office rentals and occupancies will continue to go up. Jones Lang LaSalle has predicted further rental growth of 25% to 30% in 2007.

Property consultants expect the residential market to remain positive for 2007. Prices for new projects in the high-end and luxury-end sectors may continue to increase and will have a spillover effect on mid-tier homes. Overall, residential property price increase for 2007 is expected to be between 5% and 8%.

For 2007, Keppel has in its stable, one of the most awaited residential project launches in Singapore, Reflections at Keppel Bay. Designed by world-renowned architect Daniel Libeskind, this 1,129-unit development will have six high-rise glass towers of 24 storeys and 41 storeys as well as 11 villa apartment blocks of six to eight storeys. It is part of the Keppel Bay precinct which offers a true waterfront lifestyle with a marina that is due to be completed in the fourth quarter of 2007. Keppel Bay is located in the district which encompasses Sentosa Island with its upcoming Integrated Resort and the VivoCity retail mall in the HarbourFront precinct. Other potential launches of the group in 2007 include Park Infinia at Wee Nam, The Tresor, and the redevelopment of Naga Court and The Crest @ Cairnhill.

Overseas
Asia’s housing market outlook also remains favourable on the back of robust economic growth and continuing inflow of global funds into Asian real estate. New residential launches in the pipeline for 2007 include a villa development in Tianjin, China; Elita Horizon in Bangalore and a condominium project in Kolkata, India; and the first phase of the group’s townships in Wuxi, China; Ho Chi Minh City, Vietnam and East Jakarta, Indonesia.

The group will continue to seek residential and township development opportunities in Asia’s promising cities and to further grow its assets under management to boost fee-based income.