A US$200 million resort hotel does not exactly resemble a suburban home. But scratch the surface of the sales market for each property category, and they look remarkably similar today.

The number of hotel deals in the United States during the first quarter plummeted by more than 40 per cent, to 127. There is a gaping spread between what sellers are asking for hotels and what buyers are willing to pay. And lenders are writing much smaller mortgages at higher interest rates than they were a year ago.

And yet several private equity firms have quietly managed to raise cash to buy hotels in recent months, said Warren Marr, a hotel consultant at PricewaterhouseCoopers. ‘It may take a bit longer than it did two years ago, but the money is there,’ he said.

Some hotel industry experts contend that this is an excellent time to raise cash, because they see fire sales on the horizon. Mr Marr said that some investors who bought hotels a year ago, at the peak of the market, and used financing to cover as much as 85 per cent or 90 per cent of the purchase price, might be forced to sell soon.

‘You could call these distressed assets - not physically distressed, but financially distressed,’ he said.

HEI Hotels and Resorts, based in Norwalk, Connecticut, is the latest company to raise cash for a new private equity fund.

This is the third fund raised by the company, which also manages the hotels in its portfolio. The new fund has more than US$500 million to invest in hotel properties.

Gary Mendell, chief executive of HEI Hotels and Resorts, said that across the industry, it is harder to raise capital now than it was a year or two ago. But he attributed his ability to raise US$500 million now to the number of repeat investors.

The company focuses exclusively on raising money from university endowments, and six of the 16 investors in the new fund also invested in both of HEI’s earlier funds, which closed in 2004 and 2006.

There is little doubt that hotel sales have plummeted since the credit squeeze took hold late last summer. For example, buyers spent US$4.1 billion on hotels in this year’s first quarter, less than half of the US$8.6 billion spent in the first quarter of 2007, according to Real Capital Analytics.

There are also far fewer big spenders. Only eight investors bought more than US$100 million worth of hotels in the US in the first quarter, down from 27 buyers who did so a year earlier, the firm reported.

Buyers are also starting to demand a little better return on their investment. Capitalisation rates - or the initial rate of return on a property, expressed as a ratio of the current income relative to the purchase price - are rising for all types of commercial real estate.

But Dan Fasulo, the director of market analysis at Real Capital Analytics, wrote in a report about hotel sales last week that the ‘large gap between asking prices and current bids indicates that buyers think cap rates should be even higher.’ Mr Fasulo said the average cap rate for all US hotel deals in the first quarter was around 8 per cent.

Mr Mendell said the HEI fund would probably buy fewer hotels than it might have two years ago, simply because lenders are demanding more equity.

Noble Investment Group, which is based in Atlanta and owns and operates hotels through similar private equity funds, raised its latest fund in early 2007. Mit Shah, the chief executive, said the company had invested about 40 per cent of this US$310 million fund so far and was focused on investing the rest, rather than on raising capital for a new fund.

Mr Shah said he thought the main reason so few hotels were on the market today was that most sellers were unwilling to part with their properties at current prices. ‘If you don’t have to sell, you won’t sell in this market,’ he said.

But he added that the pool of buyers was much shallower than it was a year ago, so he hoped to pick up some good deals soon. ‘There is a significant amount of capital on the sidelines,’ he said.

David Loeb, a hotel analyst at Robert W Baird & Co, an investment bank in Milwaukee, predicted that the fundamentals of the hotel business would worsen over the next two years.

He said this was only partly because of the lagging economy. He said a significant amount of new hotel construction was in the works, which had been financed before the credit markets soured.

He estimated that the number of hotel rooms in the United States would increase 2.5 per cent this year, and possibly another 2 per cent to 2.5 per cent next year.

Mr Loeb said he thought this was a smart time to be raising money to buy hotels. ‘There will be owners who can’t afford to keep their hotels anymore,’ he said, because they bought them in highly leveraged deals a year or so ago.

He added that some trophy properties might even change hands.

‘Luxury properties do not come on the market often,’ he said. ‘But in this market, you will absolutely see some of them sell.’

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After a long night of making love, the young guy rolled over, pulled out a cigarette from his jeans and searched for his lighter.

Unable to find it, he asked the girl if she had one at hand.

“There might be some matches in the top drawer,” she replied.

He opened the drawer of the bedside table and found a box of matches sitting neatly on top of a framed picture of another man.

Naturally, the guy began to worry.

“Is this your husband?” he inquired nervously.

“No, silly,” she replied, snuggling up to him.

“Your boyfriend then?” he asked.

“No, not at all,” she said, nibbling away at his ear.

“Well, who is he then?” demanded the bewildered guy.

Calmly, the girl replied, “That’s me before the operation.”

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High oil prices and economic worries damped demand for international air traffic last month, and cross-border cargo shipment growth was sluggish, the airline industry body Iata said on Thursday.

In its monthly traffic report, the International Air Transport Association (Iata) said air passenger demand rose just 3 per cent in April on a year-on-year basis, while freight demand growth was 3.7 per cent up on the same month in 2007.

‘The impact of skyrocketing oil prices and weaker economies has made its way to traffic growth,’ Iata President Giovanni Bisignani said in a statement.

‘Combine slowing growth with skyrocketing oil prices, and the industry outlook is grim at best,’ he said.

Cross-border air shipments, which Iata measures in freight tonne kilometres, are considered a prime indicator of the health of world trade.

In the first four months of 2008, demand for such cargo shipments was up 3.4 per cent compared with the same period of 2007, a much slower growth rate than in past years.

‘There has been a step change downwards,’ Mr Bisignani said.

Iata represents 240 airlines operating 94 per cent of all international passenger and cargo flights. Domestic flights are excluded from its data.

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US stocks rose on Wednesday as a report pointing to stronger business spending boosted shares of blue-chip computer firms and heavy equipment makers, overshadowing the latest signs of turmoil in the financial sector.

Shares of technology companies such as IBM and Hewlett-Packard Co rose after a government report on orders for durable goods - long-lasting manufactured items - showed a surprising jump in business investment last month.

The data also boosted shares of companies that make expensive machinery such as Caterpillar and Deere & Co .

Fears of more loan losses crept back into the market and limited gains overall after KeyCorp, a big Midwestern bank, said its write-offs for the year may be twice as much as it had previously forecast.

Shares of American International Group dropped nearly 5 per cent after Citigroup said the insurer may need even more capital after raising US$20 billion just last week.

‘You’ve got the financials lower, (but) there’s general strength in technology after durable goods,’ said Tim Smalls, head of US stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. ‘Durable goods also helps stocks in the Dow like Caterpillar, Alcoa.’

The Dow Jones industrial average was up 45.68 points, or 0.36 per cent, at 12,594.03. The Standard & Poor’s 500 Index was up 5.49 points, or 0.40 per cent, at 1,390.84. The Nasdaq Composite Index was up 5.46 points, or 0.22 per cent, at 2,486.70.

Trading was extremely light on the New York Stock Exchange, with about 1.19 billion shares changing hands, well below last year’s estimated daily average of roughly 1.9 billion, while on Nasdaq, about 1.82 billion shares traded, short of last year’s daily average of 2.17 billion.

Advancing stocks outnumbered declining issues by a ratio of about 4 to 3 on the NYSE. Advancers and decliners were nearly even on the Nasdaq.

Hope springs eternal… heh heh

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In those good old days that folks always wax lyrical about, children always found something to do and something to talk about.

One day three young boys were playing, and talking about their home life with their parents. One little boy said, “It’s about time I be getting home, because if I’m late for supper, my Paw will get mad and whip up on me. He’s a real mean Paw.”

The second little boy said, “Your Paw ain’t mean, I got the meanest Paw in the world.” The first little boy said, “How come you say that?”

The second little boy said, “Every time I go home, he slaps me if I say something, and if I don’t say something he slaps me. Man I just don’t know what to do anymore.”

The third little boy said, “Not me, I got the best Paw in the world. He plays with me, and do things with me. He’s a real good Paw.”

The first two boys looked at him kind of funny and said, “Do he teach you how to do things too?”

The third boy said, “He sho’ do, he’s teaching me how to swim! Every morning he takes me out to the middle of the lake, and let’s me swim back to the shore.”

The first two said, almost in unison, “Ain’t it kind of hard to swim from the middle of the lake back to the shore?”

“Naw, man, that’s the easy part, the hard part is getting out of that sack!”

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THE abrupt collapse of takeover talks between South Africa’s MTN Group and India’s Bharti Airtel over the weekend has not drawn much interest from the market.

Some are hopeful this could mean a special dividend is on the cards soon, while others think SingTel may keep its money chest full for the time being, given that other projects are brewing.

When SingTel’s associate, 30 per cent-owned Bharti, announced it was in talks with MTN early this month, there was a fair bit of buzz. After all, if successful, the deal would be the largest takeover involving an Indian company, and it could have given a boost to SingTel which has been eyeing telcos in the Middle East and Africa.

There was speculation that the takeover - which had valued MTN, South Africa’s largest telco, at a reported US$50 billion - might see SingTel get involved either as a co-buyer or increasing its stake in Bharti where it is already the biggest shareholder. Merging MTN and Bharti would create the world’s sixth-largest mobile operator, with more than 130 million subscribers in around two dozen countries.

But Bharti, India’s leading mobile operator, said on Saturday it had called off the talks after MTN proposed a new structure which would have seen the Indian group becoming a unit of the South African-based mobile phone operator.

The new structure envisaged Bharti Airtel becoming a subsidiary of MTN and the exchange of majority shares of Bharti Airtel held by the Bharti family and SingTel, in exchange for a controlling stake in MTN.

‘Bharti believes that this convoluted way of getting an indirect control of the combined entity would have compromised the minority shareholders of Bharti Airtel and also would not capture the synergies of a combined entity,’ it said.

Bharti added that it had lined up funding from bankers of over US$60 billion.

Many believed that when SingTel did not announce a special dividend - which had been expected - when it released full-year (FY) 2008 results on May 14, it was saving up cash for the takeover.

The telco had, after all, between 2004 and 2007 returned extra cash to shareholders via capital reduction and special dividends when it did not make any significant investments.

Commenting on SingTel’s latest dividend, CEO Chua Sock Koong said: ‘We are balancing our desire for an efficient balance sheet with financial flexibility to make further investments.’

DBS analyst Sachin Mittal sees two outcomes from the scrapped takeover bid.

‘We expect SingTel’s share price to benefit from this news in the near term due to two key reasons: (1) Bharti’s stock price has fallen by close to 10 per cent from its peak in the last one month on possible overpayment concerns. As Bharti constitutes 33 per cent of our sum-of-the-parts valuation for SingTel, if Bharti stages 5-10 per cent recovery, SingTel can register 2-3 per cent recovery. (2) SingTel had omitted special dividends with its FY08 results (we had expected 8 cents) possibly to reserve cash for MTN deal. With no cash outlay required for the MTN deal now, investors can hope SingTel to announce special dividends in FY09, given its net debt to earnings before interest, tax, depreciation and amortisation at 0.9x is much below the optimal ratio of 1.5x-2.0x.’

Mr Mittal also thinks that SingTel remains under pressure to invest in emerging market telcos to deliver on its guidance of double-digit growth in earnings in the medium term (5-7 years).

But UBS’ Suresh Mahadevan does not think a special dividend is on the cards for the time being. He also said ‘SingTel’s strategy doesn’t revolve around acquisition’, adding that the ‘group has a fairly good footprint in the region, especially in India and Indonesia’.

As for the prospect of a special dividend, Mr Mahadevan points to Bharti’s statement where it had received a positive response from banks on funding the proposed takeover.

He figures Bharti would have done the deal with or without SingTel’s help.

It is good for SingTel to have financial flexibility in the meantime since it has put in a bid with partners Axia Netmedia of Canada and Singapore Press Holdings for the rewiring of the nation’s high-speed broadband network, he said.

Perhaps the lack of buzz stems from shareholders’ faith in SingTel’s management, and the general flight to quality during uncertain times. SingTel, along with rivals StarHub and MobileOne, continue to be rated favourably for their high dividend yields.

Said Mr Mahadevan: ‘Singapore telcos have good management teams which are completely aligned with shareholders’ interests.’

Or it could also be the start of the mid-year school holidays with many market players away.

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At the Russian military academy, a General gave a lecture on
“Potential Problems and Military Strategy”. At the end of the lecture
he asked if there are any questions.

An officer stood up and asked: “Will there be a third world war? Will
Russia take part in it?”

The general answered both questions in the affirmative.

The officer asked: “Who will be the enemy?”

The General: “All indications point to China.”

All the audience is shocked, the officer asks: “General, we are only
250 million, but there are 1,500 million Chinese. Can we win at all?”

The General: “Just think about this. In modern warfare, it is not the
quantity that matters but the quality. For example in the middle east
we have had a few wars recently where 5 million Jews fought against
50 million Arabs, and Israel was always victorious.”

After a small pause the officer asked, “Do we have enough Jews???”

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There is a two-letter word that perhaps has more meanings than any other
two-letter word, and that is “UP.”

It’s easy to understand UP , meaning toward the sky or at the top of the
list, but when we awaken in the morning, why do we wake UP ? At a meeting,
why does a topic come UP ? Why do we speak UP and why are the officers UP
for election and why is it UP to the secretary to write UP a report ?

We call UP our friends. And we use it to brighten UP a room, polish UP the
silver; warm UP the leftovers and clean UP the kitchen. We lock UP the house
and some guys fix UP the old car . At other times the little word has real
special meaning. People stir UP trouble, line UP for tickets, work UP an
appetite, and think UP excuses . To be dressed is one thing but to be
dressed UP is special.

And this UP is confusing: A drain must be opened UP because it is stopped UP
. We open UP a store in the morning but we close it UP at night.

We seem to be pretty mixed UP about UP ! To be knowledgeable about the
proper uses of UP , look the word UP in the dictionary. In a desk-sized
dictionary, it takes UP almost 1/4th of the page and can add UP to about
thirty definitions. If you are UP to it, you might try building UP a list
of the many ways UP is used It will take UP a lot of your time, but if you
don’t giveUP , you may wind UP with a hundred or more. When it threatens to
rain, we say it is clouding UP When the sun comes out we say it is clearing
UP

When it rains, it wets the earth and often messes things UP
When it doesn’t rain for awhile, things dry UP .

We could go on, but I’ll wrap it UP , for now my time is UP , so… Time to
shut UP !

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I’m a terrible lover. I’ve actually given a woman an anti-climax.

Scott Roeben

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Every investor gets in the stock market with the same objective i.e. to make more money. Have you ever seen any investor who wants to go into the market just to lose money? Throughout time memorial, the stock market has been shown to be a winning strategy to establish personal wealth for investors around the globe. Although many investors are fortunate in their quest for wealth, there are also many, many others who lose money. Of course these investors tend to keep quiet about their losses.

Anyway, we can pinpoint the five most common investment errors that most investors make i.e. lack of portfolio diversification, poor market timing, lack of reinvestment, emotional investing and high fees for investment funds.

1. Lack of Diversification

Diversification is among the fundaments to a flourishing investment portfolio, yet so many investors neglect to properly address this step. Whenever an investor decides to invest into a particular industry sector or into a particular company without diversifying across other investments, they’re essentially putting all of their eggs into one basket. This move can significantly add to the investor’s portfolio risk and the possibility for loss of capital. A properly diversified portfolio will adhere to all components of an asset allocation, considering risk tolerance, investment capital available, investment time frame and the current portfolio’s investment class weightings.

2. Market Timing

Some investors get wind of success stories from investors and traders who win big time by timing the markets. Although market timing can turn out to be successful for a lot of investors, many investors make the mistake of investing into a stock while its price is climbing instead of at the ground level. Another market timing error is selling an investment when the investor thinks that the stock is about to come down, potentially causing the investor to lose capital growth opportunities if the stock does not in fact drop-off as anticipated. Though market timing is a winning strategy for many investors, it can be a risky investment strategy and is not suggested for most investors.

3. Lack of Reinvestment

Whenever an investor is to sell off his investments, a big mistake that can be made is to not reinvest the money into a different investment, therefore holding the proceeds in cash. In many cases, it is advisable to reinvest the proceeds into another stock that meets the investor’s own objectives. Another reinvestment error occurs when investors fail to take advantage of the opportunity that a lot of investments offer the ability to reinvest dividends. This is an good strategy for wealth building and should be considered by nearly all investors.

4. Emotional Decisions

Most investors make their trading decisions on an emotional basis rather than on a logical basis. For instance, emotional investors will sell off an investment as it is dropping in price, therefore taking a loss instead of waiting for the market to re-correct. Although the overall investment goal is to buy when low and sell when high, a lot of investors execute the exact opposite strategy based on their emotional reactions.

5. Overpaying for Investment Fees

The price that is paid for investments can have a huge impact on an investor’s total investment return. So do carefully consider the total cost of investment trading fees, investment transaction fees and up front prices for investment advice etc. in order to ensure that your net investment returns are as high as possible.

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