Real News‎ > ‎2014‎ > ‎April 2014‎ > ‎

18th April 2014

Singapore Real Estate

Couple drops suit against developer over penthouse size

Source: Straits Times

Couple who sued an executive condominium (EC) developer for more than $1 million , claiming they were misled into buying a penthouse which was smaller than they believed, have dropped the lawsuit. The developer, Grand Isle Holdings, a subsidiary of City Developments Limited (CDL), has also dropped its allegations that the couple falsely under-declared their combined income when applying to buy the unit.

Real Estate Companies' Brief

Cambridge Industrial Trust to slash performance fees

Source: Business Times / Companies

THE manager of Cambridge Industrial Trust (CIT) has decided to amend the calculation method of its performance fees - this will reduce the fees by about half - with immediate effect.

Speaking at the Reit's fifth annual general meeting, the manager said its Tier 2 performance fee will be reduced to 5 per cent (from 15 per cent), effectively cutting the performance fees by up to 50 per cent.

The fee revision has to do with the trust's rather unique method of pegging its performance fees to its share price. In the first half of last year, its counter started at 68.5 cents, broke through two key resistances to reach a high of 85.5 cents on April 22, before ending at 72.5 cents on June 28.

Reits were enjoying a good run during that period on positive earnings while other sectors languished. CIT had a "near-term catalyst which created a bit of buzz", said DBS Group Research equity analyst Derek Tan: the perceived en-bloc sale potential of its freehold Lam Soon Industrial Building on Hillview Avenue. It eventually divested its stake in the building for $140.8 million last July.

-By Lee Meixian

CMA posts 2.8% rise in Q1 profit

Source: Business Times / Companies

CAPITAMALLS Asia (CMA) posted a 2.8 per cent increase in first-quarter net profit to $75.3 million from $73.2 million. Revenue rose 4.8 per cent year-on-year to $125 million. This growth in revenue was mainly driven by higher property income from Olinas Mall in Japan and operating malls in China.

At the same time, higher property management fees from Singapore boosted the topline as well, because of the opening of Bedok Mall and Westgate in December last year. The results of CMA's first quarter in 2013 were restated to reflect the consolidation of CapitaMalls Malaysia Trust's results. This, however, had no impact on the group's profit after tax and minority interest (Patmi).

CMA also recorded a portfolio loss of $1.9 million for Q1 2014 - from the group's proportionate share of the loss that resulted from the sale of IYE mall in Japan - against a gain of $6.6 million for Q1 2013. The group's earnings per share stood at 1.9 cents, the same as in the corresponding quarter the year before.

-By Joyce Hooi

CCT renews Robinsons, M&S lease at Raffles City

Trust posts 7.2% increase in Q1 DPU to 2.08¢, poised to ride Grade A office rental recovery

Source: Business Times / Companies

CAPITACOMMERCIAL TRUST (CCT), which posted a 7.2 per cent year-on-year increase in distribution per unit (DPU) for the first quarter to 2.08 cents, has renewed the 100,000 sq ft Robinsons/Marks & Spencer lease at Raffles City Shopping Centre.

CCT, which has a 60 per cent stake in Raffles City Singapore, did not name the tenant yesterday, when it revealed the size of the space involved for a major retail tenant's lease renewal in the complex, in its Q1 2014 results statement issued after the market close.

The trust's Q1 DPU translates to an annualised distribution yield of 5.2 per cent based on CCT's closing price per unit of $1.635 yesterday.

-By Kalpana Rashiwala

Global Economy & Global Real Estate

FDI in China up

Source: Straits Times

China property slump stirs talk of easing of curbs

Source: Business Times / World

CHINA'S slump in property sales and construction is spurring speculation that the government's four-year-old campaign of real estate controls will start to crack.

Citigroup Inc sees "targeted easing" including on home purchase restrictions, while Bank of America Corp says smaller cities may see looser rules. Centaline Group, parent of China's biggest real estate brokerage, says some cities are inclined to adjust policies such as the level of scrutiny of buyers.

A 25 per cent plunge in new building construction helped drag economic growth in the first three months of this year to the slowest in six quarters, adding pressure on Premier Li Keqiang to avert a deeper slowdown. While the government announced more support measures including lower reserve requirements for rural banks, Mr Li reiterated on Wednesday that the nation isn't considering stronger stimulus.

-From Beijing, China

China Seen Cracking on Property Controls

Source: Bloomberg / News

China’s slump in property sales and construction is spurring speculation that the government’s four-year-old campaign of real-estate controls will start to crack.

Citigroup Inc. sees “targeted easing” including on home purchase restrictions, while Bank of America Corp. says smaller cities may see looser rules. Centaline Group, parent of China’s biggest real-estate brokerage, says some cities are inclined to adjust policies such as the level of scrutiny of buyers.

A 25 percent plunge in new-building construction helped drag economic growth in the first three months of this year to the slowest in six quarters, adding pressure on Premier Li Keqiang to avert a deeper slowdown. While the government last night announced more support measures including lower reserve requirements for rural banks, Li reiterated that the nation isn’t considering stronger stimulus.

“The housing sector now poses the biggest downside risk to the Chinese economy,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “The next batch of policy announcements is likely to be housing policy relaxation at the local government level.”

The National Bureau of Statistics said yesterday that growth in gross domestic product slowed to 7.4 percent in the first quarter from 7.7 percent in the previous period, compared with a 7.5 percent annual target. Industrial production in March and fixed-asset investment for the first three months of the year trailed estimates.

Rural Banks

The State Council, or cabinet, said last night that it would lower reserve requirements at “qualified” rural banks to provide more funds to agriculture-related industries, building on plans announced earlier this month for railway and housing spending and tax breaks to support expansion. First-quarter growth was within a reasonable range, the cabinet said.

China’s interest-rate swaps fell by the most since June after last night’s announcement. The cost of the one-year rate swap, the fixed payment needed to receive the floating seven-day repurchase rate, dropped 18 basis points to 3.86 percent as of 10:58 a.m. in Shanghai. It reached 3.81 percent earlier, the lowest since July 9, according to data compiled by Bloomberg.

Last night’s measures “are small in magnitude in terms of their macro impact, but send a clear signal of loosening intention,” Goldman Sachs Group Inc. analysts said in a note. Bank of America Corp. estimated that a cut of 1 percentage point in rural lenders’ reserve ratios may release as much as 78 billion yuan ($13 billion) in liquidity.

Reasonable Range

Li said yesterday that growth a bit higher or lower than 7.5 percent can be deemed to be in a reasonable range, according to a government statement after a State Council meeting. China will maintain a “prudent” monetary policy and a “proactive” fiscal stance and will ensure the 2014 growth target can be reached through reform and changes to the structure of the economy, Li said.

The value of property sales in the first quarter fell 5.2 percent from a year earlier and unsold completed properties jumped 23 percent from a year earlier to 521.6 million square meters, the bureau said.

Sheng Laiyun, a spokesman for the statistics bureau, said yesterday that “relevant departments will closely follow the changes in the property market and improve property macro-control policies accordingly,” responding to a question at a briefing on whether housing-market policies would be relaxed.

The property market has had new developments including falling prices in third- and fourth-tier cities, Sheng said.

Shadow Banking

The nation’s slowdown is partly being engineered by the government, which has been trying to curb a $6 trillion shadow-banking industry and reduce overcapacity and pollution. Nationwide measures to cool property-price gains since 2010 have included higher interest rates for second-home mortgages, and restrictions on purchases in about 40 cities.

UBS AG estimates the real-estate industry accounts for more than a quarter of final demand in the economy when including property-generated needs for goods including electric machinery and instruments, chemicals and metals.

“For now, I think the government will hold its breath, but if the sector were to continue to weaken -- and I think most forward-looking indicators suggest it will -- I’d expect the government’s nerve not to hold,” George Magnus, an independent senior economic adviser in London to UBS, said in an e-mail.

Measures may include “monetary easing, including possibly further yuan depreciation, and a relaxation of some past restraints on property purchases and transactions,” Magnus said.

Some Easing

JPMorgan Chase & Co. said yesterday that there may be “some degree of easing in property tightening measures” such as restrictions on purchases and mortgages in markets where housing is under pressure. It’s “unlikely to evolve” into a national policy shift, Grace Ng, senior China economist in Hong Kong, said in a note.

Any loosening measures may only be minor, said Andy Mantel, founder and chief executive officer of Pacific Sun Advisors in Hong Kong. Xu Gao, chief economist at Everbright Securities Co. in Beijing, said the government should focus on loosening monetary policy to help the property market.

Some of the cities that have imposed home purchase restrictions, such as Wenzhou, Xuzhou and Zhoushan, have been loosening such curbs starting in the second half of 2013 to boost sales, according to Centaline.

Beijing Prices

In the capital city of Beijing, one of the four “first-tier” major cities, existing-home prices fell 3.8 percent from the March average to 31,265 yuan a square meter in the first 10 days of April, according to Bacic & 5i5j Group, the city’s second-biggest property broker.

Ding Shuang, senior China economist at Citigroup in Hong Kong, said it’s possible the government could buy housing inventory to use as low-income apartments.

“Property developers, especially smaller ones, are very vulnerable,” he said. “If they cannot sell their inventory, they may default and the non-performing loan ratio could increase and bond defaults could also increase.”

-By Bloomberg News

Blackstone posts 30% rise in Q1 earnings

Source: Business Times / World

Credit Foncier Selling First French Home-Loan Bonds Since 2006

Source: Bloomberg / Luxury

Credit Foncier de France SA is selling the first bonds backed by French residential mortgages since 2006 as regulators press for the revival of the securitized debt market to boost lending.

The mortgage lender, owned by Paris-based bank Groupe BPCE, is expected to sell the bonds following investor meetings beginning on April 22, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The deal is the bank’s debut issue of notes backed by prime mortgages.

France’s central bank Governor Christian Noyer is encouraging lenders to revive the market for residential mortgage-backed securities after stricter capital rules curbed lending. This is the second part of Noyer’s plan to use securitization to increase the supply of credit to businesses, with a program for packaging loans to small- and medium-sized businesses into bonds starting last week.

“French banks are facing pressure from Bank of France to make room on their balance sheets to provide financing to companies,” said Ratul Roy, head of European securitized products research at Citigroup Inc. in London. “Development of a functioning French RMBS market would be a valuable addition to the European securitized universe, where primary issuance has been dominated by U.K. and Dutch RMBS, and auto ABS during the past few years.”

Leverage Restriction

French banks are restrained from expanding their balance sheets, which already hold about 1.5 trillion euros ($2 trillion) of corporate loans and residential mortgages, by Basel III’s leverage ratio requirement, according to Citigroup. That’s prompting policy makers to seek new ways to boost finance to SMEs, which employ 63 percent of private sector workers in France and are central to the country’s moribund economy, where unemployment is above 10 percent.

The last French RMBS deal was a securitization of guarantees on loans made by Credit Logement SA in September 2006, according to UniCredit SpA.

Credit Foncier is the lead arranger of its new deal, while Credit Suisse Group AG (CSGN) and BPCE’s Natixis (KN) SA unit are co-arrangers. Lloyds Banking Group Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc are joint lead managers.

Credit Foncier’s transaction follows the first Italian RMBS since 2011, sold by Veneto Banca ScpA last week. The Montebelluna, Italy-based bank paid 115 basis points more than the euro interbank offered rate, down from the 120 basis points first indicated amid strong demand for the deal.

“With the first Italian deal in three years pricing at the tighter end of guidance this month, I expect to see similarly strong demand for a French issuer,” said Markus Ernst, an analyst at UniCredit in Munich.

-By Alastair Marsh

Crowdfunding Spreads to Hotels as Hard Rock Sells Stakes

Source: Bloomberg / Personal Finance

Real estate crowdfunding is spreading to the U.S. hotel industry, offering individual investors perks such as room upgrades along with an interest in the property.

The owner of Southern California’s Hard Rock Hotel Palm Springs is selling stakes in the 163-room luxury resort, with investors receiving such benefits as improved bookings, room-rate discounts and free use of a poolside cabana set aside for hotel owners. The offering, which started yesterday, is the first of its kind for an existing hotel, according to online marketplace Realty Mogul and Kittridge Hotels & Resorts LLC, the property’s majority owner.

Crowdfunding, in which large amounts of money are raised through small contributions, has been on the rise in commercial real estate and probably will gain popularity among hotels as investors seek to put money into “an existing asset they understand and can use,” said Steve Cinelli, chief executive officer of online marketplace Primarq Inc.

“With crowdfunding in the lodging space, what you’re looking to do is not just provide a stake in a hotel but also perks,” Cinelli said in a telephone interview. “Besides raising capital, you’re building an audience. That’s why lodging makes so much sense for crowdfunding.”

Primarq, which brings together property owners and investors, is planning to use the strategy to raise money for two hotels in the San Francisco Bay area, where the company is based, Cinelli said.

Hotel Conversion

Kittridge is seeking to raise as much as $1.5 million within four weeks to build a new nightclub at the Hard Rock and recoup some of its original investment, said Andy Carpiac, president of the Calabasas, California-based company.

The Palm Springs property, purchased in September 2012 for an undisclosed price, was closed for renovations last July and reopened under the Hard Rock brand in October. Kittridge spent $8 million on the conversion and upgrades, according to Carpiac.

“We expect a fairly large amount of investor interest because we have many fans of the hotel and the brand,” Carpiac said in a telephone interview. “They come here and stay with us, they spend money here, they bring their friends and family and act like real owners, which they should. It benefits them and it benefits us.”

The minimum investment is $10,000, Carpiac said.


Crowdfunding gained traction after the Jumpstart Our Business Startups Act went into effect in April 2012. The law has eased restrictions on investments in closely held companies, including those set up to own commercial property, by people making less than $200,000 a year and with a net worth of less than $1 million. Before passage of the JOBS Act, such firms could market and sell shares to individuals who exceed those levels, known as accredited investors.

All types of crowdfunding jumped 81 percent to $2.7 billion in 2012 and was expected to soar to $5.1 billion last year, according to a 2013 report by research firm Massolution.

Realty Mogul, based in Beverly Hills, California, raised $14.9 million for 58 properties from September through last month, according to its website. Retail and residential made up the biggest share of transactions, at a combined 59 percent, while hospitality was the last of six property types at 5 percent.

The Hard Rock Hotel offering may appeal to investors because of rising lodging demand in the area. Palm Springs occupancy was 68 percent and nightly room rates averaged $145.49 in the first two months of 2014, the highest levels for the period in at least five years, according to Hendersonville, Tennessee-based research firm STR Inc.

Hotel Outperformance

Hard Rock Hotel Palm Springs probably will outperform other hotels in the area with an expected average occupancy of about 70 percent this year, Carpiac said. The hotel had an average nightly rate of $198 in March. Carpiac wouldn’t say what he expects the average rate to be for all of 2014.

The hotel’s public areas feature music-oriented displays such as an archway made of speakers, framed rock memorabilia and pop art-inspired paintings and murals. Its rooms, lobby and hallways are decorated in dark purple, orange, pink and gold, and rooms have beds with leather headboards and furniture in the mid-century-modern style.

As of this morning, the Hard Rock had attracted about $280,000 from individual investors through, according to Jilliene Helman, the company’s CEO and co-founder.

“Anything that has a very understandable consumer orientation really lends itself well to crowd financing,” said Cinelli of Primarq. “You’re not selling a technology that has algorithms you have to be a rocket scientist to understand.”

-By Nadja Brandt