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23rd April 2014

Singapore Economy

Singapore-Guangzhou joint venture opens office here

Source: Business Times / Singapore

SINO-SINGAPORE Guangzhou Knowledge City Investment and Development (GKC Co) has opened its first overseas representative office in Singapore, as part of efforts to deepen collaboration between Singapore and Guangdong.

The office will focus on enhancing relations with collaboration partners, promoting investments in the Sino-Singapore Guangzhou Knowledge City (SSGKC), conducting research on relevant industries and exploring opportunities for collaboration, and coordinating event organisation and official visits.

The representative office was unveiled by Guangzhou City Vice-mayor Chen Zhiying and Singbridge Corporate chief executive Chong Phit Lian yesterday.

"By establishing an overseas representative office, we aim to expand our footprint and help bring more international investors and partners into SSGKC. This is especially timely now that significant progress in the start-up area has been made. SSGKC is ready to welcome its first batch of corporations by 2015," said Chin Phei Chen, chief executive of GKC Co.

-By Vivien Shiao

CFOs upbeat on profit growth

Source: Straits Times

Chief financial officers (CFO) remain optimistic about profit growth this year although there are concerns among many that revenues might slip, according to a new survey. It found that 67.7 per cent of Singapore-based companies polled expect earnings growth while 61.3 per cent estimate that revenue will expand.

Business sentiment mixed as restructuring continues to hurt

SMEs in industries focused on domestic economy uncertain, while those linked to global marketplace more optimistic

Source: Today Online / Business

SINGAPORE — The global economy may be on the mend, but not all businesses are reaping the benefits.

Many small and medium firms, particularly those in the construction and business service industries that tend to be more dependent on the domestic economy, are uncertain of their outlook because of local constraints. This is in contrast to sectors such as manufacturing and transport, which expect to benefit from the improving external conditions.

This was the general sentiment of the latest SME Index, which was jointly released by the Singapore Business Federation and DP Information yesterday, following interviews with 3,000 SME owners and managers.

“SMEs linked to the global marketplace are becoming more optimistic … Singapore is one of the most open economies in the world, so our SMEs will benefit as trade growth picks up this year and during 2015,” DP Information’s managing director Chen Yew Nah said. “Meanwhile, those linked to the domestic economy are tempering their outlook.”

With the global economy projected by the World Bank to grow by 3.2 per cent this year after last year’s 2.4 per cent, respondents in the manufacturing as well as transport and storage sectors were the most optimistic about their overall performance for the six months between April and September.

The index score for manufacturing increased to 54.9 from 54.8 in the last survey, while that for transport and storage rose to 54.3 from 54.2, the survey showed. The two sectors are also the only ones that expect better turnover and profitability during the period, the index showed.

As for the other three sectors surveyed — business services, commerce and trading, construction and engineering — the index showed overall sentiment had deteriorated, with respondents citing domestic constraints such as manpower crunch and escalating business costs.

These local constraints were highlighted last week by the Monetary Authority of Singapore (MAS) in its latest policy statement, which cautioned that wage pressures were likely to persist amid a tight labour market, with firms expected to pass on business costs to consumers.

Meanwhile, the index yesterday also showed businesses in all surveyed sectors are expecting to cut back on hiring over the next few months.

Said SBF’s chief operating officer Victor Tay: “I believe companies may be starting to see the benefits of their investments in productivity and automation, which will ease dependence on manpower somewhat. But this reflects the ongoing tightening of foreign labour policies, some of which are scheduled to come into effect this year.” Foreign worker levies will be raised across the board from July, the Government announced at the Budget last year.

But with data by the Department of Statistics showing a doubling in the rate of company closures since 2007, it may be time for the government to check the pace of restructuring, Mr Tay said. “In 2007, 9,268 companies were closed down. By 2012, that number shot up to 18,331. Certainly, the post-Lehman economic crisis played a part, but it may also imply the impact of Singapore’s economic restructuring.”

“A physician will want to (know) if his medicine is healing or killing his patient — and likewise, the policymakers may wish to assess whether it’s time to moderate their approach now.”

-By Wong Wei Han

Singapore Real Estate

Foreigners' share of home purchases creeping up

Source: Straits Times

Private home purchases fell across the board in the first three months of this year to just over 2,000 units - the first time in more than five years that the number has dropped below 3,000 homes. However, foreigners' share of transactions edged up because of a sharper pullback by Singaporean buyers.

Privatisation unhappiness: market is to blame

Source: Business Times / Companies

TAKEOVER/privatisation fever has gripped the local market in recent days as a flurry of these exercises have been announced. UIC kicked things off with its offer for Singapore Land, CapitaLand then grabbed the headlines with its plan to buy out all of CapitaMalls Asia (CMA), and a private consortium headed by Hotel Properties' boss Ong Beng Seng tabled a takeover of HPL that could eventually lead to HPL being delisted.

This, in turn, has sparked off a search for the next big privatisation play and driven the local market higher, as if this was something to be celebrated and trumpeted.

Truth be told, it isn't.

On the contrary, it is a damning indictment of a market aspiring to be a major gateway for global finance that good quality companies are being persistently mispriced by a supposedly efficient market. It isn't really efficient by any stretch, but let's pretend for argument's sake that it is. But once the delistings are done and dusted, a void will appear that will take years to fill.

-By R Sivanithy

CCM unit's condo contract terminated

The loss-making subsidiary was constructing the Balestier project

Source: Business Times / Companies

A LOSS-MAKING subsidiary of CCM Group that is being disposed of has received a notice of termination on a condominium in Balestier it was constructing.

The contract was terminated "on the grounds of alleged breaches of contract", the Catalist-listed construction firm said yesterday. It added that it was seeking legal advice and evaluating 

the financial impact of this development.

The contract, secured in August 2011, was worth $32.3 million. It was awarded by developer Orion-One Residential to CCM subsidiary CCM Industrial. The latter was to build a 23-storey residential flat with a five-storey car park, swimming pool, communal facilities and a sky terrace, at 6 Jalan Ampas.

The freehold project was marketed under the name The Viridian@Bales-tier. Construction was scheduled to start in October 2011 and was originally slated to be completed in October last year. According to a marketing website, the project was expected to be completed in the middle of this year, with prices from $785,000.

-By Cai Haoxiang

Pearl Bank owners bank on conservation order

Source: Straits Times

The owners of Pearl Bank Apartments are seeking a conservation order for their building as part of an ambitious plan to entice a developer to rejuvenate it. If they succeed, the owners, who have tried three times for a collective sale of the 38-year-old building, would have broken new ground in the private property sector with their strategy.

Real Estate Companies' Brief

Mapletree Industrial Trust's Q4 DPU up at 2.51 cents

Source: Business Times / Companies

MAPLETREE Industrial Trust yesterday posted a distribution per unit of 2.51 cents for its fourth quarter ended March 31, 2014, a 5.9 per cent increase from 2.37 cents a year ago.

This will be paid on June 3, 2014.

Distributable income rose 9.5 per cent to $42.6 million, while net property income rose 7.5 per cent to $53.3 million. Gross revenue rose 4.2 per cent to $75.2 million, driven by higher occupancies in flatted factories and higher rental rates secured for leases across all the property segments except business parks, the Reit said.

According to JTC statistics, the median monthly rental rates for multi-user factory space islandwide increased slightly to $2 per square foot (psf) in the first two months of Q1. Median monthly rents for business park space fell 5.8 per cent from $4.49 psf to $4.23 psf in Q1, however, reversing the upward trend since Q2 2013.

-By Lee Meixian

Frasers Centrepoint Trust posts Q2 DPU of 2.88 cts

Source: Business Times / Companies

FRASERS Centrepoint Trust (FCT) reported a distribution per unit (DPU) of 2.88 cents for its second quarter ended March 31, a 6.7 per cent increase from 2.7 cents a year ago.

The Q2 distribution will be paid on May 30.

Income available for distribution rose 1.4 per cent to $23.8 million, while net property income rose 2 per cent to $29.3 million.

Gross revenue rose 2.9 per cent to $41 million, driven by improved revenue from Causeway Point, upon completion of its addition and alteration works.

-By Lee Meixian

Property, banks' turn to lift STI

Index up 21.7 points at 3,277.53; DBS, UOB and OCBC contribute 9 pts, while CityDev adds 3.2

Source: Business Times / Singapore Markets

IT wasn't the Jardine group that played the biggest role in propelling the Straits Times Index up 21.7 points to 3,277.53 yesterday, but the three banks and property stocks. Brokers said that the play on the banks was probably ahead of their results which are due soon but when the large gains in property stocks are taken into account, it could also be due to hope that the government might ease some of its property cooling measures.

Rises in DBS, UOB and OCBC contributed nine points towards elevating the STI, while property developer City Developments jumped 46 cents or 4.4 per cent to $11 with 2.2 million traded, adding 3.2 points. CapitaLand, which has been steadily climbing since it announced a takeover of CapitaMalls Asia, rose another three cents to $3.24 with 17.6 million done. Developers UOL, Wing Tai and Ho Bee were also up.

A dealer said that there was talk that several rounds of property cooling measures have had their desired effect and that perhaps some measures may be lifted. Another however, said: "Developers and real estate companies have been clamouring for the curbs to be removed but it probably is too early."

An added factor was privatisation speculation, which has been sparked by CapitaLand's bid to delist CapitaMalls Asia last week.

-By R Sivanithy

Ascendas ReitS

Source: Business Times / Singapore Markets

A-Reit's Q4 2014 distribution per unit (DPU) of 3.55 cents (+5.3 per cent y-o-y) brings DPU for the full year to 14.2 cents, within our estimates. Q4 2014 topline and net property income came in 8 per cent and 12 per cent higher y-o-y at $156.5 million and $112.3 million, respectively.

Views, Reviews & Forum

His passion for cranes lifts firm to success

Source: Straits Times

Love of cranes led Mr Vincent Chua to work for 30 years in the construction industry as a trader in construction parts at a multinational firm. Then in 2012, at an age when most people are thinking of retirement, Mr Chua, now 64, set up his own crane company. "It is about being young at heart and following your passion. I wanted to build a company of my own because I don't think I'm ready to leave the industry just yet," he said.

Global Economy & Global Real Estate

Singapore companies have mixed views of Iskandar

Source: Today Online / Business

SINGAPORE — Ten years ago, Mr Lim — the owner of a Singapore food manufacturing company — purchased two industrial land plots across the Causeway, with the hope of shifting some of his operations to Johor Baru’s low-cost environment. He has yet to make that move as, after crunching the numbers, there is not a strong financial case.

“Iskandar is also facing issues of a manpower shortage and rising costs. Last year’s introduction of minimum wages and Goods and Services Tax are just part of it,” Mr Lim, who asked to keep his identity and the name of his company private, told TODAY. “The fact that Iskandar doesn’t have a free port also matters to a food company like us, because imported materials and exported products will be tariffed. Or we can go through Singapore’s ports — and fork out just as much for the cross-strait transport costs.”

But Iskandar’s appeal was enough to help persuade Super Union Precision Engineering to expand part of its manufacturing operations there in 2011. However, while business development director Sabrina Lim said the company is committed to making the move work, the initial results have been disappointing.

“Our factory in Iskandar’s Zone E has been operating since July last year, but besides the property gains from our early purchase, we have yet to enjoy much savings or convenience. In fact, we’re having to pay a premium to transfer some of our workers from Singapore due to a shortage of manpower with the right skills.”

Despite the initial challenges, Ms Lim has no doubt Super Union’s move is necessary and more companies will follow suit.

“Sooner or later, moving or expanding to Iskandar will be a matter of necessity for Singapore companies. Necessity is the word I use, because that’s what happened to us,” she said. “We went to Iskandar not by choice — we were pressured by the intense labour and land constraints at home.”

“My advice is to go there as part of a group — Super Union was one of the six companies that expanded to Iskandar as a cluster. That enabled us to share information on problems such as licence applications, which made things easier for us,” Ms Lim added. “But I hope to see both governments at least improving customs efficiency for easier travelling. Or else there won’t be much cross-border synergy to speak of.”

-By Wong Wei Han

Iskandar to move away from being low-cost centre

Source: Today Online / Business

SINGAPORE — Iskandar Malaysia is set to focus more on attracting higher-value manufacturing companies, in a move that may result in some lower-end Singapore businesses having to look for an alternative overseas destination where they can shift some of their operations as they grapple with higher costs and manpower constraints at home.

Mr Ismail Ibrahim, the chief executive of the Iskandar Regional Development Authority (IRDA), told TODAY in an interview that the special economic zone is shifting away from activities dependent on cheap labour.

“For the manufacturing sector, we are moving Iskandar Malaysia towards higher levels of the value chain. We want to see more of what we term as technology-intensive manufacturing activities and less of the low-cost kind of industries,” he said, adding that this has always been part of the IRDA’s planning.

“Of course, in the early days of Iskandar Malaysia, we couldn’t have been too aggressive in pushing for this. But we have to do it gradually — and now is the right time to not only push for the high value-add manufacturing to come in, but also to restructure the current ones,” he said.

“So, now it leaves investors from Singapore a choice — if they wish to have low investment and high returns, they may have to assess and decide Iskandar Malaysia is not attractive for them. We are okay with that — they may want to go elsewhere in Malaysia where their requirements can be met.”

Mr Ismail said the IRDA has been working with public- and private-sector partners to create awareness among companies in Singapore and elsewhere of this strategy.


The CEO’s comments come as anecdotal evidence suggests that some Singapore manufacturers do not see a compelling reason to move operations to Iskandar.

Two weeks ago, the prime ministers of Singapore and Malaysia lauded the progress being made there, highlighting the role it can play in complementing the Republic’s economic activities.

At their leaders’ retreat, Prime Minister Lee Hsien Loong and Malaysian Premier Najib Razak declared their satisfaction with the joint projects and initiatives in the special economic zone, with Mr Najib noting that if Iskandar can offer advantages at more competitive rates, it will be more attractive for Singapore businesses.

Although some Singapore manufacturers have moved some operations north, others have decided that, around eight years after Iskandar was launched, it does not offer the same value it once did.

“Cumulatively, the numbers of Singapore businesses in Iskandar should be climbing up, but the momentum isn’t that strong,” said Savills senior director for research and consultancy Alan Cheong, citing feedback from his industrial property agents active in the economic zone.

“All the nitty-gritty issues eventually come to play and these can swamp the broad brush advantages,” he said. “For instance, SMEs (small and medium enterprises) going there are competing for the same pool of skilled Malaysian workers who could easily just ply the Causeway every day drawing Singapore-scaled wages.”

PricewaterhouseCoopers Singapore’s international tax partner Abhijit Ghosh agreed that a key reason for the reluctance among some Singapore manufacturers to move to Iskandar is the shrinking cost advantage.

“What our clients told us is that whereas they used to enjoy around 30 to 35 per cent savings on combined labour and real estate costs when they relocated to Iskandar, that advantage has narrowed to 10 to 20 per cent now as wages and, to a lesser degree, land prices continue to edge up,” he said.

Nevertheless, Singapore remains the biggest foreign investor in Iskandar, having committed a cumulative RM11 billion (S$4.23 billion) to the area as of January, showed data provided by the IRDA. This forms a key part of the RM133.07 billion overall investment that the region has attracted so far, of which RM47.82 billion has been committed to the manufacturing sector.

However, a closer look at the data reveals that although the overall investment amount has been increasing, the proportion of foreign investment in Iskandar has been steadily shrinking, from 55 per cent of the total in 2008 to 35 per cent currently, suggesting a slowdown in overseas interest.


International Enterprise (IE) Singapore’s Kuala Lumpur centre director Adeline Quek acknowledged that Iskandar is a work-in-progress for foreign companies, but the longer-term view is positive.

“Bearing in mind that Iskandar Malaysia is essentially a greenfield development, it will take some time for the development of softer aspects such as a suitable talent pool and supporting industries such as consumer and business services,” she said. “In the meantime, Singapore companies need to be prepared to manage teething issues such as manpower constraints and even a possible construction crunch.”

Whatever the headwinds, eroding financial benefits should not be seen as a deal breaker, Ms Quek added.

“For Singapore companies, the real advantage of Iskandar Malaysia lies in its connectivity. Its proximity allows companies to shuttle efficiently between both locations, creating an integrated business ecosystem as they expand.”

Mr Ismail added that momentum is gathering to create a business environment that companies from Singapore and elsewhere should find very appealing.

“In Iskandar’s case, we are creating an ecosystem that you simply can’t ignore. We have the best infrastructure, we will provide the necessary talents and we are making efforts to ensure we are environmentally sustainable while improving processes for greater ease of doing business. At the end of the day, senses will prevail and I believe businesses will find Iskandar an attractive choice, even though the costs might be higher.”

And he added that the push to move Iskandar up the manufacturing value chain may act as a spur for some Singapore companies looking to shift some operations.

“We’re happy to note that most Singapore companies we’ve talked to welcome this change — which shouldn’t be a major challenge for them anyway, given the advanced standards of the manufacturing industry in Singapore.”

-By Wong Wei Han

Revaluation of properties drives profits for 1MDB

Real estate gains of RM2.7b responsible for earnings growth

Source: Business Times / Malaysia

[KUALA LUMPUR] Malaysian state investment fund 1Malaysia Development Bhd (1MDB) relied on a sharp revaluation of its property assets to drive profit growth in its last financial year, accounts released yesterday showed.

The improvement came despite 1MDB paying more than RM10 billion (S$3.8 billion) to buy power businesses in the past two years.

1MDB, whose board of advisers is chaired by Prime Minister Najib Razak and which has been criticised for a lack of transparency, last week reported a net profit of RM778 million for the year through March 2013, up from RM44.7 million the previous year.

The detailed accounts released by the country's Companies Commission show the earnings rise was driven by property revaluation gains totalling RM2.7 billion, without which 1MDB would have posted a loss of RM1.85 billion.

-From Kuala Lumpur

Can Japanese economy come back?

Source: Straits Times

Germany's biggest mall coming up in Berlin

Despite lagging in purchasing power, the city is becoming a retail destination

Source: Business Times / World

[BERLIN] When Harald Huth bought the former Wertheim department store site in central Berlin, he planned to build a mall with 200 shops for about 400 million euros (S$690 million). Three years and almost one billion euros later, he's set to open Germany's biggest shopping centre, with 270 stores.

The developer's growing ambitions reflect Berlin's emergence as a shopping destination. Retail rents in the capital climbed the most among Germany's big cities last year, driven by a surge in tourism and a growing population.

"In the past 10 years, Berlin has developed excellently," Mr Huth, 45, said. "The tenant demand we received gave me confidence that the project could be bigger." Germany's biggest city has been something of an emerging market in the decades of rebuilding that followed the fall of the Berlin Wall in 1989.

Though Berliners' incomes are still lower than the national average, the city is beginning to attract brands like Apple and Forever 21, which opened stores there last year.

-From Berlin, Germany

Sales of Existing U.S. Homes Fall for a Third Month

Source: Bloomberg / Personal Finance

Sales of previously owned homes fell in March for a third consecutive month as rising prices and a lack of inventory discouraged would-be buyers.

Closings, which usually take place a month or two after a contract is signed, fell 0.2 percent to a 4.59 million annual rate, the lowest level since July 2012, the National Association of Realtors reported today in Washington. Purchases were down 8.5 percent compared with the same month last year before adjusting for seasonal patterns.

Property values have climbed faster than wages, putting ownership out of reach for some Americans. Harsh winter weather in January and February also probably kept some properties off the market, contributing to a lack of supply that has further stoked price increases.

“The housing recovery is on pause,” said Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut, which is among the top home-sales forecasters over the past two years, according to data compiled by Bloomberg. “There may be some weather impact, but it doesn’t seem like that’s what’s really holding things back. What does seem to be holding things back is this shortage of inventory.”

Stocks rose a sixth day, with the Standard & Poor’s 500 Index capping its longest rally since September, as health-care shares surged amid a $45.7 billion bid for Allergan Inc. and earnings from Netflix Inc. to Harley-Davidson Inc. topped estimates. The S&P 500 climbed 0.4 percent to 1,879.55 at the close in New York.

Survey Results

The median forecast of 75 economists surveyed by Bloomberg called for sales to slow to a 4.56 million annual rate. Estimates ranged from 4.5 million to 4.85 million. February’s pace was unrevised at 4.6 million.

Demand slackened in parts of the country such as the West, where property values have rebounded too rapidly, while other regions are still trying to dig out from the unusually harsh winter that prevented buyers and sellers from venturing into the market, Lawrence Yun, NAR chief economist, told reporters as the figures were released. Nonetheless, the relative stabilization over the past two months is a hopeful sign that sales will strengthen in coming months, when purchases typically pick up.

“Sales may be stabilizing,” said Yun. “I do expect some spring bounce.”

The median price of an existing home climbed 7.9 percent from March 2013 to $198,500, today’s report showed. The appreciation was led by a 12.6 percent year-to-year advance in the West, while the Northeast lagged behind with a 3.2 percent increase.

Regional Breakdown

Sales were mirror images of prices, with the biggest 12-month drop coming in the West at 13.5 percent, and the smallest in the Northeast, with a 4.4 percent decrease.

The number of houses for sale at the end of last month rose to 1.99 million compared with 1.93 million a year earlier. At the current pace, it would take 5.2 months to sell houses compared with 5 months at the end of February. That still constitutes a tight market that favors sellers over buyers, Yun said.

“Prices are continuing to rise because we have a shortage of inventory,” Yun said in the press conference. “We do need to see a moderation in price growth because affordability will impact sales negatively.”

Another report today showed house prices rose 6.9 percent in the 12 months through February, the smallest gain in a year, in a sign that the housing market’s recovery is cooling. Prices climbed 0.6 percent on a seasonally adjusted basis from January, the Federal Housing Finance Agency said.

Post Recession

While existing home sales have improved since hitting a low of 3.45 million in July 2010, rising interest rates and higher prices have pushed transactions down from a recent high of 5.38 million reached in July 2013.

The average rate on a 30-year, fixed mortgage fell to a two-month low of 4.27 percent in the week ended April 17. A year ago, the rate averaged 3.41 percent, according to Freddie Mac in McLean, Virginia.

Work began on fewer new homes than forecast in March, Commerce Department data showed last week. Builders also have fewer houses in the pipeline, with the number of permits declining 2.4 percent last month.

Housing’s slow recovery is being felt by mortgage lenders, many of which have cut staffing. Since the beginning of the year, Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. have eliminated workers in their mortgage divisions.

Mortgage Lending

At PNC Financial Services Group, loans used to buy homes fell to $1.9 billion in the first quarter compared to $4.2 billion a year earlier, Chief Financial Officer Rob Reilly said. Total revenue for the Pittsburgh-based bank could fall this year in part because of reduced demand for mortgages, he said.

“We announced expense reductions in residential mortgage during the fourth quarter of last year and we have fully captured those savings,” Reilly said on an April 16 earnings call. “In this environment, we will remain focused on disciplined expense management.”

-By Lorraine Woellert

Home resales in March fall to lowest since July 2012

Source: Business Times / World

[WASHINGTON] US home resales fell to their lowest level in more than 11/2 years last month, but there were signs a recent downward trend that has plagued the housing market may be drawing to an end.

The National Association of Realtors (NAR) said yesterday that home sales slipped 0.2 per cent to an annual rate of 4.59 million units, the lowest level since July 2012.

The decline was, however, less than economists' expectations for a fall to a 4.55-million pace. February's sales pace was unrevised at 4.6 million units. "The negative housing momentum, which was exacerbated by severe weather conditions during the winter months, may be starting to fade," said Gennadiy Goldberg, an economist at TD Securities in New York.

Existing home sales are counted at the closing of contracts and last month's sales reflected contracts signed in January and February, when the country was in the grip of an unusually cold and snowy winter.

-From Washington, US

U.S. Home Prices Rose 6.9% in February as Recovery Cools

Source: Bloomberg / Luxury

U.S. house prices rose 6.9 percent in the 12 months through February, the smallest gain in a year, in a sign that the housing market’s recovery is cooling.

Prices climbed 0.6 percent on a seasonally adjusted basis from January, the Federal Housing Finance Agency said today in a report from Washington. The average economist estimate was for a 0.5 percent increase, according to data compiled by Bloomberg.

Price gains, driven by competition for a tight supply of listings, may be poised to slow as real estate becomes more expensive, more sellers list houses and homebuilders add to the supply of available properties. The average rate for a 30-year fixed mortgage has climbed by almost a percentage point from a year ago, further reducing affordability.

“We’re still seeing prices growing because inventory is tight,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview yesterday. “But going forward, we see year-over-year price growth slowly decelerating.”

Sales (ETSLTOTL) of previously owned U.S. homes fell 0.2 percent in March from the previous month to a 4.59 million annual pace, the lowest level since July 2012, the National Association of Realtors reported today in Washington.

The 12-month increase in the FHFA index was the smallest since January 2013, according to data compiled by Bloomberg.

The FHFA’s report showed prices increased 14.3 percent from a year earlier in the Pacific area, which includes California and Oregon. In the Mountain region, with state such as Colorado and Nevada, the gain was 11.2 percent. The New England area -- including Connecticut and Massachusetts -- had the smallest increase, at 0.6 percent.

The index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide a specific price for homes.

-By Prashant Gopal

MNCs 'planning to invest less in China'

Source: Straits Times

Financing Plan for Trade Center Tower Faces Challenges

Source: Bloomberg / News

A financing plan for a third World Trade Center skyscraper in lower Manhattan is at risk as commissioners of the Port Authority of New York and New Jersey prepare to vote on a $1.2 billion loan guarantee.

William “Pat” Schuber, one of nine commissioners at the agency, said he was uncertain if tomorrow’s expected vote on a the financing arrangement would take place. Kenneth Lipper, a commissioner who has been leading opposition to the proposal, said the plan would be defeated if a vote were held tomorrow.

While proponents of the plan led by Vice Chairman Scott Rechler say the guarantee to developer Larry Silverstein for 3 World Trade Center is critical to the revitalization of the 16-acre (6.5-hectare) site that the Port Authority owns, Lipper contends the real estate project diverts the agency further from its primary mission of operating bridges, tunnels, airports and shipping terminals serving the two states.

“I’m not sure there’s support for it yet on the New Jersey side,” Schuber said yesterday after a meeting of a panel seeking ways to reform the authority.

Under the agency’s bylaws, the board is split equally between New York and New Jersey representatives. Six members must vote in favor of the measure for it to pass, with at least one vote of approval from each state.

Schuber is a New Jersey commissioner. Lipper and Rechler are appointees of New York Governor Andrew Cuomo.

Bridge Scandal

The 93-year-old Port Authority has been under heightened scrutiny in the wake of a scandal involving lane closures at the George Washington Bridge by allies of New Jersey Governor Chris Christie. Authority Chairman David Samson, appointed by Christie, resigned last month. David Wildstein, an agency official charged with carrying out Christie’s agenda, and Deputy Executive Director Bill Baroni, another Christie appointee, also quit.

Anthony Sartor, a New Jersey appointee who had been head of the board’s World Trade Center subcommittee, resigned last week. Four New Jersey representatives remain.

Kevin Roberts, a spokesman for Christie, said by telephone that he had no comment on the financing. Matt Wing, a Cuomo spokesman, didn’t respond to an e-mail and telephone call seeking comment.

The 3 World Trade Center proposal restructures a 2010 agreement. A third-party financial analysis of the new plan, along with a number of other materials related to the tower, has been prepared for commissioners to review “to ensure an informed and productive discussion at Wednesday’s board meeting,” said Christopher Valens, a spokesman for the authority.

Construction Stalled

A delay in the vote or voting the package down could call into question the prospects for the construction of the 80-story skyscraper, which is now stalled at eight stories. Silverstein has signed one tenant, the advertising firm GroupM, to take about 20 percent of the tower. Another 2 million square feet (186,000 square meters) of space is available, which would add to the roughly 2.4 million square feet in 1 and 4 World Trade Center that remain unrented.

“I believe that if it came to a vote, it would be defeated,” Lipper said yesterday in a telephone interview. “If it mercifully goes into postponement for eternity, that’s fine with me too.”

The plan is far from a giveaway, Rechler said in an interview last week. Silverstein will pay the authority back in several ways for the $1.2 billion backstop, which would come in the form of bond insurance, he said.

Retail Sale

These include an additional $100 million in fees the agency would receive from the developer and the release from an earlier authority commitment to provide $200 million in cash, as well as an acceleration of ground-rent payments if the project is expedited. The agency would also get $230 million by selling its interest in part of the center’s retail property to Westfield Group, which can only happen if tower is built.

The authority would have the right to foreclose on Silverstein at 50 percent of the tower’s value if he fails to live up to his agreements, according to the plan.

An additional requirement that Silverstein provide $450 million of the $2.3 billion tower cost in the form of equity or high-interest mezzanine debt will put pressure on the developer to fill up the building, Rechler said. Under the existing agreement, Silverstein had to provide only $300 million of equity and mezzanine financing.

“There’s a market check,” said Rechler, the head of office landlord RXR Realty. “People won’t invest if they determine the project shouldn’t go forward, and if they do, they will see that if he needs to lower his rents, he will do so.”

The building would have enough cash flow to prevent a shortfall until at least 2032 even if it were only 50 percent leased, Rechler said.

‘Cash Cow’

Janno Lieber, president of Silverstein’s World Trade Center unit, said the developer has already paid more than $1 billion of ground rent to the authority since the 2001 terror attack.

“We need to get the buildings finished to maintain those substantial payments to the authority,” he said in an interview. “Without this cash cow, the entire burden of the Port Authority’s operations would fall on toll payers and airport users.”

The Port Authority’s plan to add its repayment pledge to the debt would help attract bond investors, said Daniel Solender, director of munis at Jersey City, New Jersey-based Lord Abbett & Co., which oversees $15.5 billion of munis.

“It all depends on the security for the bonds,” Solender said in an e-mail. “If it is a straight real estate deal depending upon the building being filled with tenants and that is the only source of revenue for bond security, that would probably be an issue since they are not filling up all the buildings. If it is backed by the Port Authority or the city or something like that, it would get better reception.”

Investors are demanding less yield to buy World Trade Center bonds even as the site struggles to find tenants. World Trade revenue bonds sold in November 2011 and maturing November 2044 traded today as low as 3.92 percent, the lowest level since May 2013, according to data compiled by Bloomberg.

-By David M. Levitt, Martin Z. Braun and Michelle Kaske

KKR Has Fivefold Gain in First Property-Investment Sale

Source: Bloomberg / News

KKR & Co. (KKR)’s sale of a stake in a senior-residence management business, the first exit of a U.S. property deal by the firm’s real estate unit, resulted in a fivefold gain on its investment.

The sale of the interest in Sunrise Senior Living LLC’s management unit was completed yesterday, according to statements from McLean, Virginia-based Sunrise and one of the buyers, Revera Inc., a Canadian provider of senior-living services. Revera’s partner in the purchase was Health Care REIT Inc., which finished buying Sunrise’s properties last July.

KKR and two partners agreed in February to sell their stake for about $400 million, according to a letter to investors, a copy of which was obtained by Bloomberg News. Including a dividend of about $101 million received last May, total proceeds from the Sunrise deal came to more than five times the $82 million the group invested in January 2013, according to the letter. The majority of the initial funds came from KKR.

The transaction was New York-based KKR’s first sale of a real estate investment since starting its property unit three years ago. Private-equity firms are taking advantage of stocks near record highs as they return money to their investors. Blackstone Group LP, the largest manager of alternatives to traditional stocks and bonds, took public three hotel companies beginning last November.

The KKR group last year bought Sunrise’s existing management contracts covering 282 communities, leasehold interests in 15 developments, and 12 land parcels. Beecken Petty O’Keefe & Co. and Coastwood Senior Housing Partners LLC were the other investors in the deal.

$1.5 Billion

KKR has made about 15 property investments since it hired Ralph Rosenberg, a former Goldman Sachs Group Inc. partner, as its first head of real estate in March 2011. The firm raised $1.5 billion for its first real estate fund in December.

Kristi Huller, a spokeswoman for KKR, declined to comment on the Sunrise transaction.

Revera, a unit of Canada’s Public Sector Pension Investment Board, now owns 76 percent of Sunrise, and Health Care REIT (HCN) has the rest. Sunrise manages senior-housing communities across Canada, the U.S. and the U.K.

“The business is well-positioned to continue its strong performance and industry-leading service,” Tom DeRosa, chief executive officer of Toledo, Ohio-based Health Care REIT, said yesterday in an e-mailed statement. The real estate investment trust “is committed to having relationships with the best operating and financial partners.”

-By Hui-yong Yu

LinkedIn to Fully Lease Tishman’s San Francisco Tower

Source: Bloomberg / Tech

LinkedIn Corp. (LNKD) agreed to fully lease a San Francisco office tower that’s being built by Tishman Speyer Properties LP in the South of Market area as growing technology firms boost rents citywide.

The professional social-networking company will occupy the building at 222 Second St. on a lease that includes 450,000 square feet (42,000 square meters) of offices, San Francisco Mayor Edwin Lee said in a statement today. The tower can accommodate 2,500 workers and has 8,500 square feet of public space including retail, according to the statement.

“LinkedIn’s decision to grow in the innovation capital of the world demonstrates, once again, investor confidence in our city,” Lee said.

LinkedIn’s agreement is the latest tower deal by a technology firm in the city following disclosure of high-rise leases by Microsoft Corp. and Inc. San Francisco rents rose 6.8 percent in the first quarter from a year earlier to $57.21 a square foot on average, and vacancies were little changed at 11.3 percent, Jones Lang LaSalle Inc. said. Rents have jumped 70 percent since 2010, according to the brokerage.

“With this new building, LinkedIn is committed to expanding in San Francisco, giving us even more access to some of the most talented professionals in the world across a variety of functions, including technology, sales and operations,” Jim Morgensen, the company’s head of workplace, said in the statement.

The lease was reported last week by, a real estate news website.

Sustainable Design

The Tishman Speyer tower, under way at Second and Howard streets, is scheduled to be completed in 2016, according to the New York-based developer. The high-rise is being built to attain the second-highest rank for sustainable design, measured by the U.S. Green Building Council.

LinkedIn has more than tripled since its 2011 initial public offering, with the shares little changed in the past year. The company is searching for office space in Dublin as it seeks to add mobile features and make acquisitions outside the U.S., two people with knowledge of the matter said on April 14.

-By Dan Levy