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25th April 2014

Top Stories

Exec condos helping people meet their housing aspirations: Khaw

Some 86% of EC buyers in the last three years are HDB dwellers, he says

Source: Business Times / Property

[SINGAPORE] Most buyers of executive condominiums (ECs) in the past three years are HDB dwellers, suggesting that the EC scheme is still helping Singaporeans to meet their aspirations for private housing, said Minister for National Development Khaw Boon Wan.

In a blog post yesterday, Mr Khaw revealed that 11,000 Singaporean families bought ECs from Q4 2010 to Q4 2013.

About 86 per cent of the buyers are HDB dwellers and 55 per cent are second-timer households. Some 80 per cent earned $10,000 or less.

ECs are public-private hybrid built by private developers to allow eligible families to own a private condo at way below market price. First-timer households can enjoy a CPF Housing Grant and sales restrictions are fully lifted after 10 years.

-By Lynette Khoo

Over 11,000 families bought ECs from 4Q 2010 to 4Q 2013

Source: Channel News Asia / Singapore

SINGAPORE: More than 11,000 Singaporean families have bought Executive Condominiums (ECs) over a three-year period, from the last quarter of 2010 to the same period in 2013.

National Development Minister Khaw Boon Wan said that in a blog post on Thursday, adding that the take-up rate for ECs has been high and supply has been ramped up to meet demand.

Mr Khaw noted that 86 per cent of those who bought ECs during the three-year period were HDB dwellers, with a majority (55 per cent) being upgraders, purchasing a home for the second time.

Eighty-three per cent of them spent below S$1 million on their purchase.

Slightly less than half (42 per cent) of those who purchased ECs are also non-university graduates and 40 per cent were aged 34 years and below.

Eighty per cent of those EC buyers also earned S$10,000 or less.

The EC scheme is designed to help Singaporeans earning up to S$12,000 a month own a private condominium at below market price.

After completing their five-year Minimum Occupation Period (MOP), EC owners can sell their unit in the open market to Singapore citizens or Permanent Residents.

Owners are allowed to sell their unit to foreigners and corporate bodies after 10 years.
The income ceiling was raised in 2011 from S$10,000 to S$12,000.

Mr Khaw said the adjustments saw shifts in the profile of EC buyers over a one-year period, which include seeing the proportion of second-time homebuyers rise from 43 to 57 per cent.

EC buyers aged between 35 and 44 also went up from 35 to 43 per cent.

"I am glad that the EC scheme is helping Singaporeans from diverse backgrounds meet their aspirations for private housing. I will continue to make sure that the EC scheme stays on track, to serve the housing needs of Singaporeans," said Mr Khaw. 

- CNA/nd

Singapore Real Estate

Moderating prices, rents for industrial space offer relief

Source: Business Times / Top Stories

[SINGAPORE] Businesses may not face more months of sharp increases in industrial prices and rents as a huge supply of completed industrial space - about six million square metres - comes onstream from now until 2016. While prices and rentals of industrial space continued to rise in the first quarter, the pace was significantly lower than the average annual increase in the past four years, according to data released by JTC Corporation yesterday.

The first quarter saw transaction prices of industrial space increase 3.8 per cent quarter on quarter and 2.5 per cent year on year, compared to an average annual growth of about 20 per cent in the last four years.

Industrial rentals rose 0.4 per cent quarter on quarter and 4.9 per cent year on year, compared to an average annual growth of about 10 per cent in the last four years.

The quarter saw occupancy rates of Singapore's industrial property market fall by 0.3 percentage points to 91.6 per cent from the previous quarter as supply outstripped demand.

-By Lee Meixian

Composition of industrial space counts: consultants

Expected supply coming on-stream is double that of annual demand

Source: Business Times / Top Stories

[SINGAPORE] The amount of industrial space expected to come on-stream is double that of annual average demand. But while this supply is broadly welcome, more can be done to re-align this with what business needs, consultants said.

According to JTC Corp's figures, an average of 2.1 million square metres (sq m) of industrial space is expected to hit the market annually over the next three years. Of this, about 28 per cent is multiple-user factory space. The remaining space is mainly single-user factory space (37 per cent) and warehouse space (25 per cent). Some business park space will also be built over the next three years.

But consultants warn that this could result in a supply glut, and instead call for a more targeted approach.

"In effect, there is no real shortage," said Chia Siew Chuin, research director at Colliers Singapore. "Any shortage could just be perceived, as small and medium-sized enterprises (SMEs) have provided feedback to the government that there is a 'shortage' of suitable/affordable industrial space for them."

-By Mindy Tan

Price, rental data for JTC industrial sites at hand

Source: Straits Times 

Industrial firms looking to rent or buy affordable space will have more market information at their fingertips under changes unveiled by landlord JTC. The addition of the new data to JTC's website is a bid to boost transparency and help firms make more informed choices, JTC said.

SMEs call for fair tenancy legislation

Source: Business Times / Companies

Singapore's office rents are set to rise as much as 15 per cent this year on increased demand and a dearth of new developments, said Lynette Leong, chief executive officer of CapitaCommercial Trust Management Ltd. Global companies including Cargill Inc, the biggest US agricultural firm, and Bordier & Cie, a Swiss private bank's local subsidiary, are driving the recovery as they set up offices in the central business district, said Ms Leong, whose company manages the biggest office trust in Asia outside Japan.

Sale of Equity Plaza may be in the works

Sam Goi-controlled GSH Corp said to be in talks; price tipped at $550-560m

Source: Business Times / Companies

NEGOTIATIONS are under way for a potential sale of Equity Plaza, a landmark quadrant-shaped office block beside Republic Plaza in the Raffles Place financial district.

Talk in the market is that listed GSH Corporation and its chairman and key shareholder, Sam Goi Seng Hui, are teaming up with a view to acquire the 28-storey office tower. They may be entering an exclusive due diligence period on the asset, BT understands.

The price is thought to be around $550-560 million, which would work out to $2,177-$2,217 per square foot based on the building's net lettable area of about 252,600 sq ft.

It is thought that Equity Plaza's owners - Keppel Land and a fund managed by Alpha Investment Partners - were looking for $580 million or $2,300 psf for the asset. Alpha is KepLand's wholly owned property fund management arm.

-By Kalpana Rashiwala

Orchard Towers, Marine Parade units for sale

Source: Business Times / Property

[SINGAPORE] Three commercial units - two in Orchard Towers and one in Marine Parade Central - are up for sale. No indicative prices were provided. Marketing agent CBRE gave sale prices of shops in nearby malls as a guide.

The freehold strata-titled units in Orchard Towers have a total strata area of about 8,105 sq ft and are located at the junction of Orchard Road and Claymore Road. One unit occupies the ground floor and the other the basement, with 7-11 and a food court as their respective anchor tenants. According to CBRE, a third-floor unit sold for $6,636 per sq ft in May last year.

The unit in Marine Parade Central has 62 years remaining on its lease, and spans the entire ground and second floors of Block 87 with a strata area of about 25,833 sq ft. Located between Marine Parade Food centre and Parkway Parade Shopping Centre, anchor tenants for Block 87 include ANZ Bank, Maybank and Standard Chartered.

Ground floor and basement shops in The Flow, along East Coast Road, were sold for between $4,008 and $5,789 per sq ft in the past nine months, said CBRE.

-By Jaira Koh

Real Estate Companies' Brief

Ascott Trust Q1 DPU falls 22% on rights issue dilution

Source: Business Times / Companies

ASCOTT Residence Trust (ART) posted a 22 per cent year-on-year drop in distribution per unit to 1.75 cents for the first quarter of this year due to dilution from shares issued following a one-for-five rights issue last December, as well as the Q1 2013 figure being boosted by an $8.1 million one-off foreign exchange gain.

The forex gain arose from the repayment of foreign currency bank loans using the proceeds from an equity placement exercise in February 2013, before the trust deployed the proceeds to fund acquisitions.

Adjusting the Q1 2013 DPU for the rights issue and excluding the forex gain, the latest DPU was up 5 per cent year-on-year.

Revenue rose 16 per cent y-on-y to $80.4 million mainly due to the additional revenue from acquisitions in FY 2013 - three serviced residences assets in China and 11 rental housing properties in Japan - as well as stronger contribution from the existing properties, mainly those in United Kingdom, France, Germany and Vietnam.

-By Kalpana Rashiwala

CapitaRetail China Trust's Q1 DPU up 3.9%

Strong organic growth, CapitaMall Grand Canyon cited for performance

Source: Business Times / Companies

FOR the first quarter of this year ended March 31, CapitaRetail China Trust (CRCT) marked a 3.9 per cent increase in distribution per unit (DPU) to 2.4 cents, due mainly to new contribution from CapitaMall Grand Canyon, as well as stronger tenant sales and rentals in its existing malls.

This translates to an annualised yield of 6.7 per cent based on the closing price of units on Wednesday.

Distribution income for the period grew 13.2 per cent year-on-year to $19.6 million.

Tony Tan, the chief executive of CRCT's trust manager, attributed the better performance to strong organic growth from existing assets, which grew by 14.9 per cent in net property income, and from contributions from CapitaMall Grand Canyon.

-By Lynette Khoo

Roxy-Pacific to buy Sydney building

Source: Business Times 

Property and hospitality group Roxy-Pacific Holdings will acquire a 28-storey commercial building in Sydney for A$90.2 million (S$105.4 million) in cash, to be financed by internal funds and bank borrowings. The 1,950 square metre site comes with 19,552.7 sq m of net lettable area.

HPL picks CIMB as independent adviser

Source: Business Times

Hotel Properties (HPL) has appointed CIMB Bank as the independent financial adviser to assess a joint $3.50 per share privatisation offer by tycoon Ong Beng Seng and Wheelock Properties.

Suntec REIT’s Q1 revenue up 32.8% to S$66m

Source: Today Online

Suntec Real Estate investment Trust (Suntec Reit) reported a 32.8 per cent jump in first quarter revenue, largely due to the opening of Suntec City Phrase 1 following the completion of renovation work while it pressed ahead with its asset-enhancement initiatives.

Cache Logistics Trust

Source: Business Times / Singapore Markets

Cache Logistics Trust turned in a firm set of Q1 2014 results. Net property income (NPI) climbed 8.2 per cent y-o-y to $19.6 million, whereas distributable income rose 5.5 per cent to $16.7 million. The positive performance was mainly attributable to contribution from acquisition of Precise Two in April 2013 and stepped-up rents in the portfolio.

Thakral to refocus its distribution business

It will move to lifestyle and green products in 3 years

Source: Business Times / Companies

THAKRAL Corporation, known for its electronics distribution business and property investments, has unveiled new growth plans across its divisions in the hopes of bringing positive returns to shareholders.

The group will reposition its distribution division over the next three years to focus more on lifestyle and environmental related products, which it expects will bring it "positive results in the coming years".

Asia remains Thakral's focus, and the firm expects growth from rising affluence there, especially in China. Over the next three to four years, the company hopes to cover 300 cities in Asia, from its current 120.

It will focus on three main product categories - lifestyle accessories, such as audio products; air purifiers and eco-friendly home appliances; as well as beauty and health products.

-By Raphael Lim

Views, Reviews & Forum

More malls add up to a zero-sum game

Source: Today Online / Voices

The perspective on “Why S’pore needs Project Jewel (and more malls)” (April 23) should be re-examined. Tourism and consumerism do generate money for Singapore, and if we were a corporation, then more malls would indeed mean more growth.

However, we are a nation and although many treat this country like Singapore Inc, such a numbers game would have a negative impact on us.

Firstly, we are facing a labour crunch in the retail and food and beverage sectors. With Singaporeans becoming more educated and affluent, many have shunned this line of work, known for its long hours and low pay.

Businesses have relied on foreigners to fill the gap, but it is widening and will continue to widen if the writer’s suggestion is adopted rapidly. Retail and F&B sectors are still labour-intensive industries where automation cannot easily be applied.

Businesses would be fighting even more for precious headcount, leading to inflated wages. The ones to suffer would be sole proprietors and small businesses.

Multinational corporations and big competitors would have the funds and synergy to pay well and offer better benefits, but small businesses would face a more daunting task in trying to recruit or retain employees.

Levies would continue to rise as the Government tries to contain the over-reliance on foreign workers. This would contribute to higher labour costs, which are then passed on to consumers. In time, it would be an upward trend.

Secondly, with a land area of 716 sq km, Singapore’s land use must be planned carefully. We are not China nor Australia, but a little red dot.

A country with such limited space must consider residential needs, essential services such as hospitals and schools, as well as open spaces such as parks and nature trails, which contribute intrinsically to citizens’ well-being. I would exchange some malls for public hospitals.

Also, we are losing our identity as a nation due to rapid development. Who would we be if we trade our heritage sites, old neighbourhoods and memories for homogeneous malls with the same brands and F&B outlets?

There is also the issue of rising rentals, which would force small businesses to relocate, or worse, close for good. I agree that Singapore should continue to grow, but more is at stake than only chasing numbers.

More malls, restaurants and shops would mean bringing in more people and more spending, but resulting also in higher rentals, labour and food costs, as well as a lower quality of life and decreasing sense of identity, adding up to a zero-sum game.

-By Donald Koh

Global Economy & Global Real Estate

Caterpillar Raises Forecast on Construction Outlook

Source: Bloomberg / Luxury

Caterpillar Inc. (CAT) posted better-than-expected first-quarter earnings and sales and boosted its full-year profit outlook on improved expectations for construction while also saying the mining industry continues to disappoint.

Profit this year excluding restructuring costs will be $6.10 a share, Peoria, Illinois-based Caterpillar said today in a statement. That exceeds the company’s January projection of $5.85 and the $5.81 average of analysts’ estimates compiled by Bloomberg. The shares climbed 1.8 percent in New York.

Caterpillar is the world’s largest maker of construction machinery, and that segment of its business increased sales 20 percent in the quarter while earnings tripled. It doubled its 2014 sales growth forecast for construction equipment such as excavators and backhoes to 10 percent. North American customer demand is rising and dealers are rebuilding inventories, the company said.

“Residential construction has been improving and now we are getting a kick from commercial construction in North America,” Karen Ubelhart, a Bloomberg Industries machinery analyst, said by phone today. “Both the dealers and Caterpillar are saying, ‘Things have turned and we want to be ready for it.’”

Non-residential construction spending in the U.S. rose 6 percent in February from a year earlier, while residential spending gained 13 percent, according to Census Bureau data compiled by Bloomberg.

Hearing Optimism

Chairman and Chief Executive Officer Doug Oberhelman said he’s hearing “positive stories about new projects and reasons for optimism” from U.S. construction customers and dealers.

“While that’s encouraging, there’s still quite a bit of room for improvement,” he said in the statement. “The U.S. construction industry is still well below its 2006 peak.”

Caterpillar rose to $105.28 at the close. The shares have climbed 16 percent this year.

First-quarter net income rose to $1.44 a share from $1.31 a year earlier. Excluding restructuring costs, profit was $1.61, topping the $1.23 average of 22 estimates compiled by Bloomberg. Sales were almost unchanged at $13.2 billion, compared with the average estimate of $13.1 billion.

The state of the construction market contrasts with the company’s natural resources business, which has been hit by a downturn in mining investment. The unit’s profit dropped 68 percent in the quarter and full-year sales are now expected to fall 20 percent, twice as much as previously expected, Caterpillar said.

Mining Slump

Caterpillar eliminated 7 percent of its workforce in the past year after the mining slump caused sales and earnings to drop last year for the first time since 2009. Mining companies have slashed spending, and Caterpillar said today that large mining-truck sales are about 80 percent down from their 2012 peak.

Caterpillar maintained its expectation for global economic growth to accelerate to 3 percent this year, from about 2 percent in 2013, with China growing 7.5 percent. Chinese reforms aimed at transitioning “to a more sustainable growth model while maintaining social stability” may impact the economy and Caterpillar’s customers, the company said.

Faster global growth should support commodity prices and maintain mine output, the company said. Mining companies may still remain cautious with equipment investments, resulting in the forecast mining-sales drop, the company said.

Caterpillar warned that the political conflict between Russia and Ukraine could escalate, slowing growth and result in government trade sanctions that would hurt sales in the region.
-By Jack Kaskey

Princeton to Pay Town More Than $24 Million Over Seven Years

Source: Bloomberg / News

Princeton University, the fifth-richest college in the U.S., agreed to increase its voluntary and one-time contributions to the town of Princeton, New Jersey, to more than $24 million during the next seven years.

Princeton will make voluntary unrestricted payments of $21.7 million over the period and additional contributions valued at $2.59 million for a variety of town projects, the Ivy League college said yesterday in a statement.

Since nonprofit colleges and universities are exempt from most taxes, many municipalities that they are located in have sought to boost voluntary payments as the institutions grow and their demands for public services increase. Under the agreement, Princeton’s voluntary unrestricted contributions will rise more than 10 percent this year to $2.75 million, and will grow by 4 percent annually in the six subsequent years.

Princeton, with an endowment valued at $18.2 billion as of June, is fighting a lawsuit by a group of residents who say the school should lose its exemption from property taxes because it shares royalties with faculty. The school reaped $524 million in license income between 2005 and 2012, mostly from a patent that Eli Lilly & Co. turned into the cancer drug Alimta.

The residents who are suing want Princeton to pay more, claiming it shares the profits with some faculty while not paying enough in local taxes. University lawyers have argued in the litigation that the payments are a sharing of royalties, not profits, and compensate faculty members for assigning property rights to the school.

‘Really Shocked’

“I’m really shocked,” said Bruce Afran, an attorney representing the residents, who said the municipality didn’t consult with them before reaching the agreement. “It’s not even a $1-million-a-year increase. This represents a tiny fraction of the hundreds of millions of dollars a year in pharmaceutical revenue they get. Rather than ally with us, they’ve chosen to do this alone and the result is they’re getting virtually no increase.”

Martin Mbugua, a spokesman for the college, declined to comment beyond the university’s statement. He said in January that the lawsuit won’t affect Princeton’s federal tax-exempt status.

The university is contributing its fair share for services in Princeton, said Kathryn Monzo, the town’s deputy administrator and director of finance.

“Both sides compromised and came out with a very good deal,” Monzo said today in a telephone interview.

Property Taxes

The municipality, with about 28,500 residents since the January 2013 consolidation of the Borough of Princeton and Princeton Township, is located halfway between New York and Philadelphia. The university, chartered in 1746 as the College of New Jersey, has about 7,900 students, according to its website. Eric Schmidt, chairman of Google Inc., and First Lady Michelle Obama are among its alumni.

While much of the school’s property is exempt, it paid $8.35 million in property taxes last year, according to yesterday’s statement. Of that amount, $1.85 million went to the town.

The university isn’t alone in facing pressure to pay its host city more. Brown University, the Ivy League school in Providence, Rhode Island, agreed in 2012 to boost payments to the city by $31.5 million over 11 years.

-By Lisa Wolfson and David Voreacos

Buffett Open to Future Housing-Finance Role for Berkshire

Source: Bloomberg / Personal Finance

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), said he’s open to the possibility of his company eventually becoming more involved in housing finance once U.S. lawmakers resolve the future of Fannie Mae (FNMA) and Freddie Mac.

“I don’t see any role for Berkshire in Fannie or Freddie,” Buffett, 83, said yesterday in an interview with Bloomberg Television’s Betty Liu. “There could be some, in some housing arrangement that gets worked out in the future.”

President Barack Obama and a bipartisan group of senators are seeking to wind down Fannie Mae and Freddie Mac while investors including Bruce Berkowitz’s Fairholme Capital Management are betting on the companies and pushing the U.S. to return them to private ownership. Fannie Mae and Freddie Mac keep money flowing in the housing market by buying mortgages from lenders and packaging them into securities.

Buffett said that the government could act as an insurer of last resort in a new system that involves private companies taking initial losses, which is the structure that has been proposed in the Senate.

“I think government has to play a part in housing,” Buffett said. “The 30-year fixed-rate mortgage is very good for the American public and I think that you will need government participation in some way to bring the costs down.”

The housing-finance companies, which were taken over by the U.S. in 2008, received $187.5 billion in taxpayer aid and paid dividends of 10 percent on the government’s stake until Treasury amended the terms of the bailout and began taking all of their profits instead.

Buffett’s Warning

Berkshire owned stakes in both firms before the housing collapse. Buffett has said he made a major investment in Freddie Mac in 1988. At the end of 1999, Omaha, Nebraska-based Berkshire owned an 8.6 percent common equity stake with a market value of $2.8 billion. Buffett sold most of the holding the next year, and also reduced a smaller position in Fannie Mae, according to his 2000 annual report. He later said that he was wary of goals the companies set to boost results.

“Any time a large financial institution starts promising regular earnings increases, you’re going to have trouble,” Buffett said in a 2010 interview with the Financial Crisis Inquiry Commission.

Berkadia Commercial Mortgage LLC, a venture between Buffett’s company and Leucadia National Corp., originates apartment loans backed by Fannie Mae and Freddie Mac. Berkshire also makes loans to customers who buy manufactured homes.

Paint, Carpet

Buffett’s company has units that benefit from an improving real estate market, including Clayton, which builds manufactured houses; paint-maker Benjamin Moore; and carpet-manufacturer Shaw Industries. The company has also been expanding its home-brokerage franchise under the Berkshire Hathaway HomeServices brand.

In the interview with Liu, Buffett dismissed speculation that he’s interested in taking a stake in Major League Baseball’s Chicago Cubs. He said he hadn’t talked with the Ricketts family, which owns the team, about a deal.

“There’s no reason to do it,” Buffett said. “I would get no big ego kick out of it, or anything of the sort.”

-By Zachary Tracer, Clea Benson and Elizabeth Dexheimer

Irish Commercial Property Rises Most Since 2006 as Economy Gains

Source: Bloomberg / News

Irish commercial real estate values rose the most since 2006 in the first quarter as the economy improves and international companies seek to lease more space, Investment Property Databank Ltd. said.

The average value of stores, offices and warehouses climbed 5 percent from the end of last year, London-based IPD said in a statement today. Total return, which combines changes in real estate values and rental income, was 7.2 percent, the most since the second quarter of 2006.

The Irish economy is recovering from a 2008 property-market crash that led to an international bailout.Consumer confidence rose to a seven-year high this month and the jobless rate has fallen for 21 months in a row to 11.8 percent. Total returns in Ireland in the year through March were 19.4 percent, the most of any market tracked by IPD.

Offices led other property types with an 8.4 percent total return. Industrial properties, little changed over the quarter, were the weakest.

Returns were driven by “increased stability in the Irish economy, considerable demand from both domestic and international investors,” Ray Hanley, chairman of the valuation group at the Society of Chartered Surveyors’ Ireland, said in the statement. He also cited the extension of capital gains tax relief in 2014 and overseas firms “establishing or extending their European bases in Ireland.”

-By Neil Callanan