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12th August 2014

Singapore Real Estate

July private home resale volume flat

Resale volume in the private residential market remained flat last month, even as resale prices fell to a 21-month low, data released yesterday by the Singapore Real Estate Exchange (SRX) showed. Some 431 units changed hands during the month, compared with 427 in June. Year on year, sales have fallen 20.5 per cent; year to date, they are down 46.6 per cent.

Roxy sitting pretty as it casts its net wide

It is in no hurry to slash prices at Trilive and Sunnyvale Residences despite tepid sales

Source: Business Times / Companies

ROXY-PACIFIC Holdings may be feeling the chill of the Singapore residential market but it is in no hurry to slash prices - the listed developer and hotel operator is sitting on pre-sale revenues of S$955.4 million, 2.6 times its record fiscal 2013 revenue and a sum that will be progressively recognised as profits until fiscal 2017.

In addition, the group has cast its net beyond its home market and its core development segment in sourcing for deals. Group executive chairman Teo Hong Lim tells The Business Times that Roxy is looking at office and residential projects in Australia, under-utilised hotels in Japan that can be optimised, and potential sites in Kuala Lumpur.

While it has had no luck yet with the bidding for hotel sites in government land tenders, the group is still keen to add hospitality assets to its portfolio to generate more recurring income. Roxy currently runs only one hotel in Singapore - Grand Mercure Roxy Hotel in the east which is managed by international hotel operator Accor Group.

"The constant challenge is how to keep looking for deals even when the market is challenging," Mr Teo says.

-By Lynette Khoo

Private home resale prices, rents hit new lows

Soft leasing market a key reason for weak prices; gloom likely to continue

Source: Straits Times / Top of The News

RESALE prices and rents for private homes both tumbled to fresh lows last month as the property market slowdown deepened.

The declines underscore a downward trend that has been evident in the residential market since tougher cooling measures and home loan restrictions were rolled out last year, and consultants believe the gloom is unlikely to lift any time soon.

July's declines have left resale prices at their lowest level in 21 months, according to Singapore Real Estate Exchange (SRX) flash estimates yesterday, while rents fell to a 38-month low amid greater competition for tenants.

Resale prices for private condominiums and apartments sank 1.3 per cent from June to reach their lowest point since October 2012. This was after they had dropped 1.6 per cent from May to June.

Housing Board flat owners are feeling similar pain, with resale prices dropping to a 30-month trough last month. Recent new launches of private condominiums have also suffered lacklustre sales, while prices of uncompleted private condominiums and apartments have slid about 1.1 per cent since the start of this year.

"With all the measures in place, the low sentiments are expected to last," said ERA key executive officer Eugene Lim.

"The current private resale market faces a situation of high competition. Landlords are also getting more realistic as it is now a tenant's market."

R'ST Research director Ong Kah Seng said the continued price slide into July suggests that "it was not merely the World Cup and school holidays in June that dented home buyers' interest". "There are larger factors at play," he added.

There were 431 private homes resold in July, largely unchanged from the 427 units resold in June. This figure was 20.5 per cent lower than for the same period last year.

Private home resale values have dropped about 6.5 per cent since the start of this year, going by SRX data.

Mr Ong expects them to fall further and decline by about 8 per cent in total over the course of this year.

The islandwide slide in resale prices last month was led by the city centre, where values tumbled 4 per cent from the previous month. The city fringe saw a 1.1 per cent decline and resale prices in the suburbs slipped 0.6 per cent in the period.

Consultants said the soft leasing market is a major reason why private home resales are so weak.

Rents of private condos and apartments fell 0.8 per cent from June to July to their lowest point since May 2011, the SRX said.

Ms Karen Ng, an executive in her early 30s who has been trying to rent out a three-bedder in Alexandra for several weeks, said that applicants remain few even though she has already lowered her asking rent by $500 or so. "It's very competitive," she said.

Consultants said rents are likely to keep falling as more homes are completed, boosting supply, while the pool of tenants shrinks because of reduced foreign worker inflows.

-By Melissa Tan

Private home resale prices fall to 21-month low: SRX

Source: Channel News Asia / Singapore

SINGAPORE: The resale prices for non-landed private homes continued its downward trend in July, falling 1.3 per cent month-on-month, according to flash estimates from the Singapore Real Estate Exchange (SRX) on Monday (Aug 11).

SRX said the decline represented a 21-month low since October 2012 and the fall in prices was felt in all three regions. Prices for the Core Central Region fell the most with 4 per cent, while Rest of Central Region and Outside Central Region dropped 1.1 per cent and 0.6 per cent respectively.

The median Transaction Over X-value (TOX) for the majority of districts - 18 out of 24 - was negative in July. For districts with more than 10 resale transactions, districts 9 (Orchard, Cairnhill, River Valley), 15 (Katong, Joo Chiat, Amber Road) and 23 (Bukit Panjang, Choa Chu Kang) saw the most negative median TOX at -S$130,000, -S$40,000 and -S$30,000 respectively.

SRX said this means that majority of the non-landed private property buyers last month in these districts purchased their units below what other buyers who came before them paid for in similar units.

Conversely, districts 5 (Pasir Panjang, Clementi) and 16 (Bedok, Upper East Coast) posted positive TOX values of S$40,000 and S$10,000 respectively.

In terms of resale volume, there were an estimated 431 transactions in July, compared with 427 in June. The volume dropped 20.5 per cent from the same month last year, SRX said.


As for rental transactions, the number of full units rented out in July was 3,360 - representing a 5.3 per cent on-month hike. Year-on-year, rental volume improved by 9 per cent from the 3,082 contracts signed in July 2013, according to the data.

However, rental prices went down, slipping 0.8 per cent from the previous month. It is a 38-month low since May 2011, SRX added. 

The decline was greatest in the Rest of Central Region at 1.4 per cent, while Core Central Region dipped 1.1 per cent. Prices for Outside Central Region improved slightly by 0.3 per cent.


Property observers said prices are likely to continue falling, under pressure from cooling measures introduced in recent years. Authorities have said that the property curbs are here to stay for now - with National Development Minister Mr Khaw Boon Wan the latest to make that point in Parliament last week.

According to property observers Channel NewsAsia spoke to, the fall in prices is not alarming and will only be a cause for concern if it is sustained for a few months.

There is in fact room for more moderation islandwide, according Mr Alan Tan, head of Singapore projects at HSR International Realtors. He pointed to how overall prices have gone up around 60 per cent from 2010 to 2013, but have only dropped by 20 per cent since 2013, when the latest round of cooling measures were implemented.

The resale volume, which remained flat in the traditionally upbeat month of July, also did not come as a surprise to property observers.

"Majority of buyers are still adopting the wait-and-see method. We do have a lot of shoppers in the market but majority of them are not willing to put in that deposit. Most of the buyers are quite confident that the prices are still going to go down," said Mr Benedict Lim, senior vice president of Dennis Wee Realty.

"If you compare to 2010, yes there is a big drop because the market was picking up; the market was heating up at that time,” said Mr Tan. “We used to see trends where new homes are sold off in months, two months, in a week even. That trend is not supposed to be normal. What we are seeing today is normal.

“Where the sales are consistent, they are not exactly fast, but they are consistent. If every new property launched is going to get sold out in a month, I think developers are just going to be increasing prices every month. So what we are seeing is a good control of price compared to the sales speed. If prices are dropping and the buyers are not coming back, then something is wrong."

Observers said homeowners would have to be realistic in their asking prices to seal deals. They can also turn to the rental market for respite. But official figures showed that rental prices have also been trending downwards since the third quarter of 2013, shortly after the Total Debt Servicing Ratio was introduced at the end of June 2013. 

- CNA/kk/ec

Little risk of home loans hitting local banks, says Maybank

Report comes amid sharp rise in housing non-performing loans at UOB in Q2

Source: Business Times / Top Stories

[SINGAPORE] Unlike the fabled three little pigs, the trio of local banks appear to have built houses of steel. The chance of a fallout via the banks' mortgage portfolios is slim, a Maybank report said yesterday, despite the sharp lift in housing non-performing loans (NPL) at UOB in the second quarter.

"Don't worry, not house of straws," said Maybank analyst Ng Wee Siang in a report yesterday.

Still, based on its stress test, taking factors such as a 30 per cent collapse in property prices, OCBC Bank's earnings would be hit the most of the three.

UOB recorded a lift in NPL from some housing loans in Singapore in the second quarter. This came from some weakness in payments from an isolated set of borrowers who had bought high-end properties for investment. UOB's NPL ratio was 1.2 per cent, unchanged from a year ago.

-By Jamie Lee

Property firm on S'pore alert list shutters its doors

Brazilian developer's investors here worry if they will get money back

Source: Straits Times / Money

A BRAZILIAN property developer that has netted millions from Singapore has apparently shuttered its office here.

The move came shortly after the firm was put on the Singapore central bank's investor alert list just last month.

The latest turn of events has left some of EcoHouse's investors in Singapore worried about whether they will get the returns they were promised.

EcoHouse builds social housing projects for former slum dwellers in Brazil. It had offered investors returns of about 20 per cent after just one year, on investment sums as low as $46,000.

However, several investors have claimed that they have not been paid despite their contracts having reached maturity.

EcoHouse Group's office on the 42nd storey of Suntec Tower Two was dark and empty when The Straits Times visited yesterday afternoon, though there was still a piece of paper stuck to the glass doors that stated the firm's opening hours.

A woman working in a firm on the same floor, who declined to be named, said that the office had been closed since the start of last week.

Calls to the Singapore office number given on EcoHouse's website went to an answering machine yesterday.

Some Singapore investors in EcoHouse told The Straits Times on Friday last week that the firm had not informed them that it was closing its office here.

But while some said the office closure made them concerned that they might never get their money back, others held out hope.

"It makes them seem more like a fly-by-night company," said Mr Ang Eng Chong, 36, who has invested $46,000 with EcoHouse.

He said he was supposed to get his capital, plus 20 per cent interest, back in March this year, but did not.

EcoHouse then promised to pay him just the 20 per cent interest, or $9,200, in May this year but failed to again, he said.

However, other investors said they believed they would eventually get their money back.

"As long as the projects are there it's not a scam. It's just a matter of time - I hope," said Mr S.K. Tan, 60, citing how EcoHouse's housing projects were backed by the Brazilian government.

He said that he had previously received a payout from the first phase of EcoHouse's building projects, though he has yet to see returns from his investment in subsequent phases.

EcoHouse chief operations officer Deen Bissessar had not responded by press time yesterday to Straits Times queries sent last week.

However, Mr Bissessar told website last week that EcoHouse had "taken measures to consolidate into our Brazil operation and managing global affairs from our global headquarters in London".

"Singapore investors should ideally view this as a further measure to improve the overall company position, thereby allowing us to complete our contracts with them faster," he said, according to the report on the website.

"We are doing everything we can to improve the situation with regard to construction and payments."

The Sunday Times reported in March last year that EcoHouse had netted $70 million from Singapore investors for three of its Brazilian housing projects.

Mr Ang told The Straits Times that he had filed a police report against the firm about a month ago.

A police spokesman confirmed last Friday that this report had been lodged, but declined to disclose whether the police were investigating.

-By Melissa Tan

Real Estate Companies' Brief

Ho Bee Q2 earnings down 53% on absence of disposal gain

Ho Bee Land's second- quarter net profit dived 53.5 per cent year-on-year to S$12.20 million. But behind the headline numbers, its transformation into a group with a substantial investment property portfolio providing recurring-income ballast is starting to show in its latest report card.

Ho Bee Land gets rent boost in Q2

Turnover jumps to $26.8m, but net profit falls due to one-off gain in 2013

Source: Straits Times / Money

HIGHER rental income lifted turnover at Ho Bee Land in the second quarter, although net profit dipped owing to a one-off gain recorded last year.

The property group's earnings for the three months to June 30 came up to $12.2 million, 53.5 per cent lower than the corresponding period last year. This was due to a $25.9 million gain on the disposal of Hotel Windsor, which bumped up net profit in the second quarter of last year.

Turnover was boosted by higher revenue from investment properties and came in at $26.8 million, up from $6.1 million in the same period last year.

Rental income from industrial and commercial properties rose to $25.7 million, from $2.8 million last year.

This was mainly contributed by office block rent from The Metropolis in Buona Vista, and Rose Court and 1 St Martin's Le Grand in London.

Net profit for the half year was $16.3 million, down 79 per cent from the $78.4 million recorded in the previous year.

In addition to the sale of Hotel Windsor, the higher earnings in the first half of last year were also the result of a $47 million gain on the sale of investment interest in Chongbang Holdings in China, the company said in a statement yesterday.

Revenue amounted to $43.9 million in the first half of this year, compared with $66.9 million in the corresponding period last year, as there was no revenue recognition from development properties this year.

Chairman and chief executive Chua Thian Poh said that Singapore's real estate environment continues to be challenging, particularly the residential sector.

The Government has reiterated that it is still too early to relax property market cooling measures.

Notwithstanding these challenges, the property group is "beginning to see the fruition of the strategic decision to increase its portfolio of investment properties", said Mr Chua.

"With the completion of The Metropolis and the strategic acquisitions of Rose Court and 1 St Martin's Le Grand in London, the group now has a substantial stream of investment income that would underpin the group's earnings in the years to come," he added.

Earnings per share for the second quarter was 1.83 cents, down from 3.88 cents in the same period last year, while net asset value per share was $3.40 as at June 30 this year, from $3.48 as at Dec 31 last year.

Ho Bee Land shares closed one cent up at $2.20 yesterday. The results were released before the market close.

-By Chia Yan Min

Strong operational profits at Frasers Centrepoint

Frasers Centrepoint Limited (FCL) is still looking to replenish its landbank in Singapore selectively, even as it develops its key overseas markets of Australia and China. Having divested six hospitality assets to Frasers Hospitality Trust (FHT) which listed last month, the group will continue reviewing its portfolio to identify suitable assets for capital recycling, said a group spokesman.

IReit Global IPO to add diversity, say analysts

It offers 8% forward yield but global uncertainties may dampen listing

Source: Straits Times / Money

ANALYSTS say an upcoming new listing of a trust that holds German office assets will add diversity and depth to the real estate investment trust (Reit) sector here.

Property and market consultants told The Straits Times that IReit Global Group offers an attractive proposition for investors, with a projected distribution per unit yield of 8 per cent next year.

But the debut could be hit by poor market conditions due to geopolitical concerns over, for example, impending United States air strikes against militants in Iraq.

OCBC Investment Research analyst Eli Lee said the 8 per cent forward yield offers a 130-200 basis point spread above average forward yields for Singapore Reits (S-Reits).

For instance, the office S-Reit subsector's average forward yield is 6 per cent, while the overall sector has an average of 6.7 per cent.

"That said, unlike IReit, which holds properties in Germany, the typical office S-Reit has the bulk of its portfolio exposure here," said Mr Lee.

"The differences in key geographical drivers could lead to meaningful divergences ahead, in terms of rental outlook, occupancy trends and reversion profiles."

Voyage Research deputy research head Ng Kian Teck noted that S-Reits have performed well, with most reporting second-quarter earnings that are either in line with or better than expectations.

IReit will have to dangle higher yields if it wants local investors to put their money into assets they are not very familiar with in a place that is half a world away.

Mr Ng added that market conditions have not been favourable for initial public offerings (IPO).

The two most recent entrants, Accordia Golf Trust and Terratech, have both sunk into the red since making their debuts in the past two weeks, and have yet to hit their IPO prices.

Mr Ng said: "The poor performances are fresh in the minds of investors, and with IReit coming behind them, the timing is not good.

"There's a lot of uncertainty now, with global markets not doing well, but a good asset is a good asset, and investors will come in, especially since Reits are usually held for the longer term."

Overseas trusts such as IReit also face inherent challenges, including currency exchange losses from a strengthening Singapore dollar, and subject potential investors to higher risks, noted Mr Ng.

Mr Donald Han, managing director of property consultancy Chestertons, pointed out that some Singapore-listed overseas Reits have done well, particularly those from growing economies.

They include Ascendas India Trust, Global Logistics Properties and Mapletree Greater China Commercial Trust, whose owners have been around for a long while.

Mr Han said Germany is considered a safe haven among European countries and is one of the key drivers of growth for the region.

"IReit's 8 per cent yield is fairly attractive compared with yields for Singapore's prime office sector, which are less than 4 per cent," he added.

"Yields for business parks and office space are also well below 6 per cent, even in major German cities such as Munich and Frankfurt."

Analysts warned that IReit's assets are mostly in second-tier German cities and highly reliant on a single tenant.

Three of its properties are leased to GMG, a unit of Deutsche Telekom, and the four office properties that make up the initial portfolio are in the cities of Bonn, Darmstadt, Munster and Munich.

The company has priced the IPO at 88 cents a unit, and 167.7 million units will be available.

The public offer closes next Monday. Trading is expected to start next Wednesday.

-By Mok Fei Fei

Listing processes hit FCL's net profit

Source: Straits Times / Money

ACCOUNTING processes connected to the company's recent share market listing affected the bottom line at Frasers Centrepoint (FCL) in the third quarter.

While underlying earnings were up, the developer posted a 55.2 per cent drop in net profit to $122 million from a year ago.

This was mainly due to a gain made last year when the company's assets were valued in preparation for its listing in January this year.

These valuations would normally be made at the end of the financial year.

If exceptional items and the revaluation gain were excluded, earnings for the three months to June 30 would have jumped 77.2 per cent to $120 million from a year ago.

FCL attributed the increase to completed projects in China such as phase two of the Chengdu Logistics Hub and the sales of completed units in One Central Park and Putney Hill, both in Australia, and Riverside Quarter in Britain.

The divestment of the Changi City Point mall to Frasers Centrepoint Trust also contributed.

Revenue rose 41.3 per cent in the quarter to $575.4 million.

Group chief executive Lim Ee Seng said the "strong operating results" were due to good contributions from overseas markets and the execution of its real estate investment trust (Reit) strategy.

Revenue from its hospitality segment grew 17 per cent to $53.5 million from a year ago, on the back of higher occupancies at Fraser Suites Queens Gate in Britain, Fraser Place Melbourne and Fraser Suites Perth.

FCL launched a takeover bid of Australand Property Group during the quarter.

The offer, which values the Australian-listed firm at about A$2.6 billion (S$3 billion), closes on Aug 21.

Quarterly earnings per share was 3.78 cents, compared with 35.96 cents a year ago, and this is after fair value change on investment properties and exceptional items.

Net asset value per share was $2.18, compared with $6.80 as at Sept 30.

FCL shares closed 1.5 cents down at $1.75 yesterday.

-By Rachael Boon

Frasers Centrepoint net profit down 60% on-year in Q3

The lack of increase in the valuation of properties held by the company, or fair value gains, contributed largely to the third quarter result, says Frasers Centrepoint.

Source: Channel News Asia / Business

SINGAPORE: Property giant Frasers Centrepoint (FCL) on Monday (Aug 11) reported a 60 per cent drop in fiscal third quarter net profit on-year due to a lack of fair value gains.

FCL, which was spun off from Fraser & Neave earlier this year, earned S$109 million in the three months ended June, down from S$271 million in the same period a year ago. This was despite a 41 per cent rise in revenue to S$575 million.

The company booked S$2 million in fair value gains for the quarter, down from the S$205 million a year ago, it added. Fair value gains refer to the increase in the valuation of properties held by the firm.

Looking ahead, FCL said its hospitality arm is on track to manage more than 10,000 apartments by the end of this year. It also said it is positive about the Singapore office market, where Central Business District (CBD) rents are expected to continue growing due to limited new supply in the next two years as well as low vacancy levels.

Over the medium term, FCL said it plans to replenish its Singapore land bank for development projects in the mass and mid-market segments.

Outside Singapore, the firm is targeting annual sales of more than 1,000 housing units in Australia and China collectively, it added.

- CNA/kk

Sino Construction posts profit warning

Source: Business Times / Companies

SINO Construction yesterday posted a profit warning for the second quarter ended June 30. It expects to report a "marginal net loss" mostly due to administrative expenses that has been incurred as part of its restructuring process. However, it expects to still turn a profit for the first half of the year. Sino Construction will announce its results on or before Aug 14.

Global Economy & Global Real Estate

Some China developers likely to default

Declining credit and cooling property market may lead to an industry shakeout

Source: Business Times / Property

[SHANGHAI] China's slumping property market is fuelling speculation the industry is set for a shakeout as small developers face difficulty raising funds to pay off debt.

Yield premiums on Chinese real estate bonds denominated in US dollars have jumped 27 basis points this month to 574 basis points over Treasuries, the sharpest increase among emerging Asian countries, according to Bank of America Merrill Lynch indexes.

That compares with a 24 basis-point advance for Indonesian builders. Moody's Investors Service and Standard & Poor's said some smaller Chinese developers may default in the second half amid falling sales and shrinking access to credit.

China's real estate industry poses the biggest near-term risk to growth in the world's second-largest economy after new home prices dropped in the most number of cities in two years in June, according to JPMorgan Chase & Co. While government steps to ease property curbs helped builder bonds rally in July, they're giving up those gains ahead of housing price data due next week.

-From Shanghai, China

Rise in London home prices seen slowing to 3%

Source: Business Times / Property

[LONDON] London house-price growth will slow to about 3 per cent next year as the prospect of higher borrowing costs forces sellers to lower their expectations, Hamptons International said in a report yesterday.

The 2015 forecast by the London-based broker is half the pace it predicted in September. Values in the city will probably climb 15.5 per cent this year, it said, more than double its previous prediction.

London's residential property values rose at their slowest pace in 15 months in June, after leading the surge in British house prices in the past year, the Royal Institution of Chartered Surveyors said last month.

Surging values in the UK capital prompted the Bank of England to limit riskier mortgages and introduce tougher affordability tests. The number of people saying the next 12 months is a good time to buy a UK home fell to the lowest since 2011, a survey by Lloyds Banking Group Plc showed last month.

-From London, UK

India finally opens US$20b door to spin off Reits

Final rules on new funding channel for cash-strapped developers due soon

Source: Business Times / Property

[NEW DELHI] India approved the setting up and listing of real estate investment trusts (Reits) as the nation seeks to unlock a US$20 billion market.

The trusts will have to own assets worth at least five billion rupees (S$102.2 million), the Securities and Exchange Board of India said in New Delhi. Investors must put in a minimum 200,000 rupees. Final notifications would be issued soon to make the new rules for Reits effective in a month or two, Press Trust of India reported, citing U K Sinha, chairman of the regulator.

The introduction of Reits will provide a new source of funding for cash-strapped developers that are struggling to reduce debt amid one of the highest interest rates in Asia and economic growth near the lowest in a decade. The products will give investors the ability to participate in the country's property market without investing directly.

"The sector has been in all sorts of trouble primarily due to high leverage for most of the developers," Pramod Gubbi at Ambit Capital said in an interview to Bloomberg TV India. "What Reit does is to open up another avenue for funding and this should bring down their cost. More money in the hands of the developers could see more projects taking off."

-From New Delhi, India

RBS said to be giving up half its space in HK's Central district

Some will move to Lincoln House in the eastern district of Quarry Bay

Source: Business Times / Property

[HONG KONG] Royal Bank of Scotland Group Plc, the UK lender scaling back its investment-banking business, is planning to reduce the office space it rents in Hong Kong's Central business district by half, according to two people with knowledge of the matter.

The bank leases about 60,000 square feet in the AIA Central building, the people said, declining to be named because the information isn't public. It plans to keep half of that for Coutts & Co, its private banking unit, and most of the other employees will move to Lincoln House in the eastern district of Quarry Bay, where RBS already leases space, by the end of the year, they 


Office rents in Central, where banks such as HSBC Holdings Plc and Goldman Sachs Group Inc have their regional headquarters, are falling as foreign financial firms continue to downsize or relocate to cut costs. Tenants in the city on three-year leases expiring this year may be able to negotiate on average rents that are 20 per cent lower than current leases, according to Cushman & Wakefield Inc.

Alexander Chu, the Edinburgh-based bank's country executive for Hong Kong, declined to comment on the move.

-From Hong Kong, China

Norway's wealth fund buys another London property

It acquires a 57.8% stake in a Mayfair estate for £343m

Source: Business Times / Property

[OSLO] Norway's sovereign wealth fund, the world's largest, bought a stake in an estate in London's Mayfair district for £343 million (S$720 million), expanding its property holdings in the UK capital.

The fund bought a 57.8 per cent share in the 1.3-ha Pollen Estate between Regent Street and Bond Street from the Church Commissioners for England, Oslo-based Norges Bank Investment Management said yesterday. The UK Crown Estate bought a 6.4 per cent stake for US$38 million.

"The purchase is according to the fund's strategy to build a global, but concentrated, real estate portfolio," a spokesman said. "Our strategy is to focus our investments on a limited number of large global cities, where we invest in core retail and office properties." The purchase expands Norway's holdings in London after it agreed in 2010 to buy a US$772 million stake in Regent Street from the Crown Estate. The Pollen Estate's 43 properties include office and retail space in a square also bordered by Conduit Street and Burlington Gardens that includes Savile Row. The properties will continue to be managed by the trustee company. The UK Secretary of Defence-Greenwich Hospital also owns 10 per cent, while the Pollen family holds 25.8 per cent.

The estate was established in 1622 with 11.7 ha of land including what is now Great Marlborough Street and Hannover Street in Mayfair.

-From Oslo, Norway

JPMorgan Said to Consider Moving Site of NYC Headquarters

Source: Bloomberg / Luxury

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, is considering moving its headquarters within New York as the company has fewer employees in the nation’s largest city, according to a person briefed on the discussions.

The potential plans, which include taking office space in Manhattan developments at the World Trade Center or Hudson Yards, are in early stages and no decision is imminent, said the person, who asked not to be identified because the talks are private. JPMorgan has moved back-office jobs to New Jersey, Delaware and Florida to cut expenses, the person said.

Banks, under pressure to boost returns, have been seeking lower-cost locations for employees who don’t interact directly with clients. JPMorgan is examining its property holdings in New York, where it had 11.4 million square feet (1.1 million square meters) at the end of 2013, including 1.3 million at its 270 Park Ave. headquarters.

JPMorgan sold its 60-story skyscraper at 1 Chase Manhattan Plaza last year to Shanghai-based Fosun International Ltd., and began moving 2,000 employees to offices in Brooklyn’s MetroTech Center this year. JPMorgan owns the Park Avenue building as well as the former headquarters of Bear Stearns Cos. at 383 Madison Ave., which it acquired in 2008.

The bank may keep 270 Park and take some space in new projects, or it could opt to refurbish the Madison Avenue building, said the person. Any decisions probably won’t result in moves for several years, the person said. The New York Post reported details of JPMorgan’s plans earlier today.

Goldman, Citigroup

Citigroup Inc., the third-biggest U.S. bank, will move its New York headquarters from 399 Park Ave. to buildings it occupies on Greenwich Street in lower Manhattan, Chief Executive Officer Michael Corbat said in April. The bank will leave the Park Avenue building when its lease expires in 2017.

Bank of New York Mellon Corp., the world’s largest custody bank, agreed in May to sell its headquarters at 1 Wall St. to a joint venture led by Macklowe Properties for $585 million. BNY Mellon is moving to Brookfield Place, the lower Manhattan complex formerly known as the World Financial Center.

Other banks have relocated jobs out of New York, including Goldman Sachs Group Inc., which added personnel in Dallas and Salt Lake City. JPMorgan CEO Jamie Dimon said at an economic summit in Miami last year that Florida has more business-friendly policies than New York, and he joked that he sometimes wonders why the company doesn’t move to Miami.

In June, JPMorgan paid $14.7 million to buy a Jersey City building it had been leasing, according to the Record newspaper in nearby Hackensack. A month earlier, New Jersey awarded the bank $22.5 million in annual tax credits for 10 years to create 1,000 jobs in the state and retain 2,612 others.

Biggest Development

The Port Authority of New York and New Jersey owns the World Trade Center site, and Silverstein Properties Inc. has plans for three buildings at the location, with 4 World Trade Center already open. One World Trade Center, co-developed by the Durst Organization, is scheduled to open by year-end.

Hudson Yards is a 28-acre (11-hectare) project by Related Cos., developer of New York’s Time Warner Center, that the firm calls the biggest private real estate development in U.S. history. The site, over rail yards along the Hudson River in midtown Manhattan, will feature five office towers and 5,000 residences, according to Related’s website for the project.

“We’re starting to see lots of interest from even financial-services sectors, hedge funds, private-equity funds,” Related CEO Jeff Blau said in a Bloomberg Television interview last month. “Interestingly, they’re all looking for large floor plates. And so if you think about the buildings that exist today around New York City, there’s not many options for them.”

-By Michael J. Moore

Realogy Forms Division to Manage Single-Family Rentals

Source: Bloomberg / Luxury

Realogy Holdings Corp. (RLGY), owner of brokerage brands Coldwell Banker and Century 21, is building a division to manage U.S. single-family homes for landlords in the growing house-rental industry.

Realogy is consolidating local operations under its NRT LLC brokerage subsidiary, which has about 20,000 properties under management. NRT, the biggest residential brokerage operator, also acquired the assets of Dallas GTF Inc., a Texas-based firm that has 1,600 rental homes under management in the Dallas/Fort Worth area, Realogy said yesterday in a statement.

Demand for quality managers has increased as mom-and-pop investors and larger companies such as Blackstone Group LP (BX) and American Homes 4 Rent (AMH) buy houses scattered over wide distances that require maintenance. The industry is being bolstered by increased demand for leasing after more than 5 million homes were lost to foreclosure and as tight lending standards limit buying. The U.S. homeownership rate is at a 19-year low of 64.2 percent, down from a high of 69.2 percent in 2004.

For Realogy, the new structure will take previously acquired property-management operations and “formalize it into a division that will become, given our footprint, one of the largest in the country pretty soon,” Richard Smith, chief executive officer of the Madison, New Jersey-based company, said in an interview.

The U.S. rental-home industry has grown to about 14 million properties, according to Jade Rahmani, an analyst at Keefe Bruyette & Woods Inc. in New York.

‘More Value’

Most landlords NRT works with have five to 10 homes on average, Smith said. The management division, which was formed in July, is being led by Robert Way, who most recently was senior vice president at Realogy’s Title Resource Group subsidiary, according to the statement.

NRT will join just a few national single-family management firms, a group that includes Carrington Holding Co. and the Rockbridge Group, formerly FirstService Residential Realty. Jim Warren, chief operating officer for Austin, Texas-based Rockbridge, said the field has plenty of room for more companies.

“I’m excited by it because the bigger the players that enter the market, the more value landlords will receive,” Warren said in an interview. “Something that gives stability to landlords can cause the industry to grow. It will give them confidence to invest more.”

The new structure will give a boost to Realogy’s real estate agents, said Rick Sharga, executive vice president at Carrington until about a year ago.

‘Stay Connected’

“This is an opportunity to stay connected to a property after the initial purchase,” said Sharga, who now has the same title at LLC., the largest U.S. online real estate auction firm. “You’re probably working with the investor on the initial transactions. Now you manage the property and, at some point, you have the opportunity to sell the home again. Meanwhile, you’re working with renters who at some point may want to become buyers.”

Dallas GTF, which does business as Get There First Realty, was formed in 1981 and manages more than $130 million of residential properties, mostly held by individual owners, according to the statement.

-By Prashant Gopal

Inland American to Spin Off Hotels Into Public REIT

Source: Bloomberg / News

Inland American Real Estate Trust Inc. (IARE), a nontraded real estate investment trust, plans to spin off its lodging subsidiary into a publicly traded company.

The new REIT, to be called Xenia Hotels & Resorts Inc., will own 46 hotels in 19 states and the District of Columbia and a majority stake in two properties under development, Oak Brook, Illinois-based Inland American said in a statement today. The hotels include brands such as Hyatt, Hilton and Marriott.

The company is seeking to enter the public markets as stocks hover close to record highs. The Bloomberg Hotel REIT Index has gained about 21 percent in the past 12 months, compared with about 8.6 percent for the broader gauge of property trusts. Marcel Verbaas, who led Inland American’s lodging investments, will become Xenia’s president and chief executive officer, according to the statement.

“These assets have performed well as part of Inland American’s portfolio, delivering strong cash flows and attractive returns,” Verbaas said in the statement. “As a standalone company, Xenia will have the additional strategic and financial flexibility to continue delivering growth and creating stockholder value.”

Xenia will be based in Orlando, Florida, and will apply to list its shares on the New York Stock Exchange under the symbol XHR. Inland American expects to complete the spinoff in the next four to eight months, pending approval of its board.

Inland American shareholders will receive an undetermined number of shares of Xenia common stock, according to the statement. Goldman Sachs Group Inc. and Morgan Stanley are the financial advisers, and Latham & Watkins LLP is acting as legal counsel to Inland American.

The name Xenia refers to an ancient Greek tradition of hospitality, in which hosts should treat guests with the respect they would show a heavenly being.

Inland American, whose shares aren’t traded on an exchange, as of March 31 owned 281 properties, including retail, industrial and office buildings and student housing.

-By Jonathan LaMantia

Hedge Funds Boost Bad-Loan Prices as U.S. Sales Increase

Source: Bloomberg / Personal Finance

Sales of U.S. delinquent mortgages are accelerating as lenders rush to meet demand from hedge funds and private-equity firms that has sent prices surging.

Bank of America Corp. is marketing soured mortgages with a balance of about $3 billion, said David Tobin, principal at loan broker Mission Capital Advisors LLC. Wells Fargo & Co. is offering about $1.3 billion of the debt, according to two people with knowledge of the sale. JPMorgan Chase & Co. last month sold about $500 million of bad loans to Lone Star Funds, while Oak Hill Advisors LP bought $659 million of delinquent debt from Freddie Mac, said two other people, who asked not to be named because the transactions are private.

The market for defaulted mortgages is heating up as Wall Street firms try to profit from the housing recovery, banks seek to avoid the added costs of holding delinquent debt, and the Department of Housing and Urban Development sells loans to reduce losses at the financially troubled Federal Housing Administration. A $3.9 billion HUD offer in June was the most competitive to date, drawing more buyers and bids than previous sales and setting off a flurry of auctions last month.

“It’s three forces conspiring to create a big trade frenzy,” Tobin said. “Sellers looking to sell, lots of buyers looking to buy and pretty good fundamentals, which are making pricing dramatically higher than in 2012.”

Sales Jump

About $30 billion of bad loans were sold in the first half of this year, more than the roughly $25 billion traded in all of 2013, according to Michael Nierenberg, chief executive officer of New Residential (NRZ) Investment Corp., a real estate trust that invests in mortgage-related assets, managed by an affiliate of Fortress Investment Group LLC. Another $30 billion of the debt probably will change hands in the second half, Nierenberg said in a telephone interview.

Wall Street buyers are acquiring the debt after foreclosure starts dropped this year to the lowest level since 2006 and house values soared in California, Phoenix and other markets hard-hit by the real estate crash. House-price gains are starting to moderate, with the S&P/Case-Shiller index rising in May at the slowest pace in a year.

“You would think supply and slower home price growth would cause loan prices to weaken, however, the amount of capital raised for the sector has caused the pricing to increase,” Nierenberg said. “At some point with volatility in the markets increasing, we would expect prices to fall.”

The Freddie Mac portfolio sold in July for 76 cents on the dollar of unpaid principal balance, according to Tobin, whose New York-based firm has advised investors on almost $60 billion in commercial and residential loan deals since 2002. That compares with average nonperforming loan prices of 64.5 cents at the end of last year and 49 cents in January 2013, he said.

Price Shock

The Freddie Mac price “shocked” Laurence Penn, CEO of Ellington Financial LLC in Old Greenwich, Connecticut.

“This market is getting very heady and you are seeing the supply come out in response to these prices,” Penn, whose firm bid on the Freddie Mac sale, said on an Aug. 7 conference call.

Lone Star Funds, the distressed-debt investment firm founded by Dallas billionaire John Grayken, paid almost 66 cents per dollar of unpaid balance at the June HUD auction, winning bids on all 16 loan pools.

“One could argue that Lone Star sweeping that sale is forcing other people to pay up if they want to get deals, because they got blanked,” said Tobin.

Since the HUD auctions in June, there have been about $9 billion in offerings of nonperforming and re-performing residential loans, said Patrick Dodman, a portfolio manager at Ellington responsible for residential whole-loan trading.

“This quarter is setting up for perhaps the highest flows post crisis,” Dodman said in a telephone interview.

More Sales

Bank of America’s $3 billion sale, which is being offered in four pools, compares with $2.1 billion the Charlotte, North Carolina-based lender sold in its most recent quarter.

“We continue to look at the sale of non-performing loans,” Chief Financial Officer Bruce Thompson said in a call with investors last month.

Wells Fargo is selling $1.3 billion in troubled mortgage debt on behalf of regional bank clients. The lender is marketing two pools made up of mostly reperforming loans as well as nonperforming loans, said one of the people with knowledge of the sale.

JPMorgan Deals

JPMorgan’s $500 million deal with Lone Star follows similar sales earlier this year, including a $390 million offering that included some mortgages tied to homes in New York.

Amy Bonitatibus, a JPMorgan spokeswoman; Dan Frahm, a spokesman for Bank of America; Elise Wilkinson, a spokeswoman for Wells Fargo; and Jed Repko, a spokesman for Dallas-based Lone Star, declined to comment on the loan sales.

James David, a spokesman for Oak Hill at Kekst & Co., declined to comment on the Freddie Mac transaction. Oak Hill raised $1.2 billion last year for a distressed residential mortgage fund, according to an October statement.

The Freddie Mac auction attracted 22 bidders and was the first by the McLean, Virginia-based mortgage company, which backs $1.9 trillion of housing debt. Fannie Mae (FNMA) and Freddie Mac, under government conservatorship since the 2008 financial crisis, had about $320 billion in loans on their books that were nonperforming or re-performing after missed payments as of June 30, according to regulatory filings, some of which could come to market as prices for soured mortgages rise.

Another Entrant

“Given where pricing is headed, it’s safe to expect Fannie and Freddie to be another entrant into this marketplace sooner rather than later,” Tobin said. “If their first deal goes off at 76, then succeeding deals will probably go off even higher.”

Fannie Mae will “evaluate those opportunities,” Fannie Mae CFO David Benson said on an Aug. 7 conference call.

HUD plans at least one more sale in 2014 and one sale per quarter in coming years, said Cameron French, a spokesman. The FHA had more than 437,000 seriously delinquent loans as of June 30, according to the Mortgage Bankers Association.

The FHA is a mortgage insurer run by HUD that helps lower-income borrowers buy houses. Losses of more than $50 billion on mortgages it insured as the housing bubble burst caused it to take a taxpayer subsidy of $1.7 billion last year, the first in its 80-year history.

Higher prices are deterring some investors who bought delinquent loans earlier this year.

New Residential purchased $500 million of nonperforming loans, or NPLs, from a bank in the second quarter and isn’t eager to buy more, Nierenberg said last week.

Not Interesting

“Current pricing, overall, probably is not something that’s really that interesting to us,” Nierenberg said on a call with investors. “We’ll keep our eye on it, but it’s not something we’re going to jump in and buy a ton of loans, RPLs or NPLs, unless we think we can meet our return hurdles.”

While rising prices are squeezing potential margins, Wall Street-backed investors are able to increase their returns by using low-cost debt to finance their purchases. Bayview Asset Management LLC, a Coral Gables, Florida-based investment firm backed by Blackstone Group LP; bond pioneer Lewis Ranieri’s Houston-based Selene Finance; and Lone Star are among the firms that have sold securities backed by delinquent loans this year.

Lenders, including some of the banks that are selling nonperforming loan portfolios, are offering debt as high as 70 percent of the portfolio price, according to Gary McCarthy, a partner at HMC Assets LLC in Redondo Beach, California.

Debt Markets

“Certainly the securitization and debt markets are making money more readily available less expensive,” said McCarthy, whose firm won six HUD loan portfolios with an unpaid balance of $576.6 million, financed partly with debt from three banks.

More firms -- including Donald R. Mullen Jr.’s Pretium Partners LLC and hedge funds Metacapital Management LP and One William Street Capital Management LP -- are seeking to acquire the soured debt. Wall Street-backed companies that have built home-rental businesses, including American Homes 4 Rent, Starwood Waypoint Residential Trust, Altisource Residential Corp. and Axonic Capital LLC are also buying nonperforming loans to expand their property holdings.

“There’s continuing demand and new entrants coming into market,” said Justin Berman, a former Goldman Sachs Group Inc. banker who runs Berman Capital Advisors, a private wealth firm in Atlanta that invests in delinquent loans through a New York-based company. “It’s a good trade as long as you can digest the loans in your system and work through them the right way.”

Keeping Homes

If the properties tied to the mortgages are still occupied, investors can work with borrowers to modify the loans and help them keep their houses. They can also pay homeowners to leave, circumventing a court process for foreclosures that has led to big backlogs of nonperforming mortgages in judicial states including New York, New Jersey, Florida and Maryland.

Another option is putting the properties through foreclosure and taking ownership, a lengthy procedure that often means paying costs such as real estate taxes, legal fees and insurance.

Rising home values across the U.S. have restored equity to many properties owned by delinquent borrowers. Nonperforming loan prices and sales volume have tracked the housing recovery, Tobin said. The S&P/Case-Shiller index of 20 cities has gained 27 percent since hitting a post-recession low in March 2012.

“Now that housing prices have caught up, you have much more willing sellers,” Tobin said.

-By Heather Perlberg and John Gittelsohn

Mexico’s Construction Industry Posts First Expansion Since 2012

Source: Bloomberg / Luxury

Mexico’s construction industry expanded in June for the first time in 19 months, adding to signs that the economy is rebounding after missing analyst estimates in seven of the last eight quarters.

Construction increased 2.2 percent from the year earlier, helping industrial production to expand 2 percent, according to data released today by the national statistics agency. The median estimate of 19 economists surveyed by Bloomberg was for industrial output to rise 2.1 percent.

“Industrial activity continued strengthening in June, very much in line with what the market expected,” Mario Correa, the chief Mexico economist at Bank of Nova Scotia, said in a note to clients today. “The construction industry finally showed a positive growth rate.”

Construction rose as government infrastructure spending increased and the housing market picked up. Cemex SAB, the largest cement maker in the Americas, said last month that growth in the residential real estate market would probably accelerate in the second half. The construction industry contracted 2.5 percent in December following housing policy changes that led to the collapse of the three largest homebuilders and delays in infrastructure projects under President Enrique Pena Nieto.

Manufacturing activity grew 3.4 percent in June from a year earlier, below the median analyst estimate of 4 percent, while mining contracted 1.3 percent and utilities such as electricity and water rose 1.3 percent, the statistics agency said.

Compared with the May level, industrial production fell 0.2 percent in June and construction gained 1.2 percent, its fifth straight monthly advance.

The car industry is helping fuel growth in Mexico. Automobile output has expanded 7.5 percent this year following record production of 2.93 million vehicles last year. Lawmakers have passed energy laws this month to bolster private-sector investment in oil and gas.

-By Brendan Case

Canada Housing Surprises Again With July Starts Increase

Source: Bloomberg / Luxury

Canada’s housing starts beat economist predictions for a fourth straight month in July, led by the most single-family home projects in almost two years.

The pace of work on new homes rose 0.7 percent to a seasonally adjusted annual pace of 200,098 units, the fastest since October, from a revised 198,665 in June, Ottawa-based Canada Mortgage & Housing Corp. reported today. Economists forecast a decline to 193,000, according to the median of 18 responses in a Bloomberg News survey.

Most economists and the central bank have predicted that rising prices and near-record debt loads would curb demand for housing. Instead, home resales, prices and starts have climbed after a tough winter, as mortgage rates remain near record lows.

“CMHC continues to expect a soft landing for the new home construction market in Canada,” the agency’s chief economist Bob Dugan wrote in the report.

Single-family starts in urban areas rose 4.7 percent to 67,062 in July, the report showed. Multiple-unit housing such as apartments and condominiums declined 2.0 percent to 115,870 units.

Canada’s dollar strengthened 0.1 percent to C$1.0958 per U.S. dollar at 9:34 a.m. in Toronto. Canada’s government five-year bond yield, a benchmark used by lenders in setting mortgage loans of the same term, fell to 1.50 percent from 1.51 percent.

The pace of starts over the past four months has averaged 197,776 units, compared with the average consensus forecast of 185,750 units.

Bank of Canada Governor Stephen Poloz said in June he expects a soft landing and that the country’s main domestic financial risk is from “stretched valuations and some signs of overbuilding” in the housing market. Construction of condominiums in Toronto and Vancouver surged in recent years.

“A deceleration in multi starts may be exactly what the market needs considering that overbuilding caused gluts in some regions of the country,” Krishen Rangasamy, senior economist at National Bank Financial in Montreal, wrote in an e-mailed commentary.

-By Greg Quinn