Real News‎ > ‎2014‎ > ‎August 2014‎ > ‎

14th August 2014

Singapore Real Estate

Singapore Housing Purchases Drop as Rates Poised to Rise

Source: Bloomberg / Luxury

James Hee, a property agent who lives with his family of four in a government-built flat he owns in Singapore, was eyeing a condo for about S$1.5 million ($1.2 million) earlier this year. Then Hee discovered that he wouldn’t qualify for a mortgage after the government restricted lending.

“Being self-employed, only 70 percent of what I earn is considered for the loan calculation, and with my car loan I can’t get the amount I would need to upgrade,” Hee, 32, said.

Singapore curbed lending after home prices climbed 25 percent between 2006 and 2008. While the measures pushed down prices, they also prevented some Singaporeans, who mostly live in government-financed units that they own, from buying privately built apartments. The central bank said in July that it’s too early to ease property restrictions, a view that some economists support to protect borrowers from an impending rise in interest rates.

“This preemptive step to limit loan liabilities could actually help to buffer a slump as it reduces the number of marginal home owners who may struggle to meet loan obligations and then need to liquidate,” said Vishnu Varathan, an economist at Mizuho Bank Ltd. in the city-state. “It’s priming the Singapore market for more resilience when the rate cycle turns.”

Government Control

The government has shaped the country’s housing market for decades. Singapore’s first prime minister, Lee Kuan Yew, transformed the city of 5.4 million from a colonial backwater during its independence in 1965 into one of Asia’s most prosperous nations. His housing policy created hundreds of thousands of government apartments where today more than 80 percent of Singaporeans live, according to the Housing & Development Board, known as HDB, website.

Singapore’s homeownership rate is among the highest in the world. The figure for resident households was 90.5 percent in 2013, up from 58.8 percent in 1980, according to government data, thanks to housing grants and a program that allows buyers to use accumulated government pension contributions for purchases.

As foreign speculators and low interest rates in Singapore sent housing prices soaring beginning in 2006, the government took action. In 2009, officials tightened lending by barring interest-only mortgages for some housing and forbidding developers from absorbing interest payments for units under construction. The government also taxed speculators and placed levies as high as 15 percent on foreign buyers. Home prices hit a record in September 2013.

Mortgage Restrictions

The Monetary Authority of Singapore, or MAS, further restricted lending last year. It stipulated that total debt should not exceed 60 percent of the income of a borrower. The central bank also cut the maximum period for new loans to buy public housing by five years to 25 years.

The HDB last year capped how much a borrower’s gross monthly income can go toward a mortgage -- or the mortgage-servicing ratio -- for public housing at 30 percent, down from 35 percent.

The restrictions have made it more difficult for Singaporeans to sell government housing and buy better private apartments.

Public units, which are clustered throughout the island-state, tend to be blocky and unadorned, with laundry often hanging off bamboo poles outside. While condo owners have easy access to swimming pools, gyms and tennis courts, these amenities are commonly shared by entire suburbs of public housing residents. Government units have an income ceiling for buyers and restrictions on the resale and rental of the units, as well as a minimum occupation period.

Lending Falls

Government policy has cut the growth in outstanding mortgage loans to 7.5 percent in June, almost the slowest monthly pace since June 2007, data compiled by Bloomberg based on MAS figures show.

Resale volumes of public housing have declined by 63 percent as of July from a peak in May 2010, when 3,649 units were sold, according to The Singapore Real Estate Exchange’s preliminary figures on Aug. 7. Resale prices for HDB flats dropped 0.9 percent in July from June, for the sixth consecutive month, to a 29-month low. A three-bedroom public flat cost about S$500,000 as of July, according to data from the exchange.

“Earlier, people bought HDBs at cheap prices and with the profit on the sale they made the down payments to upgrade to a private condo,” said Denka Wee, head of business services at property broker Dennis Wee Realty. “Now they can’t get the price they need for the upgrade.”

Condos Plunge

The private market is also plunging as one of its biggest sources of buyers is stuck in government housing.

Private-home sales dropped 56 percent to 4,505 units in the first half of 2014 compared with the same period a year earlier, according to Urban Redevelopment Authority data.

Prices of mass-market private homes -- apartments which cost about S$1,000 per square foot and are located about 10 kilometers from the central business district -- posted their third quarter of decline in June, sliding 0.9 percent, URA data show. The average price of a new 900-square-foot private condo in Singapore is estimated to be between S$900,000 and S$950,000, according to Savills Plc.

“We could see slower sales in mass market projects because of lower demand from HDB homeowners as the loan measures have dented their ability to afford private homes,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “Some of the mass market suburban condo demand was coming from the HDB upgraders.”

Underweight Rating

For the year, public housing prices are expected to decline by between 5 percent and 8 percent because of falling demand and increased supply, according to Singapore-based Christine Li, head of research and consultancy at property broker Pte. Developers will complete 28,000 build-to-order HDB units by year’s end, Li said.

“When HDB prices slow, there’s a psychological effect that some upgraders tend to hold back because they feel their HDB cannot fetch a premium for them to upgrade to a condominium,” she said.

Barclays Bank Plc reiterated its underweight rating on City Developments Ltd. (CIT), Singapore’s second-largest developer, and Keppel Land Ltd. (KPLD), the third largest.CapitaLand Ltd. (CAPL), Southeast Asia’s largest developer, hasn’t been hit as hard because its residential assets make up only a quarter of its total.

Investment Risk

Tricia Song, an analyst at Barclays, said that the government probably won’t scale back its housing restrictions anytime soon.

“The government is unlikely to relax property tightening measures before a significant decline in the property price index, which we forecast to be sometime in mid-2015,” Song wrote in an Aug. 4 report. Prices may drop by as much as 15 percent in 2015, according to Barclays.

City Developments said the housing limits run the risk of harming Singapore. The nation could lose its competitive edge as an investment destination unless the government reviews its property cooling measures, Kwek Leng Beng, executive chairman at City Developments, told the Straits Times newspaper. Foreigners are choosing to plough their investment dollars into countries like Britain, Australia and the U.S. over Singapore, while Singaporeans have been investing abroad, he said.

The developer today reported a 33 percent drop in profit to S$137.9 million for the quarter ended June 30.

“Singapore’s property landscape continues to experience challenging headwinds,” Kwek said in today’s statement. “We will accelerate our overseas expansion initiatives to supplement existing operations.”

City Developments shares fell 2.7 percent to S$9.78 at the close of trading in Singapore, posting the biggest decline since Jan. 30.

Saving Money

Hee, the property agent, said he will continue living in government housing in Hougang along with his wife, child, mother-in-law and a maid until he can save the extra money for a condo.

“I don’t see the loan measures going, so I guess I’ll just need to work harder, earn more and wait a few years before I can move to a private condominium,” Hee said.

-By Pooja Thakur

S'pore tops Asia in Q2 office rental gains

Source: Business Times / Property

[SINGAPORE] Singapore posted the strongest quarterly gains in office rentals in Asia during the second quarter of 2014, according to latest data from JLL.

In local currency terms, Singapore continued to see the strongest quarterly rental growth of 4.6 per cent compared to the preceding quarter.

The average rental for a Grade A office space was US$828 per square metre (psm) per year, making the city-state the third most expensive after Hong Kong Central at US$1,493 psm per year and Beijing's Central Business District at US$996 psm per year.

Small-space occupiers, particularly those from the e-commerce and fast-moving consumer goods (FMCG) segment, continued to dominate the Singapore market.

-By Angela Tan

H1 subsales come after long holding periods

Ngee Ann Poly study suggests seller's stamp duty effective in curbing speculation

Source: Business Times / Top Stories

[SINGAPORE] Most subsales of private apartments and condos in the first half of this year involved relatively long holding periods, according to a study by Ngee Ann Polytechnic.

This suggests that the seller's stamp duty (SSD) is effective in curbing speculative residential property deals. Subsales are secondary-market transactions in uncompleted projects.

In the high-end segment, nearly all subsale caveats for non-landed private homes lodged for H1 were traced to units that had been bought in 2009 and 2010 and which therefore would not have incurred SSD. There was no caveat for units in Core Central Region (CCR) that had been previously bought in 2012 to 2013.

In the mass-market segment, 73 per cent of subsale transactions involved properties that had been bought in 2009 and 2010.

SSD was introduced in 2010 for residential properties bought on or after Feb 20, 2010 and flipped within a year. Later that year, SSD was extended to properties bought on or after Aug 30, 2010 and sold within three years.

Since early 2011, the holding period has been extended to four years with sharply higher rates. Residential properties bought from Jan 14, 2011 and sold within four years incur SSD of 16, 12, 8 or 4 per cent if they are sold in the first, second, third or fourth year of purchase respectively.

"Back in 2009, pre-SSD, there were units flipped within the same year of purchase," said Feily Sofian, a lecturer at Ngee Ann Polytechnic's School of Design & Environment.

"However, in H1 2014, there were no subsale caveats registered that involved units bought last year."

Subsales are secondary-market transactions of units in projects that have yet to receive Certificate of Statutory Completion and where the titles for all the units have yet to be issued. They are seen as a gauge of the level of property speculation.

Given their long holding periods, most of the H1 subsale transactions were profitable, though the proportion of subsales that were in the black was higher in the mass-market segment, where prices have climbed at a faster clip from the Q2 2009 trough.

Seventy-five per cent of the 40 subsales in CCR made money. In Outside Central Region (OCR), where mass-market homes are located, the proportion is 97 per cent, out of 142 subsales.

Profit or loss was calculated by comparing the latest price against the price at which the unit had previously changed hands, factoring in the prevailing SSD rates (if applicable). However, other costs such as interest, legal fees and the additional buyer's stamp duty (ABSD) were not counted.

Ms Sofian, who teaches the real estate business diploma course, said that ABSD was not included because it rested on who the buyer was and how many residential properties they own - "which is something we can't ascertain".

Ngee Ann mined Urban Redevelopment Authority's Realis data for caveats of subsales of non-landed private homes in OCR and CCR in H1. It then sought out caveats data for previous transactions of these units. As at Aug 11, 2014, there were 147 subsale deals in OCR in H1, with previous transaction information traced for 142.

The average profit on the 138 profitable subsales in OCR was S$221,275 (translating to a 24 per cent gain). As for the four remaining subsales that were in the red, the average loss was S$35,646 (or 5 per cent).

Giving a split of the profitable subsales in H1 by the year in which the units had been bought, Ms Sofian said that in OCR, the biggest average profit of S$379,603 accrued to units that had been bought in 2009 - the nadir-year of the Singapore private housing market after the global crisis.

Subsale gains thinned for units bought in subsequent years, with those picked up in 2012 and subsold in H1 2014 posting an average gain of S$104,500. The four unprofitable subsales involved properties bought in later years, 2011 and 2012.

In CCR, there were 42 subsales in H1 and of these, caveat matches of previous transactions were found for 40 properties. Among the 30 profitable subsale transactions, units bought in 2009 and 2010 posted average gains of 14 per cent and 16 per cent respectively.

These are lower than the average gains for subsale transactions of mass-market units in the first-half involving units bought in the same years - 37 per cent for units picked up in 2009 and 25 per cent for units bought in 2010.

"This is in line with the market trend, as seen in the stronger rise of 72 per cent in URA's price index of non-landed homes in OCR between Q2 2009's trough and Q2 2014 - compared with a 42 per cent increase in CCR over the same period," said Ms Sofian.

The polytechnic collaborated with the website started by SLP International executive director Tony Koe in his private capacity .

Subsale transactions will probably remain subdued in coming months.

Knight Frank chairman Tan Tiong Cheng said: "So long as the low interest rate environment continues, the authorities are unlikely to remove cooling measures.

"Investors are now caught not only by SSD when they need to trade or swap private residential properties to rebalance their portfolio, but deterred from making a purchase in the first instance due to the ABSD. On top of that, the foreign buying contingent is still missing - which reduces liquidity in the market.

"First-time buyers will be spoilt for choice."

-By Kalpana Rashiwala

Most profitable CCR subsale in H1 yields S$3m gain

Subdued market seen as an attractive hunting ground for first-time buyers

Source: Business Times / Top Stories

[SINGAPORE] The most profitable subsale transaction in the first half of this year in the Core Central Region (CCR) yielded a gain of about S$3 million.

It involves a low-floor unit at Goodwood Residence in Bukit Timah Road purchased from developer GuocoLand in April 2010 at S$8.5 million or S$1,815 per square foot and subsold at S$11.5 million or S$2,456 psf in May this year.

The transaction also produced the highest percentage gain for a subsale deal - 35 per cent - in the period, shows a caveat analysis by Ngee Ann Polytechnic's School of Design & Environment.

Subsales are secondary market transactions of units in projects that have yet to receive Certificate of Statutory Completion (CSC) and where the titles for all the units have yet to be issued.

Subsales - tracked as a barometer of the level of speculative activity in the property market - have slowed in the private housing segment in recent years, thanks to cooling measures such as the seller's stamp duty (SSD), aimed at deterring short-term trading of residential property, as well as the June 2013 total debt servicing ratio framework that banks have to take into account when granting new property loans to people.

Ngee Ann's analysis also showed that subsale gains of about S$500,000-plus each were generated by two high-floor units at Centennia Suites in Kim Seng Road. They were acquired in separate transactions in March 2010 and divested in the subsale market earlier this year.

A quarter of the non-landed private homes in CCR - which covers the traditional prime districts 9, 10 and 11, the Downtown Core planning area and Sentosa - that changed hands in the subsale market in H1 resulted in a loss for the sellers.

Quantum-wise, the biggest loss of S$800,000 was chalked up by an apartment on a low floor of the Waterscape at Cavenagh condo. Its owner bought it from the developer back in June 2010 for S$3.9 million or S$2,059 psf and offloaded it in May this year at S$3.1 million (S$1,636 psf). At the Reignwood Hamilton Scotts, a mid-floor unit acquired in September 2009 at S$9.13 million was subsold in May this year for S$8.5 million, producing a loss of over S$600,000.

In the Dunearn Road area, an apartment at The Glyndebourne picked up from the developer at S$3.2 million in November 2010 changed hands in April at S$2.8 million - a 13 per cent loss. 

Subsales of four units in Robinson Suites in April were in the red to the tune of S$300,000-plus each or about 22-23 per cent; the units were bought from the developer in December 2010.

In Outside Central Region, where mass market condos are located, the most profitable subsale in H1 - with a S$746,000 gain - was for a unit at Hundred Trees in West Coast Drive. Its owner paid S$1.39 million for the low-floor in October 2009 and divested it in the subsale market this March at S$2.14 million. Percentage wise, the gain was 54 per cent.

In all, there were seven subsale transactions at Hundred Trees in H1, all profitable.

At the Tree House in Chestnut Avenue, the owner of a high-floor unit who paid S$1.13 million in May 2010, found a buyer for the unit at S$1.66 million this May.

Slightly over 97 per cent of the 142 subsales in OCR were profitable.

The four deals that chalked up a loss involved units at Kovan Regency (about S$89,200), Seastrand (S$46,200), Ripple Bay (S$5,500) and Euhabitat (S$1,700).

Profit or loss was calculated by comparing the H1 subsale price for the unit against the price at which the unit had previously changed hands; SSD was also factored in where applicable but not any other costs.

The current subdued market provides an attractive hunting ground for first-time buyers. As Ong Choon Fah, DTZ SE Asia chief operating officer, observed: "The savvy have started to look for good deals from motivated sellers, including those who bought from developers. The trend of subsale transactions involving a relatively long holding period is set to continue."

-By Kalpana Rashiwala

Queenstown rolls out heritage plan

5-year blueprint includes $2m museum to connect the present with the past

Source: Straits Times / Singapore

QUEENSTOWN has unveiled a five-year plan to protect its heritage, becoming the first estate here to clearly outline its preservation efforts.

The plan will seek to not only conserve sites in Singapore's first satellite estate, but also connect the present with the past with a $2 million museum by 2020 and a festival once every two years.

A highlight of its ambition is a network of galleries, heritage corners and markers to be rolled out across various parts of Queenstown by next year.

The blueprint by civic group My Community and Queenstown Citizens Consultative Committee maps out tangible goals even as different pockets of the 61-year- old estate undergo development.

My Community founder Kwek Li Yong, who has been championing the estate's heritage, said: "It incorporates feedback from residents on what they feel is important to conserve. Rather than just ride the wave of nostalgia, we worked out concrete plans for the neighbourhood."

These include the construction of 11 galleries displaying residents' old photographs across void decks, walkways and public institutions, and the installation of 38 site markers highlighting historic places and buildings.

The six Queenstown neighbourhoods will also have areas carved out to pay homage to the precincts' rich history. These heritage corners will feature interactive spaces with photographs, artefacts, 3D displays and stories from residents. These will brighten up the half a dozen neighbourhoods including Commonwealth, Tanglin Halt, Princess, Duchess, Mei Ling and Queen's Close.

Each area is distinct, said Mr Kwek. "There's the industrial heritage of Tanglin Halt, the Hakka tombstones of Commonwealth, the military camps of Princess estate, the old town centre of Duchess estate and the Malayan Railway which used to run through Queen's Close," he said. He also gave the example of Block 145, Mei Ling Street which will have a kampung-themed exhibition that pays tribute to its early years as the site of Boh Beh Kang village.

Speaking at the blueprint's launch yesterday, Tanjong Pagar GRC MP Chia Shi-Lu said the aim is for Queenstown to become a centre for community heritage which people can visit to "relive their memories... and understand how different social institutions have evolved".

It is also part of the estate's bid for the National Heritage Board's Heritage Town Award 2014.

Minister for Social and Family Development Chan Chun Sing, who was guest of honour at the launch, said balancing redevelopment and heritage will continue to be a top priority. "If we can do this well in Queenstown, it will be a testimony to how we can do things on a larger scale in Singapore, balancing conservation and development at the same time."
-By Melody Zaccheus

Real Estate Companies' Brief

Global Logistic bags new lease agreements

Source: Business Times / Companies\

GLOBAL Logistic Properties has signed five new lease agreements totalling 90,000 square metres in multiple locations across China. Four of the new leases were signed with leading express delivery providers in China.

IReit Global rises 1.7% on IPO debut

But concerns still exist over general sentiment on bourse

Source: Straits Times / Money

THE latest listing on the local stock market made a modest gain on its first day of trading, although fears lingered about weak overall market sentiment.

IReit Global, a real estate investment trust (Reit) with office assets in Germany, closed at 89.5 cents, a gain of 1.5 cents, or 1.7 per cent, from its initial public offering (IPO) price of 88 cents.

That was certainly an improvement over Accordia Golf Trust, which holds golf course assets in Japan. Accordia listed on Aug 1. Its IPO price was 97 cents but it closed day one at 85 cents, a loss of 12 cents or 12 per cent.

Another recent debutant, marble producer Terratech Group, rose on its first day of trading but has since gone under water. The firm, which listed on July 30, closed yesterday at 17 cents, down six cents or 26 per cent from the IPO price of 23 cents.

Although IReit Global rose yesterday, remisiers were reluctant to conclude that the worst is over for the IPO market and for general sentiment on the bourse.

Remisier Desmond Leong noted that the volume was relatively small for IReit Global and that the stock did not make it into the list of 20 most active stocks.

"Trading was muted. That's why it didn't move much," he said.

About 7.47 million IReit Global units changed hands in half a session after the stock started trading at 2pm.

The Singapore Exchange (SGX) website displays the 20 most active stocks. No. 20 yesterday was GSH Corp with a much higher volume of 17.9 million shares.

Mr Leong said "as a whole, the market is still weak".

"Most people are still fearful and there are still flashes of selldowns in individual stocks."

Sentiment has been soft since the Dow Jones Industrial Average fell more than 300 points on July 31, he said.

The fall was linked to geopolitical risks in Ukraine and the Middle East and fears of an earlier-than-expected interest rate hike.

"These are events that have been ongoing, they didn't come about suddenly," said Mr Leong. "But the 300-point drop in the United States was the trigger for the market to correct."

Turnover here continued to be soft with only $801 million worth of trades, compared with the past year's daily average of $1.1 billion.

Remisier Alvin Yong said IReit Global did well thanks to the "Tong Effect", referring to Chinese tycoon Tong Jinquan who snapped up many units in the IReit Global IPO as part of a separate arrangement.

Mr Tong is fast developing a reputation among bankers and remisiers as the go-to investor for Reit offerings in Singapore, given his large Singapore Reit portfolio.

IReit Global "did well thanks to his (Mr Tong's) support," said Mr Yong.

"It's too early to say if the IPO markets are doing better.

"Samudra Energy would not have cancelled its IPO if the market was good."

Oil and gas company Samudra Energy this month said it was postponing its IPO here, citing the "current market volatility".

-By Jonathan Kwok

Views, Reviews & Forum

Punggol residents can look forward to more facilities

Source: Straits Times / Forum Letter

WE THANK Mr Lee Kok Lin for his letter ("Punggol sorely lacking in basic amenities"; July 30).

Amenities in HDB towns are planned comprehensively from the onset and developed progressively as the towns grow. In the case of Punggol, residents can look forward to more amenities and facilities within their town.

Over the next few years, Punggol Town Centre will be transformed into a vibrant hub. A major retail mall, Waterway Point, will be completed by the end of next year. This will be followed by the Punggol Town Square, a community gathering space located next to Waterway Point. There are also plans for other facilities within the town centre, including a community club, regional library and hawker centre.

A new food and beverage development at Punggol Point, The Punggol Settlement, has recently been completed and some stalls have commenced operations.

A commercial centre and a primary care facility along Punggol Drive, near Oasis LRT station, will also be up and running within the next few years.

As for sports and recreational facilities, residents can look forward to the Safra Punggol clubhouse, targeted for completion by 2016. A new Regional Sports Centre, catering to a wide range of competitive sports and events, will also be integrated with Punggol's waterways and adjoin the Safra Punggol clubhouse.

We will continue to provide well-placed and comprehensive amenities to better serve the needs of residents.

Chong Fook Loong

Director (Urban Design Department 1)

Housing & Development Board

Mark Goh

Director (Physical Planning, North East)

Urban Redevelopment Authority

Global economy & Global Real Estate

Overhaul ahead for Zell's Equity Commonwealth

Disparate holdings to come under scrutiny after investor-led revolt

Source: Business Times / Property

[CHICAGO] Since taking over Equity Commonwealth in an investor-led revolt almost three months ago, Sam Zell and his team have found buyers for more than US$200 million of properties, sold shares in a former unit and moved the company's headquarters. Now they face a bigger challenge.

Mr Zell and one of his longtime deputies, David Helfand, must remake the Chicago-based office landlord after an ouster of top executives based on claims of mismanagement and a misdirected strategy. They're in charge of a disparate group of more than 100 properties in US suburbs and markets where rent growth is slower than in big cities such as New York and San Francisco.

"There will be significant - I hesitate to use the word radical - but very significant changes to the portfolio in the coming quarters," said Ian Goltra, a real estate fund manager at San Francisco-based Forward Management LLC, which oversees about US$5 billion of assets.

Mr Helfand and Mr Zell, the 72-year-old billionaire who founded the biggest US apartment owner, will have to examine holdings that stretch from San Diego to Hartford, Connecticut, and decide which Equity Commonwealth properties to keep, which to spruce up and which to sell. The changes come after a yearlong campaign led by Related Cos and Corvex Management LP to oust the previous board, claiming that the company had conflicts of interest and was making high-priced acquisitions while selling real estate at low prices. The new strategy is still in flux.

-From Chicago, US

Trump goes on the prowl in India

Source: Business Times / Property

[MUMBAI] American tycoon Donald Trump is looking to invest in India's hospitality industry after lending his name to luxury residential projects as the real estate mogul diversifies his businesses outside the US.

"India is a great place to invest, especially after the elections," Mr Trump, 68, who has licensing tie-ups with Pune-based Panchsil Realty and Lodha Developers Pvt, said during a press conference in Mumbai on Monday.

Prime Minister Narendra Modi's party secured India's first single-party parliamentary majority in 30 years after general elections in April and May. He pledged 1.48 trillion rupees (S$30.2 billion) last month to unclog transport links, spur power output and build cities, while also loosening restrictions on foreign investment.

Home prices in Mumbai, the nation's financial capital, have more than doubled in the five years through March, according to data from Liases Foras Real Estate Rating & Research Pvt. The government on Sunday approved the setting up and listing of real estate investment trusts (Reits) in an attempt to lure investors and unlock a US$20 billion market.

-From Mumbai, India

Mori raises 13b yen in 10-year bonds

Developer decides on longer-maturity bonds to lock in borrowing costs

Source: Business Times / Property

[TOKYO] Mori Building Co has sold its longest bond ever as Japan's biggest closely-held developer plans one trillion yen (S$12.2 billion) of projects in the decade that will include the 2020 Tokyo Olympic Games.

The company, whose Roppongi Hills complex houses Goldman Sachs Group Inc and Apple Inc, raised 13 billion yen in 10-year bonds last Friday. The notes offered three times the average yield premium for Japanese peers at 34 basis points over government debt. Global property companies pay 130 basis points, Bank of America Merrill Lynch indexes show. (A basis point is 

0.01 percentage point.)

Mori is boosting investments as occupancy rates for offices in Tokyo are at their highest in five years and the Olympics bid committee forecast an economic windfall of three trillion yen for the nation. The company, whose Toranomon Hills became the capital's second-tallest building in June, plans to develop about 10 projects over the next decade in the city with partners, president Shingo Tsuji said in June.

"Mori's strength lies in its ability to bring together large-scale developments and the quality of its core projects," said Ryosuke Kaneko, a credit analyst in Tokyo at Mizuho Securities Co. "The environment surrounding Japanese developers is improving, and that can be seen in falling office vacancy rates."

-From Tokyo, Japan

Japanese rush into flexi-rate mortgages raises concerns

Proportion of such home loans in Feb jumps to 42.8%, highest since Dec

Source: Business Times / Property

[TOKYO] Japanese homebuyers are piling into floating-rate mortgages, stirring debate over whether they are too complacent as Bank of Japan (BOJ) stimulus revives inflation.

The proportion of home loans with adjustable rates climbed to 42.8 per cent of Japan's new lending in February, the highest since December, according to data from Japan Housing Finance Agency (JHFA). The lowest variable mortgage rate at Japan's three biggest banks was at 0.775 per cent, compared with a 10-year fixed rate of 1.3 per cent.

Outstanding housing loans to individuals expanded to 113.7 trillion yen (S$1.38 trillion), the most since at least 1974 in June as BOJ Governor Haruhiko RKuroda's monthly sovereign bond buying aimed at ending deflation made it cheaper than ever to finance a home purchase.

Borrowers such as 30-year-old retail employee Eriko Brown, who chose a flexible-rate mortgage to buy a house this year, are betting rates won't rise significantly, even as global policy makers fret over how to exit from easing.

-From Tokyo, Japan

Dubai hotels sink to 18-year low - more than half empty

Source: Business Times / Property

[DUBAI] Dubai's hotels had the lowest occupancy in at least 18 years in July, standing more than half empty, as more rooms were created and demand declined, according to research firm STR Global. Occupancy declined 11.8 percentage points to 45.4 per cent from a year earlier, STR Global said in a report dated yesterday. That's the lowest since the company began tracking the Dubai hospitality market.

Dubai, which built some of the world's most recognisable hotels such as the sail-shaped Burj al Arab, plans to almost double the number of hotel rooms by 2020 as it expects a surge of visitors ahead of the World Expo that year. The emirate is targeting about 160,000 rooms, many of them in the three and four-star category rather than the luxury segment, Helal Saeed Almarri, director-general of the Dubai Tourism and Commerce Marketing, said in March.

Elizabeth Winkle, managing director of STR Global, said in the report: "As July is one of the hottest months within the region and coincides with the fasting month of Ramadan, the city had an overall negative trend, on top of growing supply."

Revenue per available room, an industry measure of occupancy and rates, fell 7.4 per cent to 290.23 dirhams (S$99), according to STR Global, which advises hotel operators, developers and banks on the hospitality industry.

-From Dubai, UAE

China's Wanda to launch foray into Australia

Source: Business Times / Property

[CANBERRA] The company of China's real estate tycoon, Wang Jianlin, will launch into Australia's property development market, creating a billion-dollar local arm to invest in new projects, including a long-awaited Gold Coast high-rise complex.

Wanda Commercial Properties, a Hong Kong-listed entity of the Dalian Wanda Group, announced on Tuesday that it would form Wanda Australia to diversify its assets internationally.

It will launch with a strong foray in Australia's Queensland leisure market, through a 55 per cent stake in the Gold Coast's Jewel development, a 147,000-square-metre mixed-use residential, hotels and shopping complex.

The remaining stake will be held by the Ridong Group's Riyu Li and Fengliu Wu. Each partner has granted unconditional put and call options.

-From Canberra, Australia

Fresh signs of softness in China property market

Unwinding of controls may lend some support in coming months

Source: Business Times / Property

[BEIJING] China's property market showed further signs of weakening last month, with real estate investment slowing and sales falling sharply despite efforts by many local governments to shore up the troubled sector.

Combined with July activity data released over the past week, the figures suggest that softness in the housing market is increasingly becoming a drag on other parts of world's second-largest economy.

Property investment grew 13.7 per cent in the first seven months from a year ago, down from an annual rise of 14.1 per cent in the first half, the National Bureau of Statistics (NBS) said yesterday.

Newly started property construction dropped 12.8 per cent in the January to July period from the same time a year ago, though the decline easing from an annual drop of 16.4 per cent in the first six months.

-From Beijing, China

Parkroyal hotel wins int'l building prize

Source: Business Times / Property

[SINGAPORE] Parkroyal on Pickering won big at an awards ceremony for building excellence last night, picking up the prestigious FIABCI Prix d'Excellence Gold Award.

The FIABCI prize is an international award established in 1992 and given to projects outstanding in overall merit.

FIABCI is the French acronym for the International Real Estate Federation founded more than 60 years ago and headquartered in Paris.

Joyce Sng, the assistant general manager in product development for UOL, the developer for whom the hotel is a star project, said: "We will continue to be innovative in creating sustainable and premium developments, and contribute to Singapore's cityscape with our masterpieces."

-By Jan Lee

Goldman in bid for 165b yen Tokyo office deal

Source: Business Times / Property

[TOKYO] A Goldman Sachs Group Inc unit is a final bidder for a Tokyo office tower in a deal that could fetch about 165 billion yen (S$2.01 billion), said people familiar with the deal, which could be the biggest office property deal in six years.

Secured Capital, part of Asian private equity firm PAG, is trying to sell the 32-storey Pacific Century Place Marunouchi, in a prime spot near the Tokyo railway station. It bought the property for about 144 billion yen in 2009.

Investors are aggressively seeking properties as Tokyo prices are expected to continue a rebound they have seen under Prime Minister Shinzo Abe's growth policies of massive monetary and fiscal stimulus.

Among other recent deals, Japan's Orix Corp and New York investors Angelo Gordon & Co are seeking around 40 billion yen for their stake in a Tokyo office building.

-From Tokyo, Japan

Health Care REIT to Buy Canada’s HealthLease Properties

Source: Bloomberg / News

Health Care REIT Inc. (HCN), the largest U.S. health-care landlord by market value, agreed to buy HealthLease Properties Real Estate Investment Trust (HLP-U) and formed a partnership for additional properties to expand in senior care.

Health Care REIT will pay C$14.20 a share in cash for HealthLease, 31 percent more than the Toronto-based REIT’s closing stock price yesterday. The transaction is valued at $950 million, including debt, the companies said in separate statements today.

Toledo, Ohio-based Health Care REIT also agreed to acquire 17 rehabilitation communities under development by Mainstreet Property Group, the company that formed HealthLease in 2012, and entered a development deal that includes gaining purchase rights to 45 other projects.

Real estate companies are seeking to take advantage of the growing demand for medical services and senior housing as the U.S. population ages. Last week, NorthStar Realty Finance Corp. agreed to buy Griffin-American Healthcare REIT II for about $3.4 billion. In June, Ventas Inc., the country’s third-biggest health-care REIT by market value, said it would acquire American Realty Capital Healthcare Trust Inc. for $2.6 billion.

Health Care REIT’s purchase demonstrates the company’s “integral role in the health-care delivery continuum,” Chief Executive Officer Tom DeRosa said in a statement. “We are connecting leading health systems, post-acute providers and seniors-housing operators to deliver integrated health-care delivery platforms that will improve the quality of care, create operating efficiencies and reduce costs.”

Share Gain

HealthLease rose 31 percent to C$14.21. Health Care REIT climbed 2.3 percent to $64.95.

HealthLease has 53 senior-housing and health-care properties concentrated in North Carolina, Indiana and Alberta, Canada. The 17 communities Health Care REIT is acquiring in the Mainstreet deal are under the Next Generation brand and include a mix of post-acute and assisted-living beds and rehabilitation space. They are located primarily in the Indianapolis, Denver and Kansas City, Missouri, metropolitan areas.

The transaction with Mainstreet will be completed in phases, beginning in the fourth quarter, Health Care REIT said. The company expects the HealthLease acquisition to close by the end of the year.

-By Jonathan Lamantia

Zell Tackles Overhaul at Equity Commonwealth: Real Estate

Source: Bloomberg / Luxury

Since taking over Equity Commonwealth in an investor-led revolt almost three months ago, Sam Zell and his team have found buyers for more than $200 million of properties, sold shares in a former unit and moved the company’s headquarters. Now they face a bigger challenge.

Zell and one of his longtime deputies, David Helfand, must remake the Chicago-based office landlord after an ouster of top executives based on claims of mismanagement and a misdirected strategy. They’re in charge of a disparate group of more than 100 properties in U.S. suburbs and markets where rent growth is slower than in big cities such as New York and San Francisco.

“There will be significant -- I hesitate to use the word radical -- but very significant changes to the portfolio in the coming quarters,” said Ian Goltra, a real estate fund manager at San Francisco-based Forward Management LLC, which oversees about $5 billion of assets.

Helfand and Zell, the 72-year-old billionaire who founded the biggest U.S. apartment owner, will have to examine holdings that stretch from San Diego to Hartford, Connecticut, and decide which Equity Commonwealth properties to keep, which to spruce up and which to sell. The changes come after a yearlong campaign led by Related Cos. and Corvex Management LP to oust the previous board, claiming that the company had conflicts of interest and was making high-priced acquisitions while selling real estate at low prices. The new strategy is still in flux.

“Equity Commonwealth is in the process of a significant transition, during which the management team and trustees are evaluating all aspects of the company’s operations,” the real estate investment trust said in its second-quarter earnings statement last week.

Board Overthrown

Corvex and Related won the shareholder vote to overthrow the previous board of the company, then known as CommonWealth REIT, in March and installed Zell as chairman and Helfand as chief executive officer in May. The investors were critical of the prior management’s strategy of selling suburban buildings and buying properties in downtowns across the U.S. They also said the landlord wasn’t paying enough attention to its buildings, failing to boost income to the levels it could have.

Proper staffing levels and reinvesting in the company’s properties “can harvest a substantial amount of ‘low-hanging fruit,’” Related and Corvex said in a January presentation.

Selling may now be a good option for some of Equity Commonwealth (EQC)’s buildings, John Guinee, a Baltimore-based analyst at Stifel Nicolaus & Co. who recommends buying the shares, said in a telephone interview. Many of the properties are considered Class B, which generally are older and have higher vacancies.

Rising Rents

Demand from investors for office properties is high, Guinee said. Office rents in U.S. metropolitan areas, bolstered by a growing economy, rose to an average of $23.83 a square foot in the second quarter from $23.24 a year earlier, according to New York-based data provider Reis Inc. (REIS)

“The investment-sale market for B and C quality product is as aggressive as it’s been in the last 10 years, which results in excellent proceeds for selling stuff that you couldn’t give away four years ago,” Guinee said.

Sarah Byrnes, a spokeswoman for Equity Commonwealth, and Joanna Rose, a Related spokeswoman, declined to comment on the company’s strategy. Jason Fredette, a spokesman for Reit Management & Research LLC, former President Adam Portnoy’s firm, also declined to comment. Rupal Doshi of New York-based Corvex didn’t respond to an e-mail seeking comment.

Property Sales

About 63 percent of Equity Commonwealth’s revenue in the second quarter came from downtown buildings, with the rest coming from the suburbs, according to an Aug. 5 regulatory filing. The company owned 156 properties in the period. Fourteen were sold in June for $215.9 million.

“There’s probably some stuff in the portfolio that really should be sold at a mothball price,” said Goltra, whose firm owns no Equity Commonwealth stock because of its valuation.

Zell’s familiar with getting the most for investors, having engineered the $39 billion sale of his Equity Office Properties Trust to Blackstone Group LP in 2007, around the last peak of the property market.

He’s also chairman of Equity Residential (EQR), the biggest publicly traded multifamily landlord, and Equity LifeStyle Properties Inc. (ELS), an owner of manufactured-home communities. Equity Residential has risen 25 percent in the past year and Equity LifeStyle is up 23 percent, outperforming a 19 percent gain in the Bloomberg REIT Apartment Index and a 12 percent increase in the broader Bloomberg gauge of property trusts.

‘Great Figurehead’

A group led by Zell exercised options to acquire more than 4 million Equity Commonwealth shares from Related and Corvex, according to a July regulatory filing. Related and Corvex now each own 2.8 percent of the company, down from almost 10 percent combined during their campaign.

Zell is “a great figurehead, and there’s no downside to that,” Guinee said. “He was basically brought on to get the vote.”

Zell has already put his stamp on the office company by trading the name CommonWealth REIT for the “Equity” branding, moving the company’s headquarters to his hometown of Chicago from Newton, Massachusetts, and disposing of $704.8 million of shares in Select Income REIT (SIR), a single-tenant property landlord.

Equity Commonwealth is considering reducing the quarterly dividend paid by the previous leadership, which was 25 cents a share, according to a regulatory filing last month. Cutting the payment is a good move because it would allow the company to reinvest in properties, Goltra said.

Shares Gain

So far, the changes have benefited shareholders. Equity Commonwealth gained 70 percent since Feb. 25, 2013, the day before Corvex and Related disclosed their stake in the company. The shares have risen 4.8 percent since Zell and the other board members were elected by shareholders.

“We’re happy with their initial moves,” said Rob Lynch, director of research at Westchester Capital Management LLC in Valhalla, New York, which has $5.5 billion under management, including about 3 million Equity Commonwealth shares and options as of March 31. “We recognize that repositioning the portfolio will take some time.”

The biggest winners may be Related and Corvex. In addition to benefiting from the gain in Equity Commonwealth’s share price, they will be reimbursed as much as $33.5 million for expenses related to the campaign to throw out the board. Under a plan approved by stockholders on July 31, half that payment is contingent upon Equity Commonwealth’s share performance next year and in 2016.

Perry Corp., based in New York, sold the 5.2 million Equity Commonwealth shares it owned, according to data compiled by Bloomberg today. The hedge-fund firm, run by Richard Perry, was an early supporter of Corvex and Related’s campaign.

After transforming Equity Commonwealth and its investments, the company’s new managers may be able to seek a buyer for the REIT -- perhaps a large private-equity fund, Goltra said.

“That would take a lot of work, obviously,” he said. “That would be way down the road.”

-By Brian Louis