Real News‎ > ‎2014‎ > ‎August 2014‎ > ‎

16th August 2014

Singapore Real Estate

Property counters, hopes for ECB stimulus lift STI

Index rises 19.94 points at 3,314.77, up 0.8 per cent for the week

Source: Straits Times / Money


LOCAL shares ended higher yesterday, fuelled by a rebound in key property counters and renewed speculation that more central bank stimulus is on the cards for Europe.

The benchmark Straits Times Index closed up 19.94 points at 3,314.77 and up 0.8 per cent for the week.

The big drivers were City Developments (CDL), Hongkong Land and CapitaLand, which all posted gains yesterday after Urban Redevelopment Authority (URA) data showed last month's residential sales, while still tepid, were roughly on a par with June's figures.

"So there was no deterioration in the health of the property market," remisier Alvin Yong noted.

European stocks opened higher yesterday, as Thursday's disappointing economic growth reports from the euro zone fuelled fresh expectations for further easing measures by the European Central Bank (ECB).

The weak data indicated that the economic recovery in the euro area is losing momentum, adding to pressure on the ECB to do more to shore up growth after it cut rates to record lows in June.

CDL gained 2.2 per cent, or 22 cents, to $10, Hongkong Land jumped 3.3 per cent, or 23 US cents, to US$7.10 and CapitaLand rose 1.2 per cent, or four cents, to $3.33.

Other top value stocks were Golden Agri-Resources, which gained nearly 1 per cent, or 0.5 cent, to 53.5 cents, with 86.9 million shares changing hands, while SingTel rebounded 1 per cent, or four cents, to $3.91.

The top five actives included Japfa, which enjoyed a positive reception on its debut yesterday despite weak overall market sentiment.

The Indonesian meat and dairy producer, which priced its initial public offering at 80 cents a share, closed at 84.5 cents, with about 68.7 million shares changing hands. Its IPO's public offer was 9.7 times subscribed.

"That's very healthy demand for a mainboard listing, considering they had a huge public float of 16.8 million," Mr Yong said. "Investors like Japfa's good growth story."

-By Grace Leong

Developers hard-pressed to price projects modestly

Source: Business Times / Top Stories

LATEST official statistics showed that developers' housing sales continued to languish last month, but the focus now is on the likely launches for the rest of the year and how much room developers have to price them attractively to get potential buyers into making a commitment.

Many developers paid high prices for 99-year private housing sites at state tenders in the past couple of years as they sought to replenish land following strong home sales at the time.

"Those with a high breakeven cost but who need to launch a project are likely to adopt a "Star Buy" strategy for inferior stacks of units in the development to draw out initial take-up to drive confidence in the launch," a seasoned developer told BT yesterday.

"Developers who worked in a potential price drop in their land bids would be in a better position today to trim end-unit prices and encourage buyers to consider making a commitment amid the current soft market," said Chia Siew Chuin, director at Colliers International.

"But even those who paid high land prices and left with less room for price adjustment may be willing to lower their price expectations. This could enable them to clear some units and generate cash flow - rather than maintaining the status quo and doing nothing as market conditions deteriorate further."

There will be heightened competition for buyers as more property launches are expected by developers who had bought residential land after December 2011. These developers are required to complete the projects and sell all units within five years, otherwise they would have to pay a hefty additional buyer's stamp duty on the land price with interest, Ms Chia noted.

Even amid the weak July developers sales stats released yesterday by the Urban Redevelopment Authority (URA), evidence is surfacing of developers successfully drawing out buying demand through attractive prices, highlights SLP International executive director Nicholas Mak.

"For instance, Wheelock released The Panorama in Ang Mo Kio in January this year, posting a median price of S$1,343 psf for sales in that month. But since it reduced prices in May to the S$1,200-plus psf level (median price), this project has been among the top sellers every month," he said.

"This goes to show that developers can revive sales at existing launches with meaningful price cuts. What remains to be seen, however, is whether this will result in a price war, which could be triggered, for instance, if one player were to sharply cut prices relative to other projects in the vicinity."

URA's July data also revealed that the remaining 37 units at The Vermont on Cairnhill, which was completed last year, were sold at S$2,113 psf median price in July. This is 8.6 per cent below the S$2,313 psf median price, based on caveats data, for all previous sales in the project by its developer, said OrangeTee research head Christine Li.

"Vermont's brisk sales show many high-end buyers are on the sidelines waiting to enter the market once prices become attractive," she noted. "In the private housing market as a whole, a 10-12 per cent price cut is typically enough to draw buyers in droves."

Last month, developers sold 484 private homes excluding executive condos (ECs), just two more than the 482 units they moved in June. In July last year, the figure was also 482 units.

Developers also offloaded 51 EC units last month, compared with 49 in June and 112 in July 2013. The weak home sales mirrored their strategy of holding back on major launches.

There were only four new launches last month - of which three were in the city fringe.

The top seller was City Gate on Beach Road, with 89 units transacted at a median price of S$1,809 psf. Near Kitchener Road, the developer of The Citron Residences found buyers for 23 units at S$1,585 psf median price. In the West Coast, 11 units were sold at Bijou at S$1,969 psf.

In the first seven months, developers sold 4,893 private homes and 354 EC units. For the whole of last year, the figures were 14,948 private homes and 3,588 ECs.

For the rest of the year, predicts Ms Li, EC sales will gather momentum and probably overshadow sale of mass-market private condos. There has not been a single new EC project launch in nearly a year, which means pent-up demand can be expected to manifest for five expected EC launches by year-end.

Some market observers expect genuine buyers to increasingly head for the resale market to pick up a completed property, including units in newly completed projects.

"These buyers can pick up something in the spot market, and within a short period either move in or rent it out," noted Savills Singapore research head Alan Cheong.

"Of course, the advantage of buying at a new launch from a developer is that buyers can make progressive payments for their property purchase, based on the phase of the project's completion. And in the case of leasehold property, they get an almost fresh lease term on their investment."

-By Kalpana Rashiwala

New private home sales remain sluggish

Poor showing expected to continue in August as developers delay projects

Source: Straits Times / Top of The News

SALES of new homes were stagnant again last month in the absence of major launches and significant price cuts.

Analysts expect this month to be just as sluggish.

Developers sold just 484 new private homes in July, according to Urban Redevelopment Authority figures out yesterday.

This was a paltry 0.4 per cent higher than the 482 private condominium and apartment units moved in June - which was a 68 per cent drop from May.

Analysts said that developers were holding back on rolling out new projects since demand has remained low after property curbs imposed last year.

Only one major launch was held last month, the city fringe 311-unit City Gate at Beach Road. It became the top seller last month by moving 89 units at a median $1,809 per sq ft (psf).

"Developers are trying to clear their current stock instead of launching new projects in a market where sentiments are low," said ERA key executive Eugene Lim.

The city fringe accounted for the lion's share of new sales last month, at 46 per cent. The suburbs made up 36 per cent and the city centre, 18 per cent.

The number of new homes sold last month was about 10 per cent more than the 434 units that went on the market, indicating that buyers could have been lured by price cuts to projects launched earlier.

The Vermont on Cairnhill near Newton, first launched in 2010, posted the second-highest sales last month. It sold its remaining 37 units by slashing prices to a median $2,113 psf, about 9 per cent less than the $2,313 psf median for previous sales.

"High-end buyers are staying on the sidelines waiting to enter the market once the prices become attractive," said OrangeTee research head Christine Li.

The other launches last month had a fairly lacklustre turnout. The 54-unit The Citron Residences near Farrer Park, the 120-unit Bijou in Pasir Panjang and the 134-unit Robin Residences in Bukit Timah sold fewer than 25 units each.

Analysts said last month's poor showing was likely to drag on into this month.

"As the Hungry Ghost Festival (the seventh lunar month) falls in August this year, developers are generally expected to continue to hold back on their project launches," said Colliers International research director Chia Siew Chuin.

She expects new home sales to come in at between 200 and 500 units this month, before picking up again towards next month.

Major projects such as Highline Residences in Tiong Bahru and the Marina One integrated development in Marina Bay are expected to launch later this year.

The above figures exclude executive condominiums (ECs), a public and private housing hybrid. Including ECs, a total of 535 new homes were sold last month.

-By Melissa Tan

One in eight EC units left vacant in Q2

Unlikely that most buyers do not plan to live in them, say experts

Source: Straits Times / Money 

ABOUT one in every eight executive condominium (EC) units was left vacant in the second quarter this year, markedly more than before, official figures show.

However, consultants said this was probably not because more people were buying EC units that they do not plan to live in.

Some people may have bought EC units ahead of their needs, but those buyers are likely only a minority, they said.

Instead, more EC units have been left vacant possibly because their owners have not moved in yet because they are under renovation or other factors, they said.

Consultants added that the growing pile of unsold as yet unbuilt EC units could raise vacancy rates further in future.

ECs are a public-private housing hybrid meant to cater to a "sandwiched class" of buyers not qualifying for public housing but unable to afford private property.

The proportion of vacant EC units shot up from 6 per cent in the first quarter to 12.2 per cent in the second, according to Urban Redevelopment Authority (URA) figures released last month.

The 12.2 per cent vacancy rate translates to an estimated 1,634 unoccupied units out of 13,448 completed EC homes in total as at the end of June - more than twice the estimated 726 vacant units in the first three months this year.

Consultants said that there could have been some people who bought EC homes even though they did not actually need them.

"There may be a minority of people who buy an EC (unit) not because they need a roof above their head but because they want to make use of housing grants," said SLP International research head Nicholas Mak.

He said such buyers may opt to live elsewhere as EC projects are on the outskirts. They may rent the unit out after the five-year minimum occupation period ends.

However, consultants said this type of buyer was rare, and the higher vacancy rate in the second quarter was most probably owing to a surge in the supply of newly completed EC projects in the second quarter. "For new EC completions, the owners are in no hurry to move into the newly completed flat," sad R'ST Research director Ong Kah Seng.

ECs completed since the middle of last year include Esparina Residences in Sengkang, Belysa in Pasir Ris and Punggol's Riverparc Residence.

Another major factor could be the weak Housing Board (HDB) flat resale market.

"It could be that some upgraders have not sold their HDB flat yet to move into their EC (flat)," said CBRE research head Desmond Sim. Upgraders are usually given six months to sell their HDB flat. Mr Sim said the growing number of ECs under construction that are still unsold would "put pressure" on vacancy rates.

As at the end of the second quarter, 739 units had not found any takers, which is equivalent to 6 per cent of the total number of uncompleted EC units.

The URA typically calculates the vacancy rate by looking at a smaller sample of EC units rather than every single unit islandwide. The vacancy figure includes both sold and unsold EC units that are already completed. There were no unsold completed EC units at the end of June.

-By Melissa Tan

Home prices near new MRT stations set to rise

Source: Straits Times / Top of The News

PRICES of homes near the future MRT stations in the east are set to rise markedly, although the full gains will be realised only as the new line nears completion, consultants say.

In the short term, however, rents may take a hit from noise, disruption and privacy issues caused by construction, said SLP International research head Nicholas Mak.

Still, some property owners may increase their asking prices by 5 to 10 per cent over the next few months, he said.

Prices of private homes in Amber, Marine Parade and Bayshore could rise as much as 15 per cent by 2023 when the first stage of the Thomson-East Coast Line (TEL) is due to be completed, said R'ST Research director Ong Kah Seng.

Likewise, Housing Board areas in Marine Parade and Bedok South are expected to see price rises after the MRT line is completed, said OrangeTee head of research Christine Li.

She expects HDB flats in Marine Parade to benefit the most.

"Most of the housing along the Thomson-East Coast Line are private residential projects, and it is likely that current residents in the area travel by private transport."

Once new MRT station locations are announced, there is generally a quick 5 to 10 per cent rise in prices for homes up to 400m from the stations, said Chestertons managing director Donald Han. Prices often then stabilise during construction, before gaining another 5 to 10 per cent the year before completion, he said.

"We saw this when the Thomson Line stations were announced, but that coincided with a general rise in property prices... the initial uplift could be marginal in this flattish market," he said.

Colliers International research and advisory director Chia Siew Chuin noted that given both HDB and private homes in district 15 already have a premium factored into their prices because of their coastal location and expressway links to the central business district, there is a limit as to how much additional premium the new MRT line can command.

"As the projected completion of the TEL line is expected 10 years from today when the MRT network islandwide will be more extensive, the increases are not expected to be as steep as in the past when there were fewer MRT lines on the island."

-By Rennie Whang

Better compensation for land-owners affected by Thomson-East Coast Line development

This is due to recently passed amendments in Parliament that saw the removal of the "betterment levy", a fee previously imposed on the compensation a land-owner gets.

Source: Channel News Asia / Singapore

SINGAPORE: Some property owners affected by land acquisition from the development of the Thomson-East Coast Line can expect better compensation. Property analysts say this is because of recent changes to the Land Acquisition Act.

Amendments passed in Parliament last week (Aug 5), saw the removal of the "betterment levy" - a fee imposed on the compensation a land owner gets. This fee is equivalent to the rise in value of the area around the acquired land as a result of developments.

Six landed properties along Amber Road, and a three-storey apartment along Tanjong Katong Road will be acquired by the Government, to make way for construction of the eastern part of the Thomson-East Coast Line.

The Singapore Land Authority (SLA) says all efforts have been made to minimise land acquisition. SLA's Land Sales and Acquisition Director Thong Wai Lin: "So far we are acquiring only for the Thomson-East Coast Line this portion of the eastern region line we're acquiring 24,136.4 sq m, the bulk of it is from Laguna Golf and Country Club. So, about 6,480 sq m are from the residential, and industrial properties, and we're only affecting 15 residential properties, nine strata units, and six landed properties."

Laguna Golf and Country Club says authorities started engaging them about the acquisition since April this year. The Club says none of the holes are affected, and believes the new MRT Line will be a boost for members, guests and staff.

Affected residents have been served notices by the Singapore Land Authority. Many say the notice came as a surprise. One affected landowner, Mr Sim, told us he was "heartbroken": "I spent the last 50 years on this business and now they ask you to move, you have to do so."

Property analysts expect affected owners to be well compensated. Said Mr Desmond Sim, Head of Research at CBRE Research: "The thing about land acquisition is that the new law that has been passed, is that it allows land acquisition to be on full market value. They have disregarded the reduction of the betterment value. So I think those people affected by this land acquisition will be better compensated going forward."

Next month, the Singapore Land Authority will meet with affected land owners on the submission of claims. They will know the compensation award in six months.

- CNA/xy

Property scam costs law firm $105,200

Bogus agent tricks it into thinking 'she' is owner of Bishan bungalow

Source: Straits Times / Singapore

A SINGLE phone call ended up costing a law firm $105,200 after its conveyancing secretary told an interested buyer the sale of a $3.8 million house was legitimate.

But the property agent conducting the sale was a fraudster and the bungalow in Bishan was not on the market.

Based on the call to law firm Vision Law, prospective buyers Chu Said Thong, an oil trader, and his wife handed over $105,200 to the "agent" to confirm their interest. The cheat absconded with the money and the couple, represented by lawyer Adrian Tan, sued the firm, which was defended by Senior Counsel N. Streenivasan.

On Thursday, Justice Vinodh Coomaraswamy ordered Vision Law to reimburse the cash as the firm had vouched, through its secretary Susan Chua, that it was acting for the owner of the property when that was not the case.

Mr Victor Tan, the "audacious identity thief" as described by the High Court, had written a note on a fake option and faxed it to the firm's conveyancing secretary.

In the note, he pretended to be Madam Lum Whye Hee, 89, the true owner of the unit in Jalan Berjaya. He instructed the law firm to act for "her" in the sale of the 5,600 sq ft property.

In September 2010, Mr Tan also advertised in the press that the house was for sale. Mr Chu and his wife, who had responded to the ad, went to look at the bungalow but did not go in because they intended to tear it down.

Mr Chu then called Ms Chua, who confirmed the law firm was acting for Madam Lum. Ms Chua had done a title search, which showed the name on the fake option matched that of the owner registered with the Singapore Land Authority.

It has since emerged that Mr Tan has cheated two other potential buyers using the same property as bait and is now on the run.

A police report was lodged.

The judge, however, dismissed the couple's further claims for fraudulent or negligent misrepresentation. Said Justice Vinodh: "The root cause of the (couple's) loss is Victor."

-By K.C. Vijayan, Senior Law Correspondent

Affected residents sad but resigned to moving out

Source: Straits Times / Top of the News

EVERY morning for the last 50 years or so, Mr Sim Chiang Lee has walked down a flight of stairs from his apartment to the ground floor to lift the metal shutters of his provision shop.

The owner of Sin Aik Provision Store along Tanjong Katong Road has affectionately been known by residents in the area as "er ge" or second elder brother in Mandarin.

By February next year, however, the 79-year-old will have to find both a new home and a way to make a living.

His provision shop and apartment sit in a three-storey apartment block that will have to make way for the Amber station of the new Thomson-East Coast Line (TEL).

"Where do you want me to move to? I've been living and working here since 1957," he said.

"Everyone knows me here. I can't bear to just pack up and leave my store and home."

The apartment block, which has a total of nine units, is one of the seven properties that will be fully acquired for the new MRT line, which will open in 2024. A total of over 24,000 sq m will be acquired from 15 properties.

Another resident, who wanted to be known only as Mr Cheng, shared Mr Sim's sentiments. Said the 66-year-old retiree: "I've lived here for over 40 years and watched all my children grow up here."

Six houses along Amber Road will also be fully acquired.

While residents declined to be quoted, the general sentiment was one of resignation, even from those who renovated their homes recently.

One resident, who has been living there for six years, said: "I just can't see myself living anywhere else."

Property owners affected by partial land acquisition, however, were more welcoming of the new MRT line.

Eight plots will be partially acquired, including 17,656 sq m - or about the size of two football fields - from Laguna National Golf & Country Club.

While their golf courses will not be affected, the club will have to move a maintenance shed.

When the line is completed, the club will have two stations nearby - Sungei Bedok of the new TEL line, and Xilin of the new Downtown Line extension.

"The land plot acquired is just 0.01 per cent of our total land area and the upsides outweigh the downsides," said Mr Patrick Bowers, the club's chief executive and managing director.

-By Lester Hio & Priscilla Goy

Law firm, property agent and seller all in the wrong

Buyer misled into overpaying for shophouse

Source: Straits Times / Singapore

A BUSINESSMAN paid $900,000 for a shophouse, believing it had 62 years left on its lease. He later found out there were only 17 years remaining.

Mr Su Ah Tee, 67, will now be paid the difference by the seller, the property agent and the law firm that acted for Mr Su, after successfully suing them in the High Court.

The court found that the market value of the Kallang Bahru shophouse would have been $591,564 when Mr Su bought it in 2011, and three parties must share the price difference of $308,436 to be paid to him, plus around $9,000 in stamp duty.

Mr Su bought the shophouse from Mr William Cheng, an HDB coffee shop owner, in March 2011 after he was told by property agent Ng Sing that there were 62 years left on the lease and the property, with two tenants, was earning rental income of $3,800 a month. He bought the unit in the names of his wife Lye Yin and son Su Hong Quan, and completed the deal in June 2011.

The following month, he received an e-mail from law firm Allister Lim and Thrumurgan (ALT) informing him that the unit had a residual leasehold of only 17 years. Around the same time, he also found out that the two tenants were in fact sub-tenants, which meant he could not collect rent directly from them.

This sparked the professional negligence suit that he filed against ALT, which had been acting for him. The law firm pinned the blame on Mr Cheng and Mr Ng for misleading Mr Su and his family.

After a trial over several days last year, Justice Belinda Ang released a 108-page reserved judgmentthis week, which apportioned 50 per cent of the blame to the seller, 45 per cent to ALT, and 5 per cent to the property agent.

Justice Ang found that Mr Cheng had misled Mr Ng about the property's tenure.

"It was clear that the three misrepresentations had been made by Cheng with the intention for Su to act upon them, and Su had in fact relied on the misrepresentations," said Justice Ang.

She rejected Mr Cheng's argument that the conditions of the contract excluded liability for the misrepresentation. As a matter of public policy, a person cannot rely on a contract to exclude liability, said the judge.

ALT's professional duty also came under scrutiny. Its lawyer, Mr Allister Lim, argued among other things that the tenure was a commercial matter and it was not necessary for him, as a conveyancing lawyer, to explain to Mr Su "essentially matters of a commercial or economic nature".

The judge disagreed that the lease particulars were a commercial matter and fell beyond the lawyer's duty. She made it clear that tenure particulars are an "integral part of the property and go beyond a commercial decision to purchase the property".

In apportioning the damages, Justice Ang found the law firm had failed to inform Mr Su about the the remaining tenure, and explain the tenancy agreements and legal implications.

The judge further found that Mr Ng was negligent in not independently verifying the tenure of the property provided by Mr Cheng when he could have done so.

Justice Ang added: "Regrettably, through an unfortunate coincidence of events and sheer bad luck, the real position of the property's leasehold tenure was not appreciated before completion of the conveyancing transaction."

-By K.C. Vijayan, Senior Law Correspondent

Real Estate Companies' Brief

City Developments

Source: Business Times / Wealth


DBS Group Research | Aug 15 |

Close: S$10 |

Global Economy & Global Real Estate

Property fund eyes NY's next hot district

CityShares pools money from investors to invest in burgeoning markets that are poised to grow

Source: Business Times / Wealth

NEW York's real estate world is filled with tales of ordinary people who bought property decades ago and saw values skyrocket to the millions. Seth Weissman is seeking investors to get in early on the next hot neighbourhoods.

The veteran of Goldman Sachs Group and hedge fund Perry Capital LLC started CityShares, which enables participants to reap rewards from increasing apartment demand in gentrifying areas. Investors who pledge at least US$100,000 to one of the programme's neighbourhood-focused funds become partial owners of a group of buildings and share in the rental income. 

The first pool is more than halfway towards its target of US$5 million, which will be used to buy properties in Brooklyn's Bedford-Stuyvesant.

Harlem in upper Manhattan is next, with a goal of as much as US$20 million. Additional funds are planned for Bushwick, Crown Heights and Sunset Park, all in Brooklyn. Renters are pushing into those more-distant areas after getting squeezed out of the borough's waterfront communities, where leasing costs rival Manhattan's. CityShares is the first programme of its kind and offers a way to invest in burgeoning markets that are poised to grow as New York's workforce expands, Mr Weissman, 31, said.

-From New York, US

Wealthy Chinese moving money into Aussie real estate

Many worried about probes and restrictions

Source: Straits Times / World

SYDNEY - More wealthy Chinese are moving their money out of China to invest in Australia's property market as a corruption crackdown in the world's second biggest economy gathers momentum, property consultants and lawyers said.

They said their clients had told them they had legitimate funds to invest but were concerned about being caught up in an investigation - which in China often delves into the affairs of dozens of associates of the main target - and losing that wealth.

"The restrictions in China are becoming more onerous," Mr David Green-Morgan, global capital markets research director at real estate services firm Jones Lang LaSalle, told Reuters. "That's triggered an increase in the amount of money that's looking to move out of China or probably is already outside of China and is looking to be spent."

China is expected to see an annual growth of 20 per cent in outbound real estate investment in the next decade, up from US$11.5 billion (S$14.3 billion) last year, property agent Savills has forecast. And Australia is now the second-most favoured destination for Chinese property buyers, behind the United States but ahead of Canada and Britain, according to, the largest real estate portal that targets Chinese buyers looking abroad.

Property investment in Australia provides an emigration option to Chinese buyers who can also establish a base for their children's education in an English-speaking country.

Wealthy Chinese have long been pouring money into real estate in major cities in North America, Europe and Asia, including New York, London and Sydney.

But some of their favourite markets are becoming less attractive: A 15 per cent stamp duty introduced for foreign buyers in Hong Kong and Singapore, where cash-rich mainland Chinese had been blamed for driving up prices, has cooled interest, while Canada recently cancelled its Immigrant Investor Programme.

Australia, in contrast, may ease rules on a visa scheme aimed at luring investment from wealthy Chinese after complaints that disclosure requirements are too strict, lawyers and migration agents have said. It also offers the kind of robust, independent legal system sought by those looking to shield their assets from the Chinese authorities.

According to Australia's foreign investment review board, China was the No. 1 source of foreign capital investment in Australia's real estate last year. It got approvals to invest nearly A$6 billion (S$7 billion) into the sector, up 41 per cent from a year ago.

"They are worried, so they are looking for a safe place," said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors. "They don't want returns, not necessarily. They want a safe place."

That will help push Chinese demand in Australian property by 15 per cent over the next 12 months, said Mr Andrew Taylor, co-CEO of


Paulson Adds to Puerto Rico Real Estate With AIG Building

Source: Bloomberg / Personal Finance

Paulson & Co., the $23 billion firm run by John Paulson, acquired an office building in San Juan, Puerto Rico, from American International Group Inc. (AIG) as the billionaire hedge-fund manager increases his investments in the commonwealth.

Paulson & Co. bought American International Plaza, a 326,000 square-foot (30,286 square-meter) office building built in 1991 that is located in the Hato Rey financial district, the New York-based firm said in an e-mailed statement. The terms weren’t disclosed.

“We remain optimistic about the future of the San Juan real estate market including the office, residential and hotel sectors,” Michael Barr, senior real estate partner at Paulson & Co., said in the statement.

Paulson, who last year considered relocating to Puerto Rico to take advantage of new tax laws, has said the economy is at the beginning of a turnaround and in April predicted the island will become the Singapore of the Caribbean. The 58-year-old billionaire said opportunities to buy real estate in the region won’t last much longer and that he’s looking to purchase sites that can be developed to serve people he expects to move there because of the legislation.

Debt Load

Paulson & Co.’s real estate acquisitions in Puerto Rico include the St. Regis Bahia Beach Resort, the Condado Vanderbilt, La Concha Renaissance Hotel and Tower, and various land parcels for future development, according to the statement.

Its latest investment comes as the commonwealth and its agencies wrestle with a $73 billion debt load and an economy that’s shrunk in five of the past seven fiscal years. The three biggest ratings companies cut the island’s credit ranking to junk earlier this year. Island officials have said Paulson plans to invest $1 billion in Puerto Rican projects over the next two years.

AIG, which employs about half as many people as it did at the end of 2008, has been consolidating its real estate footprint. The insurer moved its headquarters to 175 Water St. in lowerManhattan, from a property it was leasing nearby on Maiden Lane, as part of a plan announced last year.

Real estate sales helped the insurer raise funds to repay its bailout, which began in 2008 and swelled to $182.3 billion. Other buildings AIG has sold include its Japan headquarters and a New York tower.

-By Kelly Bit

NYC’s Next Hot Neighborhoods Targeted With Property Funds

Source: Bloomberg / Personal Finance

New York’s real estate world is filled with tales of ordinary people who bought property decades ago and saw values skyrocket to the millions. Seth Weissman is seeking investors to get in early on the next hot neighborhoods.

The veteran of Goldman Sachs Group Inc. and hedge fund Perry Capital LLC started CityShares, which enables participants to reap rewards from increasing apartment demand in gentrifying areas. Investors who pledge at least $100,000 to one of the program’s neighborhood-focused funds become partial owners of a group of buildings and share in the rental income. The first pool is more than halfway toward its target of $5 million, which will be used to buy properties in Brooklyn’s Bedford-Stuyvesant.

Harlem in upper Manhattan is next, with a goal of as much as $20 million. Additional funds are planned for Bushwick, Crown Heights and Sunset Park, all in Brooklyn. Renters are pushing into those more-distant areas after getting squeezed out of the borough’s waterfront communities, where leasing costs rival Manhattan’s. CityShares is the first program of its kind and offers a way to invest in burgeoning markets that are poised to grow as New York’s workforce expands, Weissman said.

“One of the things we learned from talking to investors was a lot of people thought about value creation through the evolution of a neighborhood,” Weissman, 31, said in an interview at a Harlem coffee shop. “Everybody seems to have that anecdotal story -- my aunt and uncle bought an apartment in Chelsea in the late ’70s and made a lot of money. There were so many of those stories.”

Weissman lives in that Manhattan district, where a townhouse costing $150,000 in 1978 could have been sold for $7.7 million in 2013, according to a promotional video on the CityShares website.

Building Upgrades

In Bedford-Stuyvesant, Weissman plans to buy as much as $15 million of properties -- mostly apartment buildings with ground-floor retail space -- with $5 million coming from investors and the rest borrowed. Buildings will be renovated, with a focus on cost-saving upgrades such as converting old oil furnaces to gas, Weissman said.

Purchases of apartment buildings in Brooklyn jumped 67 percent in the first half of 2014 from a year earlier, with Bedford-Stuyvesant, Bushwick and Crown Heights accounting for about a quarter of transactions, according to a report by New York-based Ariel Property Advisors.

“People are looking to Brooklyn today because of Brooklyn,” said Shimon Shkury, founder and president of the investment-sales brokerage. “Not because of it being less expensive than Manhattan.”

‘They Care’

Weissman said he chose neighborhoods for the funds based on amenities renters look for, including easy access to transportation and job centers. Bedford Stuyvesant and Harlem, in particular, are distinguished by their blocks of 19th-century brownstones and a sense of community that’s hard to replicate, he said.

“In Bed-Stuy, you walk around and, people will be tending to their planters and you’ll look up and a cornice will be missing,” Weissman said. “Clearly the building needs major work. They may not have the resources to make those larger investments but they care. They do what they can. They say hello. It’s a little bit more touchy-feely than, ‘Subway line runs here,’ but I think it’s important.”

CityShares investors must be accredited under U.S. Securities and Exchange Commission rules, meaning they made at least $200,000 in each of the past two years or have a net worth of at least $1 million.

Not Crowdfunding

That’s more restrictive than crowdfunding, in which large amounts of money are raised through small contributions. Weissman said his program also differs from such websites as Realty Mogul and Fundrise in that those companies distribute pledges to property managers and developers, while CityShares will buy and manage buildings directly.

Participants will collect quarterly dividends from leasing income and in about a decade should see the benefits of price gains as the properties are sold, Weissman said. The goal for the first fund is an annual return of at least 12 percent over a seven- to 10-year timeline, the majority of which will come from rents, he said.

CityShares is the only way for property investors “to get exposure to that appreciation and rental income outside of buying an apartment or buying a brownstone on their own,” Weissman said. That’s “a big check. It’s not a $100,000 or $200,000 check.”

Townhouse Prices

The median sale price of a multiresidence townhouse in Brooklyn was $1.1 million in the second quarter, according to a report by the Corcoran Group. That’s more than 10 times the minimum CityShares investment.

The second tier of Brooklyn neighborhoods, such as those targeted by CityShares, have already become more popular as renters priced out of Williamsburg and other communities along the East River look south and east for cheaper alternatives, said Ofer Cohen, president of brokerage TerraCRG.

In Bedford-Stuyvesant, the median monthly apartment rent in July was $2,386, up 46 percent in the past five years, according to data from StreetEasy, a New York property-listings website. The median was $3,419 in Williamsburg, up 29 percent since 2009 and $224 more than in Manhattan.

“As these neighborhoods mature, there’s more of a critical mass of residents moving into the area, the area’s getting more established, and more retailers are moving into the area,” Cohen said in an interview. Landlords entering the market now are “not getting in on the ground floor, but you’re getting in on the second floor or third floor.”

Fire Island

Weissman, a 2005 graduate of the University of Pennsylvania’s Wharton School, worked in Goldman Sachs’s investment banking group after graduation. He moved to the real estate private-equity group of Perry Capital, a $15 billion hedge fund, before founding a property-investment company of his own with his brother Matthew in 2008. Two years later, Weissman Equities was part of a team that bought about 75 percent of the commercial space in the Pines section of Fire Island.

Michael Amirkhanian, director of sales in the Brooklyn office of commercial brokerage Massey Knakal Realty Services, met Weissman about five years ago when he took the investor on a walking tour of Bedford-Stuyvesant.

“Seth is a sharp guy that had the vision for these areas,” Amirkhanian said in an interview. “You’re seeing more private-equity funds out of Manhattan that are now looking at these neighborhoods that probably didn’t know where Bed-Stuy or Bushwick were on a map seven years ago. He had that vision then.”

Deal Scouts

As CityShares adds more neighborhoods and rounds of funding, Weissman plans to hire scouts to hunt for off-market deals by building relationships with community leaders and business owners.

The program will offer participants advantages over buying shares of a real estate investment trust, including access to rent rolls, payment histories and other data on the funds’ buildings, Weissman said.

That information isn’t necessarily valuable, as investors won’t be able to sell shares on the secondary market the way they could with a publicly traded REIT, said Jeffrey Langbaum, a Bloomberg Intelligence analyst.

The Bedford-Stuyvesant fund’s projected annual return of at least 12 percent compares with the 23 percent gain in the past year for the Bloomberg Apartment REIT Index with dividends reinvested.

‘Gazillion People’

Eric Peerless, a 34-year-old CityShares partner who pledged $100,000 for the first pool, views the investment as “relatively safe, especially if you’re in the long-term game.”

The lower Manhattan resident also sees the fund as a wager on job growth in that area, where new skyscrapers are opening at the World Trade Center site. Workers filling those buildings will venture to Brooklyn to find affordable apartments with short commute times, said Peerless, who runs Mad Development, a builder of websites and applications for businesses.

CityShares is investing in “multifamily housing in an area where there’s a gazillion people and the population is growing,” he said.

-By Jonathan LaMantia

Samsung Buys Startup SmartThings to Move Into Smart Homes

Source: Bloomberg / Tech

Samsung Electronics Co. (005930), which is competing with Google Inc. and Apple Inc. to gain a foothold in home automation, is acquiring SmartThings, a startup that makes makes mobile applications to remotely control devices in houses.

Terms of the deal weren’t disclosed, with technology blog Recode reporting the price as $200 million. David Eun, head of Samsung’s Open Innovation Center, said that while the South Korean company has a tradition of developing technology internally, his group in Silicon Valley would be stepping up its acquisitions.

“We have been looking for companies across a lot of different spaces that have a similar vision as the Samsung approach,” he said in a phone interview.

SmartThings brings to Samsung a company with an expanding base of developers, Eun said. SmartThings doesn’t make any devices itself and instead provides software that other companies can use to make devices speak to each other. For instance, house keys that will buzz a smartphone if a person has left the house without them, or a living room light that will brighten or dim if a person is in the room.

Eun declined to comment on how much Samsung paid for SmartThings.

Alex Hawkinson, the founder and chief executive officer of SmartThings, said in an interview that the company has been speaking with Samsung for about two months. He decided to do a deal because of Samsung’s global scale, and the opportunity to be closely integrated on the Samsung smartphones.

Independent Business

“In a nutshell it’s all about scale,” he said.

SmartThings said in a blog post yesterday that it would operate as an independent business within Samsung’s Open Innovation Center and would relocate to a new headquarters in Palo Alto,California. Joining forces with Samsung will enable SmartThings to support leading smartphone vendors, devices, and applications, according to the blog post.

The deal underscores how larger technology companies are interested in the so-called Internet of things, which includes Web-enabled home appliances and centrally linked industrial equipment. Google earlier this year purchased smart thermostat maker Nest Labs Inc. for $3.2 billion. Apple in June showed HomeKit, a set of tools for developers to make iPhones work with so-called smart homes by controlling things like a light bulb or door lock with a smartphone.

SmartThings, founded in 2012, raised funding through crowd-funding site Kickstarter and later got financing from venture capital firms including Greylock Partners, the company said on its site.

Eun said connected homes would become much more mainstream and global in the years ahead. “This is not science fiction. This is here today,” he said.

-By Adam Satariano