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20th August 2014

Singapore Real Estate

China/HK developers lead bids in Potong Pasir tender

MCC Land offers S$775 psf ppr, pipping Cheung Kong

Source: Business Times / Top Stories

[SINGAPORE] A state tender for a commercial and residential site next to Potong Pasir MRT Station has surprised the market with a whopping 15 bids, with strong participation from the China contingent.

The top four bids were cast by China/Hong Kong players (including one who teamed up with a Singapore developer). The China players generally have a more optimistic view of the Singapore property market compared with Singapore developers.

Local players, on the other hand, generally cast more measured bids. City Developments was the the fifth highest bidder yesterday at S$716 per square foot per plot ratio (psf ppr) - much lower than the S$793 psf ppr it paid back in September 2012 for the nearby Tai Thong Crescent site, which is zoned for residential use with commercial space on the first storey and now being developed into The Venue Residences and Shoppes.

The latest site, at Meyappa Chettiar Road, is considered to be choicer as it is right next to the MRT station and has a bigger commercial component.

-By Kalpana Rashiwala

Potong Pasir mixed-use site draws foreign interest

China developer MCC Land's $471.6m is highest of 15 bids for 1.6ha plot

Source: Straits Times / Money

FOREIGN developers were out in force in a hotly contested state tender for a mixed-use site at Potong Pasir that closed yesterday.

The 1.6ha residential and commercial plot in Meyappa Chettiar Road fetched a stunning 15 bids, far more than the expected number of eight.

Consultants said the plot could have appealed because it is right next to the Potong Pasir MRT station and has a commercial segment.

A mixed-use development there could tap the growth of the upcoming Bidadari new town, they added.

The tender was a close fight with a difference of just 3.2 per cent between the top bid and the third-highest for the 99-year leasehold site.

Chinese developer MCC Land led the way, offering $471.6 million, or $775 per sq ft (psf) per plot ratio (ppr).

It edged out another foreign developer, Best Desire Investments, which offered $757 psf ppr. Best Desire is believed to be part of Hong Kong tycoon Li Ka Shing's Cheung Kong group.

These bids were in the middle of the $600 to $900 psf ppr price range that analysts had predicted, signalling that most developers were still cautious.

A joint venture between Bo An Investments and Santarli Venture came in third with $751 psf ppr.

The lowest offer was from Tennessee Investments, which bid $244 million, or $401 psf ppr.

Analysts noted that foreign developers had bid actively and, in some cases, more aggressively than local players.

"Six of the 15 bids were either submitted by foreign developers or consortiums with foreign companies," SLP International research head Nicholas Mak said yesterday.

Real estate lawyer Lee Liat Yeang added: "Chinese developers still believe in putting money here, especially in good sites above MRT stations. This site is also large, allowing them to achieve economies of scale. The total cost is not big by Chinese standards."

This tender drew the highest number of bids since a Geylang East private condominium site tender that closed in January this year, which garnered 16 offers.

CBRE research head Desmond Sim said the high number "proved that developers still need to replenish their land banks to ensure that core business is sustainable".

"The opportunity to put the commercial component of this development for sale on a strata-titled basis could have propped up the bid," Mr Sim said.

Up to 5,000 sq m, or 53,819.5 sq ft, of the plot's gross floor area can be for commercial use. This is about 8.8 per cent of the maximum gross floor area.

Mr Mak estimates that the break-even price for homes and commercial units developed on the Meyappa Chettiar site will range from $1,250 psf to $1,320 psf.

A nearby mixed-use site with a smaller commercial portion was sold in September 2012 for $793 psf ppr to City Developments and Hong Leong. Its commercial component was capped at 2,000 sq m of gross floor area.

This 99-year leasehold parcel is being developed into a mixed development called The Venue Residences and Shoppes. It had sold 66 out of its 266 homes by the end of last month.

-By Melissa Tan

Property prices in Jurong unlikely to rise significantly: Propnex

Despite the redevelopment plans for Jurong announced at the National Day Rally, cooling measures mean home prices are unlikely to go up by too much, said the real estate agency. 

Source: Channel News Asia / Singapore

SINGAPORE: With cooling measures still in place, home prices in Jurong are unlikely to increase significantly, a property watcher said. This is despite the redevelopment plans for the area, which were announced at Sunday's (Aug 17) National Day Rally.

Real estate agency PropNex says prices of HDB resale flats in Jurong have gone up by 70 per cent in the last seven years. There has also been a rise for the private residential market - private homes in Jurong used to cost about S$700 per square foot, but are now at S$1,200.

Looking ahead, the agency said new private homes there are expected to be priced competitively, and there is still pent-up demand for private homes as there have only been a few major projects in Jurong over the past two years.

But PropNex Key Executive Officer Lim Yong Hock said prices may not go too high. "Developers would also be concerned about the impact of the cooling measures. The buyers may not be able to afford if it is too high."

- CNA/xy

More payment delays in Q2, especially by construction sector

Source: Business Times / Top Stories

[SINGAPORE] Local companies were less prompt with their bill payments in the second quarter, with the construction sector being the most tardy.

The Singapore Commercial Credit Bureau (SCCB), a body which tracks the credit history of local enterprises, has announced that, for the first time since Q3 2013, payment promptness of local firms fell sharply below the 50 per cent mark in Q2 2014; the fall was by 4.5 percentage points to 47.4 per cent.

Slow payments exceeded 40 per cent, increasing by 3.2 percentage points to 41.1 per cent in the quarter.

Prompt payment is defined as a situation in which at least 90 per cent of total bills are paid within the agreed payment terms; payments are considered slow when more than half of total bills are paid later than stated in the agreed credit terms.

All five industries - construction, manufacturing, retail, services and wholesale - reported slower payments, with construction recording the most number of delays for the second straight quarter.

Payment delays in the construction industry rose 3.8 percentage points to 51.4 per cent in Q2. This means that only slightly more than two in five of payment transactions within the sector were prompt.

Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), said: "We're not seeing construction SMEs that are ready to fold. It's not gotten to that level, but it is not looking pretty at all."

He attributed the sector's slow payments to the manpower shortage it faces, which sometimes makes it difficult to complete projects on time. As contractors receive progressive payments for a certain percentage of a project completed, missing a deadline could mean subsequent cash flow problems and cost overruns.

Another factor is the rising labour and operating costs, and the inability of builders here to restructure quickly enough to overcome them.

Productivity gains from process revamps take a longer time to materialise in the construction sector because of the time lag between project design and project completion.

Mr Wee said: "We need to move the developers a lot more into precision precast technology," he said, referring to the practice of manufacturing modules off site, and then transporting them to the site for assembly.

Roland Ng, the managing director of crane operator Tat Hong Holdings, cited depressed tender prices - sometimes from foreign main contractors unfamiliar with Singapore's labour constraints - as a cause of payment delays. This has put a squeeze on the margins of the local firms to whom they sub-contract the project.

Construction woes have been making headlines since last year. For example, when Poh Lian Construction was placed under judicial management, its subcontractor Capstone Construction abruptly halted work on two HDB build-to-order projects in Bukit Panjang and the upgrading of St Anthony's Canossian Secondary School.

At his National Day Rally last Sunday, Prime Minister Lee Hsien Loong disclosed that Ng Teng Fong General Hospital in Jurong, which was to open in December, will now open in the middle of next year instead. The project's main contractor, GS Engineering & Construction has put the blame partly on a shortage of skilled construction workers in Singapore.

Singapore Contractors Association president Ho Nyok Yong suggested, however, that the two quarters of slow payments in the construction sector could be cyclical: "Every second quarter, payment delays seem to be on the uptrend. It could be that they pay more promptly during the new year and lag after that. Anyway, it's only two quarters - hardly a trend. I won't say it's worrying."

The services sector recorded a sharp increase in payment delays - up 3.8 percentage points to 43.9 per cent in Q2.

SCCB said health services, hotels & accommodation services and business services, accounted for the biggest increases in payment delays; the education and financial services industries had fewer delays.

The wholesale sector was the best paymaster, but even it reported more delayed payments on the back of a moderation in non-oil re-exports growth. Delayed bill payments also rose in the retail sector amid slower sales and a drop in tourist arrivals.

-By Lee Meixian

Condo's beams 'part of common property'

Owners not responsible for fixing beam defects: Court

Source: Straits Times / Singapore

A HIGH Court ruling has clarified that condo unit owners in Singapore are not responsible for repairing defects in structural beams above their properties.

Justice Tan Siong Thye criticised a condominium's management corporation (MC) of displaying a "nonchalant attitude" towards a couple by refusing to fix structural beams over their unit.

The management corporation of Highpoint in Mount Elizabeth took Madam Lee Siew Yuen and her husband Eng Chiet Shoong to the Strata Titles Board (STB) after the unit owners claimed they were not responsible for repairing cracks in the ceiling above their kitchen and bedroom toilet.

However, Justice Tan Siong Thye found in the couple's favour, after their lawyers argued that the beams are part of the common property.

The saga began in 2012 when their contractor discovered cracks in beams hidden in the false ceiling of the 41-year-old building, which could have been caused by water seepage.

The couple referred the problem to the MC, saying it should be responsible for repairing them.

The MC's lawyers - Josephine Choo and Emily Su from Wong Partnership - denied the beams were part of common property because they were located within the unit.

They added that the MC had discharged its duty to rectify the defects when it sent a circular to owners to check their ceilings for broken concrete and make good any defects.

Lee & Lee lawyers Toh Kok Seng and Yik Shu Ying countered for the couple that the affected beams fell within the meaning of common property under the Building Maintenance and Strata Management Act.

Justice Tan agreed and held that the MC was duty-bound to undertake the repairs on that ground.

He added that the unit did not include the beams when it was bought by the couple in 1993 as the beams served only to support the unit above it and were "shared by two units". Stressing that the occupants' safety is of "paramount importance", he found no evidence to suggest the couple had done anything to cause the defects.

Justice Tan noted that both parties agreed the case involved matters of public interest "as the outcome will have an impact on other units in the development and other condominiums in Singapore".

He also ticked off the MC for the manner of its appeal. "The (corporation) has criticised almost every aspect of the STB's deliberations, including its findings of fact," he said in the grounds, released last month. "It also alleged STB had misconducted the proceedings, regardless of whether or not it relates to a point of law. This is an abuse of the appeal process."

Chiding the management for taking "a nonchalant attitude towards such a serious matter", he added: " I would expect a responsible (MC) that is concerned for the lives and safety of its occupants at the development to urgently rectify the structural defects and then subsequently deal with the legal issues and ascertain who is to bear the cost of the repairs."

The High Court ordered the management to carry out the repairs promptly.

-By K.C. Vijayan, Senior Law Correspondent

Global Economy & Global Real Estate

US housing market picks up, inflation pressures muted

Data is supportive of Fed's slow approach to exiting monetary accommodation

Source: Business Times / Top Stories

[WASHINGTON] US housing starts rebounded strongly in July, pointing to momentum in the economy, but a moderate increase in consumer prices suggested the Federal Reserve has room to keep interest rates low for a while.

Groundbreaking surged 15.7 per cent last month to a seasonally adjusted annual 1.09-million unit pace, the Commerce Department said yesterday, snapping two straight months of declines.

Economists had forecast starts to rise to a 969,000-unit rate in July.

The housing market is regaining its footing after being slammed by last year's run-up in interest rates. A shortage of properties for sale has also lifted prices, pushing housing out of the reach of many first-time buyers.

-From Washington, US

Housing Starts Rebound in U.S. as Inflation Eases: Economy

Source: Bloomberg / Personal Finance

Home construction rebounded in July and the cost of living rose at a slower pace, showing a strengthening U.S. economy has yet to generate a sustained pickup in inflation.

A 15.7 percent jump took housing starts to a 1.09 million annualized rate, the strongest since November, and halted a two-month slide, the Commerce Department said in Washington. The consumer price index increased 0.1 percent after rising 0.3 percent in June, the Labor Department also reported.

An improving job market and cheaper borrowing costs are helping revive residential real estate, helping boost sales at companies such as Home Depot Inc. (HD) As inflation continues to run below the Federal Reserve’s target, it gives the central bank room to keep interest rates low well after the projected end of its bond-buying program in October.

“The recovery remains on track, but we’re not moving forward at a burning-hot pace,” said Laura Rosner, a U.S. economist at BNP Paribas in New York, who accurately forecast the increase in consumer prices. “The Fed has the luxury really to keep policy very accommodative and keep fostering economic growth and labor market improvement.”

“There’s no hurry to raise rates at this point,” said Rosner.

The improving economy and low inflation helped stocks advance. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,981.6 at the close in New York. The S&P Supercomposite Homebuilding Sub Index advanced 2.6 percent.

U.K. Inflation

Price pressures also abated overseas. U.K. inflation cooled more than economists forecast in July, giving the Bank of England leeway to keep its key interest rate at a record low. The rate of consumer-price growth fell to 1.6 percent from 1.9 percent in June, the Office for National Statistics said today in London.

The pickup in housing starts in the U.S. exceeded all estimates in a Bloomberg survey of 75 economists. The median projection called for 965,000, within a range of 898,000 to 1.03 million. The Commerce Department also revised June’s reading up to a 945,000 pace from a previously reported 893,000.

The report also indicated the building industry will probably consolidate gains in coming months as permits for future projects advanced 8.1 percent to a 1.05 million pace, about in line with the current level of starts. The gain reflected the most applications for single-family dwellings since November.

Starts Breakdown

Starts of single-family properties rose 8.3 percent to a 656,000 rate in July, the fastest this year, the Commerce Department said. Construction of multifamily projects such as condominiums and apartments rose 28.9 percent to an annual rate of 437,000, the most since January 2006 and the second-strongest since February 2000.

Three of four regions showed an increase in groundbreaking last month, led by a 44 percent jump in the Northeast to the highest level since July 2008. Starts rebounded 29 percent in the South and climbed 18.6 percent in the West.

Home Depot is benefiting from improving demand. Second-quarter profit at the largest U.S. home-improvement retailer topped analysts’ estimates and the Atlanta-based company today raised its forecast for the year, sending its shares up 5.6 percent at the close.

Part of the reason for the optimism is that homeowners are buying more appliances, a category that Home Depot has been expanding. U.S. shipments of major home appliances rose 7.1 percent in the 12 months that ended in July, according to the Association of Home Appliance Manufacturers.

Food, Energy

Today’s Labor Department consumer-price report showed a 0.4 percent increase in food costs in July, reflecting broad-based increases. The gain was almost offset by a 0.3 percent decrease in fuel expenses as gasoline prices retreated.

Declines in energy prices have continued this month, giving households some relief. The average cost of a gallon of regular gasoline was $3.45 as of Aug. 18, down from an average $3.59 in July, according to AAA, the biggest U.S. auto club.

Consumer prices excluding food and fuel, known as the core rate, also climbed 0.1 percent in July for a second month, the Labor Department reported.

The core rate reflected increases in rents, new cars and medical care, which were almost completely offset by lower costs for airline fares, used cars, tobacco, recreation and household furnishings. The price of plane tickets dropped 5.9 percent, the most since December 1995, after rising 10.9 percent over the previous five months.

Erodes Wages

The muted increase in total prices was still enough to erode wage gains. Hourly earnings were unchanged on average last month after adjusting for inflation, another Labor Department report showed today. They were also little changed over the past 12 months.

The housing industry’s recovery has been challenged by the slow wage growth and tight credit, which have put homeownership out of reach for some Americans.

Nonetheless, today’s figures corroborate a report yesterday showing builder confidence rose in August to the highest level in seven months.

Weather dealt a setback to builders at the beginning of the year as snow blanketed construction sites in parts of the country and bitter cold kept some would-be buyers at home. Homebuilding bounced back in the second quarter, climbing at a 7.5 percent annualized rate after a 5.3 percent slump in the first three months of the year, data from the Commerce Department showed on July 30.

Job Market

More hiring and cheap borrowing costs are helping some Americans take the plunge. The economy added more than 200,000 jobs for a sixth straight month in July, the longest such stretch since 1997, according to Labor Department figures.

A decline in borrowing costs this year has also helped. The average 30-year, fixed-rate mortgage was 4.12 percent in the week ended Aug. 14, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.

While the market recovers, demand is outpacing construction. The U.S. requires between 1.6 million and 1.9 million new units a year just to accommodate population growth and household formation, according to the Harvard Joint Center for Housing.

New orders at the Ryland Group Inc. climbed 1.7 percent, to 2,228 homes, in the three months ended June 30. It was the best quarter in seven years for the Westlake Village, California-based company and President and Chief Executive Officer Larry Nicholson said he is optimistic about the outlook.

“We remain confident about the future of housing,” Nicholson said on a July 31 earnings call. “We see the markets continue to move forward. We have good traffic. We’re making sales. We’re making margin. We’re pretty upbeat for what we see for the rest of the year.”

-By Lorraine Woellert and Victoria Stilwell

Australians ‘Relaxed’ About Property Investing, Survey Shows

Source: Bloomberg / News

Australians are “relaxed” about investing in their first property and are undeterred by possible interest-rate increases in a market where home prices are at a record, according to a survey.

The majority of those surveyed by Westpac Banking Corp. (WBC), the nation’s second-largest mortgage lender, were confident in buying a property to rent out and would only reconsider their plans if interest rates climbed 2 percentage points.

First-time investors “do not appear to be overly sensitive to such increases, with their intention to invest only deterred by larger rate rises,” Martine Jager, the chief executive officer of RAMS Financial Group Pty, said in a statement. “Even if the rate direction changes suddenly, there could still be at least a year of strong demand left in the Australian property market.”

Spurring the rise in home sales are the lowest mortgage rates in almost five years, after the central bank cut the cash rate by 2.25 percentage points since late 2011. Investors are driving sales, with the share of first-home buyer mortgage approvals matching a record low of 12.3 percent in April, according to government data. It recovered to 13.2 percent in June.

The Reserve Bank of Australia reiterated yesterday that interest rates are set to stay on hold as the nation’s economic outlook remains uncertain. Market pricing shows a higher chance of further policy easing after the unemployment rate jumped to a 12-year high in July, the RBA cut its growth and inflation forecasts, and wage growth stagnated.

Loose monetary policy has boosted the property market. Home prices rose 10.1 percent in the three months ended June from a year earlier, according to government data released last week.

An almost doubling of Australian household debt since 1997 and banks’ exposure to mortgages are a significant source of risk to the country’s financial system, according to a government inquiry said last month.

-By Narayanan Somasundaram

Monaco $400 Million Penthouse Secrecy Booms: Real Estate

Source: Bloomberg / Luxury

Monaco, the tax haven on the French Riviera, is experiencing a luxury-housing boom that includes the world’s most expensive penthouse as developers prepare for an influx of millionaires and billionaires escaping higher taxes or a loss of banking privacy.

A “flow” of new residents is emigrating from Switzerland, where financial-secrecy laws are crumbling, said Jean Claude Caputo, managing director of broker Savills Plc (SVS)’s French Riviera unit. They’re drawn by the principality’s “security, sophistication and climate,” he said -- as well as for financial reasons. The Swiss government signed an accord in May to automatically share bank data across borders.

“High-net-worth individuals want to be in this part of the world,” Caputo said as he drove in his Audi Quattro to Monaco to brief Swiss private bankers on the property market there and help them advise clients considering a move.

New levies on luxury homes in London and a U.S.-led global crackdown on hiding assets will also probably attract the affluent to Monaco, which already counts pop stars, Formula One drivers and Russian billionaires among its inhabitants. One in three of Monaco’s 38,000 residents are millionaires, according to a study by Spear’s magazine and WealthInsight. As that number increases, home values will rise by about a fifth by June 2015, according to London-based Savills. That would almost erase losses sustained since the market’s 2007 peak.

Tour Odeon

The Tour Odeon, a double-skyscraper being built by Groupe Marzocco SAM near Monaco’s Mediterranean seafront, will contain a 3,300 square-meter (35,500 square-foot) penthouse with a water slide connecting a dance floor to a circular open-air swimming pool. The apartment may sell for more than 300 million euros ($400 million) when it goes on the market next year, French magazine Challenges reported. That would make it the world’s most expensive penthouse, according to broker Knight Frank LLP.

“We think we can get a little bit more,” Daniele Marzocco, a director at the company, said in June. So far, the developer has found buyers for 26 of the 36 luxury homes that have been offered for sale. A car parking space at the project costs 250,000 euros, Marzocco said. That’s about 50 percent more than the median value of an existing U.S. home, according to data compiled by the National Association of Realtors.

“What we sell is Monaco,” commercial director Niccolo Marzocco said during a viewing of the skyscraper, which is costing more than 600 million euros to build, excluding the land. He cited security, stability and the convenience of living in a city-state about two-thirds the size of New York’s Central Park.

007’s Casino

The most expensive part of Monaco, centered on the Golden Square and The Casino de Monte-Carlo made famous in James Bond films, is already the world’s costliest property location ahead of Hong Kong. For $1 million, you could buy about 15 square meters (160 square feet) of space, Knight Frank estimates. That’s about a third of the size of the median studio in Manhattan, according to the Naked Apartments website.

The principality’s residents, who include Russian billionaire Dmitry Rybolovlev and pop singer Shirley Bassey, don’t pay taxes on income. The French have to pay taxes there, with certain exceptions dating back more than 50 years. Rybolovlev lives in the Belle Epoque building overlooking the harbor, according to a New York state court filing in 2012.

Famous for its Grand Prix, Monaco is home to a host of Formula One drivers such as 2008 World Champion Lewis Hamilton, who moved there from Switzerland two years ago. Caputo at Savills said he could tell whether Alain Prost or Ayrton Senna was leading Formula One races there in the 1980s and 1990s by the sounds of the gear shifts as the cars approached. Senna was much smoother, he said.

Princess Grace

The Grimaldi family first took control of the city-state in 1297 when Francois Grimaldi, disguised as a monk, seized the fortress from a rival Italian faction. The family has largely reigned since and is now ruled by Prince Albert II, son of Prince Rainier and Hollywood star Grace Kelly.

While Switzerland also has some of Europe’s lowest tax rates, it’s becoming less attractive to luxury homebuyers as the country’s financial secrecy laws are eroded amid a move toward a global standard of information exchange between tax authorities. Other jurisdictions, including Monaco, are looking for ways to tap into the wealth held in the Alpine country.

Moving to Monaco is an “obvious” strategy for many of Switzerland’s super-rich residents, according to Richard Murphy, co-author of “Tax Havens: How Globalization Really Works.”

“You’ve got to go somewhere where you can flash what you’ve got and still have secrecy about how you got it,” Murphy said.

‘Tax Tourist’

Asking prices for luxury homes in Geneva have fallen by an average of about 30 percent in the last 12 months and values have dropped by as much as 6 percent, according to Alex Koch de Gooreynd, a partner at Knight Frank.

“The tax tourist, yes, is probably leaving Geneva now because there are so many changes” in Switzerland’s rules, though new clients are moving to the city for security and education, he said.

Central London’s luxury-home market has also shown signs of cooling amid new taxes and more on the horizon. U.K. Chancellor of the Exchequer George Osborne is adding a capital-gains levy next year on homes sold by people living abroad. He’s already raised a transaction tax for properties sold for more than 2 million pounds ($3.4 million).

Concern about next year’s U.K. national election, after the opposition Labour party said it wants to introduce an annual mansion levy, and tax changes in some Swiss cantons are among things “making Monaco look like a very safe, stable place,” said Irene Luke, a broker at Savills who moved to Monaco in 1990 after working as a real estate lawyer with Lawrence Graham LLP in London. “It’s becoming more and more like London by the sea.”

Bigger Demand

Larger apartments are in demand from homebuyers moving their families to the principality. While just 15 new apartments sold there last year, the average price was 9.3 million euros, compared with 2.9 million euros two years earlier, according to government data. The average price of homes with five bedrooms or more rose 24 percent last year compared with a 9 percent decline for studios, according to the report.

The Tour Odeon will be Monaco’s first high-rise since the 1980s. A quarter of the apartments sold on the open market by Groupe Marzocco have gone to expatriates from the former Soviet Union, the company said, without disclosing where they’re based.

Separate Entrance

A model apartment now being offered has 270 meters of internal space and 130 square meters of balconies and is valued at 28 million euros. The lower floors were sold to Monaco’s government for use by local citizens, who will enter the building through a separate entrance.

The tower’s construction began during the global financial crisis. “The government was quite wise” to buy some of the apartments, Daniele Marzocco said. “It also was something at the time to push the economy because we pay a lot of value-added tax, we create employment.”

Still, not all property developers are interested in building homes in Monaco.

“It’s just a crazy market,” Pierre Vaquier, chief executive officer of Axa Real Estate Investment Managers, said in a March interview. “You buy there not only for the environment, but also for the tax regime,” said Vaquier, who said he’s not interested in developing homes in the principality.

Offshore Accounts

Monaco has come under pressure to increase transparency. The Paris-based Organization for Economic Cooperation and Development labeled Monaco an “uncooperative” tax haven in 2002, though it was removed from the OECD’s list in 2009 after entering exchange-of-information agreements. Those targeted individuals or companies in the principality with offshore accounts, not established residents.

“Today, Monaco is more and more onshore,” Daniele Marzocco said. “People have to live here for more than six months. This is good for Monaco, it’s good for the economy.”

Switzerland in November retained the top spot in a financial-secrecy index by the Tax Justice Network. Some wealthy investors prefer jurisdictions whose legal system is based on British law, such as the British Virgin Islands, due to its predictability.

Famous Architects

Some of the companies building in Monaco have hired well-known architects to build bigger and more luxurious projects. The Yacht Club de Monaco, which opened in June, was designed by Foster & Partners. Societe des Bains de Mer et du Cercle des Etrangers a Monaco, a developer that’s controlled by the Monaco government, won planning approval to build apartments, stores and offices on Place du Casino designed by Rogers Stirk Harbour & Partners LLP.

Christian Candy’s CPC Group Ltd., developer of the One Hyde Park residential complex in London, combined two apartments in Le Park Palace, a weathered apartment block near the casino, and renovated a home in Le Porto Bello overlooking the harbor, according to its website. Candy wasn’t available for an interview.

Two apartments in the former Mirabeau hotel on Avenue des Citronniers are being offered for sale by Savills. Bids of 45 million euros are being sought for the unfurnished home, while the five-bedroom furnished apartment on the third and fourth floors is valued at 55 million euros.

Bouygues SA is in exclusive talks with Monaco’s government to build a six-hectare (15-acre) land-extension project in the Portier district. Specifications are still being discussed, Mathieu Carre, a spokesman for the Paris-based construction and telecommunications group, said by e-mail.

Monaco will have to further expand into the sea and build more residential skyscrapers like Tour Odeon to cater to the expected influx of wealthy buyers, according to a May report by Savills.

“People have looked at the next available place which has a similar type of secrecy environment” as Switzerland and provides a high quality of life, said Murphy, the economist. “Monaco is one place that fits that bill.”

-By Neil Callanan

Blackstone Suffers Court Setback in Irish Real Estate Drama

Source: Bloomberg / News

At 11:15 a.m. on July 29, Irish property developer Michael O’Flynn realized that Blackstone Group LP (BX) was trying to gain control of his real estate empire, which includes the country’s tallest residential tower.

Ten weeks earlier, the private equity firm had bought 1.8 billion euros ($2.4 billion) of loans to O’Flynn’s companies and the developer personally. Coming out of a meeting, he learned Blackstone was demanding the immediate repayment of 16 million euros of personal loans secured on his shareholdings -- even though he wasn’t in default. By the end of the day he had lost control of the business he’d spent more than 30 years building.

“I was shocked that they’d made this demand,” O’Flynn, 57, said in an interview. “It took time to understand the gravity of it because I’ve never been served with a demand in my 36 years of business. I was very recently transferred to Blackstone and I was doing my damnedest to work with them.”

O’Flynn was out, but not for long. Last week, an Irish judge restored him to the top of his company, saying Blackstone hadn’t acted in the “utmost good faith” or given the developer enough time to repay the money.

The judgment is a setback for Blackstone, manager of the largest fund dedicated to buying real estate in Europe, as it tries to buy up distressed real estate assets in Ireland with the economy starting to rebound from its property crash of 2008.

Judge Mary Irvine ruled Aug. 13 that Blackstone failed to disclose relevant information when it sought to have officials appointed by a court to oversee O’Flynn’s companies in July. That “breached the obligation of utmost good faith,” she said.

‘Appropriate’ Actions

After the court defeat, Carbon Finance, the Blackstone-owned company that bought O’Flynn’s loans for more than 1 billion euros, said in a statement its actions were “appropriate and necessary.” The company declined to comment beyond the statement while officials at Blackstone in London declined to comment.

The ruling may only be a temporary reprieve for O’Flynn until a full hearing over Blackstone’s efforts to gain control of the company in October. Irvine said while Blackstone may have the “better side of the argument” in its view that it was enforcing an accord O’Flynn had entered with “open eyes,” the company’s approach had raised enough questions to warrant a full airing of the case.

The case is part of the legacy of Ireland’s economic collapse, which stemmed from a real estate bubble that burst in 2008. Property developers had borrowed billions of euros from the nation’s banks as they sought to cash in on the boom. After the collapse, home prices halved, the government took over the domestic banking system, and the state needed a three-year international bailout in 2010.

Elysian, Cork

O’Flynn’s story begins in Cork, a city of about 120,000 people in the south of Ireland. From there, O’Flynn forged his real estate business, culminating in the construction of the Elysian in Cork at the height of the nation’s property bubble.

Close to the River Lee, the 17-story tower contained 211 apartments, selling for as much as much as 1.8 million euros each. Trouble was, construction finished just as Ireland’s property market crashed, in 2008.

Two years later, O’Flynn’s loans were transferred to the country’s bad bank, the National Asset Management Agency, set up to purge the financial system of commercial real estate loans.

Enter Blackstone. In May, it agreed to buy the O’Flynn loans through Carbon Finance.

Burlington Hotel

Spearheaded by Blackstone, overseas investors have poured into Ireland since the crash, picking up real estate and loans to developers at a fraction of their face value. Blackstone owns the Burlington Hotel, a landmark, 501-bedroom hotel in the south of Dublin, and this year bought three office buildings in the capital from NAMA. Prime Dublin office rents rose 15 percent in the second quarter from the previous three months, according to CBRE Group Inc., a real estate services adviser.

Last month, Blackstone delivered a letter to O’Flynn’s home in the Cork village of Ovens, alerting him to the demand for payment of personal loans, according to Irvine’s ruling.

In court filings on July 29, Blackstone said that it wanted to seize shares in O’Flynn’s parent company he had pledged as security for personal loans if he wasn’t in a position to meet their demands. The loans were payable on demand, Blackstone said in the filings. As O’Flynn was unable to repay the loans forthwith, Blackstone was able to topple him, and by 1:05 p.m. that day, court-appointed officials had removed O’Flynn as a director of the wider group.

August Hearing

O’Flynn would still be out of a job if not for Irvine’s ruling. The judge returned to Dublin’s court complex, which was otherwise deserted during the August summer break, to deliver her decision.

The press and public galleries, including Bill Cullen, who hosted “The Apprentice” television show in Ireland as the nation’s version of Donald Trump, were full. In 2008, contestants on the show were invited to create a 45-second commercial for the Elysian, with the winner chosen by O’Flynn.

O’Flynn visibly relaxed during Irvine’s hour-long reading of the judgment as it became clear that he had defeated Blackstone.

Irvine concluded that Blackstone’s demand for instant repayment was designed to gain control of the entire company, because the loans were linked.

“When it issued the demand letters, it was not setting out to recover the money,” she said. “The last thing it wanted was payment because that would have scuttled its plans.”

Year-end Payment

In its statement, Blackstone signaled it’s not giving up. At the end of the year, 235 million euros are scheduled to be repaid to Carbon Finance, which maintained his companies are insolvent.

The company “will continue to safeguard its position as a significant creditor of the O’Flynn Group and to do everything to protect the assets of the group and its creditors,” Carbon Finance said in its statement.

O’Flynn, for his part, simply says he’s ready to move on.

“We’re all big boys and we just want to move on with doing what we do best,” O’Flynn said. “That’s making a return.”

-By Donal Griffin and Dara Doyle