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21st August 2014

Singapore Economy

S'pore is 'fourth most liveable city' in Asia

Source: Straits Times / Singapore

SINGAPORE is the fourth most liveable city in Asia after Osaka, Tokyo and Hong Kong in the latest such ranking by The Economist magazine.

The Republic came in 52nd out of 140 cities in the Economist Intelligence Unit's (EIU) latest Liveability Ranking. Hong Kong was ranked 31st.

The index, designed to help international firms work out how much to pay employees to live and work in a given city, ranks cities based on measures such as stability, health care, culture and environment, education and infrastructure.

The Australian city of Melbourne was tops for the fourth year in a row, with a score of 97.5 out of 100, while the war-torn Syrian city of Damascus was in last place with 30.5 points.

Four Australian and three Canadian cities made the top 10, along with Vienna in Austria, Helsinki in Finland and Auckland in New Zealand.

While the scores of the top cities did not change much, average liveability across the world has fallen by 0.68 per cent since 2009, "highlighting the fact that the last five years have been characterised by heightened unrest in the wake of the global economic crisis", the EIU said in its report.

Singapore, which was also ranked 52nd last year, had 88.7 points while Hong Kong had 92. It was rated the same as Hong Kong on stability and health care, ahead of it on infrastructure, and behind it on education and culture and environment.

Singapore's culture and environment score of 77 out of 100, taking into account humidity and temperature, discomfort of the climate to travellers, corruption, social or religious curbs, censorship and cultural availability, among others, was lowered by its humid climate, said EIU analyst Toby Iles.

It also lost marks on censorship, scoring a two (uncomfortable) on a scale of zero (intolerable) to four (acceptable), he said. The education score includes availability and quality of private schools.

A city's overall score of more than 80 means there are few challenges to living there, and employees posted there do not merit hardship pay.

"(Singapore's) score is 88.7 out of 100 and anything over 80 means there aren't really any significant challenges to living in that place," Mr Iles said.

Of the 140 cities, 64 scored more than 80. Just 13 fell in the bottom tier, with scores of 50 or less.

-By Grace Chua

Singapore Real Estate

En bloc sales still the way to go: Colliers

BT understands Tanglin Shopping Centre has a lower S$1b reserve price

Source: Business Times / Property

[SINGAPORE] Collective sales remain a relevant option for property owners to exit from their ageing assets and for developers to replenish their development pipeline, despite the current standstill in the en bloc market, says Colliers International.

But an expectation gap, as described by Colliers in a white paper issued this month, is continuing to impede en bloc deals.

Sellers who are still hoping to strike rich overnight through an en bloc do not seem to have awoken to the new market reality. Developers, on the other hand, are looking for a higher risk discount now to mitigate the headwinds in property development given the softening market.

"It is inconceivable that buyers (developers and landlords) are going to pay anywhere close to outrageous sums for development land, unless it makes economic sense," said Chia Siew Chuin, Colliers director for research and consultancy.

-By Lynette Khoo

Prices of Sentosa Cove homes hit by property-cooling measures

Investment demand has dropped due to measures such as the additional buyer's stamp duty and the total debt servicing ratio framework, and some observers have noticed non-landed homes there being resold at prices below market value. 

Source: Channel News Asia / Business

SINGAPORE: The number of transactions involving non-landed homes in Sentosa has fallen considerably over the last three years. According to caveats lodged, property analysts say only 10 units were sold in the first seven months of this year.

A 3,046 sq ft penthouse unit at The Berth By The Cove was sold under valuation for S$3.5 million in July. That works out to about $1,150 per sq ft (psf) - cheap by Sentosa Cove standards.

Century 21 Singapore has observed that units resold in Sentosa recently were below market value. Two units at Turquoise went for under $1,500 psf, while another at The Oceanfront was sold at just over $1,600 psf.

Prices of luxury homes have been hit by recent property-cooling measures, such as the additional buyer's stamp duty (ABSD) and the total debt servicing ratio framework. Sentosa has not been spared as investment demand, especially from foreigners, took a dive.

Mr Mohd Ismail, CEO of real estate agency PropNex, said: "Prior to the ABSD in 2012, 2011, Sentosa condominiums commanded an average price closer to the range of S$1,900 to S$2,000. Some of the good facing units were above S$2,000 per square foot. Right now, it has dropped on average about 20 per cent. Today, the average price of most of the Sentosa units is about S$1,500 to S$ 1,600 psf."

PropNex says the sales volume for Sentosa homes has dropped from 71 transactions in 2012, to 34 in 2013, and just 10 in the first seven months of this year. Analysts say most owners of high-end homes have strong holding power and are not in a hurry to sell. Some of those who have done so could either be taking profit, or have run into financing problems.

Analysts also say that the weaker property markets in District 4 - comprising properties in Sentosa and the Keppel Bay area - as well as District 1 at downtown Marina Bay are seen as putting a drag on the Core Central Region (CCR).

"The price drop within districts 9, 10, 11 of the CCR isn't that significant - perhaps we have lost 2 per cent over the last 12 months compared to the previous 12 months. It is the drag of districts 1, 4 and the 99-year properties that is causing the CCR to drop by a bit more. Districts 9, 10, 11 consist mainly of freehold properties, so the price drop would be a lot less," said Mr Ku Swee Yong, chief executive of Century 21 Singapore

Home prices in the Core Central Region have fallen in the last few years, and they have not been able to catch up with the peak prices set in 2008. Some analysts expect home prices in this area to fall by over 5 per cent this year.

In the first half of 2014, prices of high-end homes have already declined by 2.6 per cent, according to data from the Urban Redevelopment Authority.  

- CNA/by

Singapore to take a leaf from Europe in use of prefab timber structures

The threat of fire and wood-eating termites are two areas of concern when it comes to building with timber, but those with experience in working with the material say there are solutions at hand.  

Source: Channel News Asia / Singapore

LONDON: Projects on two to four Government Land Sale sites every year will be picked to showcase new construction technologies, as Singapore gradually ramps up productivity in the sector. These technologies will include Cross Laminated Timber, or prefabricated wood structures, which have been cleared by local fire authorities as being safe for use.

Singapore has adopted European design codes for timber, which include fire precautions and other engineering considerations when building with wood. London, for example, is emerging as a city that is seeing a mini-renaissance in the use of timber for building projects. When completed, Banyan Wharf - a 10-storey residential and commercial project in the English capital - will be be the tallest cross-laminated timber building in Europe. The development uses cross-laminated timber wood for its floors and walls.

Singapore has studied how European projects keep timber structures safe and secure - against risks such as fire. Thanks to modern construction techniques, timber structures can be designed to withstand a blaze. Said Mr Nick Milestone, Project Director for Banyan Wharf: "This is solid wood and not timber frame. Basically wood chars at 0.7 millimetres per minute, therefore anything over 42 mm thick will take more than one hour to crack."

When flames come into contact with a wooden surface, the charring produces a layer of charcoal that actually slows down the penetration of fire. As fire needs oxygen in order to burn, and oxygen isn't present within the core of the timber structure, the inside of thestructure remains intact for quite a while even as flames lick the outside.

Another issue is the threat of wood-eating termites. Mr Markus Tiling, Director of Timber Concept said this problem can be overcome with chemicals: "If you put chemicals onto the wood or into the wood, the wood becomes not so interesting for the termites and the insects."

Alternatively, timber can be overlaid with protective layers of other material, which further guard wooden building structures from fire or insects. Such hybrid structures can be seen in London properties like Bridport House.

Singapore's fire regulations now allow timber to be used alongside other materials like concrete for building. 

- CNA/xy

Workers at Punggol site told to vacate makeshift dorm

MOM officers conduct checks after ST report on poor living conditions

Source: Straits Times / Top of The News

HUNDREDS of workers were told to move out of a makeshift dormitory in Punggol yesterday after checks by the authorities on the state of their living quarters.

The poor living conditions at the dorm, on one of the worksites of a housing project, were reported in The Straits Times on Tuesday.

Yesterday, when The Straits Times visited the dorm at about 7pm, workers were seen milling outside the site with luggage.

Workers said that men wearing official-looking tags had visited the dorm to check on their rooms, drains and toilets over the past few days. And yesterday at about 4pm, the men were told by the construction firm to vacate their rooms and get ready to move to other dorms in Mandai and Kranji.

A Manpower Ministry (MOM) spokesman said its enforcement officers conducted an inspection of housing quarters in Punggol yesterday morning "to ascertain the workers' living conditions".

Employers "are required to provide acceptable accommodation for their foreign workers", it said.

Those who fail to do so face a fine of up to $10,000, and/or up to 12 months in jail, for each foreign worker housed in poor conditions. They will also be barred from applying for new work passes or renewing existing ones.

MOM also encouraged the public to report such cases so that it can investigate and take action.

There are 200,000 beds in purpose-built dorms with facilities like foodcourts. But many foreign workers continue to be housed in quarters with poor conditions.

The Punggol dorm had broken urinals and choked toilet bowls. Workers also had to bathe using water that was meant to clean machinery, because of the poor shower facilities there.

But a supervisor based at the site said yesterday that the company is making changes.

"The company is trying to make things better for the workers by moving them to another dorm. The conditions here need to improve."

-By Amelia Tan & Aw Cheng Wei

Cool savings with new air-con system

Swiss-Singaporean breakthrough could cut energy costs by 40%

Source: Straits Times / Singapore

A CHEAPER, more efficient air-conditioning system to run a 50-storey office building has been developed by a team of Swiss and Singaporean researchers.

The system, which could save 40 per cent in energy costs, will be used for the first time in Asia at an international school in Singapore.

Not only does it reduce energy costs, it also takes up less space than conventional means, translating to construction cost savings of up to 29 per cent.

The developer of the energy-efficient building technology, Future Cities Laboratory, signed a deal yesterday to install it as a prototype at a $50 million addition being built at the United World College of South East Asia's Dover campus.

The 24,000 sq m school building will be completed by next year and, in 2018, Future Cities Laboratory hopes to showcase the system's performance to potential buyers such as commercial property developers.

The potential savings are significant as, in Singapore, consumption by buildings makes up nearly a third of total electricity usage, and 60 per cent of buildings' electricity use goes to cooling.

Conventional air-conditioning systems use water at 6 deg C to dehumidify and cool air, which is then piped around a whole building through air ducts.

The prototype, however, dehumidifies air first using small ventilation units built directly into the building's facade. This cuts the amount of ductwork required for transporting the air.

It also uses a separate cooling system: Chilled water - which needs to be only 17 deg C - is injected into special ceiling beams to cool the surrounding area.

As water can absorb more heat than the same volume of air, using these ceiling beams to cool a room takes up much less space than conventional overhead air ducts.

The technology is already used in Swiss offices for heating, but was adapted for cooling in the warm, humid tropics.

Future Cities Laboratory is set up under a National Research Foundation programme called Create (Campus for Research Excellence and Technological Enterprise), in which Singapore collaborates with different foreign universities.

UWCSEA head of college Chris Edwards said of the decision to use the new system: "We do have pragmatic motives. Sixty per cent of our energy bill goes to air-conditioning, so we are genuinely thrilled about the prospects."

-By Grace Chua

Real Estate Companies' Brief

KOP plans to acquire land use rights for Shanghai resort

Source: Business Times 

KOP Limited said it has progressed in its plans to develop an integrated indoor winter resort in Shanghai, entering into a collaboration agreement with Shanghai West Hongqiao Business Development to work together in procuring the land use rights for six plots of land in West Hongqiao Business District.

Global Economy & Global Real Estate

Asia-Pac hotel investment hits 5-year high in 2013

But lower transaction volume expected for S'pore this year

Source: Business Times / Property

[SINGAPORE] Investing in Asia-Pacific hotels seemed the thing to do last year, with the hospitality investment market in the region hitting a five-year high on a transaction volume of US$12.83 billion.

This was 30 per cent higher than the figure for 2012, said real estate services firm Cushman & Wakefield in its report on hotel markets across 17 gateway cities and prime destinations in Asia and Australia.

China was the largest market last year, followed closely by Singapore.

China accounted for US$2.636 billion or 20.5 per cent of the total investment volume; Singapore came in at US$2.634 billion, with Japan third (US$2.61 billion) and Australia, fourth (US$2.271 billion).

-By Nisha Ramchandani

GIC launches retail mall in Melbourne CBD

Over 200 stores and a food court spread across 48,000 sq m

Source: Business Times / Property

THE retail mall in Melbourne's central business district (CBD) that GIC Real Estate co-invested with Colonial First State Retail Property Trust Group (CFX), was launched yesterday.

Spreading across 48,000 square metres, Emporium Melbourne will host more than 200 stores - consisting of both international and Australian fashion brands as well as a 1,100-seat food court.

The mall will also link with the Myer Melbourne department store and to David Jones (a high-end Australian department store chain) via pedestrian bridges and tunnels.

This launch comes five years after the announcement that CFX and GIC had successfully entered into an agreement with Myer to acquire and redevelop the iconic Myer Melbourne site for a total of about A$1.1 billion (S$1.28 billion at current rates).

Buyers abandon homes in China city as prices fall

Source: Business Times / Property

[SHANGHAI] Falling property prices in China's eastern city of Wenzhou has triggered 6.4 billion yuan (S$1.3 billion) of bad loans as buyers abandoned homes and stopped making mortgage payments, the Economy & Nation Weekly reported.

Purchasers of 1,107 properties halted payments as prices dropped for 34 straight months, the Xinhua News Agency-affiliated magazine said earlier this week on its website, citing data from the local banking regulator.

A press officer at the Wenzhou branch of the China Banking Regulatory Commission declined to confirm the data.

China's slumping property market is a drag on the world's second-biggest economy and banks' profits, with lenders' soured loans increasing for almost three years.

-From Shanghai, China

Chinese Millionaire Roils Brokers Over Shrinking Mansion

Source: Bloomberg / Luxury

Millionaire Hiroshi Horiike spent two years searching California for a dream home, one grander than any he could find in his native China.

After visiting more than 80 properties in the Los Angeles area with an agent from Coldwell Banker, Horiike paid $12.25 million in cash for a four-bedroom, six-bath Tuscan-style mansion with a swimming pool, spa and guest house on 5.1 acres (2.1 hectares) overlooking the Pacific Ocean.

There was just one catch. After settling in, Horiike found the Malibu home had less living space than he’d been told -- a third less. It had 9,434 square feet (876 square meters) instead of the 15,000 square feet shown in marketing brochures from the seller’s agent, who also worked with Coldwell Banker.

Horiike, who also goes by his native Chinese name Peng Hong Ling after adopting a Japanese name as an adult, claimed he was cheated and sued the agent and the brokerage. He won a state appeals court ruling that sellers’ agents have a fiduciary duty to protect buyers’ interests, not just those of their clients, when there’s only one brokerage involved in a deal.

If left standing, the decision could compel disclosure of confidential client information or force brokerages to drop out of transactions where they represent both buyers and sellers, threatening commissions on tens of thousands of deals.

‘Luxurious Problem’

“This luxurious problem of a mansion that wasn’t big enough has become an industry’s potential nightmare,” said Dana Tsubota, an attorney in Oakland, California, who represents real estate developers and investors and isn’t involved in Horiike’s case. “The decision takes a large step away from what is current practice, and it would surprise me if brokers continue to have ‘dual agency’ deals if the ruling isn’t struck down.”

The issue of dual agency arises when the agents for both a home’s seller and its buyer work for the same brokerage. Florida,Colorado, Kansas and Wyoming are the only states that prohibit dual agency in real estate transactions, while most states -- including California, home to more than 10 percent of U.S. residential sales last year -- require disclosures by agents, according to the National Association of Realtors.

California Governor Jerry Brown last week signed a bill into law that extends dual agency disclosure requirements to commercial real estate deals.

Increasingly Common

Dual-sided transactions are becoming increasingly common as home brokerage companies such as Coldwell Banker’s parent, Realogy Holdings Corp. (RLGY), and Warren Buffett’s Berkshire Hathaway HomeServices take bigger shares of the market. The practice is especially frequent among agents who deal in multimillion-dollar properties.

Horiike sued Coldwell Banker and Chris Cortazzo, the Malibu mansion’s selling agent, in state court in Los Angeles in 2010, alleging false advertising, unfair business practices and breach of fiduciary duty. He claimed he overpaid as much as $5 million and demanded punitive compensation for misrepresentation of the home’s size.

Horiike, 56, lost a jury trial in 2012. That verdict was overturned in April by the appeals court, which ordered a retrial, saying that the jury received incorrect instructions. Coldwell Banker and Cortazzo then appealed to the California Supreme Court. It agreed last month to hear the request to reverse the appeals court’s decision.

New Disclosures

Coldwell Banker’s lawyers argue that agents will be forced to disclose information that buyers and sellers typically keep quiet, such as a homeowner needing a quick sale because of financial problems.

“The buyer’s or seller’s only options are to 1) agree to this nightmare; 2) forgo the sale or purchase they wanted to consummate; or 3) fire their sales person,” Coldwell Banker’s attorneys said in a court filing.

In California, licensed real estate agents must work for brokers, who have more credentials and are responsible for the agents’ actions. Coldwell Banker, the broker, and Cortazzo, its No. 1 selling agent in Malibu, are scheduled to file their opening arguments with the California Supreme Court by Sept. 15. The court may rule on the matter next year.

“I want justice,” Horiike, said in an interview at the Malibu mansion last month. “I don’t want anybody to be cheated by a real estate agent.”

Cortazzo declined to comment and referred questions to his attorney, Neil Gunny, who also declined to comment because the case is still pending. Coldwell Banker Residential Brokerage Co., the California affiliate named in the complaint, doesn’t comment on pending litigation, said Holly Taylor, a spokeswoman for the brokerage with Rogers & Cowan.

Billionaires’ Beach

Cortazzo said in court filings and testimony that a Malibu ordinance allows for more of a property’s space to be counted in its square footage, and that he explained to potential buyers, including Horiike, why he used the larger size in his brochure.

Malibu is a Los Angeles getaway for Hollywood celebrities, business barons and international investors. Pacific Coast Highway slices between a string of waterfront enclaves with names such as Paradise Cove and hills that are home to villas with ocean vistas. Property owners on Malibu’s Carbon Beach, nicknamed Billionaires’ Beach, include Oracle Corp. (ORCL) founder Larry Ellison and entertainment mogul David Geffen.

Cortazzo, a native of Malibu and real estate agent since 1994, “has attracted some of the biggest names in entertainment and business,” according to his website. He closed deals totaling $325.5 million last year, the seventh-highest volume of any U.S. agent, according to Real Trends Inc., a Castle Rock, Colorado-based consulting service.

‘Have Integrity’

“The secret is to work hard and have integrity,” he said on his website. “I am proof that you can reach the top without sacrificing your values.”

When he was a boy, Horiike’s four-member family lived in a 200-square-foot attic in Shanghai, where his father worked as a book editor and film critic. The family couldn’t afford an electric fan to get through the summer heat, he said. After earning a degree in Japanese at Shanghai University’s School of Foreign Languages, he moved to Japan, where he married, changed his name and became a Japanese passport holder.

He founded Large Horse International Group, a holding company headquartered in Hong Kong with about 2,000 employees that invests in energy deals and manufactures electric appliances and parts sold to customers including Whirlpool Corp. (WHR) He retired in 2002, at age 44, with plans to buy a California mansion larger than anything he could find in Asia.

“In Hong Kong or Japan, it’s impossible, because the land is very small,” he said. “Only here in America, I can find my dream house.”

Foreign Buyers

The case has implications for the growing number of cash-bearing foreigners, who may make quick deals dependent upon agent advice. International buyers spent $92 billion on American houses in the 12 months through March, led by a record $22 billion from Greater China, including Taiwan and Hong Kong, where Horiike resides much of the year. About 60 percent of the foreign buyers paid cash, according to a July report by the National Association of Realtors.

“At the end of the day, I think they trust America more than China,” Sam Van Horebeek, director of East-West Property Advisors, a Hong Kong-based firm that advises Chinese investors on U.S. real estate deals, said in a telephone interview.

Horiike started his Los Angeles search in 2005, guided by Coldwell Banker agent Chizuko Namba, who spent more than two years showing him dozens of homes in Beverly Hills and Bel Air, communities Horiike said he liked for their luxurious reputations. Nothing met his criteria.

Too Old

“Everything big was old,” Horiike said. “I wanted new, because I didn’t want to spend time to remodel.”

In November 2007, Namba took Horiike to Malibu to see the house shown by Cortazzo, who told Horiike it was built in 2002, before Malibu imposed a size limit on new homes, according to court filings.

“I said that this property cannot be duplicated,” Cortazzo testified in September 2012, according to a trial transcript.

“My heart was moved by his words,” Horiike said in last month’s interview.

After viewing the house in the afternoon, Horiike returned in the evening to see the property, which climbs a hill overlooking Pacific Coast Highway and the ocean. He negotiated the price after taking a flight to Hong Kong, according to a court filing.

Cash Buyer

A full appraisal wasn’t necessary because Horiike was paying with cash and didn’t need to qualify for a mortgage. While the house was in escrow, Horiike ordered inspections of the utilities and foundation. He didn’t ask to measure the square footage or obtain a copy of the architect’s blueprints, according to court filings. Los Angeles County property records list the size of the living area as 9,434 square feet.

Horiike learned of the size discrepancy only in 2009, when he sought a city permit to remodel a sun room. Cortazzo said that the larger size he used is valid when the lower level, garage and patio areas are included, according to court filings. Cortazzo said county records of the house size didn’t reflect Malibu’s “post-2005 formula for allowable square footage,” which would add the basement and other spaces to the total area, and that he relied on the home’s architect for the 15,000-square-foot figure.

Single Meeting

He also said that he was never asked nor agreed to represent Horiike. The two met only the day Horiike visited the Malibu house, and his limited English made it hard for them to talk directly, Cortazzo said in court filings. A trial court jury, acting on the judge’s instructions, found that Cortazzo as the listing salesperson had no fiduciary duty to the buyer.

Namba, Horiike’s agent, declined to comment on the case. She wasn’t named in the complaint because she didn’t misrepresent the size of the house and “to sue Coldwell Banker is to sue her,” Horiike said in an e-mail.

Horiike appealed and a state appeals court panel in Los Angeles last year ordered a new trial. It cited closing documents required under state law establishing that Coldwell Banker, as broker for both the buyer’s and seller’s agents, had “a fiduciary duty of utmost care, integrity, honesty and loyalty” that extended to Cortazzo as well. Coldwell Banker appealed that ruling before a second trial could be held.

The appeals court also said that Cortazzo told shoppers who had looked at the home earlier that the architect put the living space at 15,000 square feet and they should hire a specialist to verify that. Cortazzo’s lawyers said in court filings that he removed the square footage from the official listing and put it at zero so he could personally explain to a potential buyer his rationale for using 15,000 square feet in the sales brochure -- which he said he did with Horiike.

No Intent

A judge or jury “could conclude that Cortazzo was aware of material information that he failed to provide Horiike, even though he did not have a fraudulent intent,” the appeals court said. No court has found Cortazzo or Coldwell Banker liable, with the appeals court and California Supreme Court examining only the law, not the actions of the agent or brokerage.

“If the appellate court decision is upheld, the fact that there was no misrepresentation is still the same, but it would change the landscape of consumers choosing their own professional, as Mr. Horiike did, instead of having fiduciary relationships foisted on parties with persons they have not selected and may not ever even meet,” Lotus Lou, a California Association of Realtors spokeswoman, said in an e-mail today.

Horiike, who’s divorced and wears his red-tinted hair down to his collar, spends about 100 days a year at the Malibu home, which he shares with three of his 10 dogs. He rejected offers to resolve his complaint against Coldwell Banker and Cortazzo through arbitration. He said he wants the outcome to be public.

“This case isn’t just for me,” Horiike said. “It’s about justice for people.”

The case is Horiike v. Coldwell Banker Residential Brokerage Co., S218734, California Supreme Court (San Francisco).

-By John Gittelsohn and Karen Gullo

Case of shrinking US mansion roils brokers

Court ruling over China millionaire's suit could threaten dual-agency deals

Source: Business Times / Property

[LOS ANGELES] Millionaire Hiroshi Horiike has spent two years searching California for a dream home, one grander than any he could find in his native China.

After visiting more than 80 properties in the Los Angeles area with an agent from Coldwell Banker, Mr Horiike paid US$12.25 million in cash for a four-bedroom, six-bath Tuscan-style mansion with a swimming pool, spa and guest house on 2.1 hectares overlooking the Pacific Ocean.

There was just one catch. After settling in, Mr Horiike found that the Malibu home had less living space than he had been told - a third less. It had 9,434 square feet instead of the 15,000 sq ft shown in marketing brochures from the seller's agent, who also worked with Coldwell Banker.

Claiming that he was cheated, Mr Horiike sued the agent and the brokerage. He won a state appeals court ruling that sellers' agents have a fiduciary duty to protect buyers' interests, not just those of their clients, when there's only one brokerage involved in a deal. If left standing, the decision could compel disclosure of confidential client information or force brokerages to drop out of transactions where they represent both buyers and sellers, threatening commissions on tens of thousands of residential deals.

-From Los Angeles, US

Iloilo beckons - and the migrants flock back

Sleepy Philippine towns are being transformed with big developments

Source: Business Times / Property

[MANILA] Jennifer Ann Palmares-Fong has come home. Fifteen years after leaving Iloilo in the Philippines for the bright lights of Manila, she and her friends have been lured back as her once-quiet hometown is transformed.

"Never in my wildest dreams did I expect there would be these developments mushrooming all over," Ms Palmares- Fong, 32, said as she prepared to take clients to view a site for new US$57,000 condominiums. "It used to be a sleepy place; now, at night it's all lights."

Iloilo, the second-largest city on Panay Island, is at the centre of the country's biggest provincial transformation since independence in 1945 as President Benigno Aquino tries to reverse decades of migration to Manila and abroad.

New airports, roads and ports are drawing property developers, retailers and business-processing companies that fuelled a decade of growth in the capital, such as US call-centre operator StarTek Inc and hotel chain Marriott International Inc.

-From Manila, The Philippines

Midtown Manhattan losing rental shine

Source: Business Times / Property

[NEW YORK] The lustre is fading on some of midtown Manhattan's shiniest skyscrapers.

Buildings in Midtown, from 30th Street to Central Park South at 59th Street, have more vacant blocks of contiguous office space than at the height of the recession in 2009, as landlords face increased competition from buildings downtown and at Hudson Yards on the far west side, according to a study by Savills Studley Inc, a New York-based real estate brokerage.

"The epicentre of this city has shifted several times before and is in the process of shifting again," Michael Cohen, tri-state region president of brokerage Colliers International, said in an interview. Midtown is "the hole in the doughnut", where landlords are vulnerable to extended vacancies and rents that probably won't rise dramatically.

The area, traditionally the most prestigious and expensive US office market, has turned into one where landlords must market space aggressively, pour money into renovations and seek early lease renewals to retain tenants. The technology and media companies that have driven New York's leasing in recent years have clustered in midtown south, between Canal Street and 30th, or moved to lower Manhattan in search of cheaper rents.

-From New York, US

Lowe’s CEO Remains Housing Bull Despite Forecast Cut

Source: Bloomberg / News

Lowe’s Cos. (LOW) Chief Executive Officer Robert Niblock remains optimistic about the U.S. housing recovery, even after trimming the annual sales forecast for the second-largest U.S. home-improvement chain.

A harsh winter and spring’s late arrival subdued the retailer’s sales in the first quarter. While the chain regained most of that missed revenue in May, June and July, weather disrupted its business again as one of the coolest summers in years sunk sales of air conditioners.

With second-quarter revenue trailing its expectations, Lowe’s cut its full-year outlook to a gain of 4.5 percent, down from 5 percent in May. However, the retailer’s assumptions for the rest of the year are unchanged as further increases in home prices and job creation fuel renovations. The chain maintained its annual profit forecast of $2.63 a share.

“We are still bullish on the outlook for the industry, which gives us confidence in our guidance for the back half of the year,” Niblock said in an interview. “With continued appreciation in homes, homeowners have increased willingness to engage in discretionary projects -- many of them projects that they put off in a downturn.”

Larger rival Home Depot Inc. hit an all-time high yesterday after keeping its full-year sales outlook of 4.8 percent growth, while boosting its earnings forecast, helped by an increase in share buybacks. Investors saw the results as an encouraging sign for the home-improvement industry, sending Lowe’s shares higher.

Shares Rebound

Today Lowe’s rose 1.6 percent to $52.33 at the close in New York after falling as much as 3.5 percent earlier following its financial results.

“When you read about lower guidance on a press release it can affect the stock, but when any company can then explain their thought process that can often help,” David Schick, an analyst at Stifel Financial Corp., said in an interview. He recommends holding Lowe’s shares.

The Mooresville, North Carolina-based retailer also reported that net income in the quarter ended Aug. 1 rose to $1.04 billion, or $1.04 a share, from $941 million, or 88 cents, a year earlier. Analysts on average projected earnings of $1.03 a share, according to data compiled by Bloomberg. Sales rose 5.7 percent to $16.6 billion, matching the average estimate.

Same-store sales, considered an important measure of performance because only established stores are counted, advanced 4.4 percent. Analysts expected a gain of 4.1 percent, based on estimates compiled by Consensus Metrix.

Cool July

The decline in sales of air conditioners lowered revenue by that measure by 0.3 percentage point during the quarter, a period that included the coolest July in the U.S. since 2009, according to the National Oceanic and Atmospheric Administration.

Purchases of appliances also fell compared with a year earlier, when the category was strong with sales growth at a high-teen percentage rate, Lowe’s said.

Both Home Depot, based in Atlanta, and Lowe’s view real estate prices as a key indicator for growth because rising values prompt consumers to spend more on their homes.

While values have been consistently gaining for more than two years, the growth slowed to a 4.4 percent advance last quarter from an increase of 8.8 percent in the first quarter, according to the National Association of Realtors. Price appreciation is moderating as more properties are listed for sale and buyer demand slows, the group said.

Lowe’s stock had risen 18 percent in the 12 months through yesterday, while Home Depot increased 17 percent. That compared with a 20 percent gain in the Standard & Poor’s 500 Index.

Limited credit availability and weak wage gains have been obstacles to what has been an uneven housing recovery.

A potential catalyst for Lowe’s and Home Depot will be sales of existing homes, which could take off if mortgage rates remain low or decline, said Schick, the analyst. Purchases of that nature rose 2.6 percent in June for the biggest gain in eight months.

“That’s the opportunity for a more sustained cycle of home improvement,” Schick said. “There’s another gear that can hit for these companies.”

-By Matt Townsend

Kenyan Hotel Occupancy Rates Plunge as Industry Job Losses Mount

Source: Bloomberg / Luxury

Kenyan hotel occupancy rates have plunged to as low as 12 percent after foreign governments issued advisories against traveling to the coastal region and the capital, Nairobi, due to concerns about insecurity.

At least 20 hotels have temporarily closed, leaving an average of 100 workers per site unemployed, said Albert Njeru, secretary-general of the Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals and Allied Workers, today.

“We are only asking the governments of respective countries to lift the travel advisories,” Njeru said by phone.

The U.S. and U.K. are among governments that advised their citizens against non-essential travel to parts of Kenya after a series of gun and grenade attacks across the country, including a deadly raid by the militant Islamist group al-Shabaab on a Nairobi mall in September. Tourism, the biggest source of foreign exchange after tea, has been hurt, with arrivals of holidaymakers falling by about a fifth to 1.4 million last year.

At this time of the year, hotel occupancy levels typically range between 70 percent and 80 percent, Njeru said.

“We are calling upon employers to consider re-opening because this is when the high season begins,” he said.

-By Eric Ombok

Manhattan Vacancies Rise in Epicenter Shift: Real Estate

Source: Bloomberg / Luxury

The luster is fading on some of midtown Manhattan’s shiniest skyscrapers.

Buildings in Midtown, from 30th Street to Central Park South at 59th Street, have more vacant blocks of contiguous office space than at the height of the recession in 2009, as landlords face increased competition from buildings downtown and at Hudson Yards on the far west side, according to a study by Savills Studley Inc., a New York-based real estate brokerage.

“The epicenter of this city has shifted several times before and is in the process of shifting again,” Michael Cohen, tri-state region president of brokerage Colliers International, said in an interview. Midtown is “the hole in the doughnut,” where landlords are vulnerable to extended vacancies and rents that probably won’t rise dramatically.

The area, traditionally the most prestigious and expensive U.S. office market, has turned into one where landlords must market space aggressively, pour money into renovations and seek early lease renewals to retain tenants. The technology and media companies that have driven New York’s leasing in recent years have clustered in midtown south, between Canal Street and 30th, or moved to lower Manhattan in search of cheaper rents.

At the end of June, 35 blocks of at least 150,000 square feet (14,000 square meters) of contiguous space each were on the market in Midtown, compared with 31 available in mid-2009, according to Savills Studley. Vacancies may rise next year as tenants continue to consolidate, Keith DeCoster, the study’s author, said in an e-mail.

“The plethora of big block opportunities in Class A buildings sets the stage for one of most dynamic and mobile leasing markets in years,” he wrote in the study.

Media Moves

Publisher Time Inc. moving from the Time & Life Building on 50th Street to Brookfield Place in lower Manhattan, while Conde Nast Publications is relocating from 4 Times Square to 1 World Trade Center. Both buildings will need new tenants.

Financial companies are also heralding change. JPMorgan Chase & Co., the biggest U.S. bank, is considering moving its headquarters at 270 Park Ave. to the World Trade Center or the far west side, though no decision is imminent, according to a person with knowledge of the matter. Citigroup Inc. is relocating its main offices from 399 Park Ave. to buildings it occupies on Greenwich Street in lower Manhattan.

New York tenants are opting for value over prestige, said Craig Lemle, a senior managing director at Savills Studley. About 54 percent of the Manhattan office space available as of June 30 was considered Class A, the highest quality.

Until late 2012, that share had never exceeded 50 percent in data going back to the beginning of 2000, when 21.9 percent of available space was Class A.

Better Deals

“Traditionally, the better spaces get rented first,” Lemle said in a phone interview. “But in these days of managing costs, we’re finding more and more tenants are looking for space that’s, quote, a better deal, than for space with better views or more prestige or higher in buildings.”

Rents for Class A offices in Midtown averaged $84.81 a square foot at the end of the second quarter, up 8 percent from a year earlier. Top-quality space downtown averaged $62.92, a 15 percent jump, according to Savills Studley.

“There’s enough supply in Midtown to keep a lid on rents for the foreseeable future,” said Cohen of Colliers.

Midtown has 270 million square feet of office space, and about 57 percent is considered Class A. In lower Manhattan, from the foot of the island to Canal Street, about 42 percent of the 95 million square feet of offices are top-quality.

Savills Studley defines availability as currently vacant space plus anything available for occupancy within the next 12 months. Two towers under construction at Related Cos.’ Hudson Yards, the first of which will be ready late next year, and the 2 million square feet at the Time & Life Building, slated to become available in 2018, aren’t included in the study.

Landlord Makeover

Rockefeller Group, owner of the Time & Life Building on 50th Street and Avenue of the Americas, is among landlords who see vacancies as an opportunity to make over their buildings, a task more easily accomplished without tenants underfoot.

The entire property’s offices will become available when Time Inc. moves its headquarters to downtown’s Brookfield Place, said Dwayne Doherty, spokesman for Rockefeller Group. The landlord plans to spend millions of dollars to make it a multitenant building, which has “already attracted interest from tenants with major requirements,” he said in an e-mail.

Rockefeller Center

A similar overhaul is already under way at nearby 75 Rockefeller Plaza, where new landlord RXR Realty Corp. is upgrading the entire 630,000 square feet. The $150 million project includes raising office ceilings from 7.5 feet (2.3 meters) to 9 feet, and relocating mechanical equipment from the top floor to create new high-priced space, said Scott Rechler, RXR’s chief executive officer.

Rechler last year acquired the leasehold on the 31-story tower, which overlooks the Rockefeller Center skating rink and the location of its famous Christmas tree. Main occupants Warner Music Group and NBC Universal have vacated, and the building will be ready for new tenants in late 2015, he said.

The next two years are the “sweet spot” for RXR to attract new tenants because most buildings in the Hudson Yards area won’t be completed yet, Rechler said in an interview.

“There are over 75 tenants with leases over 100,000 square feet whose leases expire in that ’15-to-’17 period,” he said. “That’s who we’re talking to.”

Conde Nast

At 4 Times Square, principal tenant Conde Nast Publications Inc. will start moving to 1 World Trade Center in November, leaving more than 800,000 square feet behind. Landlord Durst Organization, which also operates and has a stake in the magazine publisher’s new headquarters, is responding with a $70 million to $80 million renovation of the building that will include new bathrooms, a climate-control and cogeneration system and elevators that can be summoned by destination.

Durst has listed Conde Nast’s space for occupancy in the first quarter. The landlord also is in talks to keep its other office tenant, the law firm Skadden Arps Slate Meagher & Flom LLP, whose rental agreement expires in 2020, said Thomas Bow, Durst’s leasing director.

Owners of older properties are competing for tenants amid Manhattan’s biggest surge of office construction since the late 1980s. Downtown, more than 2 million square feet are unrented at 1 and 4 World Trade Center, and another 2 million square feet are available at 3 World Trade Center, now being built.

Near the Hudson Yards train depot on Midtown’s far west side, about 20 million square feet of offices are proposed or under development.

Tech Demand

Mary Ann Tighe, CEO for the New York area at brokerage CBRE Group Inc., said Midtown is caught between the west side and downtown construction booms and “the warehouse phenomenon,” which drew technology companies including Google Inc, Facebook Inc. and EBay Inc. to vintage buildings in midtown south. A surge in rents in that area, roughly from 30th down to Canal streets, has helped trigger a surge of leasing in lower Manhattan.

“Midtown is definitely playing catch-up,” she said.

Tighe said she sees a rebound in demand from mid-sized financial firms, citing recent expansions by Neuberger Berman Group LLC and Blackstone Group LP, which have capitalized on cutbacks by the larger banks.

Plaza District

Not all of Midtown is weighed down by large vacancies. The Plaza District, home to some of the country’s highest office rents, “remains the preferred location” for private-equity and hedge-fund firms, which can afford the costs, according to Savills Studley. Availability in the submarket, named for its proximity to the Plaza Hotel overlooking Central Park, is well below the 13.4 percent average for Class A space Manhattanwide, the firm said.

Most tenants shopping for space now aren’t set on a particular location and are more interested in the building itself, according to Rechler.

“Historically, they’d say ‘I want to be on Park Avenue,’ or ‘I want to be on Sixth Avenue,’” he said. “They’re now willing to look at the whole spectrum of submarkets at what buildings specifically meet their needs.”

-By David M. Levitt

UBS O’Connor Hedge Fund Sells U.S. REITs in Second Quarter

Source: Bloomberg / News

UBS O’Connor LLC, the $5.6 billion hedge-fund unit within Switzerland’s biggest bank, sold most of its stakes in U.S. real estate investment trusts during the second quarter after the companies delivered some of the highest stock-market returns in the past year.

O’Connor cut its holdings by more than $900 million, selling almost every type of REIT, including those backed by apartments, offices, mortgage bonds, campgrounds, cell-phone towers and hotels, according to a filing last week with the U.S. Securities and Exchange Commission. The biggest reductions were in Mid-America Apartment Communities Inc., AvalonBay Communities Inc. and Equity Lifestyle Properties Inc.

The selling took place from the firm’s $4.8 billion global multi-strategy fund as the firm switched into other industries, according to a person with knowledge of the matter, who asked not to be identified because the information is private. O’Connor increased investments in information technology and consumer staples, including Coca-Cola Enterprises Inc. and Mondelez International Inc., the filing shows.

Ted Smith, a spokesman for O’Connor at Dukas Public Relations, declined to comment on the filing or the reasons for the sales.

Managers with more than $100 million in U.S. equities are required to file a Form 13F with the SEC. The O’Connor filing showed the market value of its U.S. equities at $4.6 billion as of June 30, a $513 million reduction from the prior quarter. It still holds REIT shares valued at about $292 million, according to data compiled by Bloomberg.

REIT Returns

REITs returned 15 percent in the first half of the year, according to the Bloomberg REIT Index, beating the 6.1 percent gain in the Standard & Poor’s 500 Index of large U.S. companies. The returns were bolstered by growing demand for commercial real estate, including apartment buildings. Since June 30, REITs have advanced 2.8 percent, compared with a 1.3 percent increase in the S&P 500.

The Bloomberg REIT Index rose 0.4 percent at the close of trading in New York. The measure, which comprises 141 publicly traded property owners, earlier gained 0.5 percent to the highest level since May 2013.

Investors have been drawn to REITs as the Federal Reserve holds interest rates near zero for the sixth year. In exchange for paying no corporate income tax, the companies are required by the Internal Revenue Service to pay out at least 90 percent of taxable earnings to shareholders.

They offer a yield of 3.5 percent, according to the Bloomberg REIT Index, which comprises 141 publicly traded property owners. That compares with yields of about 2.4 percent on 10-year Treasury notes.

Rising Rates

Rising interest rates will probably reduce the appeal of the yield that REITs offer. Expectations have heightened that the Fed will be forced to raise interest rates sooner than expected as the U.S. economy improves. Central bank officials said it may be appropriate to reduce economic stimulus sooner than anticipated, according to minutes of their July meeting.

O’Connor exited investments in firms including American Homes 4 Rent, Ryman Hospitality Properties Inc. and Sovran Self Storage Inc. It held stakes as of June 30 in REITs including mortgage firm Redwood Trust Inc. and American Realty Capital Properties Inc. The hedge fund increased its shares of Weyerhaeuser Co., a forest-products company.

The firm was founded as O’Connor & Associates in 1977 by mathematician Michael Greenbaum, with funding from brothers Edmund and William O’Connor, according to the 1999 book “The Predictors” by Thomas A. Bass, who wrote that the firm “made money hand over fist” and “developed a cult of secrecy.”

Swiss Bank Corp., a UBS AG predecessor, bought O’Connor in 1992. UBS O’Connor’s traders developed the bank’s equities proprietary-trading desk before opening hedge funds to clients in 2000.

-By Margaret Collins and Devin Banerjee