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28th August 2014

Singapore Real Estate

Mapletree snaps up US property for US$70m

This is its first foray into serviced residences in its JV with Oakwood

Source: Business Times / Property

MAPLETREE Investments has snapped up a property in the heart of America's Silicon Valley for US$70 million, marking its maiden acquisition in the United States.

The Temasek Holdings unit will retrofit and upgrade the property, a 184-unit, freehold apartment complex in Sunnyvale, and turn it into a modern serviced residence.

The property, to be fully owned by Mapletree, will be rebranded as Oakwood Silicon Valley under Mapletree's partnership with Oakwood Worldwide, a major operator-manager of serviced apartments.

Mapletree Group chief investment officer Chua Tiow Chye said on Wednesday: "While this is our first serviced apartment venture in the US, the liquidity and transparency of the market will provide opportunities for us to participate in its recovering economy and scale up our business."

-By Lynette Khoo

Mapletree buys apartment complex in Silicon Valley

$87m deal is S'pore property group's 1st investment in serviced apartments

Source: Straits Times / Money

PROPERTY group Mapletree Investments has made its first investment in serviced apartments following its partnership earlier this year with Oakwood Worldwide.

The Singapore-headquartered group, which is wholly owned by Temasek Holdings, bought The Cascades Apartments in Silicon Valley in the United States for US$70 million ($87.4 million), it said in a statement yesterday.

It intends to retrofit and upgrade the 184-unit freehold apartment complex into serviced apartments and rebrand the complex as Oakwood Silicon Valley.


The apartments are in the city of Sunnyvale and near the Cupertino Union School District with 20 elementary schools and five middle schools, Mapletree said.

Notable firms in the tech enclave include Yahoo, Juniper Networks, Applied Materials, Advanced Micro Devices and Broadcom.

Cupertino is also where Apple has located its new headquarters, which is just over 1km south of Oakwood Silicon Valley, Mapletree noted. In the neighbouring city of Mountain View are the offices of Internet behemoths Google and LinkedIn.

Mapletree said this is its first acquisition of a serviced apartment asset after it agreed in April to collaborate with Los Angeles-based Oakwood Worldwide, which provides temporary corporate housing.

As part of the collaboration, Mapletree took a 49 per cent stake in Oakwood Asia Pacific, which manages serviced apartments under the Oakwood brand in Asia Pacific and outside North America.

Under the joint venture, the two companies aim to open more than 100 corporate and serviced apartment properties in the next five years.

Mapletree said in April that it plans to buy and develop US$4 billion worth of serviced apartment assets in Asia, Europe and North America.

Oakwood helped to find the Silicon Valley property and facilitate its acquisition, Mapletree said.

The complex sits on a 214,000 sq ft site and has a gross building area of about 210,000 sq ft spread across six apartment blocks. Its facilities include a swimming pool, children's playground and clubhouse.

It is also within easy reach of major transport corridors and amenities such as retail shops and markets, the company added.

"This maiden acquisition of Oakwood Silicon Valley marks a good start to our partnership with Oakwood," said Mapletree group chief investment officer Chua Tiow Chye.

"Mapletree will continue to seek new investment opportunities in this asset class in Asia, the US and Europe."

Mr Chua also said the "liquidity and transparency" of the US market offers opportunities for Mapletree to participate in the country's recovering economy and scale up its business.

Mapletree is also gearing up to sign new management contracts under its partnership with Oakwood, he added.

Oakwood was founded in 1960 and now manages properties in more than 25,000 locations across North America, Latin America, Europe, the Middle East and Africa and the Asia Pacific region, according to its website.

-By Fiona Chan

Despite labour crunch, firms still send workers for training

Companies say improving workers' skills results in higher productivity

Source: Straits Times / Top of The News

COMPANIES are heeding the call to send workers for structured training and rolling out more programmes to support this, even though it is often hard to free them up during work hours.

They are willing to do so, say bosses, as it ultimately results in higher productivity - better skilled workers can take on more responsibilities and make fewer mistakes, while greater efficiency also ensures a smooth workflow despite the labour crunch.

Said Mr Mohamed K. Rafin, chief corporate officer of the Park Hotel Group: "Training helps us to do more with less."

The benefits of training have led several firms in sectors such as hospitality, logistics and engineering to support new plans to roll out structured skill programmes for workers.

On Monday, the Education Ministry announced that it was working with schools and firms to provide structured on-the-job training for polytechnic and Institute of Technical Education (ITE) graduates.

But sparing workers for training also means having to deal with inconvenience and higher costs at times, said firms.

For instance, logistics company DHL Singapore often has to redeploy staff in one warehouse to cover those in another who are attending classes. Part-timers are sometimes hired too.

As Mr Paul Wong, human resource director of DHL Supply Chain Singapore, said: "Training requires effort, planning and a lot of commitment from managers."

However, even with planning, some firms are so short of workers that they cannot spare staff to attend full-day courses.

Instead, firms such as Japanese restaurant chain Sakae Holdings and Concorde Hotel in Orchard Road get workers to attend two- to three-hour courses during off-peak periods in the work day. Sakae also gets Workforce Skills Qualifications trainers to run classes at its outlets.

Bosses say that training has another advantage: better staff retention.

Mr Brenton Ong, human resource director of Concorde Hotel, said workers who are trained to take on more responsibilities such as housekeeping can earn $200 to $300 a month on top of base monthly wages of about $1,500. "When workers earn more, they are happier and they stay on longer," said Mr Ong.

Mr Tay Cheng Hoo, human resource director of German electronics firm Rohde & Schwarz, agrees that better training boosts morale.

Mr Tay said good training schemes, competitive salaries and a supportive work environment helped to keep the firm's staff attrition rate at an average of about 9 per cent in recent years. This compares with 15 per cent in the engineering sector.

Workers who rose up the ranks with training said they are loyal to their companies because of the opportunities given to improve their skills.

Take ITE graduate Gladys Lim, 38, who draws a five-figure salary as a vice-president at Sakae Holdings. Ms Lim, who oversees more than 40 restaurants, has gone for seminars and conferences to build up her interpersonal skills and knowledge in areas like food safety.

"Bosses in other companies won't even consider me for bigger job roles because I am a non-degree holder. But my bosses saw the potential in me and gave me projects for me to grow. I am very thankful," she said.

-By Amelia Tan

Real Estate Companies' Brief

OCBC in talks with Thai firm to sell UE stake

Source: Business Times / Companies

OCBC Bank and its insurance arm, Great Eastern Holdings, have agreed to exclusively discuss a sale of their stakes in United Engineers (UE) and WBL Corporation with a company controlled by Thai tycoon Charoen Sirivadhanabhakdi and his wife, Khunying Wanna Sirivadhanabhakdi.

The exclusivity agreement, which Mr Charoen is carrying out through TCC Top Enterprise, began on Tuesday and will last for six weeks after due diligence is granted.

OCBC shares last traded at S$10.01 on Wednesday. Great Eastern closed at S$22.70, while UE headed out at S$2.82.

OCBC, Great Eastern in talks to sell UE, WBL stakes to Charoen

Source: Straits Times / Money

OCBC Bank and its insurance subsidiary Great Eastern Holdings are in exclusive talks to sell their stakes in United Engineers (UE) and its WBL Corp unit to Thailand's richest man.

The discussions started on Tuesday and will expire six weeks after Thai billionaire Charoen Sirivadhanabhakdi's TCC Top Enterprise begins due diligence on the companies, according to a filing to the Singapore Exchange by OCBC and Great Eastern yesterday.

Selling the stake would help OCBC, South-east Asia's second-largest lender by assets, bolster capital after its US$5 billion (S$6.2 billion) takeover of Hong Kong's Wing Hang Bank this year.

Companies backed by Mr Charoen have announced US$4.5 billion of acquisitions this year, according to data compiled by Bloomberg.

"This positive development gives us a hint as to why OCBC's share offering to help fund the Wing Hang Bank acquisition was on the extreme low side of expectations," said Mr Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia with a "buy" rating on the Singaporean lender.

"OCBC and Great Eastern will likely book gains on the sale of their United Engineers and WBL stakes, and this will take some pressure off of capital ratios," he noted.

OCBC said last week it plans to raise $3.37 billion from selling stock to existing shareholders to bolster its balance sheet following the Wing Hang purchase.

The Singapore bank said its common equity Tier 1 capital adequacy ratio, a measure of financial strength under Basel III guidelines, will fall to 13.2 per cent following the acquisition and the rights offer, from 14.7 per cent before the takeover.

OCBC, its insurance unit and the bank's founding Lee family own a combined 34.1 per cent stake in United Engineers, according to a filing in August last year.

In 2012, OCBC entered into talks to sell its holdings in Fraser & Neave (F&N) and Asia Pacific Breweries (APB) to Mr Charoen's Thai Beverage.

That touched off a three-front bidding war for the two companies, with Heineken eventually buying APB and Mr Charoen beating out OUE for F&N in deals that totalled US$15 billion, data compiled by Bloomberg shows.

Mr Charoen is Thailand's richest person with a net worth estimated at US$12.4 billion, according to Bloomberg Billionaires Index.

OCBC shares eased two cents to $10.01, Great Eastern shares rose by three cents to $22.70 while United Engineers climbed six cents to $2.82, pushing the company's market value to $1.8 billion.

-By Bloomberg

Straits Trading Building

Source: Business Times

The Business Times reported on Tuesday that the Straits Trading Building, currently owned by Straits Trading Company (STC), may be sold to an overseas party in Asia for about S$450 million, implying S$2,800 per square foot of NLA (net lettable area). This is understood to be a benchmark pricing for an office block in recent years. The price is understood to imply an exit yield of 3 per cent. The property, which was completed in 2009 and has a NLA of 159,000 sq ft, is currently 100 per cent occupied and anchored by Rajah & Tann, one of Singapore leading law firms and the headquarters of STC.

Global Economy & Global Real Estate

Vanke offers discounts to Taobao shoppers

Source: Business Times / Property

[BEIJING] China Vanke Co, the country's biggest developer, teamed up with Alibaba Group Holding Ltd to offer discounts of as much as US$325,000 to home buyers who also shopped on the e-commerce company's Taobao Marketplace.

Vanke will grant discounts of two million yuan (S$405,860) on select properties if the home buyer spent more than two million yuan on Taobao in the last year, according to a statement on Taobao's website. Spending one yuan makes buyers eligible for a 50,000 yuan rebate.

Vanke and other developers have cut prices since March to lure homebuyers amid a slump in the nation's property market, according to China Real Estate Information Corp. Last month, new-home prices fell in the most cities tracked by the government since January 2011, as tight mortgage lending deterred buyers.

Alibaba, meanwhile, is preparing for an initial public offering (IPO) in the US that may raise as much as US$20 billion - possibly making it the largest IPO ever in the US.

Uproar over NY condo with entrances for rich and poor

Project combines condos with luxury facilities and affordable rental units that can't share the perks

Source: Business Times / Property

[NEW YORK] A 33-storey glassy tower rising on Manhattan's waterfront will offer all the extras that a condo buyer paying up to US$25 million would expect, like concierge service, entertainment rooms, and unobstructed views of the Hudson River and miles beyond.

The project will also cater to renters who make no more than about US$50,000. They will not share the same perks, and they will also not share the same entrance.

The so-called poor door has brought an outcry, with numerous officials now demanding an end to the strategy. But the question of how to best incorporate affordable units into projects built for the rich has become more relevant than ever as Mayor Bill de Blasio seeks the construction of 80,000 new affordable units over the next 10 years.

The answer is not a simple one. As public housing becomes a crumbling relic of another era, American cities have grown more reliant on private industry to build housing for the poor and working class. Developers say they can maximise their revenues, and thus build more affordable units, by separating them from their luxury counterparts.

-From New York, US

Mumbai developers co-opt slum dwellers

Developments rehouse, employ former slum residents

Source: Business Times / Property

[MUMBAI] By the time Indian developer Babulal Varma stepped in, bulldozers and police with truncheons were a day away from forcibly evicting the last residents of a corrugated-roofed, rain-tarped slum that had grown like a tumour into a prime area of central Mumbai.

This time, Mr Varma recounted, it was an old woman holding up his plans to replace the slum with a US$1 billion complex: six luxury towers with million-dollar apartments overlooking the Arabian Sea, coupled with housing blocks nearby with free homes for all the slum dwellers with rights to the land. It was not that the old woman did not want a free apartment. She wanted two. Yet the law permits developers to give only one.

So Mr Varma paid her a visit. The woman lived with her two sons, and the sons' wives, in a 90-square-foot shack. The wives argued. Constantly. Mr Varma listened and came back with a piece of paper showing a separation line drawn through the unit that they would be getting, with a second door cut into the hallway. The wives could live separately, he explained. Agreement came in 45 minutes. Construction began the next day.

"If you can understand their problem, if you can understand their issues, all the issues are very small, like a peanut, but to them this is the biggest thing," the 44-year-old co-founder of Omkar Realtors & Developers Pvt, who cites karma as his operating philosophy, said in an interview beside an incense-burning Hindu altar. "This is my approach till today. It's a human approach to each and every person."

-From Mumbai, India

Luxury-Apartment Boom Favors D.C.’s Millennial Renters

Source: Bloomberg / Personal Finance

Mandy Johnson was priced out of Virginia Square Towers, a luxury-apartment building rising across the Potomac River from Washington, D.C., where about $3,000 a month would bring perks such as a swimming pool, yoga studio and a game room with virtual golf and zombie dodge ball.

Less than 24 hours after declining to sign the contract in June, she got an e-mail from a leasing manager offering two months’ free rent. That brought the monthly payment down for Johnson and her roommate by about $450 over the term of the lease and put the place within reach.

“The building is still under construction, so we have to deal with that part, but we are also able to have this brand new apartment for the same price as one in older buildings, so we went for the shiny object,” said Johnson, 28, who works at a nonprofit that gives scholarships to military families.

Renters like Johnson are coveted in the Washington metropolitan area, which has become the worst U.S. market for apartment landlords. While rents across the country are approaching record highs on demand from young Americans who are waiting longer to buy, a glut of construction in the nation’s capital has limited gains in leasing costs and given bargaining power to tenants who can afford higher-end housing.

Rents in the Washington region, including the suburbs of Maryland and Virginia, declined 0.1 percent in the second quarter, compared with national average gains of 3.3 percent, according to apartment-research company Axiometrics Inc. That follows a jump in inventory, with 14,840 newly constructed units coming to the area this year, an 86 percent increase from 2013, data from the Dallas-based firm show.

Upper End

Renters at the upper end of the market, where new projects are concentrated, have enjoyed the most benefits in a city that remains relatively expensive. The average monthly rent in Washington, at $1,605, was 39 percent higher than the U.S. average last quarter, according to Axiometrics.

“As supply comes online, landlords are forced to reduce rents to fill up and stabilize the new properties,” Stephanie McCleskey, vice president of research, said in an e-mail.

That gives renters leverage and options for homes that some of them wouldn’t otherwise be able to afford. Landlords are offering concessions such as a free month’s rent or removing fees for parking or pets, according to Rick Gersten, chief executive officer of Urban Igloo, a company that helps renters find places to live in Washington, Virginia, Maryland and the Philadelphia metro area.

Sticker Shock

“We have a lot of renters coming back to us who have sticker shock after that first year,” Gersten said in a telephone interview. “They’re getting hit with rent increases because the buildings are now at 95 or 96 percent occupancy and the millennials, who this market is catering to, will literally move across the street if they feel like they can get a better rent at another building leasing up.”

Johnson said she’ll probably have to move if her rent is raised back to market rate at the end of her lease. She expects the flurry of development will give her room to negotiate.

“I’ve heard if you’re a good renter and always pay on time you can finagle a little bit and tell them, ‘We’ll stay here if you leave us at the same price,’” Johnson said in a telephone interview. “If they did raise it to the normal amount I would probably be in trouble. I hate moving, but there’s so much being built around us.”

Building Boom

Washington-area building began booming in 2010. Rents during the real estate crash fell half as much as in the rest of the country and began climbing sooner. The region was among the top three U.S. markets for job growth, and developers began work on 5,186 apartments that year, according to Axiometrics.

The construction wave gave rise to towers and residential enclaves with amenities such as sundecks with grilling stations and free fitness classes catered to urban millennials -- about 85 million people born from the early 1980s through 2000 -- who want to live close to work.

The excess of new luxury-housing units wasn’t mirrored at the low end. Since 2000, Washington lost half of its low-cost rental units, those with monthly rent and utility expenses of less than $750, according to a 2012 report from the D.C. Fiscal Policy Institute. The number of apartments with costs of at least $1,500 more than tripled.

Mayor Vincent C. Gray has been fighting back. He set aside $100 million for affordable housing this year after creating a task force in 2012 with goals to build or preserve 10,000 affordable units by 2020. So far, 5,938 units have been built or are under construction, with an additional 5,861 expected to be produced or preserved in the next two years, according to a document from the Office of the Deputy Mayor for Planning and Economic Development.

Pushed Out

The city’s effort hasn’t eased rising rents or building in some of its hippest neighborhoods, which has pushed out many of the longtime, lower-income residents, said Rolf Pendall, director of the Metropolitan Housing and Communities Policy Center at the Urban Institute in Washington.

“More low-income people are finding housing outside the boundaries of the district, either in Prince George’s County in Maryland or in more distant locations like Prince William County in Virginia,” he said in a telephone interview.

The high cost of land makes building affordable housing a serious challenge, and preserving units in a hot real estate market can be difficult because owners of buildings that were subsidized for a limited period may want to opt out and offer homes for rent or sale to upper-income residents, Pendall said.

There were 25,481 Class A, or high-end, apartments either under construction or being marketed midyear, according to Delta Associates, an Alexandria, Virginia-based property-research firm. The average rent in central Washington, which includes some of the city’s most expensive neighborhoods, was $2,847 as of the end of June.

REIT Downturn

That’s still not high enough to benefit investors such as real estate investment trusts, which may experience a lengthy downturn into 2016 in Washington, “the weakest apartment market in the country right now,” said Haendel St. Juste, a Morgan Stanley analyst.

Equity Residential, the country’s largest publicly traded apartment landlord, projects revenue for its Washington-area properties will fall 1 percent this year, Chief Operating Officer David Santee said last month on a call with investors.

Cities including Seattle, San Francisco and Denver, where there’s a strong job market, are expected to produce more than 5 percent revenue growth, according to the Chicago-based REIT.

Landlords in cities including Austin, Texas, and Charlotte, North Carolina, that are experiencing slower job growth may face challenges similar to Washington in absorbing the new supply of apartments, St. Juste said.

U Street

UDR Inc., a Highland Ranch, Colorado-based apartment REIT, said last month that its worst-performing Washington property in the first quarter had about a 4 percent drop in revenue. It was a building in the U Street corridor, where up and down both sides of bustling 14th Street, new projects are emblazoned with signs that read “Now Leasing.”

They’re likely to fill up eventually. The share of young adults living with their parents is near a many-decade high and long-term demographic changes mean more new households will be created and headed by young people, Jed Kolko, chief economist at San Francisco-based Trulia Inc., said in an e-mail.

“We’re at the point of the recovery when young adults are starting to move out of their parents’ homes,” Kolko said. “Few will move from their parents’ basements directly into homeownership. Most will rent first before they buy.”

For now, young renters like Johnson, in her luxury Arlington, Virginia, building, can take advantage of discounts from landlords competing to a keep their new apartments full with free breakfasts and lounges where they can drive golf balls into a screen, or play games like zombie dodge ball, where players throw balls to knock down virtual marauding zombies in a video game.

Johnson expects to have a courtyard view from her floor-to-ceiling windows when construction on the outdoor space is completed. And when the rent does go higher, she knows she has options in the area. This apartment is her third home in less than five years.

“It’s nice,” she said. “At the price it is now.”

-By Heather Perlberg

Paramount Group Files for REIT IPO Poised to Be Largest

Source: Bloomberg / News

Paramount Group Inc., a U.S. office landlord, filed for an initial public offering that is poised to be the largest ever for a real estate investment trust.

The New York-based company plans to raise more than $2.5 billion in the stock sale, according to people familiar with the matter who asked not to be identified because the information is private. A filing by the company yesterday didn’t give a price range or number of shares to be sold. Paramount last month filed a confidential registration statement with the Securities and Exchange Commission.

The company, which plans to qualify as a REIT, owns or has stakes in 12 office buildings in New York, Washington and San Francisco. Office rents in the two coastal cities are growing faster than in many other parts of the country as the economy grows and technology companies expand.

The largest IPO of a U.S. REIT was a $1.4 billion offering by Douglas Emmett Inc. in 2006, according to data compiled by Bloomberg. There have been only three initial stock sales by REITs this year, down from 19 in 2013, according to the National Association of Real Estate Investment Trusts.

Paramount’s properties, which include San Francisco’s One Market Plaza and New York’s 712 Fifth Ave., were 90.7 percent leased to 253 tenants as of June 30, according to the filing. Its New York buildings accounted for 76 percent of its annualized rent.

‘Best, Strongest’

“San Francisco is the best, strongest office market in the country at the moment,” said Robert Gadsden, portfolio manager at Alpine Woods Capital Investors LLC in Purchase, New York. “New York is showing signs of slow, grind-it-out improvement.”

Yesterday’s filing included a placeholder of $100 million, an amount used to calculate registration fees that will change when the company sets the price range and number of shares it will sell, closer to the IPO.

Jason Chudoba, a spokesman for Paramount, declined to comment on the offering.

Effective rents, the amount paid after landlord discounts, may climb 6.1 percent next year in San Francisco and 5 percent in New York, compared with 3.8 percent growth for the U.S., according to a Reis Inc. forecast.

Paramount’s predecessor company was founded by Werner Otto in 1978. Otto, who started Germany’s largest mail-order company from a shoe factory in Hamburg, died in 2011 at the age of 102. In 1965, he started ECE Projektmanagement GmbH, which has grown to now manage 196 shopping centers, according to ECE’s website.

Paramount is led by Albert Behler, its chief executive officer since 1991.

The underwriters on the offering are Bank of America Corp., Morgan Stanley and Wells Fargo & Co.

-By Brian Louis

Foxtons Falls Most Since IPO as CEO Warns London Slowing

Source: Bloomberg / Luxury

Foxtons Plc (FOXT), a property broker focused on London and southeast England, declined the most since it first sold shares to the public after Chief Executive Officer Nic Budden said the U.K. capital’s property market may be facing a slowdown in the second half.

Foxtons declined 10 percent in London, the most since its initial public offering on Sept. 20. The shares have fallen about 20 percent this year, giving the London-based company a market value of 745 million pounds ($1.2 billion).

“We expect the growth in transaction volumes to slow from the rapid rate seen in the first half,” Budden said in a statement today. “The policy initiatives introduced in 2014 aimed at controlling mortgage lending, together with the expectation of increases in interest rates, are now having an impact on short-term demand among buyers.”

Growth in London home prices is slowing after the Bank of England and a U.K. financial regulator introduced tougher affordability checks and stress tests to curb lending and borrowing excesses. Prices will gain 15 percent this year, slow to 5 percent in 2015 and likely not grow in 2016, London-based broker Savills Plc (SVS) said in an e-mailed statement yesterday.

Foxtons said five new branches opened in the first half, bringing the total to 49, and two more are scheduled to open in the second half. Pretax profit for the six months through June climbed 57 percent to 23.1 million pounds, according to the company’s statement.

-By Patrick Gower