Singapore Real Estate DC rates for non-landed residential use dip on weaker home prices No change for landed and industrial use; 9% average rise for places of worship, hotels Source: Business Times / Top Stories THE authorities have trimmed development charge rates for non-landed residential use by an average of 1.6 per cent from Monday. This is not surprising given the weakening in non-landed private home prices, say analysts. Landed residential DC rates were left untouched as were the rates for industrial use. For commercial use, DC rates were raised 1.9 per cent on average.
DC rates - which are payable for enhancing the use of some sites or building bigger projects on them - will go up by an average of 9 per cent each for two use groups: one which includes hotels and hospitals, and the other, places of worship and civic and community institutions. -By Kalpana Rashiwala Development charges for non-landed residential sites fallSource: Today Online / Business SINGAPORE — Charges that developers have to pay to enhance the use of land will be lowered for almost half of the geographical sectors in the non-landed residential segment for the next six months — the first decline since March 2012 — amid a slowing property market as a result of repeated rounds of government curbs. Analysts said the downward revision in development charge (DC) rates for the segment in the half-yearly review is not surprising, given the recent moderation in private home prices. The DC rates for non-landed residential sites will drop by between 2.8 and 5 per cent for 55 of 118 sectors in the period from September to February, compared with the previous six months, the Urban Redevelopment Authority (URA) said yesterday. Property consultant Colliers International’s calculations show this works out to an average decrease of 1.6 per cent across the segment. The biggest decline of 5 per cent is seen in two sectors, encompassing areas such as Prince Charles Crescent, Alexandra Road, Tanglin Road and Telok Blangah Heights. The DC rates for the other 63 sectors remain unchanged. Mr Ku Swee Yong, chief executive officer of Century 21, said: “This downtrend is not unforeseen. The URA price index has been falling, especially for the Core Central Region. Several new launches in those areas, where the chief valuer has lowered DC rates, also did not do so well.” Similarly, Ms Chia Siew Chuin, director of research and advisory at Colliers International, said: “Tender bid prices of Government Land sales sites have become more conservative. At the same time, there are no successful residential collective sales so far this year,” she said. As for land for commercial use, DC rates will increase by an average of 2 per cent, with 26 of 118 sectors set to see hikes of 5 to 11 per cent, while the rates for the remaining 92 sectors will stay unchanged. Mr Ku said: “The retail segment continued to show strength, as seen in shops in certain HDB estates and landed neighbourhoods, where rentals have remained resilient.” Meanwhile, DC rates for the landed residential and industrial segments remain unchanged, while charges for the hotel and hospital segments are up by an average of 9 per cent islandwide. -By Lee Yen Nee Development charges for condos fall Drop reflects weak residential market; but rates for commercial land up sharply Source: Straits Times / Money DEVELOPMENT charges - the rates developers pay the Government to enhance land use - have fallen for the first time in almost 18 months for residential sites earmarked for non-landed homes such as condominiums. However, these rates shot up for commercial land, places of worship, civic institutions, as well as hotels and hospitals. Development charges, which can be a significant cost in a redevelopment, are revised after regular half-yearly reviews based on land prices and market deals. They fell by an average of 2 per cent for non-landed homes, on the back of flagging property sales since the start of the year. The new fees were released by the Urban Redevelopment Authority (URA) yesterday. They are applied when the value of a site goes up because of a re-zoning or when a taller building can be erected after a change in the site's plot ratio. Consultants said they expected the dip in the rates for non-landed residential plots, given the 2.1 per cent slip in the official residential price index in the first half of the year. Bids for land sold under the Government Land Sales programme have also been conservative, noted Ms Chia Siew Chuin, director of research and advisory at Colliers International, unless the plot is in a popular area. Moreover, the collective sale market has screeched to a halt this year, she said. However, the dip in development charges is not expected to boost the acquisition of land significantly, because the risk of shrinking profits from falling property prices is still far greater, noted Mr Nicholas Mak, research head at SLP International. This was because "the reduction in the development charge rate would only increase the developer's return on investment of the residential project by 1 per cent, assuming all other factors remain unchanged". Non-landed residential plots in Prince Charles Crescent, Alexandra Road, Tanglin Road, Henderson Road, Depot Road and the Telok Blangah area recorded the sharpest dips of 5 per cent. On the other hand, experts were surprised by the 9 per cent hike in fees for land slated for hotels, hospitals, places of worship and civic institutions - the highest average across all segments. After all, hotel deals this year have paled in comparison with the "landmark year of transactions" last year, said Dr Chua Yang Liang, head of research Southeast Asia at Jones Lang LaSalle (JLL). The increase in charges for land for places of worship and civic institutions was also the first hike in five years, JLL noted. "We believe that the upward revision in both (categories) is for the overall harmonisation of development charge rates with other use groups," said Dr Chua. For the commercial sector, charges rose by an average of 2 per cent, with the highest increases in places such as Balestier Road, Thomson Road and the Novena area. This was largely thanks to the uptick in strata-sales activity at Balestier towers, Dr Chua added. Construction group Low Keng Huat, for instance, had in July forked out about $64 million for 36 units at the mixed-use project in Balestier Road. The rates were unchanged for landed residential and industrial sites. Though there were transactions for industrial land in the review period which showed that development charge rates were "trailing behind land prices", there were also plots of industrial land being sold for less than the land value imputed by the development charge for the area, said Ms Chia. For instance, the highest bid for a plot in Tuas South Avenue 7 was 22.7 per cent lower than the land value imputed by its development charge. The new development charges will take effect on Monday. -By Cheryl Ong http://www.todayonline.com/business/property/development-charges-non-landed-residential-sites-fall
Silence hangs over Sentosa Cove as luxury unit prices plunge Source: Straits Times / Money `THERE is an eerie silence at night in Sentosa Cove, the man-made island resort billed as Singapore's answer to Monte Carlo and the only place in the country where foreigners can buy landed property. Dozens of houses - complete with their own private yacht berths and multiple swimming pools - sit empty while few lights are on in the apartment blocks overlooking the marina, a few kilometres away from Sentosa's giant casino. Prices in the gated community, where Australian mining tycoons Gina Rinehart and Nathan Tinkler bought properties, fell around 20 per cent in the past year as lending restrictions and taxes on foreign buyers bit hard into the luxury real estate market. Investors could see the value of their assets fall even further with developers and investors still struggling to sell even after the recent price falls. Real estate websites list hundreds of flats and bungalows for sale, yet just 12 apartments and one house have changed hands all year on Sentosa, according to data from the Urban Redevelopment Authority (URA). "The way prices have fallen in Sentosa, it's as if there is a global financial crisis," said Mr Alan Cheong, head of Singapore research at property firm Savills. That could mean a tough 2015 for the banks unless policy restrictions are eased soon. But that looks unlikely because government-imposed curbs are having the desired effect of keeping the broader market in check after private house prices rose more than 60 per cent between 2009 and last year. New mortgage business at the country's lenders is up to 40 per cent below last year's levels, although the downturn is unlikely to show up in their balance sheets until next year as loans are typically agreed a year ahead of them starting to be drawn down. Compounding the problem for property investors are cutbacks in housing allowances for expatriate workers - meaning rents have fallen - and a drop in the number of high-net-worth foreigners being granted permanent residency. Estate agent Knight Frank's analysis of property prices in 32 cities around the world found Singapore's prime residential market, defined as the priciest 5 per cent of properties, performed the worst in the first half of this year, with prices falling 7.3 per cent. For the luxury sector, the government measures have led to a sharp drop in foreign buyers, who accounted for over half of Sentosa sales between 2010 and this year. That means the number of distressed investors is expected to rise. "Some of the earlier buyers are likely to have bought at prices 20 to 30 per cent above current prices," said Ms Christine Li, head of research at property consultancy OrangeTee. "The rental can't even cover the mortgage for these high-end investments - they want to offload but there are no takers." United Overseas Bank, Singapore's third-biggest lender, last month reported a doubling in its bad debt charges for the second quarter, saying a group of investors was struggling to service high-end property loans. The number of residential properties being put up for sale at auction by banks after buyers defaulted on mortgages, known as mortgagee sales, quadrupled to 64 in the first half of this year from 16 in the second half of last year, according to real estate agency Colliers. "This is different from previous years, when owners' sales dominated auctions," said Ms Joy Tan, head of auctions at DTZ. "The tables have turned and we expect more mortgagee sales on the way." Last month, a four-bedroom apartment in Sentosa's Turquoise condo sold at auction for $3.88 million in a mortgagee sale, or about S$1,400 per sq ft. In 2012, a flat in the same block sold for $2,450 per sq ft and in 2007 for as much as $2,800. The only house that has sold on Sentosa all year - a six-bedroom pad on "Treasure Island" - went for $17 million in February, having been bought for $20.2 million in June 2012. Some in the luxury property industry fear foreign buyers have gone for good. City Developments, South-east Asia's second-largest residential property developer, said in its latest results statement that foreign buyers have "shifted and are still shifting their investments to markets outside Singapore". Sentosa Cove was developed in the early 2000s at a time when Singapore was actively courting the world's wealthy to its shores. It sprang up along with other luxury developments near the glitzy Orchard Road shopping district."Sentosa happens to be a development targeted at a time when the world was leveraging up but now that we have deleveraged, there is a much smaller pool of people who can afford it," Savills' Mr Cheong said.
-By REUTERS Marina One condo to launch at S$2,600 psf Pricing takes into account prime location and connectivity to 4 MRT lines, says developer Source: Business Times / Wealth LUXURY condo Marina One Residences is set to launch in mid-September at an average asking price of S$2,600 per square foot - a level that market watchers deem challenging given current market conditions. It is part of the Marina South integrated project developed by M+S Pte Ltd, a joint venture between Temasek Holdings and Malaysian sovereign wealth fund Khazanah Nasional following a historic land swop between the two countries involving KTM railway land. Four firms - ERA, CBRE, Knight Frank and DTZ - have been appointed to market the residential units, while commercial leasing for the office and retail spaces will be handled by CBRE and Cushman & Wakefield.
Only one out of the two 34-storey residential blocks in the 1,042-unit condo will be released for sale initially, said M+S. The launch date is yet to be fixed but the sales gallery will be open from Sept 13 to Oct 12. -By Lynette Khoo Lakeside boosted by new developments They include the Jurong Lake District plans and improved public transport Source: Straits Times / Money Fresh plans for the Jurong Lake District, announced at the recent National Day Rally, should further boost interest in Lakeside, a largely residential enclave which has been steadily gaining in popularity, analysts say. Residents in the area are set to enjoy an expanded Jurong Lake Gardens which will include the new Science Centre. Traffic in the district will also be improved by the upcoming Jurong Region Line and Cross-Island Line. The terminal for the Singapore-Kuala Lumpur High Speed Rail may be sited there too. Prices in Lakeside have trended upwards over the last few years - from projects launching as low as $440 per sq ft (psf) for Lakeholmz in 2003, to $580 psf for Caspian in 2009, and $1,020 psf for The Lakefront Residences in 2010. At 696-unit Lakeville, the latest project to launch in the area, in April, the average price is $1,300 psf so far. As at the end of last month, just two of the 230 units launched in April were unsold. Since the National Day Rally news, developer MCL Land has been seeing more inquiries and interest in the project, said Ms Loh Lee Hong, general manager of marketing for MCL Land. It has sold more than 17 units in the past month alone, she said. The launch of a second phase is expected in the fourth quarter of this year, with prices not yet fixed, she said. Unlike its neighbour, the budding commercial district Jurong Gateway, Lakeside has developed into a less crowded town popular with Housing Board upgraders. Over the past 12 months, average resale prices have ranged from $706 psf at the 31-year-old Lakepoint Condominium to $1,263 psf at The Lakefront Residences, which recently obtained its temporary occupation permit (TOP), data from Squarefoot Research showed. The area has seen fairly strong leasing activity, with rents in newer condos averaging higher than $3 psf per month, said R'ST Research director Ong Kah Seng. Rental yields have been fairly high as well, with gross yields of about 3.9 per cent in the first half of this year, he added. Two-year-old Caspian and six-year-old The Lakeshore have the highest gross rental yields in the area of about 4 per cent. In comparison, gross yields islandwide was about 3.7 per cent over the same period. Noting that developments have consistently seen high leasing interest, with at least 10 leases signed at each development in each quarter in recent years, "the location is well-tested in leasing demand and investment potential", said Mr Ong. The additional two condo projects - The Lakefront Residences and Lakeville - should still see sufficient leasing demand, with a ready pool of tenants working in the western technological corridor, he added. Developers may also take an interest in a 99-year leasehold residential site above Jurong Lake, in between The Lakeshore and Lakeville, which will be launched in December through the Government Land Sales Programme. The 1.85ha site is expected to yield about 575 homes. "The area has aroused interest for quite some time. Given the number of announcements (on Jurong Lake District), larger developers taking a long-term stance may look to it as an opportunity," said Dr Chua Yang Liang, Jones Lang LaSalle's head of research for Singapore and South-east Asia. "However, with the actual location of the High Speed Rail terminal still unknown, smaller developers' interest may also be limited." -By Rennie Whang For the busy professional - showflat on wheels Source: Business Times / Wealth DREAD heading out to an over-crowded showflat? Property developer UOL Group is now taking their showroom to you. The mobile showroom targets busy professionals, and carries a mock-up of a Riverbank@Fernvale living room. The traditional full-fledged showflat is located along Fernvale Link in Sengkang.
The transformed truck - which measures 6.9 metres by 2.2 metres, and has a height of 3.1 metres - is roaming through Singapore until Sept 7. It will be stopping at different locations - including United Square, One Raffles Place, and the Singapore Expo - for one to three days at a time. -By Kelly Tay Show-flat on the go Source: Straits Times / Money Property developer UOL yesterday launched a mobile showroom for its Riverbank@Fernvale project. The truck, which was parked at Century Square in Tampines yesterday, will be there until Sunday from 10am to 8pm daily. On display is a living room of the 555-unit project. Other stops include United Square, One Raffles Place and Singapore Expo.
Office worker Ong Soh Kheng, who visited the showroom, said: "My office is just across the road. It's an interesting concept - bringing a condominium show-flat to a mall makes it convenient for potential buyers."
http://www.straitstimes.com/archive/saturday/premium/money/story/show-flat-the-go-20140830 8 trade groups, business chambers awarded S$10m Funding will allow them to help members become more competent Source: Business Times / Singapore INTERNATIONAL Enterprise (IE) Singapore and Spring Singapore awarded eight trade associations and chambers (TACs) more than S$10 million in Local Enterprise and Association Development (Lead) funding at the Lead Partners Dinner on Friday evening. Lead, launched in 2005, is a programme jointly managed by IE and Spring which strives to forge partnerships with TACs to improve the overall capabilities and competitiveness of local enterprises in their industries. The Lead programme, in its ninth run this year, has supported 30 TACs in 53 industry-upgrading projects totalling more than S$160 million, benefiting about 38,000 local enterprises.
Similarly, the eight awardees this year will be able to use the Lead funding to embark on new industry or in-market projects to help Singapore businesses become more competent. -By Jan Lee More choosing HDB loans on fear bank rates may rise Tighter lending rules may have also made them more appealing: Experts Source: Straits Times / Top of The News BANK loans may have lower interest rates than Housing Board loans at the moment, but the fear that rates may rise has prompted more flat buyers to opt for the board's fixed concessionary loans. Tighter home loan rules may have also made HDB loans more attractive, said experts. The latest data from the HDB shows more buyers taking loans from it - 94 per cent of loans granted for new flats were from the HDB in the first seven months of this year, up from 92 per cent last year and 91 per cent in 2012. Similarly, more buyers of resale flats have been taking up HDB loans over bank loans. In the first seven months of this year, concessionary HDB loans formed 38 per cent of loans granted for resale flats. It was 27 per cent last year, and 24 per cent in 2012. The growing popularity of HDB loans comes despite bank loans' lower interest rates. With global interest rates at a low, bank home loan rates start from around 1.2 per cent to 1.8 per cent. In contrast, the HDB concessionary loan rate - fixed for the loan's tenure and pegged at 0.1 per cent above the prevailing CPF interest rate - is now 2.6 per cent. But buyers may prefer HDB loans as they know that low bank rates will not last, said experts. "Although bank interest rates are currently lower than HDB interest rates, buyers are recognising that (bank interest rates are) due for an increase and may want the 'certainty' offered by the HDB loan," said SingCapital chief executive officer Alfred Chia. The HDB itself warned that the low global interest rate environment will not last indefinitely. "Hence, we advise flat buyers to take a long-term view, understand the loan terms offered by HDB and different banks, and assess the monthly loan repayments based on different interest rate scenarios," said a spokesman. The fear that rates will rise is why engineer Mohd Hazri Zaini, 31, is taking an HDB loan. "With interest rates (being uncertain) like this, I'd rather not jump into a bank loan," said the buyer of a three-room resale flat. But DBS Bank has seen more resale flat buyers coming to it for home loans since it launched the POSB HDB Loan option last year. The loan has a floating interest rate that is capped at 2.5 per cent for the first eight years, for a "balance of flexibility and security". Another reason people are opting for HDB loans is that the down payment for flats using such loans can be made entirely with Central Provident Fund savings. But a bank loan requires some cash for that, noted Century21 CEO Ku Swee Yong. "Younger couples (who buy new flats) have less cash savings so they simply go for HDB loans." Another possible factor for bank loans' decreasing popularity is how much of a home buyer's monthly income can be used to service a mortgage. Previously, with no such caps, banks granted loans even if repayments took up as much as 60 per cent of income. Last year, the Government capped the mortgage repayment ceiling at 30 per cent. -By Janice Heng Real Estate Companies' Brief New developments in the Reit direction New MRT line, Jurong Lake hub seen giving local-based trusts a big lift Source: Straits Times / Money THE big question for Reit investors after the strong performance put up by the sector in the first eight months of this year is: What next? Since January, the FTSE ST Reits Index, which tracks 49 real estate investment trusts (Reits) and property counters, has risen 8.3 per cent, outperforming the benchmark Straits Times Index, which is up 5.1 per cent over the same period. In its recent write-up on the sector, DBS Vickers Securities said the strong performance was due to the attractive spread of 4 per cent that Reit yields enjoy over 10-year government bonds. It believes Reits are "fairly valued at current prices and outperformance would come from counters with brighter prospects and/or quality assets". In a cautionary note on the sector, Morgan Stanley analysts Wilson Ng and Sean Gardiner noted that there were more "misses then beats" in the June quarter results, with half of 30 Reits missing street estimates. Only a quarter of them, mostly from the malls sector, exceeded analyst estimates, they added. "At 6 per cent yield, industry-wide valuations have fairly priced in the dividend growth prospects vis-a-vis interest rate risks in our view." But Goldman Sachs noted that the second-quarter results were largely in line with the "central theme of strong office and weak retail/hotels". "While rising interest rates remain a concern, investors have been focused on whether organic fundamentals could offset rising rates," it added. Goldman also said Reits with overseas exposure have outperformed Singapore-based ones. "Of the top 10 Reits, only three are Singapore-centric, all with meaningful office exposure. Unsurprisingly, more Reits are now looking overseas for growth." For some other analysts, though, it is the upcoming development of the Thomson-East Coast MRT line (TEL) and the transformation of the Jurong Lakeside District into a major leisure and business hub that may provide catalysts for Reits to grow their businesses here. UOB Kay Hian noted that the TEL may benefit retail Reits such as Frasers Centrepoint Trust, which owns Changi City Point, as it boosts the traffic flow between the East Coast and Changi. "Orchard malls such as Wisma Atria and Ngee Ann City, which are partly owned by Starhill Global Reit, and Paragon (owned by SPH Reit) will also benefit as the TEL will improve connectivity between Orchard and the East Coast," it added. Barclays Research analyst Tricia Song said in her note that CapitaMall Trust and Mapletree Industrial Trust are likely to benefit from the Government's plan to turn the Jurong Lake District into a business hub. Mapletree Industrial Trust owns two properties in the area. They make up 13 per cent of its assets by value. The average occupancy for the two properties was 96 per cent as of June, she added. -By Goh Eng Yeow, Senior Correspondent UE's construction arm 'could be sold' Move will help United Engineers cut debt burden from WBL takeover: Analysts Source: Straits Times / Money DEVELOPER United Engineers (UE) may continue its divestment strategy by offloading its engineering and construction arm, say some analysts. They believe that selling its sizeable stake in UE E&C would allow UE to significantly lower its $2.7 million debt burden, which stems largely from its takeover of WBL Corporation last year. Selling UE E&C, which is considered a "non-core" business, would also take UE a step closer to becoming a pure property firm. That in turn would minimise any "conglomerate discount" on its valuation if UE is sold to Thai tycoon Charoen Sirivadhanabhakdi, who controls Singapore developer Frasers Centrepoint and is said to be eyeing UE's property business. However, any sale of UE E&C is far from being a sure thing. UE has been divesting its non-core assets. It sold its luxury car division for $455 million earlier this week and said earlier this month that it had agreed to sell its technology business, MFS Technology, for $124 million. Both of those non-core subsidiaries were under the umbrella of WBL Corp, which UE took over in May last year after a tense takeover battle. UE holds about 68 per cent of UE E&C, which is listed on the Singapore Exchange mainboard and had a market cap of about $331 million yesterday, making UE's stake worth about $225 million. Talk that UE E&C was up for sale surfaced early this year. UE revealed in March that it had begun talks to sell to an unnamed "third party" its shares in UE E&C, which it said "may or may not" lead to a general offer by the buyer. But there has been no word on the outcome of the discussions. One possible reason, market watchers say, is that the talks may have been put on hold until Mr Chaoren decides whether he wants UE E&C to be part of the package. UE E&C is an established engineering and construction group that has also diversified in recent years into property development. To be sure, UE E&C's property development arm is small fry compared to UE's. DMG analyst Goh Han Peng told The Straits Times yesterday that Mr Charoen is likely to be more keen on investment properties, which UE E&C does not have much of. UE's investment properties could be worth nearly $2.07 billion and its residential developments about $627 million, according to a CIMB report. In contrast, UE E&C had about $5.2 million in investment property and $200,000 in property held for sale as at the end of last year, according to its 2013 annual report. The firm is a joint developer of several private and executive condominium (EC) projects, albeit mainly as a minority partner. Its joint venture projects include Wing Tai's The Crest condominium in the posh enclave of Prince Charles Crescent and the Waterwoods EC in Punggol, developed with Sing Holdings. Completions of the 540-unit Austville Residences EC and the 416-unit Watercolours condo are expected to lift its earnings over its next two years. Still, Mr Goh said that even if UE E&C's property portfolio doesn't quite cut it, Mr Charoen may see some benefit in having an established contractor such as UE E&C in his portfolio. "Contractors can always play a complementary role to developers. If you want to have both the upstream and downstream (businesses), it may make sense to keep UE E&C in house," Mr Goh said. -By Melissa Tan Wing Tai Holdings Source: Business Times Wing Tai's Q4 results were below both Deutsche Bank's (DB) and consensus estimates due to the timing of development profit recognition. The company also declared a six cents per share dividend (about 3.2 per cent yield). While the sales outlook remains challenging given anaemic demand for high-end projects, valuations are still undemanding at a 45 per cent discount to RNAV.
http://www.businesstimes.com.sg/archive/saturday/premium/wealth/others/brokers-take-20140830 Cambridge Industrial Trust Source: Straits Times / Money Broker: DBS Group Research Call: Hold Target price: 77 cents CAMBRIDGE Industrial Trust just announced the proposed acquisition of 12 Ang Mo Kio Street 65, a six-storey light-industrial building, for $39.8 million, or $220 per sq ft. The manager hopes to complete the purchase by the third quarter. The property, with 36 years remaining on its land lease, has a total gross floor area of 180,500 sq ft. According to the manager, the initial yield on cost is about 5.3 per cent based on current occupancy of 85 per cent, which appears low at first sight. However, we understand that the manager is in discussions for a tenant to take up the remaining 15 per cent, which, based on estimates, should bring yields up to around 6.6 per cent. In addition, given that average monthly rent of $1.80 psf per month is 20 per cent below the market passing of $2.20, we estimate that returns could exceed 7 per cent on a longer term basis. The low initial yield is a reflection of the current tight acquisition market where Cambridge Industrial Trust looked to deliver through value accretive deals.
The stock currently offers a dividend yield of 7.2-7.7 per cent for the financial year 2014-2015. GuocoLeisure Source: Straits Times / Money Broker: CIMB Call: Add Target price: $1.23 OUR revenue and core earnings forecasts for GuocoLeisure were spot on. The only deviation was a one-off impairment loss of US$4.3 million (S$5.4 million) for its gaming segment, which has only one casino in London. Given a portfolio of underperforming hotels in prime locations in London, management has the best instrument to play with so as to deliver a remarkable performance catch-up. Helmed by the former Standard Chartered banker Mike DeNoma who came on board in August 2012, GuocoLeisure's hotel segment is undergoing a series of positive developments. These include the utilisation of data science to improve customer retention, refurbishment work to improve the value of its room stock as well as the rebranding exercise to improve its hotels' market positioning.
Potential catalysts include Britain's booming hospitality sector, potential new hotel management contracts and value unlocking from the possible disposal of non-core assets. Croesus Retail Trust Source: Straits Times / Money Broker: DMG & Partners Call: Buy Target price: $1.15 FINANCIAL year 2014 was a good year for Croesus Retail Trust, for which we expect earnings to remain resilient and provide an 8 per cent dividend yield. Its revenue was in line with estimates, while net property income was 4.8 per cent better than initially forecast due to savings in property management and repair expenses despite an increase in utility expenses, as well as extra sales and promotion expenses to boost store traffic at Mallage Shobu. The key growth drivers are rental revisions at Mallage Shobu and potential acquisitions of more retail malls in Japan. The management has confirmed that rental revisions are on track and positive rental revisions range from 3 per cent to 300 per cent, depending on the outlet size.
The Reit incorporated Durian TMK in June, and we think there is a high probability that there may be an acquisition in the near future, judging from past patterns. Views, Reviews & Forum Jurong Lake Gardens will be developed sensitively Source: Straits Times / Forum Letters WE THANK Madam Chan Ching Wei ("Don't turn Jurong Lake Gardens into tourist playground"; Aug 22), Mr Lee Ju Guang ("Maintain tranquillity of Chinese and Japanese gardens"; Forum Online, Wednesday) and Mr Phillip Tan Fong Lip ("Tourists needed to fund Jurong revamp"; Forum Online, Wednesday) for their feedback on the plans for the future Jurong Lake Gardens that were announced recently. Jurong Lake Gardens, which will comprise Jurong Lake Park, the Chinese Garden and the Japanese Garden, will be developed as a garden for the people. The grounds of the new Science Centre will also be developed and managed as an integral part of Jurong Lake Gardens. We agree that the existing parks and gardens hold a special meaning not only for Jurong residents, but also for many other Singaporeans. This is why the National Parks Board (NParks) envisions the new Jurong Lake Gardens to be an endearing green space for the community to enjoy. In line with this, a key objective is for the Gardens to be a place where community gardeners from all over Singapore can come together to co-create and maintain show gardens of high horticultural quality. They will be supported by NParks, local landscape designers and industry partners. The community gardeners will be able to display their collective talent and passion for gardening, take pride in their gardens, and forge meaningful relationships with one another through the love of gardening. The development of the new Gardens will be done sensitively to preserve the current charm, while incorporating fresh elements to inject life and vibrancy into the Gardens. Nature and community involvement are two key components that will be featured strongly at Jurong Lake Gardens. The Urban Redevelopment Authority will also work with the relevant agencies to develop future family-centric attractions and developments that will cater to both the local community and visitors.
NParks will be seeking ideas from the community on the masterplan design of the Jurong Lake Gardens next year. The design of the Gardens will then be formulated based on the suggestions and feedback received. In the meantime, members of the public who would like to share their ideas with us can e-mail us at nparks_public_affairs@nparks.gov.sg -By Kartini Omar (Ms) Director (Parks) National Parks Board Geylang sorely in need of transformation Source: Straits Times / Forum Letters IN HIS National Day Rally speech, Prime Minister Lee Hsien Loong announced plans to transform the Jurong Lake District, starting with an expanded Jurong Lake Gardens that will include a new Science Centre ("Lakeside area will get 'people's garden' "; Aug 18). One district that is sorely in need of transformation is Geylang. As it is, Geylang is unique with its combination of shophouses, foreign workers' quarters, karaoke lounges and numerous eateries.
For residents and property owners, Geylang's reputation as a red-light district does not make it an ideal environment to raise families, despite market forces changing the landscape with more condominiums springing up in recent years ("Grungy Geylang seeing new faces"; Monday). In the aftermath of the Little India riot, the Commissioner of Police acknowledged that Geylang is a potential trouble spot ("1,000 more cops needed to boost force: Police chief"; March 26). With PM Lee promising to make every corner of Singapore an outstanding environment to live in, Geylang should top the Government's list for transformation and rejuvenation. While it is impossible to remove the vice scene altogether, the Government could consider the following when transforming Geylang, to maximise its potential:
-By Lee Yong Se Global Economy & Global Real Estate Canada house prices likely to rise further Chances of a crash have increased in the past year, say analysts Source: Business Times / Wealth THE risk of a property market crash in Canada has not ebbed, according to an increasing number of analysts polled by Reuters who said that chances of a steep fall in prices have increased in the past year. Still, the survey medians showed house prices will likely rise more than earlier expected at least until 2017, reflecting ongoing reluctance by forecasters, many of whom work for mortgage lenders, to predict negative returns on property. This year, Canadian home prices on average will appreciate by 5 per cent followed by a 2 per cent rise in 2015 and then again in 2016 after doubling in value over the past decade.
But seven of 20 respondents in the poll conducted on Aug 19-26 said the threat of a property market meltdown had intensified over the past year, especially in Toronto and Vancouver, up from five of 21 in the May poll. -From Toronto, Canada London Property Market Falters on Price Resistance Source: Bloomberg / Luxury London’s property market stagnated for a second month in August as buyers became reluctant to accept high asking prices amid the prospect of increasing borrowing costs, Hometrack Ltd. said. The survey of real-estate agents showed values were unchanged in a “stark” change from the sharp increases over the past year that helped propel national prices to a record. Across England and Wales, values grew 0.1 percent, bolstered by gains in commuter towns in the southeast. Nationwide Building Society offered a more upbeat assessment today, with its national index showing prices up 0.8 percent this month. There’s “evidence of growing resistance to rapid price rises in the London market,” said Richard Donnell, director of research at Hometrack. “Talk of a housing bubble and warning from the Bank of England have impacted sentiment.” In London, 11 percent of postcode districts registered price increases this month, down from 87 percent in February, Hometrack said. Homes in the capital took an average 4.9 weeks to sell in August, up from 4.3 weeks in July. While the BOE’s benchmark interest rate has been at a record-low 0.5 percent since March 2009, policy makers Martin Weale and Ian McCafferty voted for an increase this month. Investors are betting the rate will increase to 0.75 percent in May, according to futures contracts. The Hometrack data add to signs of a cooling market after BOE Deputy Governor Ben Broadbent said in an interview in July that “the edge is coming off” property. The BOE introduced measures in June to limit riskier mortgages, months after new rules came into force requiring tougher affordability tests. Uncertain OutlookIn its report, Nationwide said U.K. home prices rose 11 percent in August from a year earlier. Nationwide Chief Economist Robert Gardner said the outlook is “highly uncertain.” While the prospect of interest-rate increases and weak wage growth may temper demand, “the brightening economic outlook is likely to provide ongoing support,” he said. Hometrack said that, across England and Wales, the number of new buyers registering with estate agents fell 0.9 percent this month. The number of properties listed for sale increased 0.1 percent after a 1.6 percent gain the previous month. Indicators are “pointing to a loss of momentum,” Donnell said. “We expect a continued shift toward a seller’s market in the face of weaker, more price-sensitive demand.” In a separate report today, GfK NOP Ltd. said its consumer sentiment index rose 3 points to 1 this month, matching June’s reading, which was the highest since March 2005. Gauges of Britons’ outlook for their personal financial situation over the coming year and their assessment of the outlook for the economy improved also increased. “It looks as if we might be in a new period of relative stability,” said Nick Moon, managing director of social research at GfK. “There is no guarantee how long this stable position will last –- a rush of good or bad economic news could set off a marked rise or fall, but things could stay like this for a while.” -By Emma Charlton Manhattan Condo Resale Prices Reach Record High Source: Bloomberg / Luxury Prices for previously owned Manhattan condominiums rose to a record last month even as an increase in the supply of units eased competition among buyers. An index of resale prices climbed 1.1 percent from June to reach the highest level in data going back to 1995, StreetEasy.com, a New York real estate website, said in a report today. The inventory of condos on the market grew 5.4 percent from a year earlier, the biggest annual gain since October 2009. The market is still tight, with the number of available condos about 16 percent below the five-year average for Manhattan. That will continue to drive up prices, according to StreetEasy, which projects a 0.4 percent increase for August. Manhattan “has been starved for more supply, and the growth in prices is a direct result of stubbornly low inventory that simply cannot keep pace with demand,” Alan Lightfeldt, data scientist at StreetEasy, said in the report. Resale prices last month were 10 percent higher than a year earlier, according to the index, which tracks repeat transactions for about 40,000 units. Condos that went under contract in July spent a median of 63 days on the market, up from a record low of 49 days in each of the three months of the market’s busiest season, March through May, said StreetEasy, which is owned by Zillow Inc. (Z) The number of pending sales dropped 8.5 percent from June. Of the homes that were listed for sale last month, 45 percent were seeking $1.9 million or more. -By Oshrat Carmiel http://www.bloomberg.com/news/2014-08-29/manhattan-condo-resale-prices-reach-record-high.html Housing Stumbling in Slowest Season for U.S.: Mortgages Source: Bloomberg / Personal Finance Just when the stumbling U.S. housing market could use a boost, it’s entering the slowest period of the year. Online home searches, an indicator of demand, peak from March through August, according to Trulia, a real estate information firm that studied three years of its search activity. By September, as summer ends and children start school, searches fall below the annual average and decline further until December. The seasonal slowdown means a turnaround in the housing market is unlikely for the rest of this year. After a robust 2013, new and existing home sales are down from a year ago even with inventories up and mortgage rates holding close to record lows. The pace of new-home purchases fell to the slowest in four months in July as rising prices and tight credit kept buyers at bay and forced economists to lower forecasts. “The first half of the year has definitely been disappointing,” said Joel Kan, director of economic forecasting at the Mortgage Bankers Association. “There is upside potential but we don’t expect a sudden or sharp increase in home sales or originations in coming quarters.” The MBA last month lowered its forecasts for purchase originations in the third quarter to $159 billion compared with $195 billion in the same period a year earlier. In January, the trade group had predicted the quarterly figure would reach $202 billion. Rising PricesRising values have made homes less affordable for buyers even as the gains are slowing. An inventory crunch for entry-level houses has worsened during the past year as discounted foreclosures became scarce and cash-paying investors snapped up affordable listings to convert to rentals. Home prices, which have risen 29 percent since bottoming in 2012, increased 8.1 percent from June 2013, the smallest 12-month gain since January 2013, according to the S&P/Case-Shiller 20-city index. Mortgage rates, which remain near record lows, haven’t provided buyers with enough savings to significantly boost sales. The 30-year fixed mortgage rate fell to 4.1 percent this week from 4.51 percent a year earlier. “There’s only so much low mortgage rates can do,” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage data firm. “Low mortgage rates are helpful. They’re attractive. But in their own way they’ve helped to foster higher home prices which have pushed additional folks to the sidelines.” Fannie’s OutlookThe housing market has had a shortage of first-time buyers, in part because millennials, saddled with unemployment and student debt, are postponing marriage, parenthood and homeownership. Fannie Mae, the government-controlled mortgage firm, said its outlook for housing has deteriorated because of a loss of sales momentum at the end of the second quarter. Sales in 2014 will be lower than 2013, Fannie Mae economist Douglas Duncan wrote in the Aug. 18 note. The company had earlier predicted that housing would increasingly drive the U.S. economy in 2014 and 2015 -- a position it no longer holds. “We have downgraded our outlook following the disappointing housing activity seen during the first half of the year,” Duncan wrote. “Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes.” While existing sales are down from a year ago, they’re at the long-term average relative to the population size, said Paul Diggle, U.S. property economist for Capital Economics Ltd. New HomesDiggle said there are now 15.2 annual existing home sales per 1,000 people compared with the average dating back to 1968 of 15.1, he said. His bigger concern is that new home sales are at about half the long-run rate. Homebuilders have moved away from the entry-level market as credit tightened and are focusing on more expensive homes for a limited portion of buyers. “What’s really lagging in the market is the level of new home sales and housing starts,” Diggle said. An index of pending sales of existing homes gained 3.3 percent in July from the previous month, the National Association of Realtors said yesterday. The median projection in a Bloomberg survey of economists called for the index to advance 0.5 percent. For the rest of the year, fewer buyers will be prowling for homes. Search activity has been more than 10 percent above the annual average from March to July, said Jed Kolko, San Francisco-based Trulia’s chief economist. In September, it slips to 5 percent below average and reaches a low of 25 percent under the base level in December. Seasonal SlowdownWhile the seasonal slowdown begins in most of the country in September, it is steeper in southern states such as Florida and college towns like College Station in Texas and Iowa City in Iowa, Kolko said. Northeastern and western states do not see as much of a drop in activity in September. The housing market also faces some of the same headwinds that held it back during the peak spring and summer months. “The economic challenges that people faced earlier are still here,” Kolko said. “Affordability worsened as prices went up, the job market continues to recover slowly and young people are still much less likely to have jobs than before the recession.” -By Prashant Gopal http://www.bloomberg.com/news/2014-08-29/housing-stumbling-in-slowest-season-for-u-s-mortgages.html Dream REIT Looks to Restaurants to Beat Office Glut Source: Bloomberg / Luxury Dream Office Real Estate Investment Trust, the worst-performing REIT in Canada over the past year, is banking on tower renovations and adding retail to keep tenants amid a wave of new office supply. Dream Office, the largest office REIT in Canada, is seeking to sell as much as C$150 million ($138 million) of properties this year in smaller markets, and to upgrade its buildings and add retail space in its Toronto and Montreal properties, according to Chief Executive Officer Jane Gavan. “It used to be pure office -- that’s all we looked at,” Gavan said in Bloomberg’s Toronto office on Aug. 27. “For us, there’s going to be a lot of opportunity to develop the things we own and add retail.” Dream Office units have dropped 0.3 percent to C$28.95 over the past 12 months, for a yield of 7.7 percent, the worst performance among the 15-member Standard & Poor’s/TSX Capped REIT Index, which has gained 13 percent on average in the same period. “Significant multiple expansion is unlikely to take place in the near term given expected challenges in the Canadian office market,” Matt Kornack, an analyst at National Bank Financial who rates the stock a buy, said in an Aug.10 note to clients. Kornack said Dream Office has “longer-term value” because of the quality and location of its portfolio, and offers an attractive yield for investors. Rents DeclineAbout 7.9 million square feet of commercial space will hit the market in Toronto, Vancouver, Calgary, Montreal, and Ottawa, this year and next, weighing on rental rates, according to New York-based real estate-services firm Cushman & Wakefield Inc. Toronto-based Dream Office is preparing for the crunch by adding shops and restaurants that net higher rents, Gavan said. Rent for the best quality office space in Toronto, the country’s financial capital, was C$52.15 on average last year, according to Cushman & Wakefield. That’s forecast to drop 5.4 percent to C$49.35 by next year as a cooling economy and a wave of new supply outweigh demand, according to the firm. In Toronto, where Dream Office has about 40 percent of its portfolio, city hall this week approved construction of three more office towers in the downtown core. That adds to the 5.1 million square feet under construction at the end of last year, the third-highest level in North America after New York and Calgary. “No doubt in Dream Office there are head winds,” Gavan said. “You’ve got new supply and you’ve got some vacancy. So we need to focus on retention, doing the real estate right, spending money so tenants want to stay.” ‘Poster Child’Dream Office, which owns 182 properties across the country, said its occupancy rate, or the percentage of leased space, slipped to 94.1 percent in the second quarter this year from 94.9 percent in the same period last year. That’s below 95.6 percent in the same quarter in 2012. By adding retail, and maybe even residential units, to its current buildings and future towers, the company aims to retain tenants and create an enticing space for potential clients. “Toronto is a poster child,” Gavan, who was appointed CEO in May when the company also changed its name from Dundee REIT, said. “If you think of what Toronto looked like 20 years ago, downtown was dead at night. Now there’s vibrancy and life. The next stage is people turning over office space to retail.” Dream Office has already added more retail in its downtown Toronto towers. The company added SpeakEasy 21, a restaurant where waiters in suspenders serve Italian sodas in mason jars and tapas-style dishes, to its flagship Scotia Plaza this year. The ground-floor restaurant, located in the building that the company bought for a record C$1.27 billion with H&R REIT in 2012, was leased for more than C$50 a square foot, according to a company presentation. -By Katia Dmitrieva http://www.bloomberg.com/news/2014-08-29/dream-reit-looks-to-restaurants-to-beat-office-glut.html Blackstone Said to Seek $2.25 Billion Office Tower Sale Source: Bloomberg / Personal Finance Blackstone Group LP (BX) is preparing to sell a New York office tower for more than $2 billion as it seeks to take advantage of rising demand for prime U.S. real estate, according to two people with knowledge of the matter. Blackstone has hired Eastdil Secured LLC to market 1095 Avenue of the Americas, a 42-story building that will soon be the headquarters of Verizon Communications Inc. (VZ), said one of the people, who asked not to be identified because the plans are private. The property may fetch about $2.25 billion, the person said, which would rank among the highest prices ever paid for a U.S. skyscraper. Blackstone acquired the tower on Bryant Park in its $39 billion takeover of Sam Zell’s Equity Office Properties Trust in 2007, near the real estate market’s peak, and completed a $300 million renovation. A sale price of more than $2 billion would demonstrate that values for top-tier New York office buildings are higher than during the last real estate boom, said Ben Thypin of Real Capital Analytics Inc. “If they were to hit this number, it would show the market is still extremely strong for these assets,” Thypin, director of market analysis at the property-research company, said in a telephone interview. “If you want to buy an office building of this size, you only have so many choices.” The Avenue of the Americas tower, between 41st and 42nd streets, is also known as 3 Bryant Park. The 1.2 million-square-foot (111,500-square-meter) property houses insurer MetLife Inc. (MET)’s administrative offices in addition to Verizon, which will make the building its headquarters on Sept. 1. General MotorsChristine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on plans to sell the tower. Martha Wallau, an Eastdil spokeswoman, didn’t return a telephone call seeking comment. A sale of more than $2 billion would be the biggest of an entire U.S. property since the General Motors Building sold to Boston Properties Inc. in 2008, according to Real Capital. The GM Building is the highest-valued tower in the country, according to New York-based Real Capital. The families of Chinese real estate developer Zhang Xin and Brazil’s Safra banking empire bought a 40 percent stake in the skyscraper for about $1.4 billion last year, implying a $3.4 billion value for the 50-story property. Blackstone’s strategy has been to sell assets it has improved through leasing gains or renovations. The Bryant Park building has undergone a “successful three-year, $300 million renovation,” according to the building’s website. Its office space is 99 percent leased, according to CoStar Group Inc., a Washington-based research firm that tracks office leasing. Completely RebuiltWhile many Equity Office buildings were sold almost immediately, including seven midtown Manhattan towers, Blackstone kept 1095 Avenue of the Americas, which was being completely rebuilt from its steel frame out. Blackstone paid about $1.47 billion for the building as part of the takeover, according to data compiled by Real Capital. “Even if this doesn’t sell for exactly what they’re asking, it’s still going to be a very high price,” Thypin said. There are enough foreign sovereign-wealth funds, pensions and insurers who prize steady dependable income to make the bidding very competitive, he said. Blackstone has been selling office properties in Boston and other markets where it has increased occupancies to more than 90 percent, and buying other assets where it believes there’s a potential for leasing and value gains. In July, the firm purchased Manhattan’s Park Avenue Tower from Shorenstein Properties LLC for about $750 million. Low VacanciesNew York had the lowest office vacancy rate in the U.S. after Washington in the second quarter, at 10 percent, compared with 16.8 percent for the country as a whole, according to research company Reis Inc. The reconstruction of the Bryant Park tower, including an expansion of its retail space to 100,000 square feet from 11,900 square feet, is almost complete, said the person familiar with Blackstone’s plans. The company is in the process of completing a deal with Whole Foods Market Inc. (WFM) to take 35,000 square feet of that space, the person said. Michael Sinatra, a Whole Foods spokesman, didn’t return a telephone call seeking comment. The retail component is about 75 percent leased, the person said, That would give a new owner the chance to improve cash flow at a property in one of the world’s strongest shopping districts. -By David M. Levitt and Hui-yong Yu http://www.bloomberg.com/news/2014-08-29/blackstone-said-to-seek-2-25-billion-office-tower-sale.html |