Real News‎ > ‎2014‎ > ‎August 2014‎ > ‎

8th August 2014

Top Stories

Singaporeans need to continue to be competitive: Manpower Minister

Manpower Minister Tan Chuan-Jin says the growth that Singapore enjoys today is not a given, and Singaporeans have to fight for it because the competition is real. 

Source: Channel News Asia / Singapore

SINGAPORE: The Manpower Ministry and its agencies have a part to play in creating an environment where the economy can grow and where job opportunities are created for Singaporeans. Manpower Minister Tan Chuan-Jin said this at his ministry's National Day Observance ceremony on Thursday (Aug 7).

Mr Tan said the growth that Singapore enjoys today is not a given, and Singaporeans have to fight for it because the competition is real. "The reason why we do need growth, we do need to continue to be competitive, we do need to continue to be open to the world is so that we can help create the opportunities for our people, for our children. So that they can have jobs that they can look forward to," said Mr Tan.

As the government creates more opportunities, it also needs to equip Singaporeans with the ability to seize them, and one way to do so is through education. Mr Tan added: "So, of course the education system helps prepare us. But we continue on that responsibility in terms of continuing education and training, especially post-formal education. To make sure that as the world changes, we are able to continue to equip Singaporeans with the skills and abilities to adjust."

To do this, Mr Tan said his ministry will work closely with other agencies and also through the Applied Study in Polytechnics and ITE Review (ASPIRE). This review aims to look at enhancing career and academic progression prospects for students from the Institutes of Technical Education (ITE) and polytechnics.

Mr Tan said: "We want to make sure there are routes for Singaporeans in every sector; whatever your education background, there are pathways open to you to fulfil your potential."

As the workplace environment plays a key role, Mr Tan said his ministry will look at promoting progressive human resource practices and better leadership.

"I think sometimes we spend too many hours at work but it is a different topic altogether. But if you are going to spend that time at work, then let us make sure that the work environment is positive, let us try to make sure that the work experience is positive. There is no reason why work should be seen as a negative", said Mr Tan.

With CPF being a hot topic recently, Mr Tan said it is important to recognise that the scheme remains a "very strong" and "stable" system. Still, he added that the scheme will continue to be strengthened to ensure retirement adequacy for Singaporeans.

Mr Tan said: "So after work ends, how do we ensure retirement adequacy, to give that peace of mind so that Singaporeans can have an assurance after that? And that is something that we do, and that is something that we will continue to strengthen. I think there are some ideas that we have in place and we will continue to strengthen the system over time." 

- CNA/by

49 years of Singapore's successes through risks

Republic must continue to manage risks to achieve next phase of growth, safeguard future

Source: Business Times / Editorial & Opinion

HISTORY offers compelling lessons for the future, and as Singapore approaches its 49th birthday we look back at the nation's evolution from a sleepy fishing village to a globally renowned city-state. Advancement and change can be risky, and Singapore and its business community have experienced all aspects of risk over the years.

Singapore's history offers learning in risk, expected and unexpected, with some of today's risks being traced back to landmark incidents of the past. As the Republic prepares for the next phase of growth, it must continue to successfully manage both the established risks as well as the emerging ones, to safeguard its future.


Singapore's beginnings go back to its establishment as a strategically located trading port. With many riches passing through the port, there comes the risk of piracy and loss of cargo at sea.

-By Andrew Vigar

Plugging into the World Economy

Source: Business Times (Pg 16)

Singapore Real Estate

Soft bids for Sengkang sites signal further weakening of private housing market

At the Aug 7 close of tender, two land parcels at Fernvale Road fell short of analysts' projected prices.

Source: Channel News Asia / Business

SINGAPORE: Two sites in Sengkang put up for sale under the Government Land Sales (GLS) programme have received lower-than-expected bids in yet another sign of a softening private residential market.

The 178,723 sq ft Fernvale Road Parcel A received four bids, with CEL Development and Unique Residence jointly putting in the top bid of S$234.9 million, or around S$438.20 per square foot per plot ratio (psfppr), Urban Redevelopment Authority (URA) data showed after the close of tender on Thursday (Aug 7).

The consortium also submitted the highest bid for the 187,441 sq ft Fernvale Road Parcel B of S$252.1 million, or around S$448.35 psf ppr, in the other tender that also closed yesterday, URA data showed.

Both the top bids fell short of the S$450-to-S$500 psf ppr range that analysts had expected for the 99-year leasehold sites when the tenders were launched in June.


Even though Parcel B garnered only three offers, the bids were more competitive than those for Parcel A due to its closer proximity to Thanggam LRT Station, analysts said.

“The bids for Parcel B reflect slightly stronger competition among the participants. The highest price is 7.2 per cent higher than the second participant and 14.3 per cent higher than the third one.

The offered prices for Parcel A vary widely, demonstrating differing views by the developers,” said Ms Christine Li, head of research and consultancy at property agency OrangeTee.

The sites each have a plot ratio of 3 and together can yield about 1,100 private homes. Ms Li estimated the breakeven prices for Parcels A and B at S$886 psf and S$898 psf, respectively. This means the selling prices could start from about S$970 to S$990 psf assuming a 10 per cent profit margin, she added.

“The results suggested that for this GLS exercise, the introduced batched tender system did not prevent market players from bidding for both plots at the same time. Nevertheless, the land prices seem to have been reined in,” she said.


Gross rental yields in uptick for first-half 2014

But this may change, with supply of condo units coming

Source: Business Times / Property

[SINGAPORE] With the recent resale prices of private condos falling at a faster clip than rents, gross rental yields picked up in the first half of this year in all regions across Singapore, after having slid since 2009.

Going by Urban Redevelopment Authority (URA) data compiled by STProperty, the recovery was led by suburban areas, especially the north-east.

Market watchers say that this rebound is likely to be a blip, as the leasing market is softening and vacancy rates are on the rise.

They reckon that, with buyers of private homes being more driven by the prospects of capital appreciation than by gross yields, the slight improvement in yields is unlikely to influence their buying decisions.

-By Lynette Khoo

Sales volume of strata-titled offices up 22.8% in 1H

Source: Channel News Asia / Business

SINGAPORE: Sales volume of strata-titled offices rose 22.8 per cent in the first six months of this year compared to the second half of 2013. According to a report by property consultancy Knight Frank on Thursday (Aug 7), there were a total of 248 transactions of such properties in the first half of 2014, compared to 202 deals in the second half of 2013.

Main contributors of leasehold strata-titled office transactions in the first six months this year are Prudential Tower, Vision Exchange, and International Plaza. Meanwhile, transactions of freehold properties mainly came from ARC 380 and Hexacube.

Ms Mary Sai, Knight Frank's Executive Director & Head of Commercial Sales, said in the report that the "strata-titled office market is expected to hold steadily in the next few quarters, supported by healthy rental growth and limited supply of well-located strata offices available for sale."

Total transaction volumes for strata-titled retail properties have declined 68 per cent, from 388 transactions in second half of 2013 to 124 transactions in first half of 2014, while transaction volume of shophouses fell to 40 transactions in the first half of this year from 49 transactions in the second half of last year.

The report said sentiment in the strata-titled retail market has been "adversely affected by the total debt servicing ratio (TDSR) ruling, rising operating costs due to the tight labour supply conditions, and growing competition from online retailing."

Looking ahead, Knight Frank expects demand for shophouses and strata-titled retail properties to remain low in the second half this year. This is due to the compressed yields and current mismatch between buyers' bids and sellers' asking prices.

- CNA/ac

HDB resale flat prices dip for 6th straight month: SRX

Source: Business Times / Top Stories

[SINGAPORE] As expected, HDB resale flat prices fell again for the sixth straight month to hit a low not seen since February 2012, going by figures from the Singapore Real Estate Exchange (SRX).

Prices slipped 0.9 per cent last month, after a 0.8 per cent dip in June - proof that June's fall in prices was not due solely to the school holidays and the World Cup distracting buyers from making home purchases, analysts said. They believe larger factors were at play, chiefly the loan curbs in the form of the mortgage servicing ratio (MSR), the total debt servicing ratio (TDSR), and loan tenures being capped at 25 years.

Since the beginning of this year, prices have declined 4 per cent. Consultants expect resale prices to fall up to 8 per cent for the whole of 2014, with the government continuing to emphasise that it is still premature to pull back cooling measures.

The HDB resale market is expected to take a hit also because a huge supply of new build-to-order flats, as well as balance flats, executive condo units and flats under the design, build and sell scheme (DBSS) are coming onstream.

-By Lee Meixian

HDB resale prices drop to 30-month low

Source: Straits Times / Top of The News

PRICES of Housing Board flats fell for the sixth consecutive month in July and to their lowest level since February 2012, the latest data from the Singapore Real Estate Exchange showed.

Though slightly more flats were sold, experts attributed this to the return of buyers and sellers after the traditionally quiet June holiday season.

The resale price index fell 0.9 per cent from June, bringing HDB resale flat prices down 4 per cent since the start of the year.

Weakening prices hit most of the market, with three-, four- and five-room flat prices dipping 1.0 per cent, 1.8 per cent and 0.4 per cent respectively. Only executive flats were spared, with prices up by about 0.1 per cent.

In all, the index is 6.7 per cent lower than July last year. Analysts said the slide was expected, due to the continued effects of cooling measures such as home loan curbs and a steady supply of new Build-To-Order flats.

"Demand and prices are expected to stabilise or slightly pick up in around the second half of 2014, due to buyers finding resale flat prices increasingly reasonable," said R'ST Research director Ong Kah Seng.

Already, last month's resale volumes rose slightly, but experts remained cautious about a turnaround. Last month, 1,341 flats were sold, up from 1,315 in June. But this was still 10.2 per cent lower than the 1,494 units that changed hands in July last year.

The recovery may be thanks to buyers and sellers returning to the market after the school holidays and World Cup in June, said SLP International Property Consultants head of research Nicholas Mak. He said the rise in volume is not likely to continue this month, as the Hungry Ghost period is seen as an inauspicious time for buying a house.

But in the longer term, buyers may be lured back into the market by low prices, said experts.

Mr Ong expects prices to fall by no more than 7 per cent for the full year. Other estimates range from 4 per cent to 8 per cent.

Property agents said some buyers have returned but not in large numbers. Said Dennis Wee Realty agent Judy Tay: "Some are those who have wanted to buy for a long time, but are coming in now that prices are low."

But with prices low and buyers still scarce, some prospective sellers might choose to rent out their units instead, said experts.

An estimated 1,601 HDB flats were rented last month, up from June's 1,574 units but flat compared with a year before. Rents were down, with the rental index falling 1.5 per cent to a three-year low. The median monthly rent was $2,300.

With foreign labour curbs hitting demand, and supply rising as upgraders move into newly completed units, rents will likely stay low, OrangeTee head of research Christine Li said.

-By Janice Heng

HDB resale prices fall to almost 2.5-year low: SRX

Resale volume inches up slightly in July— probably due to end of June school holidays and FIFA World Cup season

Source: Today Online / Business

SINGAPORE — The public housing market showed some signs of life with resale volume inching up slightly last month, but that was not enough to lift prices, which fell to their lowest in almost two-and-a-half years and analysts expect further softening as the cooling measures continue to dampen buyer sentiment.

Prices of previously-owned Housing and Development Board (HDB) flats slipped 0.9 per cent on-month in July, bringing the fall since the start of the year to 4 per cent and the weakest level since February 2012, revealed a flash report by the Singapore Real Estate Exchange (SRX).

It was also the sixth consecutive month of price decline.

The drop was seen across three-, four- and five-room flats, whose prices dropped 1, 1.8 and 0.4 per cent, respectively. But prices of executive flats were up 0.1 per cent.

Analysts said the downtrend was not a surprise given that the Government has indicated its intention to leave the various property curbs untouched for now.

“Loan restriction rules such as Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) continue to dampen the demand for HDB flats as some potential buyers face limitations in their loan applications,” said Mr Nicholas Mak, executive director of SLP International Property Consultants.

“In addition, new permanent residents (PRs) have to wait three years from the date of obtaining their PR status before they can buy HDB resale flats, thus the demand for HDB resale flats is lower, while the supply is (increasing) as more and more HDB flats complete their five-year minimum occupation period.”

Resale volume saw a marginal improvement to 1,341 units last month from 1,315 units in June, SRX said.

The increase was probably due to the end of the June school holidays and FIFA World Cup season, noted OrangeTee head of research and consultancy Christine Li.

However, sales were weaker than the same period last year. “From a year-on-year perspective, the figure amounts to a drop of around 10 per cent. The monthly volume has plummeted by more than 60 per cent from its peak performance registered about four years ago,” said Ms Li, who expects demand to stay subdued and resale prices to depreciate by around 5 per cent for the whole of this year.

Meanwhile, the HDB rental market saw an uptick in activity with 1,601 new leases registered last month compared with 1,574 cases in June. That also failed to boost rental prices, which fell by 1.5 per cent to a three-year low, SRX said.

Analysts said prices are likely to stay soft as more flats will enter the supply pool. Figures provided by the HDB showed that the number of flats that will meet their minimum occupation period and be eligible for rental is expected to rise from the current 690,000 to around 750,000 by end-2016.

Ms Li said: “Due to the ongoing effort to enhance productivity and lower foreign labour supply, the HDB leasing market is predicted to remain tepid for a considerable period of time. Greater supply of private housing property means that a large amount of rented flats from upgraders will keep HDB rental increase at bay.”

-By Lee Yen Nee

FCL on track to acquire Australand

Source: Business Times / Companies

FRASERS Centrepoint Ltd (FCL) is on track to complete its biggest acquisition after more than half of Australand Property Group shareholders accepted the Singapore company's takeover offer, according to two people familiar with the matter.

Frasers has received enough acceptances from the Australian company's equity investors to make its A$4.48 cents a share bid unconditional, said the people, who asked not to be identified as the details are private.

The purchase gives FCL - which began trading independently from Fraser & Neave Ltd in January - control of Australand's A$2.4 billion (S$2.78 billion) of office and industrial properties and A$9.3 billion of developments in Australia. FCL is seeking to boost its operations in faster-growing overseas markets, which contributed 38 per cent of earnings as at March 31 from 10 per cent a year earlier, and has flagged Australia and China as preferred destinations.

Equity investors in the Australian company are now entitled to a 2.6 Australian cent dividend. FCL declined to comment in an e-mailed statement. Australand managing director Bob Johnston also declined to comment, according to Trudy Wise, an external spokeswoman for the company at Wise McBaron Communication.

Singapore’s evolving cityscape

Source: Business Times (Pg 20)

Real Estate Companies' Brief

Hotel Properties Q2 net profit dives

Source: Business Times / Companies

HOTEL Properties yesterday posted an 81 per cent plunge in second-quarter net profit to S$7 million, due to a sharp fall in share of profits from associates. This was due to lower profits from The Interlace condominium development, which was completed in September last year.

Hiap Hoe warns of net loss in second quarter

Source: Business Times / Companies

PROPERTY developer Hiap Hoe warned yesterday that it would record a net loss in the second quarter of the year. This is due to the stamp duty expense from the acquisition of Australian property; lower sales revenue; and recognition of non-controlling interest linked to the privatisation of its sports and leisure arm SuperBowl Holdings.

Global Economy & Global Real Estate

3 possible locations for third Sino-S'pore project

Chengdu, Chongqing, Xi'an on the list but S'pore prefers to tread slowly

Source: Straits Times / Top of The News

CHENGDU, Chongqing and Xi'an in western China are the locations being considered for a third government-to-government project between Singapore and China, say Singapore officials.

But while China is excited at the prospect of furthering its push to develop the vast inland region, The Straits Times understands that Singapore wants to tread slowly.

Of the three, Chongqing may stand the best chance of being selected, according to several analysts and property developers who spoke to The Straits Times.

First, the south-western municipality is hungry for foreign investments, which plunged following the Bo Xilai scandal two years ago. The former Chongqing party chief was ousted in 2012 and sentenced to life in prison last September for corruption and abuse of power.

Second, politics is a key factor in Singapore's considerations for a third bilateral project, which was first revealed during Deputy Prime Minister Teo Chee Hean's visit to China last month.

The first two projects are the Suzhou Industrial Park (SIP) and the Tianjin Eco-City (TEC).

Chongqing party chief Sun Zhengcai, 51, is touted as a future premier and Singapore will be keen to build ties early.

Singapore's experience working with Mr Sun on the Jilin Food Zone when he was party chief of the north-eastern province could also be another factor.

Third, given that the proposed project is likely to adopt the model of an integrated business park with residential properties, Chongqing's housing situation would be more appealing than that in Chengdu, the capital of Sichuan province. Official statistics show Chengdu has 260 million sq m of unsold residential properties for its 14 million residents, while Chongqing has 130 million sq m for its 30 million-strong population. "It would be harder to sell residential properties in overbuilt Chengdu compared to Chongqing," said a representative of a Singapore developer, who declined to be named.

Also, some feel that Singapore would prefer Chongqing to Chengdu, which already houses the Singapore-Sichuan Hi-Tech Innovation Park, a private-led, government-backed project.

An official said it is important that the city could attract enough Singaporeans and enterprises, which is what Xi'an, capital city of Shaanxi province, may be found lacking in.

With discussions still at a preliminary stage, The Straits Times understands that the location and nature of the proposed project have not been confirmed.

During his trip to Beijing and Chongqing, DPM Teo said officials had been tasked to study the feasibility of a third bilateral project and to report their findings at the next meeting of the Joint Council for Bilateral Cooperation (JCBC) scheduled later this year. He and China's Executive Vice-Premier Zhang Gaoli co-chair the JCBC. He said Mr Zhang had in October last year proposed that the two countries cooperate in China's western region.

Still, the project is not one that Singapore would want to rush into, given the work-in-progress status of its other collaborations with China, and the fact that Singaporean leaders want the new venture to be ground-breaking, like those in Suzhou and Tianjin.

According to Mr Teo, the expertise that Singapore brings to the project should not only bring benefits to the local economy where it is sited, but also make an impact across China. The project should be a model for others.

The SIP, the very first Sino-Singapore collaboration, would serve as a model for well-planned, integrated industrial parks in the early 1990s. The TEC, which broke ground in 2008, met China's desire for eco-friendly and sustainable urban design.

Coming up with a project that fits the developmental model of the western region would pose an additional challenge, according to Singapore officials.

Analysts noted that coastal provinces such as Jiangsu, where the SIP is located, are geared towards exporting to foreign markets. In contrast, the three western cities' industries serve the vast, inland domestic market - hardly Singapore's area of expertise, they added.

Nevertheless, analysts believe that a third joint venture would add new ballast to bilateral ties.

"One of Singapore's overriding objectives is to stay relevant to China's growth," said East Asian Institute assistant director Lye Liang Fook. "If this is the case, then it is in Singapore's interests to constantly find opportunities to collaborate with China to derive win-win benefits."

-By Rachel Chang in Beijing

More Chinese cities relax property curbs

Analysts say Beijing is turning a blind eye to bolster the cooling market

Source: Business Times / Property

[BEIJING] More than half of China's cities have relaxed property controls and analysts say more are expected to follow, suggesting the central government is easing its grip on the sector as the cooling housing market poses a growing threat to the economy.

Foshan, a southern city in Guangdong Province, yesterday relaxed restrictions that limited the number of homes that residents can buy, the government said on its Weibo microblog.

With Foshan's move, at least 28 regional governments in small to mid-sized Chinese cities have openly or quietly relaxed home purchase restrictions this year, data from private property consultancies showed.

This means that over half of China's 46 local governments have scrapped limits on the number of homes that Chinese can buy, in a bid to support economic growth.

-From Beijing, China

China developers’ reluctance to cut prices likely to hamper growth

Source: Today Online / Business

BEIJING — The biggest immediate risk facing China’s economy is about to get worse as a reluctance among some developers to cut prices is worsening a housing glut that threatens to extend a slide in construction that has already weighed on growth.

“Developers have been unable to build up adequate client interest as buyers are still waiting on the sidelines. They are also worried that excessive price adjustments may reinforce the wait-and-see mood,” said Mr Zhang Haiqing, research director at Centaline, China’s biggest real-estate brokerage.

In Nanjing, the capital of Jiangsu province in eastern China, sales for nine housing projects originally planned in the first half of this year have been postponed to later this year, consulting firm Everyday Network said.

The number of homes added to the market last month in 21 major Chinese cities dropped 25 per cent from June, said Centaline.

“The completed apartments will be in the marketplace sooner or later and potential buyers will continue to expect prices to fall. The property market weakness hasn’t changed, despite the policy adjustments,” said Nomura Holdings China economist Hua Changchun.

Developers’ sales delays in the first half were widespread because prospects were poor, given weak demand and tight credit conditions, said Guotai Junan Securities analyst Donald Yu.

“Will the increased supply lead to declines in prices in the second half? That, for sure, will happen,” he said.

Last month’s economic data, due in the coming days, starting with the trade numbers today, will give a sense of how well growth is holding up in Asia’s largest economy after rising to 7.5 per cent in the second quarter from a year earlier. Inflation data will be released tomorrow, followed by industrial production, fixed-asset investment and retail sales figures next Wednesday.

The central bank will report lending and money-supply figures by the middle of the month. China’s broadest measure of new credit rose in June to the highest level for the month since 2009, underscoring the role of debt in supporting expansion.

China’s home sales slumped 9.2 per cent in the first half of this year from a year earlier, following the full-year 26.6 per cent increase last year, while new property construction plunged 16.4 per cent.

Meanwhile, the inventory of unsold new homes in 20 large cities jumped to an average of more than 23 months of sales in June, Shenzhen World Union Properties Consultancy data compiled by Bloomberg showed. And the floor space of unsold new apartments nationwide on June 30 surged 25 per cent from a year earlier, government data showed.

“Should future demand for property be met increasingly from running down these inventories rather than from new supply, construction activity would also slow significantly,” Moody’s Investors Service warned.

Construction is slowing, while the inventory of unsold homes will keep rising without an increase in sales, Standard Chartered economists said in a report on Wednesday, citing its quarterly survey of 30 developers conducted in June and last month.

“Our survey suggests that the worst times for China’s real estate sector are still ahead,” they said.

The average new home price in 100 cities tracked by real estate portal SouFun Holdings fell 0.8 per cent last month from June, the third consecutive month of declines.

Twenty-eight cities have eased home-purchase curbs through Monday, said SouFun. The loosening has not boosted sales, as mortgage restrictions from the central government remain in place and buyers are still hesitant, data provider China Real Estate Information Corp said last week.

-By Bloomberg

Sunset Boulevard getting 21st century makeover

Ageing landmarks out, luxury buildings with hotels coming up

Source: Business Times / Property

[LOS ANGELES] It was rocked by the Doors in the 1960s, Van Halen in the '70s and Guns N' Roses in the '80s. Now California's Sunset Strip is getting a new sound: the booms of buildings being demolished and new ones developed.

Known for its giant billboards, celebrity hot spots and rock clubs including the Whisky a Go Go and the Viper Room, Sunset Boulevard is getting a 21st century makeover. Some ageing landmarks, such as the House of Blues and Larry Flynt's Hustler Hollywood erotica store, are on their way out, to be replaced by luxury lodging by hoteliers including Ian Schrager.

Investors AECOM Capital, CIM Group and Schrager all have buildings with hotels planned for the Sunset Strip. The projects are part of a record number of developments along the 2.6 km stretch of Sunset Boulevard running through the city of West Hollywood, where hotel occupancies were among the highest in Los Angeles County last year.

"We like turnaround neighbourhoods," said Warren Wachsberger, vice-president of Los Angeles-based AECOM Capital, the investment arm of AECOM Technology Corp. "If you look at the evolution of Sunset Boulevard, 10, 15 years ago, you couldn't move because of all the traffic. It was dirty and dangerous. Today, Sunset is a dramatically different place."

-From Los Angeles, US

Annaly Sours on Commercial Buildings Seeing Cranes Pop Up

Source: Bloomberg / Luxury

Annaly Capital Management Inc. (NLY) has soured on investments tied to commercial real estate only a year after the real-estate investment trust jumped into the market.

Why? Partly because all the construction Chief Executive Officer Wellington J. Denahan sees casts doubt on predictions that inflated prices will be supported by limited supply.

“I always struggle with listening to people tell me, ‘Well, there’s not all this supply that there was the last time the commercial market had a problem,’” she said today on an earnings conference call. “Well, there seems to be a hell of a lot of cranes in the air all over the place, and when that supply comes on and how it starts to impact pricing remains to be seen.”

Annaly, the largest REIT focused on debt with $87 billion of assets as of June 30, last year bought CreXus Investment Corp., a commercial mortgage REIT it had managed. In May, the New York-based company announced an initiative to purchase buildings including industrial, office, retail and restaurant properties.

The Federal Reserve’s unprecedented accommodation may result in financial instability or cause a correction in asset prices when it starts reducing the size of its balance sheet, according to Denahan. Commercial property values have surpassed their 2007 peaks in the largest U.S. cities after plunging as much as 42 percent in the aftermath of the credit crisis, according to the Moody’s/RCA Commercial Property Price Index.

Higher Returns

Annaly is sticking with its traditional focus on buying government-backed home-loan securities, mainly with borrowed money. The strategy offers returns of about 10 percent to 13 percent, compared with 7 percent to 8 percent on subordinate commercial debt of “the kind of quality you might want,” she said.

Government-backed mortgage debt is also more liquid, which “will become paramount at some point,” Denahan said. The securities may also benefit from being used as a stimulus tool by Fed officials trying to combat economic weakness or market volatility, she said.

Annaly held $1.6 billion of commercial real-estate debt and preferred equity on June 30 and $74.4 million of investments in commercial properties, both little changed from March 31, according to a statement today.

-By Jody Shenn

An ambitious but subtle facelift for a French beauty

Hotel Plaza Athenee re-opens after 200m euro expansion & renovation

Source: Business Times / Property

[NEW YORK] The red awnings and scarlet geraniums have returned to the newly buffed art nouveau balconies of the Hôtel Plaza Athénée, whose facade on chic Avenue Montaigne in Paris had for months resembled a construction zone.

And then it didn't. After a 200 million euro (S$334 million) expansion and renovation, this marquee property of the Dorchester Collection reopened this month in what was being billed as a soft launch but seemed a little more substantial.

"All of the available rooms were full the first night, the bar was full," said François Delahaye, general manager of the Plaza Athénée and chief operating officer of the Dorchester Collection. "We served 486 meals from room service. Of course, we were prepared, but it was a little unexpected."

Still to be seen is whether the hotel will be hit with protests along the lines of boycotts that have beset other Dorchester properties owned by an investment fund led by Sultan Hassanal Bolkiah of Brunei.

-From New York, US

U.K. House Prices Rise to Record as Sales Surge

Source: Bloomberg / Luxury

U.K. home prices rose to a record last month as sales reached the highest in seven years, according to Acadata.

Values rose 0.6 percent from June and were up 9.9 percent compared with a year earlier, pushing the average price to 270,636 pounds ($456,000), it said in statement today. About 90,000 properties were sold, marking a 21 percent surge over the past year.

While the report adds to evidence of a booming property market, Acadata said the national picture is being skewed by London and the south east. Other reports have indicated the market is cooling after stricter lending rules were introduced this year, and Bank of England Deputy Governor Ben Broadbent said last month that the “edge is coming off” U.K. housing.

“The market is quite difficult to read at the moment, as various indicators give different views,” Acadata Chairman Peter Williams said. Anticipation of interest-rate increases by the Bank of England has also “dampened the slightly frenetic behavior that was emerging in some markets,” he said.

The BOE kept its key rate at a record-low 0.5 percent yesterday. While traders are betting policy makers will not increase rates until March, some economists predict a move by the end of this year.

Construction Growth

Separate data today showed U.K. construction output rose 4.8 percent in the second quarter compared with a year earlier. New private homebuilding surged 17.1 percent in the same period. Markit Economics said earlier this month that U.K. homebuilding expanded at the fastest pace in more than a decade in July.

Acadata noted that recent housing surveys show more people think it’s a good time to sell property rather than buy.

“This does suggest uncertainty regarding prices and the way households might sense a slowing market,” Williams said. “Selling now to capture buoyant prices, but delay buying to see how they settle in the next few months.”

The report also showed that first-time buyers and buy-to-let landlords are spurring activity in the housing market. On a regional basis, London led price gains, with a 19 percent annual increase in the past three months. Values in the south east were up 8.4 percent.

-By Jillian Ward

Developer Who Sued Zuckerberg Cites E-Mail Showing Offer

Source: Bloomberg / Tech

A property developer who sued billionaire Mark Zuckerberg for allegedly failing to assist him with business networking as part of a real estate deal produced an e-mail mentioning that the Facebook Inc. (FB) founder offered to help him in a “light” way.

The e-mail and others filed in a lawsuit against Zuckerberg show the executive knew he made the promise and reneged on it, David Draper, the attorney for developer Mircea Voskerician, said in court filings.

Voskerician says he gave the Facebook chief executive officer a 40 percent discount in 2012 on a $4.3 million property located behind Zuckerberg’s Palo Alto, California, home because he was promised introductions and referrals to boost his business. After trying and failing to reach Zuckerberg, Voskerician sued in state court in San Jose, California, to get the house back, claiming fraud, breach of contract and misrepresentation, according to the complaint.

The e-mails disclosed yesterday, some of which were copied to a Facebook vice president of marketing, show an associate of Zuckerberg feared the developer was becoming a security or public relations risk.

“I just had a quick chat with Mark on this issue -- and he said he does remember saying that he would help this guy in a ‘light’ way,” Andrea Besmehn, whose employment affiliation wasn’t revealed in the e-mail chain, wrote in a Nov. 4, 2013, message. “Is there a way when we chat with him that we can find out a way for us (not necessarily Mark) to help him with something small? Also…we’ll have to manage this carefully because we don’t want to give an inch and then…”

‘PR Standpoint’

Besmehn was Zuckerberg’s assistant, Draper said in a filing. In a separate message on the same day, Besmehn wrote that she wanted to raise the issue “before it escalates from either a security or PR standpoint,” adding that it “sounds like he has some expectation about Mark helping him out.” Besmehn noted that she also copied the message to a Facebook security official.

Former Goldman Sachs Group Inc. executive Divesh Makan, who now works at Iconiq Capital LLC, is also copied on the messages and figures prominently in what Draper said in the court filing was a plan to get Voskerician to go away. Makan tells Besmehn in an e-mail that his team will “hear his story,” referring to Voskerician.

“We have no interest in doing anything with him, but this will hopefully put his desire to meet with Mark to bed,” Makan wrote, according to the court filing.

Draper is seeking to add Makan and Iconiq as defendants in the lawsuit under a claim of conspiracy to commit fraud. Makan didn’t immediately respond to a phone message left for him at Iconiq’s San Francisco office seeking comment on the filing.

No Basis

Zuckerberg’s lawyers have argued the lawsuit has no basis in law or fact. The developer won an early round in the case last month when a judge provisionally refused Zuckerberg’s request to dismiss it.

“We don’t think the lawsuit has any merit whatsoever and we will defend our clients vigorously,” Patrick Gunn, Zuckerberg’s attorney, said by phone.

Genevieve Grdina, a spokeswoman for Menlo Park, California-based Facebook, declined to comment on the court filing.

The case is Voskerician v. Zuckerberg, 114CV264667, Superior Court of the California, County of Santa Clara (San Jose).

-By Joel Rosenblatt and Karen Gullo

Brookfield Weighs Sale of Stake in NYC’s Brookfield Place

Source: Bloomberg / News

Brookfield Property Partners LP (BPY-U) is considering the sale of a stake in Brookfield Place, the lower Manhattan office complex where it has been working to fill office space left behind by Merrill Lynch & Co.

A partnership is a possibility now that the 8 million-square-foot (740,000-square-meter) property is substantially leased, Brookfield Chief Executive Officer Ric Clark said today on a conference call. Time Inc., Bank of New York Mellon Corp. and Jane Street Capital LLC reached deals in recent months to move to the office complex, the largest in downtown Manhattan.

“We have no definitive plans at the moment,” Clark said in response to a question from Michael Bilerman, a Citigroup Inc. analyst. “But our view was always that once we were able to reposition the property and create the value, we would look to bring in a partner. We never wanted to do that at the beginning of the process for fear of leaving way too much money on the table.”

The expiration of leases from Merrill Lynch, which had its headquarters in the complex before its purchase by Bank of America Corp., left the Hudson River waterfront buildings only 59 percent occupied as of September. With more than 1 million square feet of tenant agreements completed in the last two and a half months, Brookfield Place is 88 percent leased, and Brookfield is aiming to have occupancy of greater than 90 percent by year’s end, the landlord said today.

Higher Income

Chief Financial Officer John Stinebaugh said the company expects income from the new leases to exceed the $160 million brought in annually by the Merrill leases. Deals already signed would generate about $115 million, he said.

“We’ve got remaining space that’s in very attractive places within the towers, and we’re starting to push rents on that,” Stinebaugh said on the call. “So we think we’ll definitely be north of the $160 million that rolled off with Merrill Lynch.”

In June, Brookfield opened the first phase of a $250 million makeover of Brookfield Place’s retail section, a food court known as Hudson Eats. That entire redevelopment will be complete before late next year, Clark said.

The complex was formerly known as the World Financial Center. The name change was part of an effort to attract a more diverse tenant base, including media and technology companies, and de-emphasize the property’s ties to the financial industry.

-By David M. Levitt

Default Risk Rises on 20% of Boom-Era Home-Equity Loans

Source: Bloomberg / Personal Finance

As much as 20 percent of home equity lines of credit worth $79 billion are at increased risk of default as their payments jump a decade after the loans were made during the U.S. housing boom, according to TransUnion Corp.

Borrowers face rate shocks as payments on the credit lines, known as HELOCs, switch from interest-only to include principal, causing monthly bills to surge more than 50 percent, according to a report today by the Chicago-based credit information company. The 20 percent of borrowers most in danger of default are property owners with low credit scores, high debt-to-income ratios and limited home equity, said Ezra Becker, TransUnion’s vice president of research.

Maturing home equity lines, which allow borrowers to use the value of their home as collateral on loans for personal spending, are the last wave of resetting debt from the era of high property values and easy credit before the 2008 financial crisis. The three biggest home equity lenders -- Bank of America Corp. (BAC), Wells Fargo & Co., JPMorgan Chase & Co. (JPM) -- held 36 percent of the $691.5 billion debt as of the first quarter, according to Federal Reserve data.

“It’s nothing trivial for the consumers who end up in default or the banks that potentially have large portfolio concentrations,” Mark Fleming, chief economist for CoreLogic Inc., said in an e-mail. “But an impactful risk to the mortgage finance system or our housing market, that’s harder to see.”

Clock Ticking

About $23 billion in HELOCs will have payment increases this year as the interest-only phase ends, rising to a projected peak of $56 billion in 2017, according to a June report by the Treasury Department’s Office of the Comptroller of the Currency. Most debtors can refinance or absorb the payment increases, with the number of borrowers at risk declining as unemployment falls and home values rise, Becker said.

Applications (INJCJC) for unemployment benefits fell to an eight-year low over the past four weeks, a sign the U.S. job market continues to gain momentum, a Labor Department report from Washington showed today.

Many borrowers either forgot or never knew their home equity lines would reset, making it important for banks to send out early alerts that the clock is ticking, TransUnion’s Becker said. At the “end-of-draw period,” which is usually 10 years after the loans started, they can no longer tap the credit line to raise cash and must begin repaying the principal and interest.

The higher monthly payments can be harsh for people on stretched budgets. In the case of an $80,000 HELOC with a 7 percent interest rate, monthly payments jump from $467 to $719 when the principal is included, a 54 percent increase. More than half of the outstanding HELOCs have a balance above $100,000, Becker said.

Lenders Intervene

“Once lenders can identify who’s at high risk, they can intervene and try to mitigate the problem,” he said. “So while we say up to $79 billion may be at elevated risk, we think that with prudent action by lenders it can be less.”

Bank of America, which had $89.7 billion in outstanding home equity loans as of June 30, the most of any bank, begins reaching out to borrowers more than a year before the reset date to help them prepare for the higher payments, according to Matt Potere, home equity products executive at the Charlotte, North Carolina-based bank.

“If a customer does have a hardship that would impact their ability to repay the principal on their loan, we have several programs to assist them based on their individual circumstances,” Potere said in an e-mail. Those programs include loan modifications which could entail principal reduction, he said.

Delinquency Rate

About 76 percent of Bank of America’s HELOCs have yet to end the interest-only period, according to a July 29 filing. The 30-day delinquency rate was about 3 percent on loans after the reset period compared with a 1 percent rate for loans in the interest-only phase.

Borrowers who received notices from Wells Fargo (WFC), which had $80 billion of home equity loans as of June 30, often were “deathly frightened and didn’t understand” when they were told about the payment change, said Pamela Simmons, a mortgage and tax attorney, who represents struggling borrowers, including many immigrants, in Santa Cruz County south of San Francisco.

“They think something bad’s going to happen to them right away,” Simmons said in a phone interview from her office in Soquel, California.

One of her clients who responded to a notice was able to refinance a Wells Fargo HELOC, which was “a good outcome,” she said.

Balance Due

Other cases are more complicated. Maritza Alfaro Escobar, who became Simmons’ client last month, said Wells Fargo told her that she had to pay the entire $64,000 balance on her loan when the interest-only period ended in December. Alfaro Escobar, a self-employed house cleaner, said she didn’t have the money and Wells Fargo wouldn’t offer her new financing on the loan, which was originally written by a correspondent lender.

“The bank wouldn’t help me,” Alfaro Escobar, 45, said. “They said I didn’t make enough money.”

Wells Fargo has $23.4 billion in home-equity loans scheduled to end the interest-only phase in 2015 through 2017, including some that “have been structured with a balloon payment, which requires full repayment of the outstanding balance at the end of the term period,” according to a company filing.

The bank can’t comment on this specific case, “but we have potential options for distressed customers including payment modification or a restructuring of the loan that could make repayment more manageable,” Vickee Adams, a Wells Fargo spokeswoman, said in an e-mail.

HELOCs Rebound

Banks slashed home equity lending and pulled unused lines after 2007, when originations reached a record high of $80 billion, according to TransUnion. New issuance plunged to a post-housing crash low of $17.8 billion in 2010 and rebounded to $27.9 billion last year as lenders began reopening the spigot after home values started to recover. Demand for HELOCs rose last month for the first time since October, according to a Federal Reserve senior loan officer opinion survey.

Banks wrote down 1.2 percent of HELOC debt as uncollectible last year compared with a high of 3.2 percent in 2009, the Office of the Comptroller of the Currency report said.

Unlike first-lien mortgages, which are packaged and sold as bonds, most HELOC debt remains on bank balance sheets, representing about 7 percent of outstanding consumer loans at national banks as of Dec. 31, according to the OCC.

Second Liens

Because the loans aren’t sold to investors, banks have more flexibility to ease terms for HELOC borrowers, according to Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington. The banks also have little incentive to foreclose or force a short sale for a loss, because second liens are wiped out before first mortgages and they can end up with nothing, he said.

Alfaro Escobar and her husband, Oswaldo Menjivar, a carpenter, continue to pay the first mortgage on the home they bought for $385,000 in 2002 with a $308,000 first mortgage from America’s Wholesale Lender, which was later acquired by Bank of America. The three-bedroom house is now worth $202,000, according to Zillow Inc. (Z), a sale price that would leave nothing to recover for Wells Fargo on the second loan.

Settlements between banks and regulators often require lenders to forgive debt or modify mortgages, which borrowers can use to their advantage to strike deals, Rheingold said.

Mortgage Settlement

The five largest U.S. mortgage lenders -- Bank of America, Wells Fargo, JPMorgan Chase,Citigroup Inc. (C) and Residential Capital LLC, a unit of Ally Financial Inc. (ALLY) -- provided $20.7 billion in loan modifications and debt forgiveness on first- and second-mortgages under a 2012 settlement with state and U.S. attorneys generals, according to an April report by Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute in Washington. Bank of America provided $2.2 billion or 23 percent of its relief to borrowers through second-lien modifications, the report said.

Total home equity debt, including second liens and reverse mortgages, peaked at $1.13 trillion in 2007 and declined to $691.5 billion in the first quarter, according to Federal Reserve data. About $474 billion of home equity lines were outstanding at the end of last year compared with $8 trillion in first-lien mortgages and $1.1 trillion in student loans, according to TransUnion.

That implies resetting HELOCs won’t pose a big threat to the larger economy, TransUnion’s Becker said.

“We estimate about $50 billion to $79 billion is at elevated risk,” Becker said. “It’s a big number, yes. But it’s not the entire marketplace.”

-By John Gittelsohn

U.S. Mortgage Rates Rise With 30-Year at 4.14%

Source: Bloomberg / Luxury

U.S. mortgage rates for 30-year loans rose for the first time in four weeks as borrowing costs that remain close to record lows spurred more Americans to refinance their homes.

The average rate for a 30-year fixed mortgage climbed to 4.14 percent from 4.12 percent, Freddie Mac said in a statement today. The average 15-year rate increased to 3.27 percent from 3.23 percent, according to the McLean, Virginia-based mortgage-finance company.

Rates for 30-year mortgages have have declined from a two-year high of 4.56 percent last August, encouraging homeowners to shift into new loans with lower costs. The share of home-loan applicants seeking to cut monthly payments climbed to 54.5 percent in the week ended Aug. 1, the highest level since March, according to the Mortgage Bankers Association. The group’s measure of refinancing applications rose 3.8 percent.

“Last week was a volatile week for interest rates, but it also proved to be a positive one as refinance applications increased,” Bill Banfield, vice president of Detroit-based lender Quicken Loans Inc., said in an e-mail yesterday. “More Americans are realizing that they need to take advantage of the low rates before they start climbing.”

The Federal Reserve is scaling back monthly bond purchases that have kept down borrowing costs. Policy makers last week announced their sixth consecutive $10 billion cut, staying on pace to end the buying program in October.

The 30-year average mortgage rate reached a record low of 3.31 percent in November 2012.

-By Prashant Gopal