Real News‎ > ‎2014‎ > ‎December 2014‎ > ‎

12th December 2014

Singapore Economy

DBS cuts S'pore 2015 GDP growth forecast to 3.2%

Divergent money policies by central banks, volatility seen

Source: Business Times / Government & Economy

DBS has cut its 2015 GDP growth forecast to 3.2 per cent from 3.6 per cent, amid concerns about a volatile year ahead - with possibly divergent monetary policies across key central banks worldwide.

This would have a significant impact on financial markets, said DBS economist Irvin Seah in a research report. "Interest rate expectations will fluctuate and currencies will be volatile. Perhaps the only upside for the global economy next year is the lower oil prices. The confluence of factors will consequently have ripple effects on economic activities. Being a small and open economy, Singapore will be like a small boat in rough seas."

His latest estimate is lower than the median forecast of 24 private-sector economists polled by Bloomberg, which stands at 3.35 per cent. Other economists from UOB, Citi, and Bank of America Merrill Lynch anticipate 2015 GDP growth to come in at 3.3 per cent, 3 per cent, and 2.8 per cent respectively. These estimates are still within the government's forecast range of 2-4 per cent growth in 2015.

Apart from the fact that restructuring and stricter foreign worker policies will continue to constrain growth at home, Bank of America Merrill Lynch's Chua Hak Bin also sees "divergent cross-currents" in Asia next year affecting Singapore's economic outlook. He says this is in part due to "unsynchronised global forces" - where global growth is US-led, while the recovery in Europe and Japan is sluggish.

Said Dr Chua: "First, growth will diverge with China's slower 'new normal' growth against recoveries under the 'new governments' in India and Indonesia. Second, monetary policies will diverge with easing in China and India versus modest tightening in several Southeast Asian countries (Philippines, Malaysia, Indonesia, and Thailand)."

Even Citi's lower-than-consensus 2015 GDP forecast of 3 per cent faces downside risks from both external and domestic headwinds. For one, with lacklustre demand elsewhere, export prospects increasingly hinge only on a recovery in US capital expenditure; clusters linked to the global oil supply chain may also be hit by lower oil prices.

"Dampened activity in the housing market could shave up to half of a percentage point off GDP growth, and construction is starting to feel the chill of the housing downturn, exacerbated by labour supply constraints and plateauing productivity levels. Home-equity erosion, household deleveraging, and slower population growth may weigh on private consumption, despite wage increases," said Citi economists Kit Wei Zheng and Yap Kim Leng.

On a more sanguine note, however, DBS economist David Carbon thinks it's possible that Singapore's productivity growth "may be a lot higher than it looks".

Explaining his contrarian view, Mr Carbon said: "Singapore's exports are faring identically with the rest of Asia. So if it has lost competitiveness - due to heightened business costs and an appreciating Singapore dollar - it must be making up for it in some other way. Productivity growth is the only thing that comes to mind."

Stressing the difficulty in measuring productivity growth in the short run, Mr Carbon added: "Nobody knows whether GDP growth is slow because productivity growth is slow, or whether productivity growth just looks slow because GDP is in the dumps for other reasons, for example, because the global economy is weak.

"Measuring productivity in the short run at the national level is like trying to measure the water in the bathtub while your four-year-old and new puppy are splashing around inside it. Good luck."

-By Kelly Tay

DBS sees Singapore economy growing by 3.2% next year

The bank’s latest projection is down from its earlier forecast of 3.6 per cent, but slightly better than the expected 3 per cent growth for 2014.

Source: Channel News Asia / Singapore

SINGAPORE: The Republic's economy is expected to grow by 3.2 per cent next year, with manufacturing held back by weak demand conditions in Europe and China, DBS predicted in a report on Thursday (Dec 11).

DBS said its latest 2015 growth outlook is down from its earlier forecast of 3.6 per cent but slightly better than the expected 3 per cent growth for 2014.

The forecast by Singapore's largest banking group is also in line with the Government's prediction of 2 to 4 per cent growth next year.

DBS noted that the latest Purchasing Managers Index (PMI) data showed a wide divergence between different regions. While the US PMI is now at the highest level since January 2011, the readings for China and the eurozone are trending down. This will in turn lead different central banks to adopt different monetary policies, it said.

"Such divergence in global monetary policies will have significant impact on the financial markets. Interest rate expectation will fluctuate and currencies will be volatile," DBS said.

"The confluence of factors will consequently have ripple effects on economic activities. Singapore, being a small and open economy, will be like a small boat in rough seas," it said.

One bright spot for Singapore and the global economy is the fall in oil prices. For manufacturers, lower energy and commodity prices will help boost margins, while for consumers, lower fuel prices will help keep a cap on inflation.

Government measures have also kept a lid on housing and healthcare costs, the bank added.

DBS expects headline inflation to average 1.7 per cent in 2015, up from an expected 1.1 per cent in 2014. "Beyond wage pressures from the tight labour market, conditions are pointing to an otherwise benign inflation outlook," DBS said.

- CNA/cy

Singapore Real Estate

Sale to parent firm: Sign developers not ready to slash prices

Experts say they have holding power, won't dump units

Source: Straits Times / Money

THE move by developer Hiap Hoe earlier this week to sell all the units in one of its new condos to its parent company was the right step, given the impending qualifying certificate (QC) deadline, say experts.

But they also say the transfer of units from the left hand to the right hand is also a clear signal that developers are not quite ready to slash prices yet.

"Balance-sheet wise, developers are pretty strong for the next one to two years, from profits made previously," said Mr Alan Cheong, Savills Singapore research head.

"Anyone who thinks developers are going to dump the units on the market in a fire sale is not likely to have their dreams fulfilled."

The Residential Property Act states that developers with shareholders or directors who are not Singaporean must obtain a QC for a new development. They then have two years after obtaining the temporary occupation permit (TOP) to sell all units.

If they fail to do this, extension charges are levied at 8 per cent of the land price for the first year, 16 per cent for the second and 24 per cent for subsequent years.

These charges can be hefty. An OrangeTee research study showed that if the projects that obtained their TOP between 2010 and 2012 failed to sell any unit by the QC deadline, they would have to pay up to $69.7 million this year.

Hiap Hoe announced on Monday that its controlling shareholder, Hiap Hoe Holdings, had agreed to buy all 48 units of the Treasure on Balmoral for $185 million.

The QC deadline had already started to bite for the project, which received its TOP on Nov 1, 2012. Extension charges of $5.52 million are being paid for a six-month period from Nov 2 under the QC for the project, the company said.

Hiap Hoe also bought the remaining units at Skyline 360° in River Valley and Signature at Lewis in Lewis Road earlier this year.

Some projects are believed to have forked out for QC extensions.

One is Scotts Square in Scotts Road, which obtained its TOP in the third quarter of 2011. It has about 50 of 338 units unsold.

The Lumos in Leonie Hill, which obtained its TOP in the same quarter, has about 35 of 53 units unsold, according to data from the Urban Redevelopment Authority (URA), said Mr Ong Kah Seng, R'ST Research director.

Developers facing sales deadlines could also privatise as a Singapore company, as SC Global did in March last year.

There are a number of projects with sales deadlines from next year.

The Goodwood Residence in Bukit Timah Road, which obtained its TOP in June last year, has about 25 per cent of 210 units unsold. Plans for the unsold units are too premature to share, a GuocoLand spokesman said.

Another is the Urban Resort Condominium in Grange Road. It obtained its TOP in the first quarter of last year and has 20 of 64 units left.

Popular Holdings said in its second-quarter results statement on Wednesday that it had 21 of 26 units unsold at Ei8ht Raja as at the end of last month. Its QC sales deadline is from May next year.

Meanwhile, Madam Rosy Yu, the spouse of a Lafe Corporation director, has bought at least six units at Residences at Emerald Hill over the past year. The condo obtained its TOP in the third quarter of 2011 and is believed to still have unsold units.

Mr Wong Xian Yang, OrangeTee research manager, said a firm buying units in its own development would be a last-ditch measure as that involves paying a 15 per cent additional buyers' stamp duty.

"But for projects where a substantial number of units are unsold, as in Hiap Hoe's case, the QC penalties could work out to much more."

-By Rennie Whang

Companies' Brief

Keppel DC Reit

Source: Business Times / Stocks

The Reit, which makes its debut on Singapore Exchange at 2pm on Friday, saw its retail tranche (comprising 53.8 million units) 9.6 times subscribed at the close of its public offer. Its placement tranche of 207.4 million units was 24.4 times subscribed. Credit Suisse (Singapore) Limited, on behalf of the joint bookrunners and underwriters, has over-allotted an additional 17.7 million units under the placement tranche.

-By Andrea Soh

Keppel DC REIT’s IPO heavily oversubscribed

Source: Today Online / Business

SINGAPORE — Demand for Keppel DC REIT’s initial public offering units was so strong that the placement tranche was 24.4 times subscribed and the public portion was 9.6 times subscribed, the investment banks managing the sale said in a regulatory filing late today (Dec 11).

The IPO of Keppel Telecommunications & Transportation’s real estate investment trust for its data centres will raise about S$513 million in the second-biggest listing in Singapore this year after Accordia Golf Trust’s S$758.6 million IPO in July.

Keppel DC REIT’s placement tranche of 207.4 million units attracted indications of interest for about 5.1 billion units, while the Singapore public tranche of about 53.8 million units received applications for 514.7 million units, the filing showed.

The IPO was priced at 93 cents per unit. Cornerstone investors such as Fortress Capital and Eastspring Investments will separately buy another S$270 million worth of units. The expected distribution yield is 6.8 per cent next year and 7.1 per cent in 2016.

Trading in the units will begin at 2pm on Friday.

Suntec Reit

Source: Business Times / Companies & Markets

We expect Suntec Reit to be a beneficiary of the robust momentum in Singapore's prime office sector, although rental growth is likely to moderate from 2015. The situation appears less sanguine for its retail segment, in our view, underpinned by industry headwinds. This has resulted in the relatively lacklustre committed occupancy rate of 60 per cent (as at Sept 30, 2014) for Suntec City Mall's Phase 3 development.

Tee International unit wins S$26m contracts

Source: Business Times / Companies & Markets

Tee International Limited said its engineering business has clinched S$26 million worth of contracts from repeat and new clients in Singapore, bringing its total outstanding order book to about S$467 million. These include two new contracts from repeat client Changi Airport Group for addition and alteration works for the existing arrival h

GLP inks new China leasing agreements

Source: Business Times / Companies & Markets

Global Logistic Properties Limited (GLP) announced that it has signed new leasing agreements with four existing customers for a total space of 65,000 square metres in six locations across China.

all coach stand at Terminal 1 and the north bus gate at Terminal 2.

Low Keng Huat

Source: Straits Times / Money

CONSTRUCTION group Low Keng Huat's third-quarter net profit jumped more than six-fold to $65.1 million, thanks to a major boost in revenue recognition for a development project.

Revenue for the three months to Oct 31 rose to $408.5 million from $22.2 million in the same period a year ago.

The firm said the increase was due to the recognition of revenue from Parkland Residences, a Design, Build and Sell Scheme (DBSS) development that received its Temporary Occupation Permit on Oct 29.

It added that an increase in construction activity at Genting Hotel in Jurong Town Hall also boosted its revenue.

Net profit for the nine months more than doubled to

$83.5 million as revenue jumped to $459.3 million.

Earnings per share for the third quarter came in at 8.81 cents as at Oct 31, up from last year's 1.41 cents.

Net asset value per share stood at 74 cents as at Oct 31, up from 65 cents as at Jan 31.

Hwa Hong

Source: Straits Times / Money

PROPERTY firm Hwa Hong has bought a 70 per cent stake in a firm that is acquiring a freehold commercial property in central London.

Capital Eagle Limited (CEL) is paying £24.6 million (S$50.7 million) for the building in the Holborn area.

The property is fully leased, bringing in an annual gross rental income of about £1.4 million.

It has a total floor area of 30,533 sq ft and is within walking distance of landmarks like Covent Garden, The British Museum and the Royal Courts of Justice.

The firm is funding the acquisition through bank loans and internal cash sources.

AVA, BCA moving to Jem in Jurong Lake District soon

Source: Straits Times / Money

THE Agri-Food & Veterinary Authority of Singapore (AVA) and the Building and Construction Authority (BCA) will move to Jem in the Jurong Lake District in a couple of weeks.

The relocation is part of the Ministry of National Development's (MND) plans to move all its operations to the area.

It has a 30-year lease for 11 levels of office space at Jem, with a net lettable area of about 310,000 sq ft. Jem, a mixed-use development, also has 241 stores over six levels.

The AVA and BCA, two of the MND's statutory boards, will occupy eight floors with the other three to be sublet, an MND spokesman said. The MND is expected to eventually occupy those three floors.

The space vacated by AVA and BCA at the MND Complex in Maxwell will also be leased.

"There are no immediate plans to redevelop the existing MND Complex," she said.

The MND's relocation plans were announced in 2010, along with plans for the Ministry of the Environment and Water Resources and its statutory boards to make the move to Jurong.

OrangeTee research manager Wong Xian Yang said AVA and BCA's presence will boost the area as related firms such as architecture firms and developers may consider moving to Jurong East as well.

Other office space in the area includes Westgate Tower. Its developer, CapitaLand, was initially supposed to occupy about half the space but the plan was aborted last year. The 20-storey building, with about 305,000 sq ft of net lettable area, was sold in January for $579.4 million.

CPG Corporation, an infrastructure, building development and management services provider, has reportedly taken an 83,000 sq ft lease at Westgate Tower and will be moving in by the fourth quarter of next year.

-By Rennie Whang

Views, Reviews & Forum

Size matters when it comes to private apartments

Source: Straits Times / Forum Letters

OVER the last few years, developers have been building smaller apartments in order to maintain affordability and profitability, given the high prices they bid for land.

At the new Tre Residences show-flat in Geylang East, the standard three-bedder is only 764 sq ft, and a four-bedder is 947 sq ft.

In contrast, a four-room HDB flat is about 970 sq ft.

With most developers churning out similar-sized units, buyers have few alternatives. I doubt if developers will go back to building normal-sized flats.

Given that developers are still putting in high bids in land auctions, it is timely for the Government to introduce some policy to ensure they provide family flats of a decent size.

For example, the Urban Redevelopment Authority could set a maximum number of units for a given piece of land.

Alternatively, it could specify the minimum size for each type of unit.

The size of a private three- and four-bedder must at least match the size of a standard four- and five-room HDB flat respectively.

-By Patrick Tan Choon Hong

Global Economy & Global Real Estate

Rundown NY homes draw Aussie fund

US Masters Residential Property Fund buys only properties located less than an hour by public transport from midtown Manhattan

Source: Business Times / Real Estate

November UK home prices up the least in 18 months

Source: Business Times / Real Estate

UK home price growth slows to 18-month low

Source: Today Online / Business

LONDON — Home prices in Britain grew at their slowest rate in a year and a half during the past three months, an industry body said yesterday, but a planned cut to property taxes is likely to temper the lull in sales in the coming year.

The Royal Institute of Chartered Surveyors (RICS) said its monthly house price index sank to plus 13 last month, down from plus 20 in October and its lowest level since May last year, when Britain’s housing market started to pick up strongly. Economists polled by Reuters had expected the index, which measures surveyors’ view of price trends over the preceding three months, to drop less sharply to plus 17.

Britain’s housing market has been slowing since the middle of this year because of tighter mortgage regulation and annual price rises of more than 10 per cent, which have far outstripped meagre wage growth. But RICS saw the potential for a boost from tax changes announced last week by Chancellor George Osborne which, he said, would result in lower payments of the stamp duty tax for more than 90 per cent of home buyers.

“The stamp duty reform could reverse the softer trend in buyer enquiries that has been visible in recent months,” said Mr Simon Rubinsohn, chief economist at RICS.

Surveyors on average expected the change to increase transactions by between 2 and 5 per cent next year and raise the supply of homes for sale, RICS said. Forecasters at the government’s Office for Budget Responsibility have said they expect the tax changes to increase annual property sales by 1 per cent in the long run, as well as push up the pre-tax selling price of many homes. 

-By Reuters

U.K. House-Price Growth Slows for a Sixth Month, RICS Reports

Source: Bloomberg / Luxury

A U.K. house-price index showed price growth slowed for a sixth month in November, according to the Royal Institution of Chartered Surveyors.

RICS said its house-price gauge fell to 13, the lowest since May 2013, from 20 in October. An index for London dropped to minus 40, the least since 2010, from minus 33.

Prospective buyers may be delaying purchases ahead of the general election in May, RICS said. The slowdown may reverse, however, as Britons are lured to the market by a property-tax overhaul announced by the government last week that cuts the cost of buying a home for most people.

“The stamp-duty reform could reverse the softer trend in buyer enquiries that has been visible in recent months,” said Simon Rubinsohn, chief economist at RICS. “Transactions could increase by up to 5 percent over the next year.”

-By Jennifer Ryan

UK's Grosvenor seeks Shanghai sites for China office project

Source: Business Times / Real Estate

Demand for homes surges after Israeli government scuttles zero-VAT proposal

Source: Business Times / Real Estate

Dubai-owned firm to open 4 mid-priced hotels next year

Source: Business Times / Real Estate

Dubai to Redress Its ‘Unhealthy’ Luxury-Hotel Imbalance

Source: Bloomberg / Luxury

A company owned by Dubai’s government plans to open four hotels in the sheikdom next year to expand the supply of mid-priced rooms in a market dominated by luxury accommodation, its chief executive officer said.

Wasl Asset Management’s Hesham Abdullah Al Qassim said the three-star properties will each have 150 to 200 rooms and will be managed by Hilton Worldwide Holdings Inc. (HLT) and Hyatt Hotels Corp. Wasl plans to build 19 hotels before end of 2017, he said.

“We want to fill the gap,” Al Qassim said by phone. “If you look at what’s available in the market you’ll find that more than 50 percent are five-star hotels. This isn’t healthy.”

Dubai, known for iconic properties such as the sail-shaped Burj Al Arab, has been seeing a decline in occupancy and profitability at its hotels as more are constructed, according to STR Global. Five-star hotels in the city cost 2,000 dirhams ($550) or more per night, while three- and four-star hotels command nightly rates of 367 dirhams to 735 dirhams, according to Filippo Sona, director of hotels in the Middle East and North Africa at Colliers International.

Wasl already owns 10 hotels and two golf courses in Dubai. The company is also Persian Gulf city’s largest landlord with more than 30,000 homes.

Dubai aims to double its hotel rooms to 160,000 by 2020, Helal Saeed Almarri, director general of the Dubai Department of Tourism and Commerce, said in March. The emirate is encouraging developers to build affordable hotels to cater to business travelers and families on holiday, he said.

Lower Prices

Occupancy rates dropped 2.5 percent to 85.5 percent in November as the number of rooms climbed 7.3 percent, STR Global said in a Dec. 10 report. Revenue per available room slid 9.2 percent, while average room rates fell 6.9 percent to 977.84 dirhams ($266), according to the report.

Wasl built a twin tower Hyatt Regency complex on Dubai Creek and for the first time will sell properties to foreigners. One of the towers includes 463-rooms, five-star hotel set to open in March that will be held by the company. The second tower has 405 serviced apartments for sale starting on Dec. 15.

“We wanted to enter the freehold market with a completed project, where buyers can see and touch the homes they are buying before they buy,” Al Qassim said.

Next year, the company plans to build two housing projects with a wide range of prices, the CEO said. “We will always hold 30 percent to 40 percent of any project for leasing,” he said.

-By Zainab Fattah

Aussie regulator urges growth limits for investment mortgages

Authority to step up oversight of mortgages, calls on banks to limit growth in home loans to investors to 10% a year

Source: Today Online / Business

SYDNEY — Australia’s financial services prudential regulator has called on banks to limit the growth in home loans to investors to 10 per cent a year, adding that it will step up oversight of mortgages amid surging house prices in Sydney and Melbourne.

Banks should add a 2 per cent buffer to their home-loan rates and have an interest-rate floor of at least 7 per cent when assessing a borrower’s ability to repay a mortgage, the Australian Prudential Regulation Authority (APRA) said yesterday. APRA will review lending practices in the first quarter of next year to assess if further action is needed for individual banks, including increases in capital requirements, it said.

Growth in mortgages to property investors “above a threshold of 10 per cent will be an important risk indicator for APRA supervisors in considering the need for further action”, the regulator said.

“At this point in time, APRA does not propose to introduce across-the-board increases in capital requirements, or caps on particular types of loans, to address current risks in the housing sector,” it added.

Regulators are concerned that speculative buying of homes to rent is creating an unbalanced housing market. Home loans to landlords account for more than half of all mortgages, the highest share on record, and housing prices have soared 13.2 per cent in Sydney in the year through November and 8.3 per cent in Melbourne.

“This is a measured and targeted response to emerging pressures in the housing market. These steps represent a dialling up in the intensity of APRA’s supervision,” said the authority’s chairman Wayne Byres.

The regulator said it would also pay particular attention to high loan-to-income and high loan-to-valuation mortgages, interest-only loans to owner-occupiers as well as loans with very long terms.

Housing-loan approvals to investors are almost 90 per cent higher in New South Wales than two years ago and 50 per cent higher over the same period in Victoria, the Reserve Bank of Australia (RBA) said in its financial stability review in September. Growth in credit to housing investors was 9.9 per cent in the 12 months through October, said the latest RBA data.

The central bank, having dismissed the idea of macroprudential measures earlier in the year, said in September that investors were distorting the market and that it was discussing with regulators, including APRA, on introducing curbs. The RBA is grappling with the same conundrum that drove its counterparts from the United Kingdom to New Zealand to tighten lending rules and slow housing while keeping interest rates low to boost the economy.

“The composition of housing and mortgage markets is becoming unbalanced, with new lending to investors being out of proportion to rental housing’s share of the housing stock,” the central bank said. “Strong investor demand can be a sign of speculative excess.”

The move by APRA comes after the Australian government last month proposed tightening rules on foreign homebuyers, who may soon need to pay an application fee of up to A$1,500 (S$1,630) when buying a residential property. Those who breach ownership regulations will have to forfeit their capital gains and face civil penalties. 

-By Bloomberg

IOI says no plan to manage Taipei 101 owner

Source: Today Online / Business

KUALA LUMPUR — Malaysian real-estate firm IOI Properties Group yesterday said it had no plans to manage the owner of the Taipei 101 skyscraper it wants to buy into, after the Taiwanese government said it opposed foreign control of the landmark.

IOI Properties, controlled by Malaysian billionaire Lee Shin Cheng, last week said it was planning to buy a 37.2 per cent stake in Taipei Financial Center Corp (TFCC) for about NT$25.1 billion (S$1.06 billion). However, Taiwan’s investment regulator said it would give the deal a strict review after Finance Minister Chang Sheng-ford said the iconic skyscraper should not be controlled by foreigners.

In a statement, IOI said it never intended to seek management control of TFCC. The company has previously said the investment will provide it with a stable income from a landmark building that is one of the world’s tallest.

Taipei 101’s tenants include Google Taiwan, the Taiwan Stock Exchange Corp, KPMG and BNP Paribas.

IOI Properties, with a market value of US$2.25 billion (S$2.96 billion), said it would finance the purchase with bank loans and/or internally-generated funds. 

-By Reuters

MetLife Buys Washington Hotel for $180 Million From Ivanhoe

Source: Bloomberg / News

MetLife Inc. (MET) bought Washington’s Fairmont Hotel from Ivanhoe Cambridge as the largest U.S. life insurer expands its commercial real estate portfolio.

MetLife agreed to pay $180 million for the luxury property, which has 415 rooms and conference space, the New York-based insurer said today in a statement.

Insurers have been investing in real estate to bolster profits and guard against inflation as returns from bonds are pressured by low interest rates. MetLife has an equity real estate portfolio of almost $16 billion, and the insurer also extends commercial mortgages.

“This was a great opportunity to acquire a luxury asset in a top tier market,” Robert Merck, MetLife’s global head of real estate, said in the statement. The property will “generate the kind of steady cash flows we need to meet our long-term policyholder obligations.”

MetLife has also been investing in office buildings in a joint venture with Norway’s sovereign wealth fund. That’s part of a business the insurer is building to manage assets for clients.

-By Zachary Tracer

Fannie, Freddie to Start Paying Into Low-Income Housing Fund

Source: Bloomberg / Personal Finance

Fannie Mae and Freddie Mac (FMCC) will start making payments that could total hundreds of millions of dollars annually into a fund for affordable housing.

Melvin L. Watt, who oversees the companies as director of the Federal Housing Finance Agency, instructed them today to start setting aside a portion of their revenue for the National Affordable Housing Trust Fund, the only source of U.S. housing money earmarked for the lowest-income families.

The fund has been empty since Congress created it in 2008 because Watt’s predecessors said the financial condition of Fannie Mae (FNMA) and Freddie Mac prevented them from making payments.

“Circumstances have changed” and the suspension of payments into the fund “is no longer justified,” Watt said in letters he sent to the two companies.

Fannie Mae and Freddie Mac, which have been under federal conservatorship since 2008, have returned to profitability after a $187.5 billion U.S. bailout. They’ve sent $225.5 billion back to the Treasury, which takes all of their profits.

The money for the affordable-housing fund will be set aside before the companies calculate their earnings. States will be able to tap the fund primarily to subsidize rental housing for families living in extreme poverty.

Unsuccessful Lawsuit

Fannie Mae and Freddie Mac buy more than half of the new mortgages in the U.S. and package them into securities.

Democratic lawmakers and housing advocates urged Watt, who served in Congress before taking over at FHFA in January, to allow the payments for low-income housing. Republican lawmakers sent him letters urging him to continue the ban.

Representative Maxine Waters of California, who served with Watt as the top Democrat on the House Financial Services Committee, lauded the decision announced today.

“By allocating a tiny percentage of Fannie Mae and Freddie Mac’s profits to these funds, we have the chance to improve the lives of millions of American children, families, people with disabilities and the elderly,” Waters said.

Jeb Hensarling, the Texas Republican who leads the House Financial Services panel, said he’d call Watt to testify before the committee in January, terming the decision a “transparent effort to evade scrutiny” because it came at the end of a congressional session.

“Watt’s decision to activate the Fannie and Freddie slush fund may be an early Christmas present for Acorn-like, liberal housing activists, but it’s a lump of coal in the stocking of every American taxpayer,” Hensarling said in a statement.

The National Low Income Housing Coalition last year unsuccessfully sued the FHFA in federal court, contending that the suspension of payments violated the law that created the trust fund. The statute requires Fannie Mae and Freddie Mac to set aside less than 1 percent of the value of new business, an amount that would have reached $382 million in 2012, according to the lawsuit. Fannie Mae and Freddie Mac reported a combined profit of $28 billion that year.

A federal judge threw out the case in August, ruling that the groups didn’t have standing to sue.

-By Clea Benson

Qatari Fund Buys Lloyds’s Stake in London’s Savoy Hotel

Source: Bloomberg / News

The Savoy, the five-star London hotel once frequented by Winston Churchill, Marilyn Monroe and Claude Monet, is now owned by the state of Qatar and one of Saudi Arabia’s richest men.

Qatar’s government-owned Katara Hospitality Co. bought a 50 percent stake from Lloyds Banking Group and Saudi billionaire Prince Alwaleed Bin Talal’s Kingdom Holding Co. (KINGDOM)owns the rest, Kingdom said in a statement today without providing a value for the transaction.

Katara Hospitality, owned by Qatar’s sovereign-wealth fund, is in talks to buy “iconic” hotels in London and Rome as it seeks to more than double its properties by 2030, Chief Operating Officer Christopher R.J. Knable said last year. The country’s sovereign wealth fund made a joint bid this month for Songbird Estates Plc, which controls the Canary Wharf financial district in London.

The Savoy, located a short walk away from the north bank of the River Thames on The Strand, first opened in 1889. It reopened in October 2010 after a 230 million-pound ($360 million) renovation that took about 30 months. The hotel typically charges at least 365 pounds a night for a basic room, according to its website.

Kingdom Holdings and the Qatar Investment Authority together own a 35 percent stake in Fairmont Raffles Holdings International Hotels Co., according to the statement.

-By Zainab Fattah

Grosvenor Seeks Shanghai Sites for First China Office Project

Source: Bloomberg / News

Grosvenor Group Ltd., the real estate firm owned by the Duke of Westminster’s family, is looking to bid for land in Shanghai for its first large-scale development in China amid weaker property prices.

The company wants to build prime offices for long-term investment on the sites, Nicholas Loup, Grosvenor’s departing Asia chief executive officer, said in an interview yesterday. It will probably work with partners and may bring in investors such as pension or sovereign funds, he said.

Grosvenor is seeking to step up investments in China at a time when domestic players retreat amid tightened liquidity and a decelerating economy. Other foreign investors such as Gaw Capital Partners, which bought a Beijing property from Hong Kong billionaire Richard Li earlier this year, are also taking advantage of the market downturn.

“I would think we’ve got a window that could be another six to 12 months,” Loup said. “I’d say there’s more availability of better-quality opportunities at sensible prices with less competition than there would normally be.”

The firm, which has operated in China for a decade, has focused on renovating residential projects. It also owns floors in the China Merchants Tower in Beijing and Shui On Plaza in Shanghai, which were acquired last year.

The Duke of Westminster, whose name is Gerald Grosvenor, is the wealthiest citizen in the U.K. with a net worth of $13.4 billion, according to the Bloomberg Billionaires Index.

Office Supply

Grosvenor’s view on the China office market differs from that of Ronnie Chan, chairman of Hong Kong developer Hang Lung Properties Ltd. (101) Chan said at a conference last week he’s “doubtful” whether there’s enough demand for the supply of prime offices and that Hang Lung only builds them as a requirement or to bring traffic for its shopping malls in China.

New office supply in top-tier cities reached a three-year high and places including Shanghai and Beijing will each see more than 400,000 square meters (4.3 million square feet) of new space over the next few months, according to broker CBRE Group Inc. Demand from state-owned firms is slowing and multinational companies remain cautious about expansion, the realtor said.

“If you stick to quality and locations, I don’t think supply is that much of an issue,” Loup said yesterday. “The overall stock of genuinely good quality office space -- in either Shanghai or Beijing -- is not that large when you look at it on a global basis, compared with London, New York and even Tokyo.”

Loup, who started Grosvenor’s Asia business in 1994, is leaving the firm in March next year and will be replaced by Benjamin Cha. Cha was formerly head of global real estate for greater China at UBS Global Asset Management.

-By Michelle Yun

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