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17th December 2014

Singapore Real Estate

HDB resale market expected to remain weak in 2015: Analysts

This could prove tricky for existing owners who have applied for a new flat. Market-watchers say that more of them may find it difficult to sell their units within six months - which is the deadline given under existing HDB rules.

Source: Channel News Asia / Singapore

SINGAPORE: Market watchers say the HDB resale market is expected to remain weak in 2015, and existing owners who have applied for a new flat will find it difficult to sell their units within the HDB deadline.

This can be attributed to a record construction programme for the HDB between 2011 and 2013, with more than 77,000 Build-To-Order (BTO) flats launched during that period - that's more than 25,000 flats each year.

The move managed to mop up demand, especially from first-time home-buyers. This year, the HDB has started to taper supply. BTO supply was reduced by 10 per cent, with 22,455 flats launched this year. This will be cut by another 25 per cent in 2015, with just 16,900 new flats expected.

Dr Lee Bee Wah, the chairperson of the Government Parliamentary Committee on National Development and a Member of Parliament for Nee Soon GRC, said: "I used to get residents at my Meet-The-People sessions telling me that they want to get married, they want to get their flat, they have balloted many times but not successful. I do not see that anymore.

"In fact, nowadays, I have residents who come to my Meet-The-People sessions almost every week asking for extension to sell their flat because they bought another flat. Many of them have right-sized their flat and it has been completed, they can collect the key. Therefore, they have to sell their current flat, and they find it is quite difficult to find the right buyers because they cannot get the right price."

Under current rules, existing HDB flat-owners have to dispose of their unit within six months of taking possession of their new flat. In the last three quarters, HDB said it has received 166 requests from HDB flat-owners for an extension of the deadline. This comes amid declining HDB resale prices over the past five quarters, and analysts said a growing number are expected to face this situation as more new homes come on stream.

According to the National Development Ministry, an estimated 47,505 residential units - which includes private and executive condominiums - will be completed in 2014. This will go up to 50,592 units in 2015 and 60,623 in 2016. In all, that means 200,034 residential units will be completed by 2017.

Mr Chris Koh, director of Chris International, said: "The seller hopes to get a price that he wants today, but the buyer says 'I am not willing to pay because I expect prices to fall maybe in the next two quarters.' Thus, he comes in with a very low offer. Everybody just has this standoff, where buyers and sellers cannot agree on a price.

"The volume of resale flats coming onto the market is increasing because many of them have jumped on the bandwagon in the last few years to maybe apply for a new condo, or bought a new condo or EC to upgrade. So they will have to do something with their flats."


Some have suggested granting existing flat-owners a longer time to dispose of their unit. They said declining HDB resale prices could have other implications as well.

Associate Professor Sing Tien Foo, from the Department of Real Estate at the National University of Singapore, said: "They may have committed to this BTO flat three years ago. Even though the prices have not dropped significantly, but there is still some difference in terms of prices. So they probably have to adjust some of their expectations.

"So if you make your financial planning based on the potential selling price three years ago, will you be able to moderate your expectations, or will you have sufficient financing for the new flat? We should still leave it to the free market to moderate this supply side and demand situation. I think it is difficult for the Government to intervene in the resale market activities."

Dr Lee added: "We would like to help our residents, those who need to sell their flat in order to move into their new flat. Give them a slightly longer time because really, some of them told me there were no viewers at all, some they said very few viewers and some didn't offer and some offered at prices that were much lower than what they expected."

Looking ahead to 2015, property analysts expect prices to continue stabilising. Mr Koh said that he expected a drop in transactions in the final quarter of this year: "Historically, during the year-end period you get fewer transactions and of course, that has an effect on prices. You have the school holidays, the festivities. Then 2015, the beginning of the year will again be a slow quarter. Again historically, the beginning of every year when you have schools re-opening, Chinese New Year - that first quarter will register fewer transactions and affect prices also.

"If we move further, into maybe mid-2015, we would have gone through a good two years of price correction. Hopefully, buyers will see that the price fall is attractive enough for them to come back into the market. By June next year, if we see prices falling by an amount that is attractive to buyers, we hope to see a recovery. But if not, I would expect prices to slide in this quarter and perhaps the first quarter of 2015 as well."

Meanwhile, there was also a call for more two-room flats for singles. Dr Lee noted that while application rates have come down since the scheme was launched in 2013, they still remain in the double digits. She said that more could also be done to address the needs of vulnerable groups - such as divorcees with children - to make it easier for them to get a flat. 

- CNA/ac

URA to seek feedback on short-term home rentals

Source: Straits Times / Top of The News

THE Urban Redevelopment Authority (URA) is to seek public feedback on whether rules on short-term rentals of private homes should be changed.

The move follows a rise in popularity of websites such as Airbnb that let owners rent out their places for short stays - often at prices lower than at hotels.

In September, Senior Minister of State for National Development Lee Yi Shyan called on the Government to study the implications of this development.

The URA says current short- term stay guidelines are meant to "safeguard the amenity and living environment" of a residential development, and to ensure residents are not "adversely affected by the frequent turnover of transient occupiers".

However, it has told The Straits Times it will conduct a survey to gather feedback on the issue. "Given the current public interest (in) the matter, URA will be carrying out a public consultation to assess if there is a need to review the policy," it said.

It is currently illegal to lease a home for less than six months in Singapore. Private home offenders can be fined up to $200,000 and jailed for up to a year.

A search on Airbnb, Roomorama and travelmob turned up more than 2,000 local listings.

"We are thrilled that this conversation is happening," an Airbnb spokesman said.

"We believe Singapore should join other leading global cities like San Francisco, London, Paris and Amsterdam, which have all reformed outdated housing rules to allow for home sharing."

Roomorama co-founder Teo Jia En, 32, said a review of the rules could boost her business.

"The demand for short-term stays is strong. You have tourists and working professionals who are in Singapore for short stints," she said.

A 41-year-old business owner, who has been letting out a room in her Novena condominium unit via Airbnb since January, described the consultation as encouraging.

Most of her guests are tourists who stay for a few days. "Many of us host for financial reasons. I'll be relieved if what I'm doing is not considered illegal."

But such practices pose competition to hotels and serviced apartments, said Singapore Hotel Association executive director Margaret Heng.

"Critical to the tourism industry... is how we ensure safety, security and hygiene standards in private outfits," she said.

"If the (rules are revised), then it may be necessary to look at whether there is a need to license private premises that are rented out."

Since last year, the URA has received 575 complaints involving the alleged rental of individual strata-titled private residential properties for less than six months.

Most were about privacy and security, due to the presence of transient guests and their use of common facilities.

-By Yeo Sam Jo

CDL ties up with Blackstone, CIMB to monetise Sentosa Cove assets

Through the club deal, these investors buy the present and future cashflows of properties collectively known as the Quayside Collection

Source: Business Times / Real Estate

CITY Developments Limited (CDL) has come up with a novel way of monetising its Sentosa Cove assets in a soft property market, even as it anticipates more overseas acquisitions over the next few years.

The Singapore-based developer cobbled together a club deal with US investment giant Blackstone and Malaysia's CIMB Bank, which along with senior bank loans, amount to S$1.5 billion.

Through a complex structure, these investors are effectively buying the present and future cashflows of a five-star hotel, retail property and residential project - collectively known as the Quayside Collection.

Cityview Place Holdings, which owns the Quayside Collection, is 100 per cent owned by CDL's wholly owned unit Baynes Investment.

Under the deal, CDL, Blackstone and CIMB formed a special purpose vehicle Sunbright Holdings to infuse S$750 million for a capital instrument called profit participation securities (PPS). Separately, DBS Bank and OCBC Bank will provide S$750 million in senior loans to Sunbright.

The PPS have a five-year tenure and carry an annual fixed payout of 5 per cent interest. In addition, PPS holders will receive cashflows from Cityview over the five-year period - specifically, Cityview will distribute profits from its business operations as dividends to Baynes, which will transfer such cashflow to Sunbright.

Under the proposed agreement inked between Baynes and Sunbright, the new investors do not own equity in Cityview, so the latter's ownership structure remains unchanged while CDL will still manage its properties upon completion of the deal.

In terms of investment breakdown, Blackstone's Tactical Opportunities Fund will invest S$367 million while CIMB will contribute S$102 million for the PPS. CDL is also putting in S$281 million through wholly owned unit Astoria.

After the transaction is completed, Cityview will repay a shareholder loan of S$700 million to CDL. Excluding revaluation gains on investment properties, CDL's net gearing ratio will be pared to 25 per cent from 36 per cent.

CDL chief executive Grant Kelley told BT that while the group is not in a rush to raise funds, given its cash hoard of around S$3 billion, it is going to be "acquisitive in the next number of years".

The move also signals CDL's progression towards fund management, which several developers have already done, Mr Kelley added. "This should, in time, help us to attract a higher PE (price to earnings) multiple, more akin to an asset manager than a property developer."

Kishore Moorjani, managing director of Blackstone who leads Asian efforts for the US$5.5 billion opportunities fund, noted that this is "the first truly hybrid product" underscored by high-quality assets that are cash-generating with no development risks.

Being a "long-term bull" in Singapore, Blackstone is looking for opportunities across sectors, Mr Moorjani said, but declined to comment on market rumours on Blackstone's interest in other high-end condos here.

Analysts note that CDL is following the footsteps of its competitors such as CapitaLand and Keppel Land that have large unlisted fund management arms - an area that CDL is "late in the game", though it was the first to launch a listed hospitality Reit here in 2006.

It also makes sense for CDL to wait for the market to recover, instead of monetising the assets through the conventional way of divesting when current yields are low, they reckon.

The three properties in the Quayside Collection have been operational for over two years. W Singapore hotel is deemed the crown jewel, given that it is Ebitda (earnings before interest, tax, depreciation and amortisation) positive, said OCBC analyst Eli Lee.

The 240-room hotel has been enjoying strong bookings, while Quayside Isle, the only F&B and retail property in Sentosa Cove, has its net lettable area of 44,121 square feet fully tenanted.

But only 25 out of the 228 units at the 99-year-leasehold The Residences at W Singapore have been sold. Some 106 unsold units are leased at "comfortable rents compared to District 9 and other CCR (core central region) areas", Mr Kelley said. There are no restrictions on developers renting out unsold units at Sentosa Cove.

In projecting future cashflows, CDL and the investors have assumed that the residential units would be sold at no less than S$2,400 per square foot (psf). Units there were last sold by the developer at a median S$2,810 psf in 2010. But the most recent sales of other Sentosa Cove condos have slipped below S$2,000 psf.

Mr Kelley said that CDL has no plans to replicate the PPS instrument to other assets in the near term, given that investors need to be comfortable with the underlying cashflows they are getting for the PPS to work. There are no plans to list Sunbright or the PPS.

Meanwhile, CDL has been diversifying its portfolio across geographies and asset classes. It has invested in properties in Australia, China, the UK and the US and more recently Japan. Mr Kelley said that the group plans to beef up its presence in the five key overseas markets.

"We plan to invest in asset classes that we know and markets that are mature, so that we can make good returns on a risk-adjusted basis," he added. "We also focus on gateway cities to make sure we can have scale in our acquisitions."

-By Lynette Khoo

CDL uses Sentosa Cove assets to raise $1.5b

It sets up linked investment instrument to boost war chest for global expansion

Source: Straits Times / Money

CITY Developments (CDL) is raising $1.5 billion from big investors and banks with a method never used in Asia before to beef up its war chest for global expansion.

Singapore's second-largest developer has set up an investment instrument linked to its Sentosa Cove properties.

Private equity giant Blackstone Group will sink $367 million into the "profit partnering security" investment, as it is called, while Malaysia's CIMB Bank will fork out $102 million.

CDL, through its subsidiary Astoria Holdings, will inject $281 million, raising $750 million in all.

The other $750 million will come from bank borrowings from OCBC and DBS Bank.

Under the deal - which will allow CDL to rake in some $1 billion - a fixed payout of 5 per cent is guaranteed for Blackstone and CIMB for five years.

The partners will enjoy cashflow from W Singapore-Sentosa Cove hotel, retail property Quayside Isle and The Residences at W Singapore-Sentosa Cove condo. This includes proceeds from any potential sale of the assets.

"Over the past 24 months, we've been actively pursuing a strategy of diversification where we don't just have exposure solely to Singapore property and our Millennium and Copthorne (hotel) chain. We've expanded geographically but the second arrow in diversification is in our products," Mr Grant Kelley, the CDL chief executive, told The Straits Times.

The launch of the product is not to raise cash, he added, as CDL is already well capitalised, but to demonstrate to the market the move towards fund management. "This should, in time, help us to attract a higher price earnings multiple, more akin to an asset manager than a property developer," Mr Kelley said.

W hotel has 240 luxury rooms, while the 44,121 sq ft retail component, Quayside Isle, is fully tenanted. At the 228-unit The Residences at W Singapore, 25 units have been sold and 106 units leased.

CDL will maintain full ownership of the Sentosa properties through its unit Cityview Place Holdings, but will "sell the present and future cash streams to Blackstone and CIMB" via a special-purpose vehicle, Sunbright Holdings.

Blackstone's investment represents its "long-term commitment" to Singapore, said Mr Kishore Moorjani, head of Blackstone's tactical opportunities fund.

"If you're just buying and selling an asset, it's all about price. But in a partnership, you need a long-term view, and with the combination of forces you have here, in five years, (the assets) are going to do much better," he said.

-By Cheryl Ong

Blackstone, CIMB to invest in CDL’s Sentosa Cove properties

The investment in the Quayside Collection – comprising the W hotel, the Quayside Isle retail complex and the Residences at W Singapore – will be via an investment instrument called a Profit Participating Security.

Source: Channel New Asia / Business

SINGAPORE: United States investment giant Blackstone and Malaysia's CIMB Bank will invest in three Sentosa Cove properties owned by City Developments (CDL), including the W Singapore hotel, in a complex transaction valued at S$1.5 billion.

The investment in the Quayside Collection – comprising the W hotel, the Quayside Isle retail complex and the Residences at W Singapore – will be via an investment instrument called a Profit Participating Security (PPS) that will give investors a fixed payout based on 5 per cent interest per annum for a period of five years, in addition to a participation in the cashflow over the period that they hold the PPS.

Astoria Holdings, a wholly-owned subsidiary of CDL, will invest S$281 million in the PPS, while Blackstone’s Tactical Opportunities Fund will invest S$367 million. CIMB Bank will contribute S$102 million. Concurrently, DBS Bank and Oversea-Chinese Banking Corporation will provide S$750 million in value of senior loan facilities.

CDL Executive Chairman Kwek Leng Beng said: “This offers investors a rare opportunity to participate in the cashflow from high-quality assets in Sentosa Cove. By leveraging on the operating strength and solid cashflows of the Quayside Collection, we will be able to build and deploy capital for our global plans.”

- CNA/cy

Developer 'may sell assets in 2018 or 2019'

Source: Straits Times / Money

CITY Developments (CDL) expects sentiment in the property market to improve in five years.

That is also when it will consider selling its collection of properties in Sentosa Cove, its chief executive Grant Kelley told The Straits Times. "We won't contemplate sales of the assets until 2018 or 2019... that's the optimum time to contemplate that."

He was commenting on the firm's plans for the W Singapore-Sentosa Cove hotel, Quayside Isle retail property, and the 228-unit condo, The Residences at W Singapore-Sentosa Cove.

The move comes amid a belief among market players that cooling measures will not be rolled back soon, and that measures to ensure financial prudence - such as the total debt servicing ratio - are here to stay.

Hiap Hoe, which was forced to buy back unsold units at its own projects last week, said: "We do not expect the prevailing cooling measures to be lifted any time soon."

Deputy Prime Minister Tharman Shanmugaratnam also noted in October that a "meaningful correction" in home prices has not been achieved, after a sharp run-up in recent years.

In the past year, private home prices have fallen 3.9 per cent.

Property disposal doesn't signal London market exit: Sinarmas

"Opportunistic" sale triggered by good offer; company plans to recycle proceeds into more London acquisitions

Source: Business Times / Real Estate

Sinarmas Land's disposal of a Grade A office building in London's West End last Friday, just one-and-a-half years after acquiring it, appeared like a move contrarian to the red-hot sentiment in the London commercial property market, where capital values are expected to appreciate going into 2015.

-By Lee Meixian

Property agent jailed for forgery, embezzling $38k

He rented out flat for client but steered payment into own account

Source: Straits Times / Singapore

A PROPERTY agent misappropriated almost $38,000 in rental payments from one of his clients after forging his signature on a letter.

Fong Wai Loon, 37, was jailed for a year yesterday after pleading guilty to forgery and criminal breach of trust.

He had got to know the client, Mr Rocky Bastiaan, in 2006 and, three years later, was asked by him to help rent out an apartment in Scotts Road.

Deputy Public Prosecutor Tow Chew Chi told the court that Fong agreed and managed to rent the flat to law firm Ince & Co. The tenancy agreement was signed on March 1, 2009.

Subsequently, Fong experienced financial difficulties. He decided to draft a letter directing Ince to set up a Giro payment arrangement to pay the monthly rent of $6,300 directly into his United Overseas Bank account.

He drafted the letter at his Zion Road home on April 20 that year and forged the victim's signature.

Ince was deceived into paying the rent via cheque and electronic bank transfer into Fong's account on six occasions between April 30 and Oct 1 that year. The total sum came to $37,800.

Fong would withdraw various amounts of money for his personal expenses. He spent the entire sum by Oct 31 that year.

After the forgery was discovered in 2010, Ince stopped making payments to Fong.

Mr Bastiaan made a police report on May 17, 2010.

DPP Tow said Fong had deprived the victim of $37,800 over five years.

Fong, who is making arrangements to pay back the amount, could have been jailed for up to 10 years and fined for forgery.

For criminal breach of trust, he could have been jailed for up to seven years and/or fined.

-By Elena Chong, Court Correspondent

China Square Central site eyed for serviced apartment

URA has given Frasers provisional permission for new work at complex

Source: Straits Times / Money

A SERVICED apartment could be built at China Square Central, a development right in the heart of Chinatown.

Property firm Frasers Hospitality is eyeing the site for one of its Capri by Fraser outlets, The Straits Times understands.

The company already has a Capri near Changi Airport.

Frasers Commercial Trust (FCOT), a related entity which owns China Square Central, said the Urban Redevelopment Authority has given provisional permission for new work at the complex at 18, Cross Street.

This includes possible alterations to the centre as well as an additional gross floor area of 172,223 sq ft for hotel use. The site, which had an assigned gross plot ratio of 4.2, has also been rezoned to have no gross plot ratio.

FCOT's manager is "still evaluating and exploring all options" on the property, which may be subject to other regulatory approvals, as well as commercial and financial viability, it said, adding that "no decision has been made".

Frasers Hospitality operates the 313-unit Capri by Fraser in Changi Business Park, which opened in 2012.

Capri units are hybrid hotel and serviced apartments and cater to guests on shorter stays.

Frasers Hospitality also operates four other brands - Fraser Suites, Fraser Residence, Fraser Place, and Modena by Fraser, which is focused on China.

While there are many boutique hotels in the Chinatown area, plus the 367-room Parkroyal on Pickering, there is just one serviced apartment - Ascott Raffles Place, said Mr Desmond Sim, CBRE research head for Singapore and South-east Asia.

Ms Chia Siew Chuin, director of research and advisory at Colliers International, said the serviced apartment sector is generally considered more resilient and less volatile than the hotel market due to the longer average length of stay. At the same time, rising demand for shorter stays has meant the emergence of a new class of serviced apartments with hotel licences, she said.

Apart from Capri, these include the Ascott Raffles Place and the Pan Pacific Serviced Suites Beach Road.

Experts note that there appears to be an ample supply of hotel rooms, with no urgency for new construction given the falling tourist numbers on the back of uncertainties in the region, including the political events in Thailand.

No hotel sites feature in the first half of next year's Government Land Sales programme.

CBRE's Mr Sim said that the plans for Chinatown would support retail activities in the area.

-By Rennie Whang

JTC launches Tuas industrial site for sale

Source: Straits Times / Money

JTC Corporation has released an industrial site in Tuas for sale and will be launching another for public tender towards the end of the month.

The first, at Tuas South Street 11, is on the confirmed list and has been launched for sale under the Industrial Government Land Sales (IGLS) programme.

The 0.8ha plot is zoned for "Business-2" development, which can include heavy and pollutive industries, warehousing, utilities and telecommunication uses.

Special industries such as those manufacturing industrial machinery or shipbuilding and repair could also be allowed in selected areas, subject to evaluation.

The site has a tenure of 20 years and five months with a maximum gross plot ratio of 1.0.

Offers must be in by 11am on Feb 10.

JTC has also accepted an application to put an industrial site in Tuas South Street 7 up for sale by public tender.

The 0.5ha plot, which is also zoned for a Business-2 development, has a tenure of 20 years and four months with a maximum permissible gross plot ratio of 1.0.

The parcel was made available for application from Oct 28 through the Reserve List system under the land sales programme.

JTC announced that the site would be released for public tender after it received a committed bid price of not less than $4.2 million - a level it deems acceptable.

Under the Reserve List system, JTC announces the minimum price committed but the applicant's identity is not released.

JTC said the Tuas South Street 7 land parcel would be launched for sale by public tender at the "end of December", without specifying a date.

Industrialists will have six weeks to bid for the site.

JTC to offer two sites in Tuas for sale

The first site, which is on JTC's confirmed list, is a 0.8-hectare piece of land at Tuas South Street 11 that had been zoned for Business-2 development, while a 0.5-hectare industrial site at Tuas South Street 7 has also been put up for sale.

Source: Channel News Asia / Business

SINGAPORE: JTC Corporation (JTC) said on Tuesday (Dec 16) that it will offer two sites in Tuas for sale by public tender.

The first site, which is on JTC's Confirmed List, is a 0.8-hectare piece of land at Tuas South Street 11 that had been zoned for Business-2 development. The site has a 20-year five-month tenure with a maximum permissible gross plot ratio of 1.0. The tender closes on Feb 10, 2015.

Mr Nicholas Mak, executive director at SLP International Property Consultants, said the site will likely fetch between S$6.4 million and S$7.2 million.

JTC - the lead government agency responsible for the development of industrial infrastructure - also said that it has accepted an application to put up a 0.5-hectare industrial site at Tuas South Street 7 for sale.

The site, which had been on the Reserve List, is also zoned for Business-2 development. Companies operating on such sites face tougher restrictions such as a nuisance buffer of more than 50 metres.

An unnamed buyer had committed to a bid price of at least S$4.2 million for the second site, which has a 20-year four-month tenure with a maximum permissible gross plot ratio of 1.0.

Under the Reserve List system, a site will be put up for sale if a developer's indicated minimum price is acceptable to the Government. The public tender for the Tuas South Street 7 site is scheduled for end-December with a tender period of six weeks. 

- CNA/dl

Singapore Property

Source: Business Times / Companies & Markets

Unsold inventory hits a post-TDSR high. The buildup in unsold inventory, amid the second-lowest primary sales in a decade, is likely to continue into 2015, and this means that developers' pricing power would continue to come under pressure as the market shifts further in favour of buyers. We are expecting primary sales of 6,000 - 8,000 in 2015, premised on a continued down-drift in property prices and insignificant tweaks to policy measures, in particular the ABSD and TDSR. We remain underweight the developers; within the space, we like CapitaLand and Keppel Land.

Straits Trading

Source: Straits Times / Money

STRAITS Trading's subsidiary, Straits Real Estate, has acquired a retail development in Chongqing, China. The property, Times Midtown, was bought for about 668.4 million yuan (S$143 million).

The property is part of a large mixed-use development with 29 residential buildings, four office towers, a hotel and an open-air street mall.

Straits Trading Company makes first property investment in China

Straits Trading Company will buy Times Midtown development from Chongqing BBMG Dacheng Shanshui Properties for 668.4 million yuan (S$140.5 million).

Source: Channel News Asia / Business

SINGAPORE: Straits Trading Company said on Tuesday (Dec 16) that it will buy a retail development in Chongqing for 668.4 million yuan (S$140.5 million), marking its first foray into China's property market.

The purchase of the Times Midtown development from Chongqing BBMG Dacheng Shanshui Properties was done via Straits Real Estate, in which the Singapore investment firm has an 89.5 per cent stake.

Straits Trading expects to spend an additional 100 million yuan to fit out and re-position the mall, which is part of a large mixed-use development project that includes 29 residential buildings, four office towers and a hotel. The mall also has a direct link to the subway.

Straits Trading, one of Singapore oldest companies, has investments in real estate and hospitality as well as tin mining and smelting. Ms Chew Gek Khim, its executive chairman, described the firm's foray into China property as a "first step" to redeploy capital into opportunities that offer higher returns.

- CNA/ac

Keppel Land

Source: Straits Times / Money

KEPPEL Land's wholly owned unit, Bayfront Development, has sold its share of Marina Bay Financial Centre Tower 3 to Keppel Reit.

Bayfront Development, which had a one-third share in the property, sold it for $665.9 million. Of this, $185 million was in the form of 152,213,000 Keppel Reit new units and the other $480.9 million was in cash.

As a result, Keppel Land's unitholding interest in Keppel Reit is now 44.93 per cent.

Keppel Land expects to recognise a gain of about $23 million for the three months ending Dec 31 as a result.

Views, Reviews & Forum

Will it be GE 2015 or 2016?

Prime Minister Lee Hsien Loong's robust speech at the People's Action Party (PAP) rally last Sunday and his remarks that the next General Election would be a "deadly serious fight" have sparked talk that polls may be round the corner. When might they be? Insight looks at the buzz on the ground and the possible election windows that are being talked about.

Source: Straits Times / Insight

SOON after the upcoming year-end festivities are over, activists from People's Action Party (PAP) branches and opposition parties plan to resume constituency walkabouts and house visits in earnest.

They will do so with a new urgency, shifting their activities to a higher gear.

While no one knows when the next General Election (GE) will be called - it must be held by January 2017 at the latest - the sense of anticipation has grown significantly.

It has been heightened also by Prime Minister Lee Hsien Loong's robust rallying of the troops at the PAP's 60th-anniversary conference last Sunday.

Addressing 6,000 party members, the ruling party's secretary-general characterised the next election as being "a deadly serious fight", and had the opposition clearly in his sights.

The timing of an election, under laws inherited from the British and which are also adopted in countries like Malaysia and India, is solely at the discretion of the Prime Minister, who has absolute say on when to dissolve Parliament and call for an election.

And even though PM Lee noted that "the elections are still a bit off yet", several PAP activists say they are starting to update their contact lists and database of residents' concerns for when the election is called.

Not to be left behind, opposition parties have also stepped up their activities.

The Workers' Party (WP) has been on regular walkabouts to meet residents and sell its newsletter, The Hammer, in the eastern part of Singapore - its longstanding stomping ground.

The Singapore Democratic Party (SDP) announced plans to launch its GE campaign on Jan 10.

"There are indications that PM Lee Hsien Loong will call for elections in 2015. As such, the SDP will get under way our preparations for the electoral campaign," the party said last week.

Over the past months, the PAP has been putting potential candidates on the ground, understudying ministers and veteran MPs in areas such as Sembawang, Ang Mo Kio, Bishan-Toa Payoh and Tanjong Pagar.

Many are already undertaking grassroots work. The party appears to be getting them involved much earlier, after feedback in the wake of GE 2011 that many of its new faces were not familiar to many residents.

Two months ago, the Elections Department said about 30,000 public servants would be called up for training as election officers - but that this is part of preparations "on an ongoing basis".

PAP activists take a similar position. Branch members offer the line that "we're already preparing for the next one the day after the previous election".

As Mr Khong Peng Ming, secretary of the PAP's Zhenghua branch, puts it: "It's not like just because elections are coming, then we put in more effort. Otherwise, it's a rush... like burning the midnight oil. I don't have any clue as to when the election will be."

Neither do MPs, or civil servants. But one thing is clear to activists and analysts alike: The Prime Minister will call for the election when he thinks it is a good time to do so.

The SG50 effect

AS SINGAPORE kicks off its Golden Jubilee celebrations in the new year, party activists and analysts alike rule out Singaporeans going to the polls in the first half of 2015. They cite fixtures in the calendar, such as the series of SG50 events to mark Singapore's 50th year of nationhood, and the Government's Budget and ensuing debate which will stretch from late February to early March.

There will then be preparations for the SEA Games, which Singapore hosts from June 5 to 16. This will be followed by the lead-up to what is expected to be a grand National Day Parade and celebration of 50 years of independence.

But several observers feel that the months after the National Day celebrations will be a good time for Mr Lee to head to the polls. They speculate that the next GE could be called not long after Aug 9, to ride on the "feel good" effect the festivities will have on voters.

But the earliest possible date after PM Lee's traditional National Day Rally speech in August would be late September. This is because some three weeks are needed from the time Parliament is dissolved to Polling Day.

Political scientist Lam Peng Er of the National University of Singapore's East Asian Institute notes that National Day will be a joyous moment, with "lots of rah-rah and reflection".

"The PAP will probably come up with the argument that Singapore would not be what it is today without the good stewardship of the ruling party," he tells Insight.

Dr Derek da Cunha, the author of Breakthrough: Roadmap For Singapore's Political Future, published after GE 2011, also believes the election will most likely take place in 2015.

Added to the feel-good effect, he expects the Government may roll out a number of "populist" measures to mark the 50th-year milestone.

Over the past year, the Government has already announced initiatives to address concerns over the rising cost of living, to improve its prospects with the ground, Dr da Cunha adds.

He cites as examples the Pioneer Generation Package, planned changes to the Central Provident Fund (CPF) scheme, increasing the stock of available HDB flats and moderated housing prices.

He also expects "pre-election sweeteners" in the Budget next February, and others nearer to National Day.

PM Lee's National Day Rally, traditionally held at the end of August, could also set the stage for the election.

Three of the past 11 elections - in 1972, 1988 and 1991 - were held in August and September, within weeks of the rally.

But opposition parties take a different view of going to the polls amidst National Day and SG50 fervour.

Mrs Jeannette Chong-Aruldoss, secretary-general of the National Solidarity Party (NSP), says that events like next year's National Day should focus on a "national celebration", rather than something the PAP can capitalise on.

While acknowledging it is the Government's prerogative when to call an election, she adds: "I hope they won't just say that Singapore is what it is because of 50 years of PAP rule, and gloss over the sacrifices and hard work of Singaporeans.

"I would like Aug 9 to be a way to focus on the contributions which our citizens have made towards the country's progress, and not a day to extol the achievements of the PAP."

Starting early

THAT talk of an election has taken firmer root could be simply down to the fact that parties like the PAP have been doing some things differently: the soft rollout of potential new faces on the ground, for instance, began as early as April this year.

Since then, more than 20 individuals have been seen at grassroots events in the company of ministers or older MPs. In the initial stages, some were introduced and described as likely candidates.

But that is no longer the case. Individuals who are being tested and assessed have been active in PM Lee's Ang Mo Kio GRC, Bishan-Toa Payoh GRC, as well as Sembawang GRC.

PAP candidates who lost at the ballot box have also been moved to other constituencies.

Surgeon Koh Poh Koon, who lost the Punggol East by-election to the WP's Lee Li Lian last year, has been seen in Ang Mo Kio GRC. Former labour movement leader Desmond Choo, who lost twice in Hougang - in 2011 and 2013 - is now helping in Tampines GRC.

The presence on the ground of potential candidates suggests that the PAP is taking seriously public feedback after the 2011 GE that candidates sometimes get "parachuted in" or introduced with little time for residents - and party activists themselves - to get a full measure of the man.

Bishan-Toa Payoh anchor minister Ng Eng Hen acknowledged as much when he told reporters earlier this year: "Many Singaporeans said they prefer candidates who have spent some time on the ground before elections come."

He says their involvement in activities also gives potential candidates time to get to know residents.

The WP is not sitting still. It has been building up its team of candidates to contest GRCs contiguous to Aljunied GRC, including East Coast, Tampines and Marine Parade.

And observers say the ratcheting up of campaign rhetoric a notch appears to be a way for the PAP to signal to voters that they should consider what is at stake.

But it also offers an opportunity for the opposition to make themselves and their plans better known to voters - and to be held up to scrutiny.

Mrs Chong-Aruldoss says the NSP is "certainly making its preparations for the next GE".

"We have no choice but to work with the possibility (of a 2015 election) in mind," she adds.

However, former Nominated MP Eugene Tan, a Singapore Management University law academic, tells Insight he doubts the election would take place in the first three quarters of 2015.

"We know that calling for elections involves strategic considerations. But for them to take place in the midst of the 50th-anniversary celebrations would distract and detract from the focal point of 2015, which is about commemorating this very important occasion in the country's history," he says.

Still, the last quarter of 2015 stretching into the new year could be one possible window.

There has, however, not been a year-end election since 2001, when voters went to the ballot box on Nov 3.

Four earlier general elections were called in late December - in 1976, 1980 and 1984. And in 1997 polling took place on Jan 2.

The year-end used to be the favoured period. The assumption was that people would be in a good mood, with bonus payouts.

But this does not seem to apply as much now. A significant number of Singaporeans also leave the country during the year-end school holidays and the Government may not be inclined to call for an election then as turnout could be lower.

SMU's Associate Professor Tan also says that SG50 celebrations will tax national resources, from security personnel to the work of government departments. And the Government may also not want to risk ending the Golden Jubilee celebrations on a low note "by going into what is likely to be very contentious debates about Singappore...because elections can be divisive".

There is also a major exhibition being organised at the end of 2015, which would paint a vision of what the country would look like over the next 50 years. That could be a perfect set-up for a general election in 2016.

May 2016?

EVEN if 2015 passes by without an election being called, the Government can sit out its full term, until Parliament is dissolved when its five-year term ends in October 2016. The law allows for polls to be held up to three months after this, and the latest an election can be held would be January 2017.

But observers feel an election would more likely be held in the second quarter of 2016, possibly in May, the same month in which GE 2006 and GE 2011 were held.

The first few months of 2016 are to avoid holding an election in, given the Chinese New Year celebrations and the annual Budget. But waiting till later in 2016 may not be the best option either.

"There's always the danger of waiting till your term is almost up, as that leaves you with very little room to manoeuvre," says Prof Tan.

"If your original plan is early or mid-2016, you can still delay it if conditions don't look so good. But if you wait till the end of the term, you're then dictated to as to when elections are held."

Observers feel that holding the election later rather than sooner may work in the PAP's favour. It means that hot-button issues from GE2011, like housing prices and transport shortcomings, would be better resolved. This would allow the Government to present a brighter report card to voters.

Stage Two of the Downtown Line linking Bukit Panjang and Bukit Timah to the city, for instance, would be completed by 2016 and more bus routes added across the island by then.

Might there even be two bumper election Budgets, if polls take place after Budget 2016?

Prof Tan feels both 2015 and 2016 may see Budgets that could further demonstrate the PAP's ability to manage the country well fiscally and deeply engage in long-term planning.

Recent Budgets, he adds, have, after all, taken a "very significant slant" towards strengthening social safety nets.

Keeping options open

OTHERS feel the choice of a GE date remains wide open.

Political watcher Zulkifli Baharudin, a former NMP, is one of those who is uncomfortable with reading the tea leaves to try and determine the election period.

So are a number of party activists with the PAP and opposition.

"Since the PAP is the incumbent and has the prerogative to call for the election any time it wants, I would like to think that this time around, and going forward, it will use this prerogative intelligently," Mr Zulkifli tells Insight.

PAP leaders have to be the judge of the best timing, he adds.

"You have the advantage, you do it. I don't think the PAP is going to pepper the whole thing with signs saying 'I will call for elections, so get prepared'. We have to be prepared for surprises," he says.

One common thread among those who prefer not to speculate is that the Prime Minister would want to keep his options open.

Dr Lam says one consideration is the need to avoid "black swan" events - unpredictable and rare yet high-impact events.

And the longer the delay in calling the GE, the more likely such an event could happen, he adds.

Global conditions could favour the PAP too. Take GE 2001, called months after the Sept 11, 2001 terror attacks on America and amid a global downturn.

That election saw the PAP returned with 75 per cent of the vote as voters saw the party as having the safest pair of hands to steer the economy through the rough patch.

While tough economic times are an advantage for the incumbent, some things are also changing. A Straits Times survey in March this year found that the need for checks and balances on government, and a candidate's attributes, were key factors for voters deciding who to vote for.

At the next election, to a man, activists and analysts expect every seat to be contested, some more fiercely than others.

This is especially for seats targeted by the WP. This is because, as observers like NUS political scientist Bilveer Singh see it, the PAP will want to ensure that the WP - with seven elected MPs - makes no further and significant electoral gains.

And with contests expected to be fiercest in constituencies bordering WP-held Aljunied GRC, the timing of the election could also well hinge on how PAP leaders assess the chances of staving off the opposition making inroads in such constituencies.

So will the general election be in 2015? Or sometime in 2016?

At this stage, few would hazard a guess.

But one thing is certain: Expect more party activity as the build-up has well and truly gotten under way.

-By Zakir Hussain, Rachel Au-Yong & Charrisa Yong

Harness tech wisely to be 'smart city'

Source: Straits Times / Forum Letters

A "SMART city" consists of "smart people" and not just "smart gadgets" ("Vision of 'e-topia' calls for smart choices"; last Wednesday).

Being a pioneer in applying IT to business and government processes in the late 1960s, I have seen investments being wasted on "white elephants", but also clever use of technology yielding great results. In the end, it is the people, and not machines, who deliver results.

The editorial asked: "As a lifestyle choice, would people prefer to interact mainly with super-efficient machines and virtual organisations or crave the buzz from organic forms of 'culture, commerce, community' ".

I would vote for the latter even though I spent more than 30 years in the IT industry.

Smartphones are the most obvious technological advancements that have changed social norms so much so that meetings no longer have to be held face-to-face.

Manufacturers like Apple are laughing all the way to the bank, but I am not sure how these devices have improved life.

We now have friends who are so engrossed in their phones that they no longer talk to one another. Then there are drivers who are so distracted by their gadgets that they no longer pay attention to the road.

Technology can work against us unless we learn to harness it to be our slaves and not our masters. To do this, we need our people to be "smarter".

Over the past couple of weeks, we have read about how leading institutions were brought to their knees by their "smart" systems.

First, a software glitch delayed the opening of Singapore Exchange's securities market by more than three hours earlier this month. Then, a computer error caused the erroneous sale of hundreds of Singapore Airlines business-class tickets at economy-class prices.

I learnt in my IT career that machine speeds can work either way. If there is an error in the "smarts", a faster machine will accentuate the error faster.

I have not even touched on over-dependence on automation. The public will be familiar with this when an MRT train or a telco network breaks down.

Until we learn to harness and make better use of technology, there should be no hurry to race to be the No. 1 "smart city".

-By Geoffrey Kung

Global Economy & Global Real Estate

Straits Trading unit to buy Chongqing development

Source: Business Times / Companies & Markets

A subsidiary of The Straits Trading Company is proposing to acquire a retail development known as Times Midtown in Chongqing, China, for about 668.4 million yuan (S$141.65 million). Straits Real Estate (SRE), through its wholly-owned subsidiary Chongqing Xinchuang Mall Management, on Tuesday entered into nine conditional sale and purchase agreements with Chongqing BBMG Dacheng Shanshui Properties to acquire the property.

-By Kelly Tay

First Sponsor Group

Source: Business Times / Companies & Markets

Housing starts decline for third straight month

Dec manufacturing PMI falls to 53.7, matching January low

Source: Business Times / Government & Economy

UK property tax cut won't stoke bubble: survey

Source: Business Times / Real Estate

Wanda Commercial raises US$3.7b in IPO

Source: Business Times / Real Estate

Dalian Wanda raises $4.9b in biggest real estate IPO

Source: Straits Times / Money

HONG KONG - Chinese shopping mall developer Dalian Wanda Commercial Properties has raised US$3.7 billion (S$4.9 billion) in an initial public offering (IPO) in Hong Kong, a report said yesterday, making it the biggest in the world by a real estate firm.

The company, owned by the property arm of Dalian Wanda Group, sold 600 million shares at HK$48 (S$8) apiece - near the higher end of its indicative price range - Dow Jones Newswires said, citing people close to the matter.

The sale beats the US$2.9 billion IPO of Singapore's Global Logistic Properties in 2010, it added.

The Beijing-based company, controlled by Chinese billionaire Wang Jianlin, is one of the world's largest developers of shopping malls, owning dozens across China.

Its parent group bought US cinema chain AMC Entertainment Holdings two years ago.

The IPO would be the city's largest public listing this year and comes after China last month cut interest rates to spur and give a lift to the mainland property market, which has seen prices falling for months.

Dalian Wanda slashed its IPO fund-raising target by about a third from the original goal, possibly to attract investors concerned by the slowing real estate market, while analysts also pointed to the company's high debt levels.

In September it was reported as seeking to raise about US$5 billion to US$6 billion in the float. The company is expected to list by Dec 23.

A string of Chinese companies are tapping into international investors through the former British colony's bourse.

Its stock exchange has now climbed to second in the world in terms of IPO fund-raising activities, Dow Jones said.

Shares in China General Nuclear Power, the nation's largest nuclear power producer, surged almost 20 per cent on their debut last week after raising more than US$3 billion in its IPO.


Real Estate Recovery in U.S. Uneven as Housing Starts Fall

Source: Bloomberg / Luxury

The residential real estate recovery in the U.S. is best described as plodding, with the industry taking a step back in November for the first time in three months.

Housing starts declined 1.6 percent, the first drop since August, to a 1.03 million annualized rate from a revised 1.05 million pace in October that was stronger than previously estimated, figures from the Commerce Department showed today in Washington. The decrease was led by a plunge in the South as other areas registered gains.

Building permits also fell last month, indicating a surge in construction is probably not in the cards for the immediate future. One positive aspect is that the recent turmoil in financial markets has pushed down interest rates, which combined with a strengthening job market, means homebuying will be within reach for more Americans next year.

“All the conditions for stronger residential investment are in place for 2015,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who forecast starts would slow to a 1.03 million pace. “An improving job market is going to do wonders for the housing market.”

Stocks fell as declines in technology and consumer-discretionary companies offset a rebound in energy shares before tomorrow’s monetary decision by Federal Reserve policy makers. The Standard & Poor’s 500 Index decreased 0.8 percent to 1,972.74 at the close in New York. The yield on the 10-year Treasury note, a benchmark for mortgage rates, dropped, almost touching 2 percent, as investors sought safer assets.

U.K., China

Plunging oil prices caused inflation in the U.K. to cool in November to the lowest level in more than a decade as transportation costs tumbled, another report showed today. In China, a factory gauge fell in December to a seven-month low, a sign the central bank will need to ease monetary policy further to stem a slowdown in growth.

The median estimate of 76 economists surveyed by Bloomberg projected U.S. November housing starts would come in at a 1.04 million rate. Estimates (NHSPSTOT) ranged from 900,000 to 1.1 million.

The October reading was revised up from a previously estimated 1.01 million rate. Housing starts exceeded a 1 million pace in each of the past three months, the first time that’s happened since early 2008.

Building permits declined 5.2 percent in November to a 1.04 million annualized rate after an October pace of 1.09 million, today’s report showed. They were projected to fall to 1.07 million within a range of 1.01 million to 1.1 million, according to the Bloomberg survey.

Market Breakdown

Construction of single-family houses decreased to a 677,000 rate, while work on multifamily homes, such as apartment buildings, climbed 6.7 percent to a 351,000 rate. The pace of such projects is often volatile.

Only the South showed a decrease in starts, plunging 19.5 percent in November from the prior month, the biggest drop for the region since June. The West jumped 28.1 percent, the most since December 2012, on a surge in multifamily projects.

Some economists attributed the drop in starts to colder-than-normal temperatures. Last month was the coldest November since 2000, according to the National Climatic Data Center.

“Weather-related disruptions are temporary, and so we are not worried about this development,”Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a research note.

The housing recovery has progressed in fits and starts this year, with historically low mortgage rates and the strongest job gains since 1999 slowly luring buyers into the market. The average 30-year, fixed-rate mortgage was 3.93 percent in the week ended Dec. 11, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.

More Affordable

As the run-up in home prices decelerates and lending standards become less strict, homeownership may become more attainable for many Americans. Starting Dec. 13, Fannie Mae is allowing lower down payments for first-time buyers and permitting borrowers who are refinancing to reduce equity to 3 percent to cover closing costs.

That may help the outlook for homebuilders including Hovnanian Enterprises Inc. (HOV), whose Chief Executive Officer Ara Hovnanian called 2014 a “disappointing year for the housing industry” after fiscal fourth-quarter adjusted earnings missed expectations.

“The housing market this past year has been more challenging,” Hovnanian said on a Dec. 10 conference call. “Ultimately, demographics are in our favor, and consumers should buy homes at an increased rate in the future. Simply put, the population in number of households in the U.S. is growing, and the nation is building fewer homes today than it needs to meet demand over the long term.”

A report yesterday showed confidence among U.S. homebuilders hovered in December close to a nine-year high, with the National Association of Home Builders/Wells Fargo sentiment gauge slipping to 57 from 58 in November.

-By Victoria Stilwell

MetLife Hires JPMorgan’s Amy Cummings for Real Estate Post

Source: Bloomberg / News

MetLife Inc. (MET), the largest U.S. life insurer, hired Amy Cummings as a managing director of its asset-management unit to help raise capital from institutional clients for real estate investments.

Cummings will be based in San Francisco and report to Lou Jug, head of investor services for MetLife Investment Management, the insurer said today in a statement on its website. She previously worked for JPMorgan Chase & Co. (JPM), according to MetLife.

MetLife has been seeking institutional clients such as pension plans and other financial firms to join with the company in bets on commercial property. The New York-based insurer has announced deals in the past two years with Norway’s sovereign-wealth fund and SunTrust Banks Inc. to invest in real estate.

Cummings “has a successful track record of developing relationships with institutional investors,” Jug said in the statement. “We think she will provide outstanding service to our clients and partners.”

Kristen Chambers, a spokeswoman for JPMorgan, didn’t immediately return a call seeking comment.

-By Zachary Tracer

Record Thai Household Debt Crimps Rate-Cut Room: Southeast Asia

Source: Bloomberg / News

Din Ruenmeesang spends about half his monthly income making minimum payments on his seven credit cards and multiple bank loans. That isn’t stopping the 33-year-old from borrowing again to buy a new car next year.

Spenders like Din are making it hard forThailand’s central bank to cut interest rates even as Southeast Asia’s second-largest economy struggles with weakening growth. Thai household debt has more than tripled in a decade to a record high 83.5 percent of gross domestic product, and lower borrowing costs may exacerbate that.

“Life is short, and I want to enjoy it,” said Din, who works in the finance department of Bumrungrad International Hospital in Bangkok, and has racked up more than 200,000 baht ($6,100) in debt from buying clothes, shoes and decorating his apartment. “When I am short of money, I use personal loans. Interest rates aren’t bad. I still have room to borrow more.”

The Bank of Thailand is grappling with an economy that’s already at risk of losing its position as a leading regional manufacturer, as exports may contract for a second year while shipments from Vietnam and the Philippines climb. The monetary authority kept its benchmark interest rate unchanged at 2 percent today for a sixth straight meeting, as predicted by 16 of 23 analysts in a Bloomberg News survey. The remainder had forecast a 25-basis-point cut.

“It’s a very tough call,” said Warapong Wongwachara, an economist at TMB Bank Pcl in Bangkok. “Poor economic growth and super-low inflation warrant a further rate cut, but the central bank is cautious because of the huge consumer debts.”

Fastest Increase

In Southeast Asia, Thailand and Malaysia have experienced the fastest increase in household indebtedness in the past five years, and the level is elevated relative to income levels, Rahul Ghosh, a senior research analyst at Moody’s Investors Service in Singapore, said in an October report. It poses a risk to private consumption growth and banks’ asset quality as the global credit cycle gradually tightens, he said.

Thai household debt was 10.03 trillion baht as of the end of June compared with 2.85 trillion baht in the same period in 2004, data show. Malaysia’s household debt was 86.8 percent of GDP as of end-2013, according to central bank data.

The Thai central bank has said the level of household debt is “alarming,” and asked the military-run government not to introduce policies that stimulate unnecessary borrowing. Prime Minister Prayuth Chan-Ocha, who seized power in a military coup in May, has unveiled a stimulus package of about $11 billion and pledged to quicken budget spending to boost consumption.

“We want the economy to grow and people to spend money, but we also want those who have lots of debt to be careful,” Governor Prasarn Trairatvorakul told reporters yesterday. “When we have lots of debt, it may be a constraint to growth.”

‘Spend Money’

The current rate is supportive of growth, with inflation remaining benign on lower oil prices and risks to financial stability contained, the central bank said today. The monetary policy committee voted five to two in favor of the decision to hold the rate, it said, adding that it will cut its GDP growth estimates for 2014 and 2015 later this month.

The benchmark Thai stock index fell to the lowest in almost six months yesterday. Russia’s central bank unexpectedly raised its benchmark rate to 17 percent from 10.5 percent this week, while the Indonesian rupiah weakened to its lowest level against the dollar since 1998 as the prospect of U.S. interest rate increases damped demand for emerging-market assets.

“The sharp fall in the rupiah is a reminder for the BoT on the fear of capital outflows from the region in 2015,” said Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore. “This could be a factor” for the central bank to consider, he said.

Cheap Funding

Thailand expanded 0.6 percent in the three months through September from a year earlier. GDP may grow 1 percent this year, according to the National Economic and Social Development Board, the slowest pace since 2011 when thousands of factories were shuttered after the worst floods in almost 70 years.

When consumer spending is largely driven by debt, it is sensitive to potential tightening in financial conditions, said Frederic Neumann, co-head of Asian economics at HSBC Holdings Plc in Hong Kong.

“Household debt may not be as big a systemic financial risk as it was in the West, but it highlights a potential growth problem in Asia: without it, how resilient would consumption spending really be?” said Neumann.

Inflation (THCPIYOY) eased to 1.26 percent last month from a year earlier, the slowest in five years. Non-performing loans at Thai commercial banks rose to 2.34 percent of total lending as of Sept. 30 from 2.15 percent at end-2013, data showed. The BoT has said it isn’t concerned, as banks are cautious in lending and manage risk well.

Din, who plans to buy a Mazda3 sedan with a new bank loan, isn’t concerned, either.

“I still spend the way I want,” he said. “I am not afraid of rising rates because I can manage by refinancing my debt. There is always a cheap source of funding.”

-By Suttinee Yuvejwattana

RBS Sells Property Loans to Cerberus for $1.7 Billion

Source: Bloomberg / News

Royal Bank of Scotland Group Plc agreed to sell Irish real estate loans at a discount to a unit of Cerberus for as much 1.1 billion pounds ($1.7 billion).

The loans have a face value of about 4.8 billion pounds, RBS said in a statement today. The sale is expected to be completed in the first quarter of 2015 and the funds raised will be used for general corporate purposes, it said.

U.K. banks are selling real estate loan books and properties as they repair balance sheets damaged during the financial crisis after property prices crashed and loans soured. Lenders in Britain cut the value of their distressed commercial-property loans by almost 14 billion pounds in the first half, a survey published by De Montfort University on Dec. 12 shows.

The carrying value of the loans is about 1 billion pounds, RBS (RBS) said. The final sale price is dependent on certain undisclosed matters being resolved, it said.

“The scale of the deal serves as a reminder of the healthy appetite for Irish loan assets at this time,” Philip O’Sullivan, an analyst at Investec Plc in Dublin, said by e-mail. “We expect to see further material disposals of Irish loan assets and the collateral underpinning them” by Ireland’s National Asset Management Agency and owners who are based abroad, he said.

Lenders sold 54.9 billion euros ($68.4 billion) of European commercial real estate loans and foreclosed property in the first three quarters of this year, more than in 2012 and 2013 combined, according to data compiled by broker Cushman & Wakefield Inc. Irish loans and properties made up 21 percent of the sales, the data shows.

The deal advances the deleveraging plans of RBS in Ireland and the bank will probably complete the process by the middle of next year, ahead of its target for the end of 2016, Goodbody Stockbrokers analysts Eamonn Hughes and Colm Foley said in a note.

The loan portfolio made a loss of 800 million pounds in 2013, mainly because of impairments, RBS said in the statement.

-By Neil Callanan

InterContinental Hotels to Buy Kimpton for $430 Million

Source: Bloomberg / Luxury

InterContinental Hotels Group Plc (IHG), owner of the Holiday Inn and Crowne Plaza brands, agreed to buy Kimpton Hotels & Restaurants for $430 million, gaining a boutique chain with high-end properties in cities across the U.S.

Kimpton, established in 1981, is the largest independent boutique hotel operator and restaurant company in the U.S., with 62 properties in 28 cities, InterContinental said today in a statement. The San Francisco-based chain also has 16 hotels under development and operates 71 restaurants, bars and lounges.

InterContinental is looking to take advantage of the fast-growing boutique segment and expand its business at the higher end, said Richard Solomons, chief executive officer of the Denham, England-based company. Kimpton’s properties include the trendy Ink48 and Muse hotels in New York, the Palomar in Los Angeles and Hotel Monaco in San Francisco.

“We have a very big U.S. business but are more skewed toward the mid-market in the region,” Solomons said in a telephone interview. “We have wanted to grow faster in the higher end and this deal will help us accomplish that.”

InterContinental will take advantage of its presence outside of the U.S. to open Kimpton hotels on other continents in the medium term, Solomons said later on a call with reporters. “We see opportunity across Europe and across large parts of Asia,” he said.

Mike DeFrino, currently Kimpton’s chief operating officer, will assume the role of CEO of the chain, replacing Mike Depatie, Solomons said. Depatie will focus on running the real estate investment funds, which hold stakes in some of the properties that are operated under the Kimpton name, he said.

The transaction won’t include the purchase of any real estate, Solomons said.


Boutique hotels have been among the fastest-growing segments in the lodging sector, buoyed by demand from millennial customers, or those born after 1980, said Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia. In October, Hilton Worldwide Holdings Inc. (HLT) said it was starting a new boutique brand called Canopy.

“When you look at all the major hotel companies, IHG is one of the only brands that didn’t have any exposure to the higher-end lifestyle segment,” Bhalla said in a telephone interview. “It can take quite some time to create a presence in key markets. By buying an established brand name like Kimpton, with many properties under management, IHG can cut its expansion by years.”

Morgans, W

The boutique segment was pioneered by Ian Schrager and Steve Rubell in the U.S., starting with their Morgans New York hotel in 1984. Large hotel operators began adding boutique properties to their chains in the late 1990s, when Starwood Hotels & Resorts Worldwide Inc. debuted its W brand.

Kimpton, which runs properties with features such as floor-to-ceiling bookcases and lush velvet drapes in guest suites, was in talks with several possible buyers, according to Solomons. Depatie declined to comment on who else the company was talking to during the sale’s process.

“Millennials are looking for varied experience versus the cookie-cutter feel where everything looks the same,” Bhalla said. “The major brands are realizing the value of that concept.”

InterContinental, which owns the budget Hotel Indigo boutique brand, with 60 properties currently open, is looking to expand Kimpton overseas in such regions as Europe and Asia, Solomons said.

“IHG will help to grow the Kimpton brand, alongside the other great brands in the IHG portfolio,” Depatie said in an e-mailed statement.

-By Nadja Brandt

Limitless Said to Rely on Land in $1.2 Billion Debt Deal

Source: Bloomberg / News

Limitless LLC has proposed selling land near Dubai’s main port to help repay a $1.2 billion loan as it seeks a second debt restructuring deal with creditors, according to three people familiar with the proposal.

The Dubai-government controlled property developer has proposed to pay lenders in three installments in 2016, 2017 and 2018 instead of the three years through 2016, the people said, asking not to be identified because the information is private. Rental income from a commercial property near the port in Dubai’s Jebel Ali area will also support payments, they said.

Limitless is one of several government-related companies that delayed debt payments after asset prices slumped and credit markets froze during the financial crisis. The developer reached a deal with creditors in 2012 to begin repaying the $1.2 billion Islamic loan in 2014, about four years after it was due, two bankers familiar with the deal said at the time.

Emirates NBD PJSC (EMIRATES), National Bank of Abu Dhabi PJSC, Dubai Islamic Bank PJSC (DIB), Mashreqbank PSC, and Arab National Bank are among creditors that will form a coordination committee to negotiate the deal on behalf of 23 creditors, said two of the people. Accounting firm Deloitte LLP has been appointed as financial adviser to evaluate the plan, according to the people.

Private discussions with lenders continue, Limitless said in an e-mailed response to questions from Bloomberg News.

Spokesmen for Emirates NBD, National Bank of Abu Dhabi and an official at Deloitte declined to comment. Spokesmen for Mashreqbank couldn’t immediately comment while no one was available at Dubai Islamic Bank to respond. A spokesman for Arab National Bank in Riyadh couldn’t immediately be reached.

Property Rebound

“Our original plan assumed a lot of revenue from overseas projects,” Chairman Ali Rashed Lootah said in September. “Now we have a new plan that is all around Dubai.”

Limitless has benefited from a rebound in real-estate prices as the emirate’s economy expands. Dubai’s property prices climbed 18 percent this year after rising 30 percent in 2013, CBRE said in a statement today.

The value of the company’s land bank in Jebel Ali is sufficient to repay creditors and proceeds from sales finalized ahead of scheduled payments will be used to settle debt, according to two of the people. The company is likely to miss payment of its first original installment of $400 million, they said.

Limitless, whose projects include the mixed-use Downtown Jebel Ali development in Dubai as well as in Riyadh, Saudi Arabia and Moscow, agreed to pay a profit rate of 175 basis points over the benchmark rate on the loan, two bankers said in 2012.

-By Arif Sharif

Dubai Home-Price Gains Slowed in Second Half, CBRE Says

Source: Bloomberg / Luxury

Dubai home-price gains slowed in the second half, CBRE Group Inc. said, after the government took steps to cool the market,

Average prices climbed 18 percent in 2014, compared with an increase of 30 percent a year earlier, Matthew Green, head of United Arab Emirates research, said at a briefing in Dubai today. Most of the growth was in the first six months.

The year “was really a game of halves,” Green said. “In the first half we saw very strong growth in residential sales and leasing, while the second half saw the market stabilize.”

Dubai’s home prices surged at the fastest pace in the world last year, prompting the sheikhdom’s government to double a transaction tax and the U.A.E. central bank to restrict mortgages. Officials at the International Monetary Fund on Nov. 6 said Dubai has done enough to control property prices six months after warning the surge was “unsustainable.”

Residential rents in Dubai rose 7 percent in 2014, down from 24 percent a year earlier, CBRE said.

More than 20,000 homes are expected to be built in Dubai next year, CBRE said. That will have a “deflationary impact” on sales and rental rates, the U.S. brokerage said.

About 65,000 homes, or 15 percent of the current supply, will be completed through 2017.

-By Zainab Fattah

German Property Hunger Prompting Riskier Loans, JLL Says

Source: Bloomberg / News

Investors are buying the most German commercial property in seven years and taking on riskier loans to finance the acquisitions.

German offices, shops, hotels and warehouses valued at 37.5 billion euros ($47 billion) will change hands this year, 22 percent more than in 2013 and the most since 2007, Jones Lang LaSalle Inc. said in a report released today. Banks surveyed by Chicago-based Jones Lang said that loan-to-value ratios on new deals widened to 69.5 percent in 2014 from 66.3 percent last year, and may reach 72.1 percent in 2015, indicating that borrowers and lenders are taking on more risk.

“Banks want to issue credit and are accepting lower margins amid competition,” Frank Poerschke, chief executive officer of Jones Lang’s German division, said at a Berlin press conference. Lending remains below the dangerous levels seen before the global recession, when bankers offered loans covering more than 90 percent of a property’s value. “We’re only seeing occasionally aggressive behavior on the risk side.”

Pension funds, insurers and private-equity firms are crowding into the German commercial-property market in a hunt for safe returns amid low borrowing costs that make investing in fixed-income markets less attractive. The year’s biggest deals were Patrizia Immobilien AG’s 1-billion-euro acquisition of the Leo I portfolio of offices in the state of Hesse, and the sale of Frankfurt’s Palais Quartier mall and hotel complex to Deutsche Bank AG (DBK)’s wealth management unit, Jones Lang said.

Commercial investments may reach 40 billion euros in 2015, still below the 2007 record of 54.7 billion euros, the broker said.

Residential deals, which peaked in 2013 at 15.8 billion euros, will probably total 11 billion euros each this year and in 2015, according to Jones Lang. The largest housing transaction in 2014 was Deutsche Wohnen AG’s takeover of GSW Immobilien AG, valued at about 1.7 billion euros.

-By Dalia Fahmy

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