Real News‎ > ‎2014‎ > ‎December 2014‎ > ‎

19th December 2014

Singapore Real Estate

Greater rental retail transparency soon

Fair Tenancy Consideration Framework will comprise data transparency, SME education and a mediation process

Source: Business Times / Real Estate

RETAILERS and landlords can look forward to greater retail rental transparency after the details of the Fair Tenancy Consideration Framework are unveiled, probably this month. The framework will comprise three components: data transparency, education and awareness, and a mediation process.

The first component will make retail rent data transparent, likely pegged to street names, with a rough gauge of the size of the shop unit.

"We tried to push for more rent details which give better transparency (down to per square foot rental)," said Kurt Wee, president of the Association of Small and Medium Enterprises (ASME). "But I think it's not going to be easy to extract this data . . . If we ever want full transparency, we are talking about a new data bank. This means for every lease you sign, you have to fill up a set of obligatory information and file it with a certain data bank.

"So I wouldn't say we've got 100 per cent of what we need to perfectly protect an SME. But this is an effort that the different associations are all very collaborative in, and it's an effort by the industry at large."

On the education front, contract templates have been drawn up.

"Some landlords can be SMEs and have no idea what to put in their contracts," said Victor Tay, the Singapore Business Federation's (SBF) chief operating officer.

"This will be a simple industry-level tenancy contract which they can adhere to. The working committee led by Cynthia Phua is supported by associations like ASME, the Restaurant Association of Singapore (RAS) and the Singapore Retailers Association (SRA), and has made reference to the UK and Australian models."

A series of guides will also be unveiled. "Some landlords have certain clauses in their contracts . . . which tenants are not familiar with or which they misunderstand," said Mr Tay.

"Perhaps (the contract has a clause which states that) the retailer cannot set up shop within 1km of the landlord's building. In this case, some tenants will say 'I will take this (clause if you) give me lower rental'. In this case, the tenant must understand the restriction of this 1km radius. If you're a fast-moving consumer retailing model like 7-11 or McDonald's - which requires multiple locations close to each other, based on consumer density to augment your branding - you may face expansion issues.

"The guide aims to show what the commonly used tenancy terms mean and if you ever undertake this, you might want to rethink how this impacts your business in the future," said Mr Tay.

Said ASME's Mr Wee: "This is a helpful guide for you if you want to talk about leasing and rents, the mechanisms that you need to understand before you sign your lease. It's our job to also get the SMEs educated, or better informed in this space as well."

The final component is the mediation process, which will likely be handled by official channels. More details of the three components will be unveiled at the end of the month.

Mr Wee added: "It's something that is important and significant, short of legislation. And you don't really want to have to go that way because that may artificially regulate supply and demand. So it is our hope that when this framework comes out, it will moderate excessive behaviour and create a more sustainable relationship between landlords and tenants."

-By Mindy Tan

Sanofi signs lease for 40,000 sq ft office space at South Beach

A 654-room hip hotel is expected to soft open next year; no decision on pricing the residential component yet

Source: Business Times / Real Estate

PHARMACEUTICAL group Sanofi has inked a lease for about 40,000 sq ft of office space at South Beach Tower, BT understands.

Another tenant includes City Serviced Office, an offshoot of City Developments Ltd (CDL), which has a 50.1 per cent stake in the consortium behind the S$3 billion South Beach mixed development.

Sanofi will be moving from 6 Raffles Quay. Earlier the consortium confirmed that Rabobank is taking 30,000 sq ft and TMF Group, a professional services firm, 16,000 sq ft. It had earlier also named Bain & Company and De Lage Landen as office tenants.

However, it has been silent in naming other office tenants.

On Thursday, Aloysius Lee, CEO of South Beach Consortium Pte Ltd (SBC), told reporters that 80-90 per cent of the 500,000 sq ft net lettable area of offices in the 34-storey South Beach Tower has been leased. "We have achieved (monthly) rents from S$9 psf to S$12 psf," he said.

"We are expecting to achieve TOP (Temporary Occupation Permit) for the office tower at the end of this year, with the first tenants commencing business in February 2015."

Malaysia's IOI Group holds the balance 49.9 per cent in SBC.

Property market watchers have been waiting for SBC to launch the 190-unit residential component of the project, which will be housed in the upper half of the second tower, which is 45 storeys high.

A few years ago, a price of at least S$4,000 psf was bandied for South Beach Residences, but with progressively weaker sentiment in the luxury residential market, a launch of the project continues to elude the consortium.

On Thursday, Mr Lee indicated that SBC will be watching the market at the time of launch to see what pricing level the market can bear. "If I say we benchmark on Ion (The Orchard Residences) . . . then it should be S$4,000 psf . . ."

"But whether we want to (launch) at S$4,000 psf and there are no sales, is another issue."

He noted that many foreigners are interested and have the means for luxury residential projects in Singapore but baulk at having to pay the 15 per cent additional buyer's stamp duty.

Mr Lee also said the group has no specific dates or plans to launch South Beach Residences and further indicated that the consortium is open to all options, including possibly leasing some of the residential units.

Unit sizes range from about 950 sq ft for a two-bedroom apartment to more than 6,500 sq ft for a five-bedder penthouse.

The residences, as well as South Beach's retail component, are expected to be completed in Q4 2015.

The retail space of about 37,000 sq ft will be mostly in a sunken plaza in basement one, with some space also on Level 1 and in a conserved building. The sunken plaza is also dubbed coral plaza as it will be adorned with some of the two-container loads of coral that was unearthed on the site, which stands on land that was reclaimed in phases dating as far back as the mid-1840s.

The coral plaza in the basement will be connected directly to the Esplanade MRT Station.

Mr Lee said that the retail space in the development will have a strong food and beverage concept, possibly an upscale gourmet foodhall styled after Eataly in Italy and New York. Another strong possibility is to have restaurants operated by celebrity chefs.

The consortium said on Thursday that the 654-room hotel is expected to soft open in April next year, with the official opening planned for September 2015. The hip hotel is styled after the Hudson Hotel in New York, as well as the W Hotel and Hotel Indigo brands of Starwood and InterContinental, respectively.

The hotel rooms will be in the lower half of the 45-storey tower as well as in a five-level podium block in the development. The average size of the hotel rooms is about 38.5 sq metres.

South Beach Club, housed in the former Non-Commissioned Officers Club building, is also slated to open in April next year. This is one of four conserved buildings in the project. Two conserved buildings will be part of the hotel's operations: one for a ballroom and the other for function rooms.

South Beach Club will feature a diving pool, wine cellar, cigar divan and themed private dining facilities.

The project was designed by Foster + Partners. Philippe Starck did the interior design for the hotel and club. The project is coming up on a 99-year leasehold site that CDL clinched at a state tender in 2007 as part of a consortium that had also originally included Dubai World unit Istithmar and US-based Elad Group (with each holding one-third stake).

In November 2008, during the global crisis, CDL deferred building plans. In 2011, Istithmar and Elad exited the project, with IOI emerging as CDL's new partner.

-By Kalpana Rashiwala

Sold: 26. Value: $588m

Demand for this class of home still healthy, with prices holding up

Source: Straits Times / Money

DEMAND for homes in Singapore may have fallen steeply this year but business has been humming in the Good Class Bungalow (GCB) market.

An analysis by CBRE showed that 26 GCBs have been sold this year with a total value of $587.75 million, comparable with last year's 29 deals worth $682 million. Even so, it is a hefty drop from 2012, when 54 GCBs changed hands for $1.17 billion - and a far cry from a record 133 deals at $2.38 billion in 2010.

GCBs typically have a land size of 1,400 sq m, or about 15,069 sq ft. But when GCB areas were gazetted in the 1980s, they included some smaller existing sites that are still considered GCBs as they would be bound by other GCB planning rules if redeveloped. There are about 2,700 GCBs here in 39 designated estates.

Transactions have fallen in recent times owing to the imposition of the total debt servicing ratio (TDSR) and additional buyers' stamp duty (ABSD), experts say.

"Most GCB buyers already have a property and are unwilling to pay ABSD if they are buying for investment. This could be quite hefty given the high quantum," said Mr K. H. Tan, managing director of Newsman Realty.

But prices appear to have held up this year. The average price of GCBs this year is $1,454 per sq ft (psf) based on transactions so far this year, 9 per cent higher than $1,388 psf last year, said Mr Douglas Wong, CBRE head of luxury homes. However, the average price is only a ballpark indicator of GCB prices and does not fully account for factors including location, size, age, design, terrain and frontage, he added.

"GCBs are expected to perform at a similar level next year as current sentiments will likely spill over... About 20 to 30 GCBs will probably be sold for the whole of 2015," said Mr Wong.

GCB areas which saw more deals this year were Belmont Park, Chatsworth Park, Chestnut Avenue, Dalvey Estate, Raffles Park and White House Park.

In terms of total price, the most expensive was 27 Ridout Road, which went for $35 million or $1,039 psf in July. The costliest on a psf basis was 22 Margoliouth Road which sold for $14.8 million or $2,051 psf in October. Also notable was 65 Holland Park, which Frasers Centrepoint sold for $30 million or $1,991 psf last month. All are freehold properties.

Neighbouring 67 Holland Park, also freehold, is for sale with a negotiable asking price of $35 million, the company said.

While cooling measures have dampened volume and prices, the outlook for GCBs remains positive. They are expected to offer strong capital preservation given their rarity, said Dr Chua Yang Liang, head of South-east Asia research at JLL.

Indeed, GCBs have appreciated at a faster rate than landed and non-landed assets over the past 10 years. A JLL analysis showed that the average price of GCBs rose from $395 psf in 2004 to $1,548 psf in the year to date. This works out to a 292 per cent increase, or a compound annual growth rate (CAGR) of about 14.6 per cent per year.

Landed home prices went up 203 per cent over the same period, with a CAGR of 7 per cent a year while non-landed home prices rose 180 per cent, with a CAGR of 6 per cent a year. But in the short term, the price increase is expected to be "moderate to stable", said Dr Chua.

-By Rennie Whang

South Beach eyeing big names in retail, F&B

Move is to set Beach Rd development apart from nearby Suntec, Raffles City

Source: Straits Times / Money

HIGH-END retailers and celebrity chefs might be added to the mix at South Beach, Singapore's largest mixed development.

The project's retail component is scheduled to open its doors in the fourth quarter of next year.

A 37,000 sq ft retail strip - called Coral Plaza - in the basement of the Beach Road project will feature 20 units, which could be leased to food and beverage (F&B) operators, said the South Beach Consortium yesterday.

Highlights could include a "gourmet food hall", said chief executive Aloysius Lee.

"We are mindful of what our neighbours are actually offering," noted the firm's head of business, Ms Karen Lau.

"There's a million sq ft of new retail space at the Suntec Singapore Convention & Exhibition Centre, and we already have a very successful 500,000 sq ft of retail space at Raffles City.

"We do not want to offer something that already exists in the area."

The team is targeting "mid-tier to high-end retailers" and has been talking to international names and celebrity chefs, the firm said.

South Beach - a joint venture between City Developments (CDL) and Malaysia's IOI Group - will have a 34-storey office tower, which will welcome its first tenant by February.

Office rentals have been secured at $9 to $12 per sq ft (psf) a month, said CDL, with about 80 to 90 per cent of leases firmed up.

In addition, the 1.65 million sq ft mixed development will feature a 45-storey tower with a 645-room, five-star hotel and 190 residences.

The Philippe Starck-designed hotel is due to open in April, but it is not clear when the homes will be up for sale.

"It does not seem to be the right time to launch any luxury product in the Singapore market," said Mr Lee.

He said there could be an option to lease out the homes, which range from two- to four-bedders.

The former Singapore Armed Forces Non-Commissioned Officers Club and three army blocks, earmarked as conservation buildings, will be incorporated into the project, and will house a 29,000 sq ft private club and ballroom.

The project as a whole is on schedule to be ready "before Christmas" next year, but it met a series of start-stops in its seven-year journey to completion, after the financial crisis led CDL to defer building plans.

The original plan would have seen it completed at an estimated total cost, including land, of $2.5 billion. The final bill will come to $3 billion, after including costs to fit out the buildings and consultancy fees, said Mr Lee.

-By Cheryl Ong

Leases secured for 80% of office space in South Beach project

Office space comprises about 30 per cent of the 1.65 million square feet development, and analysts say the occupancy rate shows that South Beach is viewed as a strong alternative to office spaces in Raffles Place and Marina Bay.

Source: Channel News Asia / Business

SINGAPORE: The downtown skyline in Singapore will see another addition once the S$3 billion South Beach project - a mega mixed development at Beach Road - is up and running over the next year.

The project's developers City Developments and IOI Group have secured leases for 80 per cent of the office space, and its first corporate tenant will move in early next year.

Office space comprises about 30 per cent of the 1.65 million square feet development, with gross rents ranging from S$9 to S$12 per square foot per month. The tenants are from sectors such as financial services, IT, business consulting and fast-moving consumer goods.

Analysts Channel NewsAsia spoke to said the occupancy rate shows that South Beach is viewed as a strong alternative to office spaces in Raffles Place and Marina Bay. Chesterton Singapore's managing director Donald Han said that there are also other factors which contributed to the high occupancy rate, such as the project being "the only prominent office to be completed in the next two years."

The project also houses a 654-room designer hotel, around 37,000 square feet of retail space and a private club. In addition, there will be 190 luxury residences - with developers saying that they are considering "all possibilities", including renting the units out. Its developers are not in a hurry to sell the units as the site is not affected by Qualifying Certificate rules, which require all units to be sold within two years of completion.

The site was acquired for about S$1.69 billion from the Urban Redevelopment Authority in 2007.

Mr Aloysius Lee, CEO of the South Beach Consortium, said: "You know the situation is not very good for the high-end market at this time due to various reasons. But we are very confident that it will recover very soon. So we have plans for all options, and at the right time, we will launch the product."

- CNA/ac

Public contracts keep construction up

They provide a buffer against fewer private sector projects

Source: Straits Times / Money

THE strong pipeline of public infrastructure projects will help construction and civil engineering companies weather the decline in private works volume.

This month alone, eight listed companies have won contracts for public transport, housing and school development.

These include Kori Holdings, which was awarded two Thomson Line MRT contracts totalling $52.9 million, TriTech, which clinched a $19.24 million deal for sewer works in Sembawang, and ISOTeam, which secured $22.2 million worth of repair and design work for town councils.

The sector's robust order book for public works is not a recent development, CIMB economist Song Seng Wun told The Straits Times, as the Government continues to step up its spending on infrastructure projects while private sector projects are slowing down.

Deputy Prime Minister Tharman Shanmugaratnam flagged some of this in his Budget speech earlier this year: "We have a lot more to do in infrastructural investments... By 2030, we will be doubling our entire rail capacity to 360km. The expansion of Changi Airport will be another important investment."

Mr Song said: "In the 12 months to October 2014, $38.5 billion worth of construction contracts were awarded, of which $21.3 billion were in the public sector. This is a large pickup from the $13.2 billion recorded in the same period a year before.

"Meanwhile, by the same comparison, private contracts eased off from $22.9 billion to $16.7 billion, due partly to the slowdown in private housing developments amid the cooling measures."

The Building and Construction Authority is forecasting that at least $14 billion to $18 billion worth of public contracts will be awarded next year and again in 2016, so companies can expect a robust project pipeline easily into next year, said Mr Song.

The construction sector is set for its 10th straight year of growth - at 4 per cent this year - despite manpower woes, he said.

Major projects are also lined up over the next two decades, including the Jurong Region MRT Line by 2025, the Cross Island Line by 2030 and further extensions to existing MRT lines through the 2020s.

This paints a very positive outlook for companies like civil engineering firm Huationg Global, which listed on the Catalist board this month in preparation for an expansion that chief executive Patrick Ng expects to be driven mostly by public sector work.

"Our civil engineering revenue to be recognised over the next one to three years is around $114.3 million. Over 90 per cent of that will come from public contracts," said Mr Ng, when announcing his company's initial public offering on Dec 1.

But Mr Ng Kian Teck of Voyage Research is less optimistic.

"The public contract pipeline will remain strong, but these projects typically have a lower margin, sometimes lower than 10 per cent compared with the 10 to 15 per cent range for private projects," said Mr Ng, the firm's deputy head of research.

"This will be further pressured by the increased competition as more foreign players come to bid for these projects.

"Also, the foreign worker levies remain in the backdrop; we have no clarity on what the Government plans to do with the levy system beyond 2016. Overall, the sector's profit outlook is not necessarily positive. Much will depend on a company's expertise and adaptability."

-By Wong Wei Han

Construction worker dies after wall falls on him

Source: Straits Times / Singapore

A 47-YEAR-OLD construction worker died yesterday after a pre-fabricated wall panel he was installing at an uncompleted condominium in Dairy Farm Road toppled and fell on him.

Another worker, 46, who attempted to assist the dead man, sustained light injuries and was taken to hospital. Both men are Chinese nationals.

The construction company, Tiong Aik Construction, has been ordered by the Manpower Ministry (MOM) to stop its installation of pre-fabricated wall panels at the Skywoods condominium. The condo developer is Bukit Timah Green Development.

The police said they received a call at 11.36am yesterday. Paramedics who responded pronounced the man dead at the scene.

MOM, when contacted, said it was informed of the incident by the police.

"Preliminary findings indicate that two workers were assigned to install a 3m-high pre-fabricated Acotec Panel System wall panel. During the installation, the wall panel toppled and fell on one of them. The worker succumbed to his injuries", the MOM spokesman said.

"Another worker was treated for light injuries that he sustained when he attempted to assist the deceased worker."

The police are investigating the unnatural death. MOM investigations are also ongoing.

Under the Workplace Safety and Health Act, companies that fail to take reasonable measures to ensure the safety and health of their workers can be fined up to $500,000 for a first offence.

There were 17 fatalities in the construction sector in the first half of this year, an spike of over 50 per cent over the same period last year.

-By Amir Hussain

Companies' Brief

Croesus trust raises hedge as yen falls

Source: Business Times / Companies & Markets

Croesus Retail Trust (CRT) has increased the amount of its distributable income hedged to about 100 per cent for the period up to Dec 31, 2015. The move, which comes amid the weakening of the yen against the Singapore dollar, is aimed at mitigating forex risks to ensure steadier returns for investors.

-By Malminderjit Singh

Property trust acts to protect returns

Weakening yen prompts CRT to hedge almost all of its distributable income

Source: Straits Times / Money

THE plunging yen has prompted the manager of Croesus Retail Trust (CRT) to hedge almost all of its distributable income to ensure investors still get steady returns.

The trust, which owns seven malls in Japan, receives all its revenue in yen, which it then converts into Singapore dollars for distribution to unitholders. CRT typically maintains a hedge of at least 80 per cent of projected distributable income, according to previous earnings reports, but risks from currency fluctuations have intensified in recent weeks.

"We have responded promptly to protect CRT and our investors from the unprecedented weakening of the yen, which has declined about 9.3 per cent in the past four months against the Singapore dollar," said Mr Jim Chang, chief executive and executive director of Croesus Retail Asset Management, the trust's manager.

One Singdollar could buy 90.3 yen yesterday, up from about 82.4 yen four months ago.

CRT is using what are called forward foreign currency exchange contracts to hedge its distributable income for the period up to Dec 31 next year.

Mr Jeremy Yong, co-founder and group managing director of CRT's sponsor, Croesus Merchants International, said yesterday: "When we can expand hedging, that shows you how visible our income stream is, and tells you that our income stream is not volatile. CRT's interest-bearing liabilities and income-yielding assets are all denominated in yen, so there is no currency mismatch."

The trust also expects rent rises to boost income from next July. It is now doing its first rent renewal exercise with 150 tenants at Mallage Shobu, a suburban mall two-thirds the size of Singapore's VivoCity. These tenants contribute 17 per cent of CRT's rental income, said Mr Yong, who is also a non-executive director of the trustee-manager.

CRT plans to revise average lease periods down to no more than five years, which will give CRT the chance to adjust rents upwards more regularly.

Leases now average nine years, down from 11 at the time of CRT's debut on the Singapore Exchange in May last year. While unimaginable here, such lengthy leases are the legacy of years of deflation, where landlords preferred contracts of no less than six years - sometimes as long as 15 years - to protect themselves against falling rent.

But rents in Japan are now rising, and Mr Yong believes they will continue to rise on the back of increasing wages and "euphoria" leading up to the 2020 Olympics in Tokyo.

CRT's policy is to distribute 100 per cent of its distributable income until next June and at least 90 per cent of its distributable income thereafter, in semi-annual payouts. CRT units closed 0.5 cent higher at 89 cents yesterday.

-By Marrisa Lee

PCRT trading suspension from Dec 23

Source: Business Times / Companies & Markets

Trading in units of Perennial China Retail Trust (PCRT) will be suspended from Dec 23. This followed offeror Perennial Real Estate Holdings' announcement that it has garnered 90.64 per cent of the issued units of PCRT, meaning the free float has fallen below 10 per cent. The offeror has said that it does not intend to take steps to preserve the listing status of PCRT.

PCRT shares to be suspended following buyout by parent

Source: Straits Times / Money

UNITS of mainboard-listed Perennial China Retail Trust (PCRT) will be suspended from trading next week after a buyout exercise by its parent passed the 90 per cent mark.

In October, developer Perennial Real Estate Holdings (PREH) made a voluntary conditional offer to acquire all the remaining units of PCRT in exchange for new PREH shares.

This followed the completion of a $1.56 billion reverse takeover by PREH of nightlife firm St James Holdings.

The units are to be swapped at 70 cents each.

PREH's financial advisers said yesterday that the company has amassed 90.64 per cent of PCRT's units.

This means that the Singapore-listed PCRT will lose its free float status. Under Singapore Exchange (SGX) rules, at least 10 per cent of a listed entity's total units have to be held by the public.

PREH, which owns real estate assets in China and Singapore, will move to de-list PCRT, which will be suspended from trading on Dec 23, the day after the offer closes.

PCRT unitholders who participate in the share swap will receive 0.52423 PREH shares for each PCRT offer unit, at an issue price of about $1.3353.

The offer had been declared unconditional in all respects on Nov 14.

PCRT announced in a statement yesterday that the board will "release further announcements at the appropriate junctures". PCRT units closed one cent or 1.82 per cent lower at 54 cents yesterday.

PREH's portfolio comprises mixed-use developments in China worth $13.1 billion, as well as properties here - including Capitol Singapore, Chijmes and TripleOne Somerset - which have a total gross development value of $3.8 billion.

PREH's shares are set to commence trading on the mainboard by Dec 31.

-By Jacqueline Woo

UOB launches online property loan calculator

Free tool covers loans for property purchase, refinancing various types of properties

Source: Business Times / Real Estate

United Overseas Bank (UOB) on Thursday launched a free online property loan calculator to help homeowners determine their total debt servicing ratio (TDSR) for mortgage loan applications. The tool was developed after the bank found in an earlier survey that one in three homebuyers were unaware or did not understand the TDSR criteria for property loans. Under the TDSR framework, financial institutions, when granting property loans to individuals, have to ensure that their total monthly debt repayments (including car loans and credit cards) do not exceed 60 per cent of their gross monthly income.

-By Lee Meixian

UOB launches loan calculator for home buyers

Source: Straits Times / Money

A NEW online tool from United Overseas Bank (UOB) could help home seekers figure out loan amounts and determine if they are taking on too much debt.

The calculator, which was launched yesterday, works out the total debt servicing ratio (TDSR) for mortgage applications. UOB noted that a survey it carried out earlier this year found that 34 per cent of home buyers were "unaware or did not understand the TDSR criteria for property loans".

The TDSR framework dictates that financial institutions can offer loans only to customers whose monthly debt repayments do not exceed 60 per cent of their gross monthly income.

The free tool on the UOB site can calculate loans used to buy or re-finance real estate across all types, including private residences, Housing Board flats, international and commercial property.

Ms Chia Siew Cheng, UOB Group's head of secured loans, said it will make it easier for consumers to make "informed decisions about purchasing or refinancing a property".

There are various mistakes home buyers can make when calculating their loan commitments.

Many people think, for instance, that 100 per cent of their variable income - rent, commission, bonuses or allowances, for example - can be used when applying for a mortgage.

UOB said banks will consider only 70 per cent of this income when calculating the TDSR.

The outstanding balance on credit cards also affects mortgage applications. Banks use the minimum payment across all plastic cards when calculating the TDSR. UOB's calculator also evaluates the mortgage servicing ratio - the loan restrictions that apply to executive condominiums.

Consumers with additional income streams can key in the worth of their financial assets such as unit trusts, shares and bonds, which helps calculate a more detailed mortgage analysis.

Ms Chia said: "When someone decides to buy a property, they should be clear about the costs and terms of their home loans. They should also set aside sufficient funds to manage potential rising interest rates and other unforeseen circumstances.

"We encourage potential home buyers to approach mortgage bankers for advice as they can guide them through these considerations."

-By Rachael Boon

Global Economy & Global Real Estate

London home-price drop deepens as rules limit buyers

Source: Business Times / Real Estate

London Home-Price Drop Deepens as Rules Limit Buyers

Source: Bloomberg / Luxury

Sue Munden bought her five-bedroom house in the southwest London district of Streatham in November after negotiating the price down to 610,000 pounds, about 100,000 pounds less than a similar home on the street sold for in April.

“I did look earlier in the year, but I wasn’t able to have an offer accepted at a level I was comfortable with,” said Munden, who was surprised to get the property for 90,000 pounds ($141,000) less than the offer price. “I thought house prices were too high.”

The drop in prices is spreading through London as the Bank of England’s restrictions on mortgage lending limit some borrowing. Values fell or were unchanged in 18 percent of the city’s postal-code districts in the three months through October, double the percentage of the previous quarter, according to data compiled by property researcher Hometrack Ltd.

“There’s nothing natural about this slowdown,” said Rob Wood, an economist at Berenberg Bank in London. “It’s been induced by what the Bank of England has done and what the government has done.” Soaring house prices “would have been dangerous, so absolutely they needed to take action and it’s really good news that it seems to have worked,” he said.

The BOE imposed limits on high loan-to-value mortgages after the government said in June it would give it the authority to do so. The Financial Conduct Authority, an independent organization that works with the U.K. Treasury, in April introduced stricter affordability checks on buyers and required banks to verify a borrower’s income. It also reined in interest-only loans.

Peak Passed

Prices in London are down as much as 10 percent from a peak in the Spring, said Jeffrey Doble, chief executive officer of Thamesview Estate Agents Ltd. The company operates 60 offices in London through brands including Dexters.

Values in the city had surged by almost 80 percent since the last trough in March 2009, according to the Office for National Statistics office.

The central bank and the FCA enacted the lending controls to stem rising household debt, which BOE Governor Mark Carney has called the biggest threat to the U.K.’s economic recovery. Borrowing, including mortgages, stands at about 145 percent of gross disposable income.

Even with the bank’s new rules in place, the value of U.K. mortgage borrowing is expected to rise by 5 billion pounds to 120 billion next year, the Council of Mortgage Lenders said on Dec. 16. The household debt-to-income ratio will start to increase across the U.K. next year after falling since 2008, according to the Office for Budget Responsibility. Combined with rising consumer spending, the measure will exceed 180 percent by 2020, the OBR said Dec. 3.


High loan-to-value lending, with down payments of 15 percent or less, in Britain fell more than 30 percent from September through November, property appraiser e.surv said this month. Mortgage loans by volume rose by less in London than in any other U.K. region in the past year, the CML said in a report today.

The lending restrictions are hitting property values in the capital harder than in the rest of the country. The London house-price index fell 1.9 percent in October from its peak in August, according to the statistics office. That’s almost twice the decline in the U.K., the data show.

Sales, offers, listings and viewings in London were lower than expected in November, Jeremy Leaf of broker Jeremy Leaf & Co. wrote in a Royal Institution of Chartered Surveyors poll published Dec. 11.

Realism Returns

“Prices went up too far and too fast earlier in the year, so realism has returned,” he said.

An index measuring new buyers interested in London homes was negative for the seventh consecutive month in November, the longest streak in six years, according to the RICS survey.

The biggest price declines in London are in the central, southwest and west districts, said Richard Donnell, director of research at Hometrack, which measures price changes by postal code. Those districts are traditionally the more affluent parts of the city.

Foxtons Group Plc, the residential property broker focused on the U.K. capital and southeast England, fell as much as 6.9 percent in London trading. The stock has declined about 54 percent this year.

Values fell 0.5 percent in southwest London and 1.1 percent in Fulham in October from a month earlier, according to broker Knight Frank LLP. Prices in Kensington and Chelsea, the U.K.’s most expensive borough, declined by 2.5 percent in the month to an average of 1.28 million pounds, according to the Land Registry.

‘Fundamentally Positive’

Doble of Thamesview said the declines are a pause in a housing market that’s still fundamentally positive.

“Demand is strong, supply weak and therefore in the medium term prices will rise,” he said. “The best time to buy is when the market is catching its breath as it is right now.”

Asking prices in the capital dropped 5.1 percent from November and are forecast to rise by 1 percent to 3 percent next year, property website Rightmove Plc said Dec. 15.

Munden said the discount she secured on her home in Streatham will shield her in case values continue to fall.

“I felt it was good value for money which would protect me from any potential weakening in London house prices,” she said.

-By Neil Callanan

China's Nov home prices down for 3rd straight month

Source: Business Times / Real Estate

China home prices fall for third month, threatening growth

Source: Today Online / Business

BEIJING — China’s home prices fell last month for a third straight month from November a year ago, Reuters calculations from official data showed yesterday, pointing to an intractable property downturn despite government efforts to energise the market.

Average home prices in 70 major cities accelerated to an annual 3.7 per cent drop last month from the 2.6 per cent decline in October, based on the calculations from National Bureau of Statistics (NBS) data. The NBS figures also showed new-home prices fell year-on-year in 68 of the 70 major cities it monitors, up from 67 in October.

The price fall came in spite of the government relaxing its lending rules in October and cutting interest rates late last month, intensifying fears that the slack property market, which accounts for about 15 per cent of China’s economy, could hold back growth.

China’s real-estate market has been plagued by falling prices and high inventory in recent months, crimping demand in 40 sectors including steel, cement and furniture. Mr Yu Liang, president of leading residential developer China Vanke, said at the weekend that Asia’s largest economy was facing a housing inventory overhang that would take 13 months to clear.

The latest data followed government reports last week that showed further signs of fatigue in China’s economy, with factory growth and investment expansion slowing. “We see gross domestic product growth cooling further to 7 per cent in the fourth quarter and 6.8 per cent in 2015, from 2014’s anticipated 7.3 per cent, as property-related headwinds offset any uplift from the United States recovery or intensifying policy support,” said UBS China economist Tao Wang.

While the housing market is expected to remain weak well into next year, it is showing tentative signs of bottoming out. The NBS data also showed China’s home prices fell 0.5 per cent last month from October, easing from a month-on-month drop of 0.8 per cent previously.

Property sales in terms of area totalled 132.2 million sqm last month, the highest in the past 11 months, though this was down 11.1 per cent from a year earlier. Mr Yu said the rate cut and regulatory easing had helped the market, but added: “It is hard to say that the industry is recovering at this stage.” 

-By Reuters

General Growth Said to Buy NYC’s Crown Building With Partner

Source: Bloomberg / News

General Growth Properties Inc. (GGP) agreed to buy the Crown Building on Manhattan’s Fifth Avenue in partnership with New York landlord Jeffrey Sutton to build its presence in the world’s most-expensive retail district, two people with knowledge of the negotiations said.

The partners agreed to pay about $1.75 billion for the 390,000-square-foot (36,200-square-meter) tower at 730 Fifth Ave., at the southwest corner of 57th Street, one of the people said. Both people asked not to be identified because the negotiations are private.

At about $4,490, the price per square foot sets a world record for an entire office building, according to Ben Thypin, director of market analysis at Real Capital Analytics Inc., a New York-based real estate research firm. Much of the tower’s value is in its roughly 50,000 square feet of retail space.

The property is part of Fifth Avenue’s “golden mile,” from about 49th Street to the edge of Central Park at 59th Street, home of Apple Inc.’s “cube” store, Jacques Gordon, global strategist for LaSalle Investment Management, said in an interview. The building’s retail tenants include jewelers Bulgari SpA and K. Mikimoto & Co.

Urban Expansion

Chicago-based General Growth, the second-biggest U.S. mall owner, has been expanding into urban markets. Chief Executive Officer Sandeep Mathrani in July said urban storefronts “offer very compelling opportunities to create shareholder value.”

Kevin Berry, a General Growth spokesman, said in an e-mail that the company had no comment on the sale, which was reported earlier by the New York Post. Karolin Bissada, a spokeswoman for seller Spitzer Enterprises, said she had no comment.

Spitzer Enterprises, whose director is former New York governor Eliot Spitzer, co-owns the property with the Winter family. A call to the family’s office wasn’t returned. Nor was a call to Wharton Properties, Sutton’s New York-based firm.

Brokers Douglas Harmon and Adam Spies of Eastdil Secured LLC represented the sellers. A call to Eastdil spokeswoman Martha Wallau wasn’t returned.

Upper Fifth Avenue, a magnet for tourists and high-end shoppers, has the highest average retail rents in the world, at $3,500 a square foot, according to a study by Cushman & Wakefield Inc. released last month. The other three corners of the Fifth Avenue and 57th Street intersection are occupied by Tiffany & Co., Louis Vuitton and Bergdorf Goodman.

Rent Growth

Most of the office and retail tenants at the Crown Building are paying well below market rents, the people with knowledge of the sale said. About 90 percent of its leases expire within seven years, offering opportunities to boost the building’s cash flow, they said.

The office tenants include Apollo Global Management LLC, KKR & Co. and Ermenegildo Zegna Group, according to the website, which collects data on New York commercial properties. The 1921 Beaux Arts structure is capped by “an elegant octagonal hat rich in copper roofing and gilded details,” according to the American Institute of Architects Guide to New York City.

The building was once owned by Philippine President Ferdinand Marcos and his wife, Imelda, before they were ousted from power.

-By David M. Levitt

Redfin Raises $71 Million in Funding Led by Wellington, Glynn

Source: Bloomberg / Tech

Redfin Corp., an online real-estate brokerage, raised $70.9 million in a financing round led by institutional investors Wellington Management Co. and Glynn Capital Management.

The investment brings Redfin’s total funding to about $167 million, according to a statement from the Seattle-based company. Redfin didn’t disclose a valuation, which was less than $500 million in 2011.

The funds will help Redfin develop new technology amid escalating competition in the U.S. online real-estate landscape. Since Redfin’s last funding in November 2013, of $50 million, real estate website Zillow Inc. agreed to buy rival Trulia Inc., and News Corp. said it would purchase the owner of listings website

Redfin uses its website to generate leads for home buyers and also employs teams of salaried sales agents to complete a sale. The company operates in 48 markets in the U.S., according to Jani Strand, a spokeswoman.

“Redfin will put this capital to good use” Glenn Kelman, Redfin’s chief executive officer, said in the statement. “With more market share, we can pair buyers and sellers more efficiently.”

Other investors include Brothers Brook, an investment firm led by Priceline Group Inc. chairman, Jeffery Boyd, and Annox Capital Management, led by Redfin board director Bob Mylod. Funds and accounts managed by T. Rowe Price Associates Inc. and Tiger Global Management also participated, after investing in the November 2013 fundraising round.

Kelman told Bloomberg News in 2012 that “we expect to be public in 2014.” In an interview last year, he said he wasn’t sure when the company will hold an IPO.

-By Kelly Gilblom

Minecraft Creator Buys Beverly Hills Home for $70 Million

Source: Bloomberg / Luxury

Markus Persson, the Swedish creator of the video game Minecraft, bought an eight-bedroom, 15-bath Beverly Hills, California, mansion for $70 million.

The price is a record for the neighborhood, according to Sally Forster Jones, Persson’s broker and president of Aaroe International Luxury Properties in Beverly Hills. Persson, who sold his company, Mojang AB, to Microsoft Corp. (MSFT) for $2.5 billion in September, looked at the 23,000-square-foot (2,100-square-meter) home for the first time about a month ago, she said.

Persson, 35, paid about $15 million less for what the mansion was listed for earlier this year. The estate, which had also been toured by Rapper Jay Z, was developed by Bruce Makowsky, who made his fortune selling handbags through department stores and the QVC television channel. Makowsky built the property, with views that sweep from downtown Los Angeles to the Pacific Ocean, without having a buyer lined up.

In an interview in September, Makowsky said he was counting on interest from global billionaires, technology magnates and entertainers whose demand for high-end properties has grown.

“The U.S. is a safe area for international buyers to invest in real estate,” Forster Jones said in a telephone interview. “But L.A. is also very, very cheap. The value and price relative to other international metropolitan areas make L.A. a bargain, even though this is a big dollar amount.”

$195 Million

At least 20 U.S. homes have sold for $50 million or more since 2010, according to New York-based appraiser Miller Samuel Inc. The highest current U.S. asking price is $195 million for Palazzo di Amore, a 12-bedroom, 23-bath Beverly Hills estate owned by real estate entrepreneur Jeffrey Greene.

The sale of the Fleur de Lys mansion for $102 million in March was the most expensive in the city of Los Angeles.

The fully furnished home purchased by Persson has $5,600 toilets and an 18-seat screening room. A 24-person dining-room table features place settings by Roberto Cavalli priced at $3,700 each, and the living room has 10 chairs designed by Bentley Motors that cost $56,000 apiece.

Branden Williams, a real estate agent with Hilton & Hyland who represented the seller along with Ben Bacal of Rodeo Realty Inc, confirmed the sale, which closed today.

-By Nadja Brandt and John Gittelsohn

Emaar Dubai Real Estate Chief Said to Leave in Revamp

Source: Bloomberg / Luxury

Emaar Properties PJSC’s (EMAAR) head of Dubai real estate has left the company amid a revamp of top management, people with knowledge of the matter said.

Robert Booth left the job in the second half, the people said, asking not to be identified because the information isn’t public. He may still act as an adviser to Emaar on some matters, they said. Booth joined Emaar in 2001, according to the Dubai-based company’s website.

Emaar, led by chairman Mohamed Alabbar, has been changing its top management and several former executives of Dubai’s largest listed company have started working at Abu Dhabi-based developer Eagle Hills, headed by Alabbar who is a board member.

Eagle Hills announced plans to develop a 4 billion-euro ($4.9 billion) project in Serbia. The Belgrade Waterfront will include homes, offices, a mall and a 200-meter (656-foot) tower, Alabbar said in June at a joint press conference in Belgrade with Serbian Premier Aleksandar Vucic. The start of construction, originally set to start in March, has been postponed to April or May, Vucic said on Oct. 13.

Low Ping, the former Emaar Properties group CEO who left the company last year, is now chief executive at Eagle Hills, according to the company’s website. Salman Sajid, previously chief financial officer of several Emaar units, is now CFO at Eagle Hills, and Tom Bartridge, who has been the firm’s executive director of human resources since August, also previously worked at Emaar.

Executive Shift

Ayman Hamdy, Emaar’s executive director, legal and company secretary, was named on the Eagle Hills website as general counsel until yesterday. Today, his name no longer appeared on a page listing nine top executives. Haitham Fekry, who was a director of development and projects at Emaar’s Egyptian unit, is holding the same title at Eagle Hills, according to the website. A spokeswoman for Eagle Hills in Abu Dhabi didn’t immediately answer calls seeking comment.

Emaar didn’t respond to e-mails and calls seeking comment. Booth declined to comment when reached on his mobile phone. Alabbar didn’t respond to calls requesting comment.

Emaar may sell shares in its hotels unit in the first half of next year according to Alabbar. The developer accounts for 17 percent of Dubai’s benchmark index, according to data compiled by Bloomberg.

-By Zainab Fattah and Dinesh Nair

Russians Quit London Luxury Homes as Only Super-Rich Stay

Source: Bloomberg / Luxury

Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist.

The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior vice president. That has led to a plunge in offers for properties priced at less than 10 million pounds ($16 million) as it becomes more difficult for all but the wealthiest to take money out of their home country.

“The banks are limiting what they can withdraw and we’re expecting further impact as sanctions kick in,” said Hannah, who advised Russian families on 180 million pounds of London property deals in the past two years. “The oligarchs are still spending. They already have banks or lawyers over here that allow them to make purchases.”

Russia is struggling to reverse a rout in the ruble with emergency measures including 7.5 percentage points of interest rate increases and more than $10 billion of ruble purchases as President Vladimir Putin confronts the country’s deepest financial crisis since 1998. A drop in Russian buyers is hitting a London luxury-property market already buffeted by economic uncertainty in the U.K. and taxes introduced by Prime Minister David Cameron’s government this month.

Buyers ‘Eliminated’

Russian buyers have been “eliminated virtually overnight,” Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents, said by phone. “Those that are still here have money out of Russia and won’t be taking it back in a hurry.”

Russians were the biggest buyers of London’s luxury homes between January and July 2013, according to Knight Frank LLP. They dropped to third during the first six months of this year, behind Italians and French purchasers, the broker said.

Russia has been hurt by sanctions against businesses run by allies of Putin imposed after the country’s March incursion into Crimea in Ukraine. The latest round of U.S. actions, on Sept. 12, targeted OAO Sberbank (SBER), the country’s largest lender, as well as energy firms and five state-owned defense and technology companies.

The ruble has sunk 16 percent against the dollar this month even after posting an 11 percent rebound yesterday, after the Finance Ministry pledged to use as much as $7 billion to support the currency and the central bank announced measures to help companies refinance looming foreign-currency debt. Putin at a news conference today criticized the central bank for not acting faster to support the ruble, which is down 44 percent this year through yesterday.

Money Worries

“You’ll also see a reduction in those trying to buy yachts and smaller items because they’re nervous about their money,” Hannah said. “They’ve got to keep hold of their cash.”

Home prices in London’s wealthiest neighborhoods fell on a monthly basis for the first time in four years in November, according to Knight Frank. Annual price growth slowed to 6.1 percent.

Changes to the U.K.’s stamp-duty sales tax mean buyers of a 5-million-pound home would pay a levy of 513,750 pounds, an increase of almost 164,000 pounds, according to government data.

“The sanctions are really beginning to bite on expensive property in London, on top of all of the tax which the government introduced in the autumn budget,” Langton said. “It’s killed the golden goose.”

French Focus

The story is different for the oligarchs, a group of the richest Russians who have thrived since the fall of Communism. Russians accounted for 21 percent of home purchases worth more than 10 million pounds during the six months to October, up from 13 percent in the prior six months,Knight Frank LLP said in a report Nov. 25. Those that continue to shop for homes are targeting London, Paris and the French Riviera, according to Hannah at Christie’s.

“The heyday of the Russian buyer was probably two years ago and it’s been declining ever since, although there was a bit of buying as a result of the Ukraine crisis,” said Robert Bartlett, chief executive officer of broker Chestertons. “There’s now a broader influx of Indian and Middle Eastern money that is having a bigger impact on the London market.”

-By Patrick Gower

Russian meltdown sparks panic buying of London homes

More are also buying rental investment properties and commercial assets

Source: Today Online / Business

LONDON — Wealthy Russians, desperate to get their money out of Moscow in the midst of the economic crisis in their country, have been panic-buying property in London this week, high-end real estate agents said.

Russia has lost control of its economy in the past several days after a massive 6.5 percentage point interest-rate hike to 17 per cent by the central bank failed to stem the collapse of the rouble, which has almost halved in value this year. The fiasco has accelerated the trend of Russians buying properties in the United Kingdom capital.

“I currently have half a dozen Russian clients urgently looking to spend over £20 million (S$41.1 million) each on buying a new home in central London. For them, the address must be Belgravia, Knightsbridge, Mayfair and Regents Park. It has got to be a prestigious postcode and, ideally, a parkside or leafy address,” said Mr Gary Beauchamp, founder of real-estate firm Beauchamp Estates.

There has also been a rise in Russians looking at investment properties, he said. “Previously, it was all end-use real estate, but now that their commercial ventures in Moscow have slowed, they are seeing London real-estate investment as a commercial opportunity. So, like the Chinese, they are now starting to purchase rental investment property and commercial assets. This has not been seen before in London by them in large numbers.”

For Ms Becky Fatemi, managing director of estate agent Rokstone, the number of Russian clients on her books has doubled this year.

“There has been a big upturn in Russian buyers since the collapse of the rouble and the slowdown in the Russian economy due to international sanctions. The Christmas season has not stopped them from looking. Currently, I have several Russian clients looking to spend up to £100 million on a home in London,” she said.

Buyers tend to be families and business people from Moscow who want big detached homes and not basement or ground-floor flats, for security reasons, Ms Fatemi added.

“They are not abandoning Russia as they are flying frequently back and forth from Moscow. What has changed significantly in the past eight months is a rise in (the number of) Russians buying investment properties in London — both residential and commercial properties,” she said.

The top Russian addresses in London include Kensington Palace Gardens, One Hyde Park, the Knightsbridge Apartments and Holland Park.

However, London could see this trend reverse over the long term as it becomes more expensive to Russians with the continued depreciation of the rouble. “Given that the influx of Russian money to prime central London significantly contributed to an overheating market, it surely follows that a reversal in demand from cash-strapped Muscovites will potentially have a significant adverse effect on the likes of Kensington, Belgravia and Mayfair,” said Mr Russell Quirk, founder of online real-estate agent eMoov.

“A plummeting Russian stock market will effectively freeze previously liquid assets and a tumbling rouble will have the effect that London has just got dearer.” 

-By The Daily Telegraph

Ocwen Said to Have Stalled Home Sales by Underwater Borrowers

Source: Bloomberg / Luxury

Ocwen Financial Corp. (OCN) is being examined over whether it improperly stalled short sales by borrowers who owe more than their homes are worth, according to two people briefed on the case, as troubles deepen for the mortgage servicer whose stock has slumped 60 percent this year.

The New York Department of Financial Services and the U.S. Consumer Financial Protection Bureau are investigating whether Ocwen is thwarting a new rule that mortgage servicers must approve or deny a short sale within 30 days of an application. They’re examining whether Ocwen is delaying such sales to collect more fees, according to the people, who asked not to be identified because the probes are confidential.

In short sales, the lender gets the proceeds of the sale and relinquishes the balance of the mortgage. Borrowers get out from under a loan they can’t repay, and housing inventory is freed up. Consultants specializing in the practice in states suffering the most in the mortgage crisis say Ocwen is known for demanding more paperwork before the deadline, forcing the process to restart.

“Ocwen has it all figured out,” Deborah Priebe, a senior vice president at Short Sale Success in Henderson, Nevada, said in an interview. “They are notorious for asking for one more piece of paper on the 29th day.”

Margaret Popper, a spokeswoman for Ocwen, said the company “has no desire to delay short sales” and their costs increase when the process is prolonged.

‘Maximize Proceeds’

“We also seek to maximize proceeds from the sale of the property,” Popper said. “Sometimes maximizing proceeds for borrowers and investors requires additional time and processes.”

Sam Gilford, a CFPB spokesman, and Matthew Anderson, a spokesman for the New York bank regulator, declined to comment on Ocwen.

Ocwen shares closed at $21.19 yesterday, down from an October 2013 high of $60.18 as government efforts to clean up the mortgage-servicing business weigh on the Atlanta-based company. Two months ago, Benjamin Lawsky, superintendent of the New York bank regulator, and three state attorneys general said they’re looking into the firm after finding it had backdated letters to homeowners, forcing them to miss deadlines for applications to modify loans.

Last year, Ocwen agreed to pay $2.1 billion to settle with the CFPB, whose director, Richard Cordray, said the firm “took advantage of borrowers at every stage of the process.”

Monitor Reviews

Lawsky has been scrutinizing Ocwen for years. In 2011, he curbed its ability to foreclose on homeowners as a condition to getting approval to buy another company, then installed a monitor there after a surprise audit in 2012 found Ocwen hadn’t complied with the terms.

Joseph Smith, a monitor overseeing compliance with another settlement over flawed foreclosures, said this week he’s hired an independent auditor to scrutinize Ocwen’s loan servicing.

“I’m not saying everybody there did wrong,” Smith said in a telephone interview. “The best you could say about it was it was sloppy. It could be more.”

Homeowners are also unhappy. Beyond the Arc, a Berkeley, California-based analytics firm, studied CFPB data and found much higher rates of complaints against Ocwen than the banks such as Wells Fargo & Co. and Bank of America Corp. that dominate the mortgage servicing business.

Though Ocwen, the largest nonbank servicer, has a smaller slice of the market than those banks, it’s been the most aggressive in acquiring rights to existing home loans. It collects fees for processing payments, foreclosures and short sales,and services about 2.6 million mortgages, worth about $426 billion, according to Fitch Ratings.

‘Something Systemic’

In the first half of 2014, Ocwen customers were more than twice as likely as Bank of America’s to complain to the consumer bureau about the service they’d received. Wells Fargo drew one-sixth as many complaints as Ocwen, suggesting “there is something systemic,” said Brandon Purcell, who directs Beyond the Arc’s data science team. The CFPB data didn’t enable them to break out what the complaints were about.

Popper disputed Beyond the Arc’s premise, and pointed to a report by Compass Point Research & Trading LLC that shows Ocwen’s complaint rate, as a percentage of delinquent loans, is lower than banks’.

That report relied on company data and still shows Ocwen’s complaint rate exceeds NationStar Mortgage Holdings Inc. (NSM), the second-largest nonbank servicer.

Smith, in his report on Ocwen this week, found that the department devoted to reporting data on its performance was “dysfunctional and chaotic.” There were “serious problems and flaws” in how it tested its own compliance, he said.

‘Fairy Dust’

In a successful short sale, the borrower lines up a buyer and submits the documents to the mortgage servicer. As of Jan. 21, under the new CFPB rule, the person should get a decision from the servicer within 30 days. Consultants in Nevada, Florida, and Utah -- the states hurt most by the crisis -- say it’s made little difference.

“That rule is written in fairy dust,” said Paul Antonelli, a real estate agent in Orlando, Florida, who also handles short sales. “It never happens.”

Still, Ocwen’s cases stand out, the consultants said.

“Ocwen is one of the harder ones to work with,” said Provo, Utah real-estate consultant Greg deMik.

Krimm’s Home

Scott Krimm, a 46-year-old disabled Army veteran, has been waiting to sell his home near Las Vegas since October 2012. With a buyer lined up, he said in an interview last month that he sees no hurdles to a sale but one: Ocwen.

With the home worth less than the $257,630.12 he still owed on a mortgage from a 2005 refinancing, Krimm has been angling for a short sale. Even with the new rule, Krimm said he couldn’t get a decision from Ocwen on whether he can sell.

“They have known from day one, for two years, about this short sale,” he said. “Ocwen won’t let it go through.”

Priebe, who says she’s handled over 1,000 short sales in the past 18 months including Krimm’s, says Ocwen uses a loophole requiring the decision be based on a “completed application.” When Ocwen says more paperwork is needed, that means the application isn’t complete and it all starts over.

Deliberate or Disorganized?

Similar to what Smith -- the monitor in place at Ocwen -- said he’s assessing, investigators are trying to sort whether the short-sale delays, and the letters tied to the loan-restructuring issues, are deliberate or due to disorganization, one of the people briefed on the probes said. Ocwen’s internal tracking systems sometimes indicate they’ve received a completed application even as the company says it needs more documents, according to the person.

Mortgage services make money collecting and tracking payments, meaning troublesome ones bring in more fees, said Roelof Slump, Fitch managing director for residential mortgage-backed securities.

Ocwen requires homeowners, even if they have buyers lined up, to also list it on an auction website, Hubzu -- a relationship Lawsky is also probing. In Krimm’s case, the website didn’t turn up any bids that beat the $188,000 offer he had, Priebe said.

On Dec. 9, Ocwen said it wouldn’t take anything less than $195,000, Priebe said. His short-sale application was rejected.

-By Carter Dougherty

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