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19th February 2014

Singapore Economy

Overall surplus seen overshooting estimates (Budget 2014)

Forecasts range from $5.9b to $7b; govt had reckoned it as $2.4b a year earlier

Source: Business Times / Top Stories

Economists are expecting the government's overall surplus to overshoot initial estimates by as much as 2.5 times, as Singapore's stronger growth in 2013 boosted GST takings and property taxes rose despite a cooling real estate market.

Overall budget surplus forecasts for the fiscal year ending March 31, 2014 (FY2013) range from $5.9 billion to $7 billion, far above the $2.4 billion the government had estimated a year earlier.

This would be the government's 10th consecutive year of fiscal outperformance, Citi economists Kit Wei Zheng and Brian Tan wrote in a recent note, forecasting a $6.5 billion overall surplus.

Operating revenue for the first three quarters of FY2013 has been stronger than initially estimated. Goods and services tax revenues may beat original projections to hit $9.4 billion, they say, thanks to stronger GDP growth of 3.7 per cent last year. That exceeded the original forecast of 1-3 per cent growth, which FY2013 budget estimates were based on.

-By Teh Shi Ning

Upgrades to Q4 growth expected

Source: Straits Times

Seven economists polled by The Straits Times predicted upgrades to Singapore's growth numbers tomorrow, when the Government unveils updated figures on how the economy performed last year. They believe the economy grew by 5.1 to 5.5 per cent in the October to December quarter, surpassing the flash estimate of 4.4 per cent released by the Trade and Industry Ministry last month. This comes after manufacturing output grew 7 per cent in the quarter, twice as much as initial estimates.

Income inequality here lowest in decade: Report

Most households here earned more last year, with incomes rising amid a tight labour market and government help for low- wage workers. The exception was the richest households, which saw their incomes fall. This resulted in the income gap narrowing, with the Gini coefficient - a widely used measure of income equality - showing the lowest inequality since 2004.

Drop at the top for work-income earners

First fall since 2008 recession; highest 10% only group to get paid less in 2013

Source: Business Times / Top Stories

Income of top earners from employment in 2013 fell for the first time since the 2008 recession - the only group to see a drop in income last year.

Resident households in the top 10 per cent income bracket saw average monthly income slip 5.2 per cent in real terms from $11,552 per household member in 2012 to $11,198 in 2013, despite higher economic growth.

The decline was 3.1 per cent in nominal terms and came after a 9.6 per cent jump in nominal terms and 5.1 per cent hike in real terms in 2012, according to the Department of Statistics' "Key Household Income Trends 2013" report.

No official reason was given for the drop, though people in the compensation business speculate that it's partly due to employers giving a bigger raise to younger and junior staff to narrow pay gaps.

Incomes of households headed by those who held jobs as managers fell sharply last year by 8.7 per cent in real terms to $12,047 per household member.

The last time the income of the top earners fell - by 2.6 per cent in real terms - was during the 2008 economic downturn, when all households' incomes were hit.

Except for the top earners, households in all income groups saw income rise in both nominal and real terms in 2013, with the biggest jumps seen in those in the third to sixth deciles (See table).

Incomes of the bottom 10 per cent, which fell 1.2 per cent in real terms in the previous year, increased 2.4 per cent in 2013 from an average monthly income of $440 in 2012 to $463 per household member.

Overall, the median monthly household income from employment grew from $7,570 in 2012 to $7,870 in 2013, up 4.0 per cent in nominal terms and 1.6 per cent in real terms.

The drop in income at the top bracket probably contributed to a narrowing in income gaps last year, as the Gini coefficient - a measure of income inequality - dipped from 0.478 in 2012 to 0.463. If government transfers and taxes are taken into account, the coefficient fell to 0.412 - the lowest since 2000 when the Statistics Department started compiling it.

Resident households overall got an average $3,440 per household member last year - higher than the $2,760 in 2012 - from government schemes such as the Workfare Income Supplement and Growth Dividends.

Households in HDB one- and two-room flats received $8,631 per household member - more than their annual income of $8,264 per member - in government help in 2013, up from $7,210 in 2012.

Over a longer time- frame of five years, incomes rose in all income brackets - including that of the top earners whose incomes tend to fluctuate more. Their income increased 1.0 per cent yearly in real terms during 2008-2013.

Total household income from employment went up 2 per cent per annum during this period. Measured by per household member, it rose 1.9 per cent yearly.

-By Chuang Peck Ming

Income gap shrinks for first time in four years

Source: Today Online / Singapore

SINGAPORE — The income gap has narrowed for the first time in four years, with the Gini coefficient — a measure of income equality — falling last year to a nine-year low.

And after taking into account Government taxes and transfers, income disparity last year was at its lowest since 2000, when such data was collated.

The Department of Statistics’ latest report on Key Household Income Trends released yesterday showed that the Gini coefficient for last year was 0.463, compared with 0.478 in 2012. After adjusting for Government transfers and taxes, it was 0.412 last year .

Median household income from work grew to S$7,870 last year, an increase of 1.6 per cent in real terms. The median monthly household income from work per household member increased 3.2 per cent after taking inflation into account.

The top 10 per cent of households, in terms of income, was the only group that experienced a drop in income last year. For this group, average monthly household income from work per household member fell 5.2 per cent in real terms last year — in contrast to the 5.1 per cent increase they experienced in 2012, the largest rise among all income groups. Last year, the bottom 10 per cent of households saw their average monthly household income from work per household member increase 2.4 per cent in real terms — in contrast to a 1.2 per cent drop in 2012.

Economists whom TODAY spoke to noted how the finance and property sectors, for example, did not do as well last year. Government curbs on foreign labour, meanwhile, had helped to push up the salaries of low-income earners.

While the economists felt that the income gap will continue to narrow in the coming years, the Department of Statistics pointed out that changes in the Gini coefficient can vary from year to year. The department said: “A single year’s change may not be symptomatic of a longer term trend. For example, after declining in 2008 and 2009, the Gini (coefficient) rose in 2010 to 2012 before dropping in 2013.”

The department added that income for the bottom 80 per cent of households grew faster last year compared with that for the top 20 per cent.

CIMB Research Regional Economist Song Seng Wun noted the difficult market conditions in the finance sector last year, while SIM Global Education Senior Lecturer Tan Khay Boon pointed out that, in the real estate and property development sectors, property cooling measures had adversely affected sales, which in turn could have lowered the earnings of those working in the industry. Both economists said the curbs on inflow of foreign workers had resulted in increased wages, especially for lower-wage workers in the resident workforce.

DBS Bank Senior Economist Irvin Seah said the narrowing income gap could also be due to the impact of government measures to improve the income and employability of lower-wage workers, such as the Workfare Income Supplement Scheme and the Workfare Training Support scheme. The report “has reaffirmed the fact that (economic) restructuring is on track”, he said.

In terms of government transfers, which include Workfare Bonus, top-ups to Central Provident Fund and Medisave accounts, as well as rebates on utilities, resident households — including those with no working persons — received S$3,440 per household member on average from various government schemes last year, compared with S$2,760 in 2012.

In particular, households in one- and two-room HDB flats received S$8,630 per household member on average, compared with S$7,210 in 2012.

-By Amir Hussain

Real Estate Companies' Brief

CapitaLand Quarterly Profit Falls on Australand Sale

Source: Bloomberg / Luxury

CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, said fourth-quarter profit fell 46 percent after it recorded a loss on the sale of a stake in Australand Property Group (ALZ) and lower revenue from its Singapore home sales.

Net income declined to S$142.9 million ($113.3 million) in the three months ended Dec. 31, from S$262.7 million a year earlier, the Singapore-based developer said in a stock exchange statement today. Revenue slid 2.3 percent to S$1.09 billion. Full-year profit 31 dropped 8.7 percent to S$849.8 million while operating profit rose 43 percent to S$527.7 million, it said.

“Operating profit was below our expectations,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. He estimated operating profit at S$596 million for the year.

CapitaLand said it booked currency losses after raising A$426.4 million ($385 million) by selling a third of its 59 percent stake in Australand in November. The number of homes sold in Singapore in the fourth quarter was a third of those in the year earlier period and the developer expects demand and prices to “further moderate” with the government’s loan curbs.

The company sold 109 residential units in the island state in the quarter, compared with 352 in the same period a year ago. For the full year, it sold 1,260 homes, almost twice the 681 a year earlier.

The shares fell 1 percent to S$2.91, the most since Jan. 30, at the close of trading in Singapore while the benchmark Straits Times Index gained 0.6 percent.

Singapore Home Demand

Singapore’s fourth-quarter home prices slid for the first time in almost two years, trimming annual gains to the smallest since 2008 as mortgage curbs cooled prices in the Southeast Asian city. Housing values gained 1.1 percent in 2013, the lowest annual increase since prices slid 4.7 percent in 2008.

Demand in Singapore homes are also expected to further moderate in 2014 because of concerns of interest rate increases, the company said in the statement.

The developer sold 611 home units in China in the quarter, the developer said today. Its two core markets of Singapore and China accounted for 88 percent of the group’s profit before interest and tax in 2013, it said.

CapitaLand bought a residential site in China’s Ningbo city for S$232 million and plans to build about 1,100 small and medium-sized units, the developer said on Jan. 23. The developer along with CapitaMalls Asia Ltd. and CapitaMall Trust sold Westgate Tower, a Singapore office building, for S$579 million, it said last month.

The company also wrote down the value of some investments in China, India, Australia and Abu Dhabi.

-By Pooja Thakur

Croesus Retail Trust

Source: Business Times 

Croesus Retail Trust (CRT) reported Q2 2014 distribution income of 713 million yen (S$8.8 million), 6 per cent above forecast, translating into a distribution per unit (DPU) of 2.02 Singapore cents. This was achieved on a 1.2 per cent higher than projected revenue of 1.287 billion yen and lower-than-expected interest expense. NPI improved 2.4 per cent on better operating cost management. Maiden DPU of 5.24 Singapore cents for May 10, 2013, to June 30, 2014, is expected to be paid on March 31, 2014. Book closure date is Feb 26, 2014.

Global Economy & Global Real Estate

State-owned Chinese firms to invest in GLP

Deal to inject up to US$2.5 billion in company

Source: Business Times / Companies

GLOBAL Logistic Properties (GLP) has signed an agreement with a group of Chinese state-owned enterprises and financial institutions for an up to US$2.5 billion investment in the company.

The transaction is expected to increase GLP's growth substantially, the provider of logistics facilities in China, Brazil and Japan said yesterday.

"The new partners bring increased access to best-in-class customers and additional capital, establishing a strong platform for future growth," said Jeffrey Schwartz, chairman of GLP's executive committee.

Partners in the transaction include Bank of China Group Investment Ltd, HOPU Funds and a large Chinese insurance company, GLP said.

-By Raphael Lim

Chinese Institutions to Invest $2.5 Billion in Global Logistic

Source: Bloomberg / News

Global Logistic Properties Ltd. (GLP), the biggest modern warehouse operator in China, will get $2.5 billion from investors including the Bank of China Ltd.’s investment unit to expand in Asia’s biggest economy.

They will invest $2.36 billion by subscribing to new shares in GLP’s local subsidiary and $163 million through buying new shares in GLP, the Singapore-listed company said in an e-mailed statement. Other investors include “a large Chinese insurance company,” which GLP didn’t name, and Hopu Funds, backed by China’s largest state-owned companies and institutional investors, it said.

GLP is seeking to tap growth in China where spending on logistics accounts for 18 percent of the country’s gross domestic product, twice as much as in developed countries such as the U.S. and Japan, according to the statement. China’s increasing urbanization and rising domestic consumption needs additional warehouse infrastructure, it said.

“The partnership with these investors will help open doors to a lot of state-owned companies and strategic partners for access to land holdings,” Ming Mei, co-founder and chief executive officer of GLP said in a phone interview today.

GLP’s portfolio in China has grown at a 67 percent compound annual growth rate since fiscal year 2005 and has 8.7 million square meters (93 million square feet) of completed facilities, according to the statement. The company, which started a $3 billion China logistic infrastructure fund in November, expects the opportunities in the country to exceed $2.5 trillion, it said in the statement.

GLP shares rose 1.8 percent to S$2.88 at the close of trading in Singapore. The announcement was made after the close of trading.

-By Pooja Thakur

Opportunities in Myanmar

Source: Straits Times 

Myanmar has the advantage of a favourable geographical position, low wages and a large potential consumer market. Its recent political and economic reforms have inspired optimism among foreign investors.

Homebuilder Confidence in U.S. Slumped in February on Weather

Source: Bloomberg / Luxury

Confidence among U.S. homebuilders plunged in February by the most on record as bad weather limited prospective buyer traffic and depressed sales.

The National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month from 56 in January, figures from the Washington-based group showed today. Readings less than 50 mean more respondents reported poor market conditions than good. The measure was weaker than the most pessimistic projection in a Bloomberg survey of economists.

Snowstorms last week from the South to the Northeast helped reduce homebuyer traffic to its slowest pace since April. Purchases and sales expectations also declined as builder confidence deteriorated from coast to coast, signaling construction will contribute less to economic growth at the start of 2014.

“Significant weather conditions across most of the country led to a decline in buyer traffic last month,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Delaware, said in a statement. “Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor.”

The February decrease was the biggest since monthly record-keeping began in 1985. The median forecast in the Bloomberg survey of 46 economists called for a reading of 56, with estimates ranging from 54 to 57.

The group’s measure of the six-month sales outlook decreased to 54 from 60, while the index of current single-family home purchases dropped to 51 from 62 in January. Both of the February readings were the weakest since May.

The gauge of prospective buyer traffic slumped to 31 this month from 40.

By Region

Builder confidence declined in all four U.S. regions, led by a 14-point plunge in the West to the lowest level since June. The index dropped nine points in the Midwest to 50, the weakest reading since May. In the South, the measure decreased to a nine-month low of 46, while sentiment among builders in the Northeast fell eight points.

Inclement weather has taken a toll on the economy so far this year. Government offices in Washington closed Feb. 13 as a winter storm that paralyzed the South with snow and ice moved to the Northeast, canceling flights, snarling traffic and downing power lines along the way.

This month’s storm follows the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland. The Northeast is also on track for the coldest winter since 1982, measured from December to February, the group said.

Weather Effect

“The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes,’ David Crowe, the NAHB’s chief economist, said in a statement. “Clearly, constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry.”

Beyond weather, borrowing costs for homebuyers have climbed since mid-2013. The average 30-year, fixed-rate mortgage was 4.28 percent in the week ended Feb. 13, up from 3.35 percent in May last year, according to data from Freddie Mac in McLean, Virginia.

At the same time, some builders, such as Atlanta-based Beazer Homes USA Inc., remain upbeat about the outlook for demand.

“While housing isn’t the screaming bargain that it was a year ago, it is still highly affordable in relation to household incomes and to alternative rental payment,” Chief Executive Officer Allan Merrill said on a Jan. 31 earnings call. “Household formations are occurring, and they drive new construction.”

A report tomorrow may show housing starts declined to a 950,000 annualized pace in January from a 999,000 rate a month earlier, according to the median forecast of economists surveyed before figures from the Commerce Department. In November, ground-breaking on new projects reached a six-year high of 1.11 million.

-By Michelle Jamrisko

RioCan’s Darth Vader CEO Sees Apartments Atop Retail

Source: Bloomberg / News

Edward Sonshine, chief executive officer of RioCan Real Estate Investment Trust, says he’s known as Darth Vader in the downtown Toronto neighborhood where he battled to put up a Wal-Mart Stores Inc. outlet.

RioCan, Canada’s largest REIT, wants to locate chain stores where people are moving -- into the center of North America’s largest cities. Sonshine plans to build rental apartments on top of his retail empire to capitalize on growing populations in places like Toronto, Calgary and Austin, Texas.

For years, the 67-year-old developer fought residents opposed to his plan of including a Wal-Mart in RioCan’s proposed retail and office complex near Kensington Market, a district of international grocers and vintage clothing stores.

“What you have is a finite amount of retail space and it’s hard to build more in this world,” Sonshine, who founded the company in 1993, said in an interview at Bloomberg’s Toronto office last week. “Witness what we’re going through at Bathurst Street. Build a few floors, and I’m the Darth Vader of Kensington.”

RioCan took a step back last week, axing the big box retailer from its latest submission to the City of Toronto. Sonshine, whose father used to take him to Kensington market on Saturdays when it was a hub for Jewish bakeries and shops, isn’t deterred from his urban push.

“That’s where we used to shop,” Sonshine said. “It’s not like that anymore. It’s become quite trendy and very focused. It is a jewel of Toronto, a different kind of jewel.”

Scarab Beetles

After building the REIT into a C$8.04 billion ($7.34 billion) company by developing shopping malls in suburbia and renting them out to retail tenants, the CEO is shifting toward mixed-used properties. Sonshine plans to build 3,000 to 4,000 residential rental units in the next five years and has three sites under consideration in Toronto.

Canada’s largest retail landlord intends to spend at least C$600 million over that time on the strategy. Many of the rentals will be perched atop the company’s tenants, including Target Corp., Canadian Tire Corp. and Wal-Mart Stores. (WMT)

“Long term, you can never go wrong owning rental residential in good areas of a good city,” said Sonshine, his gold scarab-beetle cuff links flashing as his hands moved over the table, emphasizing a point. “No one is interested in one-off profits. The value will be better by keeping that rental residential real estate.”

Census Geek

RioCan rose 1.4 percent to C$26.60 at the 4 p.m. close in Toronto today. The shares have gained 7.4 percent this year, outperforming the 3.1 percent increase in the 39-member Bloomberg Canadian Real Estate Investment Trust Index. The stock, which fell 10 percent last year along with the REIT index amid concerns over rising interest rates, has four buys, five holds and no sells among analysts who research the firm.

The Toronto-based company has been pulling out of smaller Canadian cities such as Sault Ste. Marie where populations are stagnating. RioCan, which made the moves after Sonshine began reading detailed census reports in 2004, shifted assets so that 73 percent of revenue today flows from urban centers. Over the next five years, that figure will reach about 80 percent, with a bias to Toronto, Calgary, and Ottawa, Sonshine said.

There hasn’t been a substantial number of rental apartments built in Toronto, a city in the midst of a condominium boom, in the last 40 years, he said. Residents, many who currently rent in those new condo towers, want the security and convenience that comes with having a professional landlord and a superintendent in the building, Sonshine said.

Toronto’s Manhattanization

RioCan plans to build The Well, a 7.7 acre (3.1 hectare) mixed-used neighborhood of condos and rental apartments, retail, and office space in downtown Toronto. The company and its partners on the project, Allied Properties Real Estate Investment Trust and Diamond Corp., submitted a rezoning application Feb. 11.

“What we’ve worked very hard at over the last few years was having the capabilities in-house to develop mixed-use properties,” Sonshine said. “That’s where the future’s going to be, that’s part of the intensification.”

The market may be hesitant of the strategy at first because RioCan’s expertise has traditionally been in retail, according to Heather Kirk, a real estate analyst at Bank of Montreal who rates the company’s shares a hold. It’s likely to pay off, she said.

“Look at Toronto -- 15 years ago that whole downtown King West area was a ghost town,” Kirk said by phone Feb. 14, referring to the neighborhood where RioCan wants to build The Well. “It’s the Manhattanization of Toronto. That’s a trend that’s happening in a lot of cities.”

Texas Malls

Across Canada, cities have grown up around the retail space that RioCan purchased two decades ago. Adding home rentals on top of those locations just means more revenue for the REIT and more return for shareholders, she said.

Toronto, Canada’s biggest city, grew 9.2 percent to 5.6 million people in 2011 from 2006, according to the most recent census by Statistics Canada. Calgary’s population jumped 13 percent in that period, fueled by the energy industry. New York’s population grew only 3.8 percent to 8.3 million people in 2011 from the decade before.

For now, 95 percent of RioCan’s rental revenue comes from retail, with Wal-Mart, Canadian Tire and movie chain Cineplex Inc. being the company’s top three tenants, according to a portfolio fact sheet. Ontario is RioCan’s biggest market, generating about 56 percent of its revenue, followed by Quebec and Alberta. The U.S. accounts for 15 percent and is composed of about 50 shopping centers in Texas and other states, Sonshine said.

Stealing Assets

RioCan snapped up properties south of the border following the 2008 financial crisis, taking advantage of the price decline.

“I’ve got one regret -- that we didn’t buy more,” Sonshine said from behind navy-blue framed glasses. “With the benefit of hindsight now, we were stealing the assets. We’re looking to expand more in the U.S. but it’s hard because things have gotten so expensive.”

After retail rents have risen 10 percent to 12 percent annually in the last five years, the company is starting to get push-back from its tenants, said Sonshine. The rise of on-line shopping websites, including, are another challenge, posing competition for shoppers’ dollars, he said.

Hence the shift into mixed-use developments, Sonshine said, whose guiding business strategy is to remain “always paranoid.”

“People may change their shopping habits, they may change their working habits,” he said. “They’ll always need a roof over their head.”

-By Katia Dmitrieva

Nashville Leading as Office Deals Beat U.S. Average: Real Estate

Source: Bloomberg / Luxury

Annie Ierardi works from home in a Nashville, Tennessee, building that’s adding apartments as waves of young workers flock to a city flush with jobs, music and ambition. Amid noise and disruption, she can’t imagine leaving.

“I love it here,” Ierardi, 25, said in a telephone interview, talking over the racket of construction on the floor above. “There are so many different neighborhoods so close to each other, the people are friendly and you can go to a show every night. I say yes to everything.”

Commercial real estate investors are also saying yes to Nashville, drawn by rising rents in the state capital and longtime hub of the country-music industry. Office and apartment sales in the area soared to records last year, combining for $1.7 billion in transactions and outperforming the U.S. average, according to Real Capital Analytics Inc.

“Nashville today is young and vibrant,” said Jay Turner, managing director of MarketStreet Enterprises LLC, master developer of the Gulch, a 30-acre (12-hectare) former rail yard that’s now a development of loft-style apartments, shops and restaurants just outside of downtown. “We predicted the millennial generation wanted to live in an urban setting, and went way out on the risk curve to make that bet.”

Last year, Nashville office deals rose 50 percent and apartments gained 35 percent, compared with increases across the U.S. of 22 percent and 14 percent, respectively, said Dan Fasulo, managing director of New York-based Real Capital Analytics. “Any time you outpace the national, it’s significant,” he said. “Smart money is picking off the best assets in these mid-tier cities.”

Music, Health

Nashville, birthplace of the Grand Ole Opry radio broadcasts almost 89 years ago, is booming “under the radar” with an expanding knowledge-based economy, said Jed Reagan, an analyst at research firm Green Street Advisors Inc. A cluster of health-care companies and spinoffs, related service firms and medical research at Vanderbilt University sit at the center of growth and form the “marquee industry in town,” he said.

Office vacancies in the city plunged to 10.4 percent in the fourth quarter from 12.3 percent a year earlier, among the 10 biggest declines for U.S. markets, according to CBRE Group Inc. Rents rose 1.7 percent to $20.84 a square foot and are poised for annual gains of 3.3 percent through next year amid a supply shortage, said Arthur Jones, a Boston-based economist with the brokerage.

Berkshire, Simon

Acquisitions last year were made by office buyers Shidler Group of Honolulu, Houston-based Lionstone Group and Toronto-based Sun Life Financial; apartment investors Berkshire Property Advisors of Boston and Irvine, California-based Steadfast Cos.; and retail buyers Simon Property Group Inc. (SPG) of Indianapolis and Munich-based GLL Real Estate Partners, Real Capital said.

Nashville’s in-migration of young people and pro-business climate “bode well for above-average office-demand growth,” Green Street said in a Dec. 4 note on Highwoods Properties Inc. (HIW), whose buying spree boosted its Nashville buildings to a value of $229 a square foot, pricier than any other market among the landlord’s holdings, including Atlanta at $180 a square foot.

Nashville was among the top three fastest-growing U.S. cities for most of 2013, Labor Department data show. Health care’s preeminence includes 220,000 jobs, a $53,000 industry wage that exceeds the $39,000 area average and decades of “wealth creation and thought leadership,” Janet Miller, chief development officer for the Nashville Area Chamber of Commerce, said in an interview at her downtown office.

Hospitality, Autos

Hospitality ranks second with 90,000 workers and automotive firms are third at 70,000, led by a Nissan North America Inc. plant that assembled its 10 millionth vehicle in October, Miller said. Bridgestone Corp. (BRDCY), the world’s largest tire company, has its U.S. unit based downtown and naming rights to the nation’s sixth-busiest arena that hosts the Predators professional hockey team and music-award shows, according to Pollstar trade data.

The $585 million Music City Center, which opened in May with 1.2 million square feet (111,500 square meters) of meeting space and a guitar-shaped roof, moved development toward the Gulch and a site where HCA Holdings Inc. (HCA), the largest for-profit hospital chain, intends to build a $200 million office complex. The project will house an HCA consulting unit and a research center named for longtime resident Sarah Cannon, better known as Minnie Pearl, the Opry’s comic rube.

Government workers housed in buildings near the 1859 state capitol; a higher-education sector that includes Middle Tennessee State University, historically black Fisk University and Belmont University, renowned for music programs; and “first-class” performance and fine-arts facilities add depth and diversity to the economy, said billionaire Thomas Frist Jr., 75, who co-founded HCA with his father in 1968 and is now a philanthropist.

‘Right Balance’

“People in Nashville have the right balance of sophistication without forgetting their roots,” Frist, whose $25 million gift helped establish the Frist Center for the Visual Arts in a former Art Deco post office, said in a telephone interview. Frist, who has a net worth of $5.7 billion, is the 248th richest person in the world, according to the Bloomberg Billionaires Index.

The city’s current buzz echoes from honky-tonks on Broadway packed with revelers enjoying live music nightly, to harmony between city and business leaders and attention from the ABC television series “Nashville,” said Jody Williams of Broadcast Music Inc., the locally based agency that collects royalties and license fees for composers and songwriters.

‘Like Paris’

“This is like Paris in the ’20s,” Williams, a BMI vice president and Nashville native, said in his office at 10 Music Square, where images of artists the firm represents, including Willie Nelson and Taylor Swift, line the walls. “All these kids who want to start their lives are choosing to come here.”

Growth may yet bring pitfalls, with lax zoning and low labor and construction costs likely to encourage speculative building, said Reagan of Green Street. Nashville needs to develop a mass-transit system with regional peers to keep pace with a growing job base, said Brian Reames, Highwoods senior vice president.

“You can look out in time and see Cool Springs growing 60 percent by 2020,” Reagan said, referring to the suburb south of downtown where developers have purchased land for potential projects. “The ease of new supply is the biggest risk.”

Tennessee residents don’t pay state income taxes and may balk at costly revenue plans necessary to improve transit and other infrastructure, said Clayton McWhorter, who saw the city prosper over three decades as an HCA executive, where he rose to become chairman.

Growth Costs

“We need to maintain growth, and at the same time we need to pay for that,” McWhorter, 80, said in a telephone interview. He retired from HCA in 1997 and then founded a venture firm focused on health-care startups.

Nashville’s good fortune can be traced to a 1963 merger of the municipality and Davidson County, which set a foundation for collaboration between civic and business leaders, according to both Frist and McWhorter. The voter-approved plan formed a single metropolitan government and stipulated that mayors be elected without party affiliation.

“We haven’t had the partisan bickering, and people pull together for the common cause,” McWhorter said. “We’ve learned what’s good for one is good for all.”

Musicians and other creative types have found their own kind of harmony in Nashville. The world-famous Opry broadcasts began on local radio station WSM in 1925, and originated for more than four decades from downtown’s Ryman Auditorium, refurbished and still known as the “Mother Church of Country Music” even with the program now beamed from the suburban Opryland USA complex.

Higher Rents

At the Gulch, developed by MarketStreet on the former rail yards, the residents are mainly young workers, said Turner, who is the nephew of Cal Turner Jr., former chairman and chief executive officer of Goodlettsville, Tennessee-based Dollar General Corp. (DG) MarketStreet’s $260 million investment has yielded average rents of $1,377, almost double what’s typical in the city.

Nashville residential rents surged to $794 in the fourth quarter, up 4.5 percent from a year earlier and the seventh-biggest jump in the U.S., ahead of Houston’s 4.4 percent increase, according to a Reis Inc. (REIS)survey of 79 markets. Home values jumped 7.9 percent in December from a year earlier, ranking the market 132nd among 400 metropolitan areas for price gains, according to CoreLogic. (CLGX)

Tower Purchase

Highwoods in September raised the investment stakes when it bought the Pinnacle office tower for a record $153 million, or $294 a square foot, Real Capital data show. The city’s newest high-rise, which opened in 2010 and is 89 percent occupied, quotes rents of $35 a square foot, providing potential for increased revenue as rates rise, according to the Raleigh, North Carolina-based real estate investment trust.

The REIT is “actively growing its appealing footprint” with 1.4 million square feet in Brentwood and 900,000 square feet in Cool Springs, submarkets with vacancies of less than 5 percent, Green Street said. Highwoods has almost 3.4 million square feet in the Nashville area, Reames said in an interview at his office near Vanderbilt’s campus southwest of downtown.

Nashville’s health-care cluster still stands at the forefront of growth, investing in cutting-edge therapies and devising ways to make the U.S. system “more user-friendly and compassionate,” Frist said. “The opportunities to make advances are greater today than ever.”

Ierardi, who has a bachelor’s degree in journalism from the University of North Carolina at Chapel Hill, and moved to Nashville from Washington, D.C., with a sales job for a consulting firm, did “tons of research” before asking her company for the relocation. Her $1,300 monthly rent comes with use of a pool and gym as well as parking, a good deal compared with $1,250 for a Georgetown row house shared with three friends, she said.

“I was ready to live alone and knew Nashville was cool and a good fit because there are a lot of jobs, obviously,” she said. “But it’s exceeded my expectations. I feel like a freshman in college again.”

-By Dan Levy

LG Electronics Plans to Move Tokyo Office to Kyobashi Tower

Source: Bloomberg / News

LG Electronics Inc. (066570), the world’s second-largest maker of televisions, said it plans to move its Tokyo office to Kyobashi Trust Tower near Tokyo Station from Akasaka to consolidate its group companies into one location.

LG is relocating from Akasaka Twin Tower, in the city’s Minato ward, as early as March, said Kim Dong Gun, a spokesman for the Seoul-based company in Tokyo. LG will occupy four floors in the new building, he said.

LG is consolidating office space to boost efficiency, Kim said.

Kyobashi Trust Tower, owned by Mori Trust Co., is scheduled to be completed by the end of the month, according to the company’s website.

-By Kathleen Chu and Katsuyo Kuwako

Miles Says ‘Big Stick’ of Rate Hike Too Blunt for Housing Market

Source: Bloomberg / Luxury

Bank of England official David Miles said policy makers will only use interest rates as a last resort to cool Britain’s housing market if it begins to overheat.

“We do have, as the last line of defense, the blunt instrument, the big stick of interest rates,” Miles said today in a Bloomberg Television interview with Guy Johnson in London. “If you did get into a situation where the tools that the Financial Policy Committee have seem not up to the job of stopping overheating in the housing market, we would then turn to the blunter instrument of using bank rate. We’re a long way from that.”

U.K. house prices have surged in the past year, prompting concerns that the market may be heading toward another bubble. The FPC, created to ensure financial stability after the last crisis, has responded by removing a mortgage aid in its Funding for Lending Scheme. Miles, a member of the Monetary Policy Committee since 2009, doesn’t sit on the FPC.

“The Financial Policy Committee is the first line of defense against the risk that the housing market generally starts to overheat,” Miles said. Its tools “are likely to be really powerful and likely to prove effective.”

Miles said price gains in the broader U.K. housing market aren’t yet rising at a unsustainable pace and the market is being skewed by demand in London.

Rightmove Plc (RMV) said today that asking prices in the capital jumped 5.2 percent to an average 541,313 pounds ($905,000) this month from January. That helped push national values up an annual 6.9 percent, the biggest increase since 2007.

London Skew

“In terms of a generalized overheating housing market, I don’t think that’s a good description of where we are,” Miles said. “We’re in a situation where the national figures for house prices are substantially influenced by the south east, London.”

The EY Item Club said this month that London’s housing market is beginning to show “bubble-like conditions.” The Institute for Fiscal Studies says the government’s Help to Buy program to aid first-time purchasers get on the property ladder risks driving prices higher.

“Net mortgage lending remains at extremely low levels, lower than you might expect in a well-functioning market,” Miles said. “At some point, it would be likely and indeed desirable that net mortgage lending moved up from current levels. I don’t have great confidence in my ability to say when that might happen.”

Miles said he would become more concerned if expectations for house-price gains became entrenched and fueled rapid growth in mortgage lending.

It’s “important that there is a clear recognition by borrowers and lenders that interest rates will not remain at this level for many years to come,” Miles said. “They need to think very carefully what’s going to happen when the cost of that mortgage moves up.”

-By Emma Charlton and Jennifer Ryan