Real News‎ > ‎2014‎ > ‎February 2014‎ > ‎

9th February 2014

Singapore Real Estate

$1.50 an hour is just too little for anyone

Source: Straits Times

For a year, Bangladeshi construction worker Hossain Iqbel worked seven days a week fitting pipes underground on Jurong Island. His basic wages - at $1.50 an hour or around $280 a month - were a third of the $800 he had been promised when he left home.

Global Economy & Global Real Estate

High-end retirement village managed by S'pore firm

Source: Straits Times

Dr Fang Huilin, a medical professor in her 70s, is starting the Year of the Horse with an unusual gift from her daughter - a trial stay in a high-end retirement village in eastern Jiangsu province. She and her husband will be among more than 30 elderly Chinese moving into the sprawling "Leling Condo", managed by Singapore's Econ Healthcare in the Suzhou Industrial Park (SIP), when it holds its soft launch next month.

Arabtec New Units to Tap U.A.E. Investment, Advisory Demand

Source: Bloomberg / News

Arabtec Holding (ARTC), the largest listed construction contractor in the United Arab Emirates, is forming units that will enable the company to offer financial advisory services and help it invest across industries.

The board approved the setting up of five subsidiaries at its Feb. 6 meeting, the company said in a statement. The units will focus on investments in infrastructure, real estate, trains, airports, power, water, and energy within and outside the U.A.E. Arabtec Capital will be established in Dubai International Financial Centre to provide financial and public offering services. Arabtec shares gained 3 percent to 5.08 dirhams.

Contracting firms are benefiting from a resurgence in the U.A.E.’s real-estate market. Prices for mid-range apartments in Dubai rose 43 percent in 2013, according to Cluttons LLC data on Bloomberg, after values more than halved following the global financial crisis in 2008. Full-year profit at Arabtec, which helped build the tallest tower in the world, will more than double to 313 million dirhams ($85 million) in 2013, according to the mean estimate of 11 analysts on Bloomberg.

“Arabtec is embarking upon an aggressive growth strategy,” Nayal Khan, head of institutional sales and trading at Naeem Holding in Dubai, said by e-mail today. Any positive news on the company’s oil and gas projects will prove to be a further catalyst for the stock, he said.

Arabtec has a joint venture with Samsung Engineering Co. that plans to provide engineering, procurement and construction services on “large-scale multi-billion” projects in the oil, gas, power and related infrastructure industries in Middle East and North Africa. The company also has a venture with GS Engineering & Construction Corp.

The company said earlier this month it won a 22.44 billion-dirham contract from Aabar Properties to build 37 towers in Dubai and Abu Dhabi. Arabtec also plans to open regional headquarters in Belgrade, Serbia to drive expansion into the Balkan region. The shares have surged 77 percent this year after gaining 54 percent in 2013.

-By Sarmad Khan

Nigeria Housing Shortage Rising With Slum Demolition: Mortgages

Source: Bloomberg / Luxury

Esther Macully used all of her five-foot frame to face down a bulldozer and save her freezer from being destroyed as a wrecking crew guarded by armed security forces razed her home in Nigeria’s Badia East slum.

While she salvaged the cooler, the 40-year-old is still waiting for the Lagos state government to fulfill a pledge to help replace the home she used as a store to sell beverages and food. The wooden shack was flattened last February along with the dwellings of thousands of others that authorities said were moved for a housing project that’s yet to get off the ground.

“We can’t be living in this kind of condition forever,” Macully said as she prepared to move back home about 100 miles east of Lagos. “We’re citizens of Nigeria. Let them have mercy on us.”

The demolition is making way for more than 1,000 one-to two-bedroom apartments that will be beyond the means of Nigerians like Macully. Lagos, sub-Saharan Africa’s most populated city, is trying to narrow a national housing shortage that the World Bank estimates at 17 million. While Nigeria is Africa’s most populous nation with about 170 million residents, the real estate market is hobbled by a dearth of home loans, interest rates about six times those in the U.S., poverty, and the continent’s second-most expensive real estate market.

Property investors in Africa’s largest oil producing nation are aiming to lease the apartments to foreigners and the wealthy of Lagos. In the city of about 21 million people, landlords typically demand one to two years’ rent upfront due to the cost of land, the continent’s most expensive after Angola’s, according to Knight Frank LLP, a London-based property broker.

Lagos Oil

“The management of land resources is considered to be the oil of Lagos,” said Felix Morka, the executive director of the Social and Economic Rights Action Center, which provides legal assistance to evicted slum residents.

Lagos State Governor Babatunde Fashola, whose second term expires after elections next year, is attempting to create a workable city out of one that’s currently best known for crime, gridlocked traffic and daily power outages. Lagos is the smallest inland area, yet most densely packed of the West African nation’s 36 states. Seventy percent of Lagosians live in slums, according to Amnesty International. The state government says Lagos needs 4 million extra homes to close the gap.

Companies including Johannesburg-based FirstRand Ltd. (FSR), Africa’s second-largest bank, Resilient Property Income Fund (RES) and Actis LLP, a London-based private-equity firm, are funding construction of office blocks and shopping malls rather than rushing into residential mortgages, which are offered by some local lenders such as FBN Holdings Plc (FBNH) and Zenith Bank Plc.

Addressing Shortfall

The government last month started Nigeria Mortgage Refinance Co. to tackle the deficit. It will fund lenders to help encourage the building of 75,000 homes a year for low- to middle-income earners. The country doesn’t publish house-price data, according to Global Property Guide, and real estate transparency is the worst of 97 markets after Sudan, according to a 2012 index published by Jones Lang LaSalle Inc. (JLL)

The World Bank estimates there were 44,000 mortgages with an average size of 5 million naira ($31,472) each from 2004 to 2010. The ratio of home loans to gross domestic product of Africa’s second-largest economy was 0.6 percent at the end of 2011, even after the market surged fourfold from 2006. That compares with 31 percent in South Africa and a European average of 50 percent, according to the Washington-based lender.

While GDP per capita more than trebled to $1,725 in the decade through 2013, according to International Monetary Fund estimates, inequality has worsened with 68 percent of Nigerians living on less than $1.25 a day, compared with 63 percent in 2004, World Bank estimates show.

Buyers Beware

Nigeria’s oil wealth over the decades has come at the expense and mismanagement of other industries, resulting in a lack of formal jobs with crude revenues being siphoned off by corruption without benefiting the majority of the population. Property scams run rife with buildings often painted with warnings such as “This House is Not for Sale” to avoid conmen selling homes to unsuspecting buyers or “Beware of 419,” referring to the Nigerian fraud code. The nation ranks 144th among 177 countries in Transparency International’s Corruption Perceptions Index.

Even in Lagos’s most affluent districts of Victoria Island and Ikoyi, trash builds up on pavements and in open drainage gutters, while derelict and poorly maintained buildings decay in the tropical heat. Knight Frank estimates office rents in those areas can typically amount to about $1,000 per square meter each year, while residential rents can cost $10,000 a month.

‘Quickly Deteriorate’

“Buildings quickly deteriorate,” Peter Welborn, head of Africa at Knight Frank, said by phone. “After five, seven, maximum 10 years a building in Lagos will probably look like a building in Europe that’s 20 to 25 years old.”

Less than seven miles from Badia East, a local construction company is pumping sand out from the sea, reclaiming eroded coastline to turn the desolate stretch of land into a section that will resemble Nigeria’s equivalent of New York’s Fifth Avenue, said David Frame, the managing director of South Energyx Nigeria Ltd., which is leading the development.

The district, known as Eko Atlantic, probably will become home to 250,000 residents, while 150,000 will be commuting there every day, Frame said in a December interview. A 15-story commercial building is set to be the first completed development by March 2015 with the land reclamation and sea wall due in 2017.

Ocean View

Residential and office plots on the first phase of the marina overlooking the ocean will sell at $2,500 per square meter, while those away from the waterfront will go for $1,250 to $1,500, he said. Manhattan’s Fifth Avenue, home to retailers Saks Fifth Avenue and Tiffany & Co., had the world’s second-highest retail rent per square foot at $2,500, behind only Hong Kong’s Causeway Bay, according to a November report by global real estate services firm Cushman & Wakefield.

The location will have its own power, sewage, drainage and garbage disposal services, while developers have expressed interest in building a shopping mall and an international-standard hospital and school, Frame said. The appeal of reducing the often three- to four-hour gridlocked commute from Lagos’s mainland to the island’s business districts will be a big draw, he said.

The housing market can expand more than 10-fold in the short term, Finance Minister Ngozi Okonjo-Iweala said in a Bloomberg TV interview last month, while the creation of Nigeria Mortgage Refinance will help bring interest rates on mortgages to around 10 percent.

Ecosystem Broken

Interest charges on home loans run 18 percent to 25 percent, Michael Chu’di Ejekam, a director at London-based Actis, said in an interview in Lagos. The Central Bank of Nigeria has kept its benchmark rate at a record 12 percent to keep the naira stable and curb inflation before elections next year.

“The ecosystem for residential investment development still remains relatively broken,” said Ejekam. “The lack of affordable mortgages is a major challenge, a major deterrent, a major hindrance to the development of residential properties in this market.”

There’s little incentive or money for private developers to provide low-cost housing, Knight Frank’s Welborn said.

“The cost of the land, the cost of what an average individual expects to have in terms of square footage in a number of rooms, none of it makes commercial sense,” he said.

Plans by Lagos to develop 5,000 affordable homes is a “drop in the ocean” of what is needed and private investors are needed to help end the shortage, Bosun Jeje, the state’s housing commissioner, said in a Jan. 10 interview.

Poor Paying

The state is using a 284.4 million-naira loan to compensate 1,933 tenants and 319 landlords affected by the Badia East clean-up, Lagos State Attorney General Ade Ipaye said in an interview Jan. 14. Estimates by Amnesty International that the shanty homes of 9,000 people were destroyed are exaggerated, he said.

The government must ensure people erect legal structures so it can formalize housing and clamp down on crime to make the city more attractive, he said. “If we cannot relax because all of the parks are now market places or places where people have put up shanties, then we don’t have a city,” Ipaye said.

Lagos state’s efforts to clean up its act is of little help to Macully, who used to pay 15,000 naira a month for the two-bedroom shack she shared with her three children.

“They want to improve the city, but they don’t want to take the steps responsible governments are required to take to achieve that goal, steps that make sure the poor are not paying disproportionately,” the Social and Economic Rights Action Center’s Morka said.

Macully’s children are now scattered with various relatives as she seeks another means of surviving, willing to take what she can get from the government.

“Whatever they say they want to give us,” she said. “Let them give it to us, so we can cope.”

-By Chris Kay and Yinka Ibukun

Catalonia to Market $406 Million Office Portfolio to Cut Deficit

Source: Bloomberg / News

Catalonia will seek to sell prime office buildings in March valued at more than 300 million euros ($406 million) as Spain’s most indebted region tries to reduce its debt.

“The package will contain around 15 office buildings in the center of Barcelona,” Salvador Estape, director of assets for Catalonia, said in an interview. “Investors from all over the world are approaching us.”

Spanish regions control more than a third of public spending and play a pivotal role in the nation’s effort to cut a defit that was the European Union’s largest in 2012 at 10.6 percent of gross domestic product. Spain’s E.U. peers have given the country until 2016 to bring the shortfall within the bloc’s 3 percent limit.

Investors spent 4.93 billion euros on commercial property assets in Spain last year, more than double the 2.32 billion euros invested in 2012, as the economy came out of its second recession since 2008 and prospects of a euro currency breakup faded. One of the biggest deals was done by AXA SA (CS)’s real estate arm, which achieved a net yield of 9.5 percent on its purchase of 13 properties for 172 million euros from the Catalonia regional government in a sale-and-leaseback deal.

Barcelona Deals

“That yield is unrepeatable,” said Hermann Montenegro, head of property for AXA Real Estate Investment Managers in Spain. The buildings included the education department’s home on Barcelona’s Via Augusta and the agriculture department’s base on Gran Via. The properties will be leased back by the regional government for 20 years at 16.2 million euros a year.

Catalonia, which used the sale proceeds to reduce its 2013 deficit, expects to complete deals for two more office portfolios this year to help meet an 864 million-euro asset-sale target, Estape said in Barcelona.

“The AXA deal was very good for us, it enabled us to reduce debt, deficit and saved 9.2 million euros annually in other costs,” Estape said. In 2012 and 2013, the region raised 315 million euros, he added.

Catalonia, which contributes 18.7 percent of Spain’s GDP, accounted for 29 percent of the country’s regional deficits through November. The deficit is about 2 percent of GDP, compared with a full-year target of about 1.6 percent. While the territory has been allowed to exceed the average regional limit of 1.3 percent for 2013, it’s been asked by the central government to cut the level this year to 1 percent, a ceiling imposed on all regions.

Catalonia Offices

The regional government of Catalonia currently occupies 534,000 square meters (5.75 million square feet) of office space, 65 percent of which is owned and the rest rented at an average of 13 euros a square meter per month. Around 71 percent of the properties are in Barcelona.

“In parallel to our asset-sale program, we are working on the rationalization of space our public administration uses to save on maintenance and running costs,” Estape said. Catalonia plans to remain a long-term tenant in some of the buildings it sells. Buildings that are more attractive to investors to transform into hotels or private offices will be sold outright.

Office-property investment in Madrid and Barcelona, Spain’s biggest markets, rose 6 percent in 2013 from a year earlier to 800 million euros, according to Aguirre Newman, a real-estate broker based in the Spanish capital. Prime office rents in Madrid rose 0.5 percent to 23.33 euros a square meter, but slipped 1.4 percent to 14.50 euros a square meter in Barcelona.

About one in five investors say they think at least one country will leave the bloc that uses the euro, made up of 18 nations after Latvia’s entry this year, according to an August poll of 905 investors by researcher Sentix GmbH. That’s down from a high of 73 percent in July 2012.

-By Sharon Smyth and Angeline Benoit

Olympic Diva Shrugs Off Hotel Gripes to Sing Sochi’s Praises

Source: Bloomberg / Luxury

After singing the Olympic Anthem to an audience of millions at the opening ceremony of the Winter Games, Russian diva Anna Netrebko urged visitors to look past slapdash accommodations and focus on the spirit of the event.

“To be attending the ceremony and singing and see all this amazing beauty, I have to say that I am extremely proud for my country and for the people who make this happen,” said the opera singer, who as a child visited the host city Sochi in the same southern Russian region where she was born.

With the medals tables filling out and Russia winning its first gold yesterday, the mood is turning to the competition in Sochi where President Vladimir Putin has presided over efforts to showcase the country. More than 59,000 people showed up on Feb. 9, with most venues filled at least 90 percent, including some volunteers, according to the Russian organizing committee.

Putin’s grandiose plans, with investments estimated at 1.5 trillion rubles ($44 billion) by the government, have met skepticism and downright ridicule as journalists and visitors turned to Twitter Inc. and other social media sites to complain about side-by-side toilets, hotels that hadn’t been fully built, poorly furnished rooms and water that was sometimes discolored and sometimes ran cold. The gripes inspired the English-language Twitter feed @SochiProblems, which gathered more followers than the official @sochi2014 account.

Repulsive Lie

The spending on such work has drawn accusations of corruption from domestic and international critics, including Alexey Navalny, the opposition leader who got an unexpectedly strong 27 percent of the vote to place second in the Moscow mayoral election last year. Even so, Navalny spoke out against hostility toward the Russian-hosted games.

“It’s repulsive to hear Putin lie and it’s unpleasant to think about pictures of rusty water posted from hotels that cost us a billion dollars,” Navalny said in a Feb. 7 blog post, referring to the president saying last month there was no large-scale corruption during the construction. “Nonetheless, it’s a great sporting event, and we all want our athletes to do well.”

Russia won its first gold medal of the games yesterday in the team figure skating competition, watched by Putin. Norway leads the medal count so far with two golds and seven total, while the Netherlands and the U.S. are tied for second -- each with two golds among four overall.

‘Truly Proud’

Putin is seeking to provide an economic springboard to elevate the tourist region for middle-income Russians into one of the leading resorts in the world. Sochi, which runs more than 100 kilometers (62 miles) along the Black Sea, has been a vacation retreat since the tsarist era and was favored by Soviet dictator Joseph Stalin.

Compared with the Sochi of her childhood, Netrebko, 42, said she was “really impressed” with the amount of construction in Sochi and the surrounding villages, although when asked whether the results justified the spending, Netrebko said she’s “not a politician.”

Netrebko was among those who found the hotels just completed. The singer said she was at the five-star Pullman Hotel, which like the nearby four-star Mercure is part-operated by Europe’s largest hotel operator,Accor SA.

‘Not About Luxury’

“I can tell even by the smell that it’s been finished yesterday,” the singer said in an interview at a champagne reception Feb. 8 attended by Putin. “It is like a sports camp, like a camp for students. It’s not about luxury here, it’s about sport.”

The singer, who has Austrian citizenship, was one of 499 famous Russians who endorsed Putin before his March 2012 election. In August last year, after Russia passed a law that bans showing gay “propaganda” to minors, she published a statement on her Facebook Inc. page saying she “never and will never discriminate against anyone.”

Alexis Delaroff, Accor’s chief operating officer for Russia and CIS, said the hotel’s construction had been delayed by two months last year because of a lack of financing.

“When dealing with such a big building a delay can have its influence on the working works,” Delaroff said by phone today. “The hotel’s construction ended in mid January, so some smells of glue could be there.”

State banks and billionaire developers have built more than 4 million square meters (43 million square feet) of housing and hotel space in Sochi for the games, according to the Federal Statistics Center and documents from the state corporation Olympstroy.

Moving Downscale

One of those is five-rated star Marriott International, which charges 8,250 rubles a night for one of its 333 rooms after the Winter Olympics and plans to expand its Russian portfolio by more than 50 percent by 2015, according to a statement.

That was where Moscow resident Larisa Zaykina, 24, stayed before moving to the four-star Golden Tulip Hotel in Rosa Khutor, near venues hosting freestyle skiing and snowboarding events.

“It’s fine, maybe it’s not the best,” Zaykina said. “As long as I have a hairdryer, it’s enough.”

Even before the host country won its first gold, some Russians had had enough of the sniping. Foreign Ministry spokeswoman Maria Zakharova criticized Western media for complaining about Sochi in posts on Facebook last week and cheered the Feb. 7 opening ceremony. “They can pour as much dirt on us as they want,” she wrote. “We are truly proud!”

-By Christopher Spillane and Ilya Arkhipov