Real News‎ > ‎2014‎ > ‎January 2014‎ > ‎

28 January 2014

Singapore Economy

Singapore leaps to fourth place in environment index

Source: Straits Times

Singapore leaped nearly 50 places places to No. 4 in the latest world index on environmental performance.It went from 52nd of 132 countries in 2012, the last time it was ranked, to fourth spot overall behind Switzerland, Luxembourg and Australia. In fifth place was the Czech Republic, with Germany No. 6. The next highest Asian country was Japan in 26th spot.

Singapore Real Estate News

MBFC owners win property tax refund appeal

Court of Appeal rules that vacancy refunds extend to fitting-out periods

Source: Business Times / Property

THE owners of Marina Bay Financial Centre (MBFC) Towers 1 and 2 have won an appeal to recover $6.9 million in property tax refunds, with the Court of Appeal having ruled that vacancy refunds extend to fitting-out periods as well.

In a landmark decision made public yesterday, the appellate court ruled that BFC Development - even after it had secured tenants for a number of units in MBFC - was entitled to vacancy refunds, including for the period while renovation works were being done, because the units were deemed unoccupied, and because neither the owners nor the tenants had obtained any beneficial use of the property.

Even with the removal of the property tax refund provision for vacant properties starting Jan 1, 2014, the ruling means that the property owners can still claim vacancy refunds for the period between Nov 1, 2012 and Dec 31, 2013, including for the fitting-out periods, said Tan Kay Kheng, a partner with WongPartnership, who represents BFC.

But he added that the owners have to do so by March 31. "IRAS should no longer be objecting to the inclusion of fitting-out periods in these claims," he said, referring to the Inland Revenue Authority of Singapore.

-By Grace Leong

Property curbs 'likely to remain for a while yet'

Source: Straits Times

PROPERTY prices and sales volumes have been in slow decline for six months but cooling measures, especially loan curbs, will be here for a while yet, experts say. Hope that the measures would be scaled down in next month's Budget look to be dashed given that household debt is still high and prices remain elevated in some segments, they note.

Home prices 'may fall up to 10%' in 2014

Source: Straits Times

Residential property prices in Singapore could fall up to 10 per cent across the board this year, an industry expert said. Mass market homes could be the hardest hit, with price dives of up to 15 per cent, said Ms Carmen Lee, research head of OCBC Investment Research.

Investments in S'pore hotels up more than five times

Source: Straits Times

Investments in Singapore hotels surged last year partly owing to the sale of The Westin Singapore, said property consultancy Savills in a report yesterday. The total sum invested last year was $2.45 billion - more than five times the $467 million invested in hotels in 2012.

700 Beach changing hands for some $120m

Buyers planning to develop 18,400 sq ft site into a hotel with about 300 rooms

Source: Business Times / Property

700 BEACH is being sold in a deal that values the asset at about $120 million and the buyers are planning to redevelop the 18,400 square foot site into a 15-storey hotel with about 300 rooms, BT understands.

Market talk suggests that the buyers are in advanced negotiations with UK hospitality group Whitbread to manage the proposed hotel under the latter's Premier Inn brand.

Premier Inn is one of the UK's biggest budget hotel chains, operated by London-listed Whitbread which has a market capitalisation of about £6.9 billion (S$14.5 billion) and which also operates restaurants and coffee shops.

Located between Golden Mile Complex and Golden Mile Tower and near Nicoll Highway MRT Station, 700 Beach is an eight-storey boutique office block on a site with a balance lease term of 89 years.

-By Kalpana Rashiwala

Hotel to provide smartphones for guests

Grand Park Orchard flagship to offer the service by March 3

Source: Business TImes / Property

THE Park Hotel Group will equip all 308 rooms at its Grand Park Orchard flagship with personalised smartphones, pre-loaded with useful travel apps, which its guests can use both within and outside the hotel.

Guests will also be able to use "handy" - as the service is dubbed - to make unlimited local and international calls to 27 countries for free as the hotel seeks to enhance guest experiences amid the competitive tourism landscape. The service will be offered by March 3, following a month-long pilot programme.

The Park Hotel Group, which has invested nearly $300,000 in introducing the technology, eventually plans to roll it out at its two other local properties this year - Grand Park City Hall and Park Hotel Clarke Quay.

It has contracted Hong-Kong based Tink Labs to provide the service. While the Park Hotel Group is the first local hotel to introduce "handy", Tink Labs has also launched it in Hong Kong and Macau.

-By Nisha Ramchandani

JP Morgan sign goes up on Capital Tower

Source: Business Times / Property

A NEW sign on the roof of Capital Tower greeted those in the CBD yesterday: JP Morgan. The US banking giant's grey signage - along the side of the roof facing SBF Center next door - replaces the familiar green "Capital Tower" sign on the crown of the 52-storey building.

Another JP Morgan signage is expected to appear on the side of the roof facing Robinson Road - under terms for the bank's lease renewal at the Grade A, Green Mark Platinum office tower which took effect late last year. BT previously reported that JP Morgan renewed its lease at Capital Tower, though for a reduced space of about 150,000 sq ft - compared with the 200,000 sq ft under its earlier lease which expired towards the end of 2013. Under a front end-back end split, the US bank has also leased around 130,000 sq ft of business park space at One@Changi City. Its total real estate footprint in Singapore of around 280,000 sq ft is an increase of about 40 per cent.

Over at Capital Tower, JP Morgan does not have exclusive roof signage rights. BT understands that "CapitaLand" signages will go up in due course on the other two sides of the building's crown - facing Cecil Street and Tanjong Pagar MRT Station.

Last August, the property giant said that it would relocate all its strategic business units in Singapore to its headquarters at Capital Tower. The property group's units are now spread over several locations in Singapore, including Robinson Point, AXA Tower and Wilkie Edge, in addition to Capital Tower.

-By Kalpana Rashiwala

HDB blocks upgraded as energy consumption rises

Source: Straits Times

Electricity consumption in homes has gone up, and Housing Board flats are being upgraded to cater to it, said Minister for National Development Khaw Boon Wan yesterday. Nearly 2,400 blocks have been upgraded since 1995 to support the higher electricity consumption of modern lifestyles, he said in a blog post, with another 4,000 "in due course".

Singles getting two-room flats in excess of quota

Source: Straits Times

Singles have been able to get new two-room flats in excess of their quota because families have not been fully taking up their allocated share. This trend is set to persist as families prefer to buy bigger flats while the demand from singles for two-room flats remains strong, according to analysts.

Real Estate Companies' Brief

Wing Tai's profit falls 45% in Q2

Sharp drop in share of profits of associated, JV firms

Source: Business TImes / Companies

A DROP in contribution from development properties - coupled with a sharp drop in share of profits of associated and joint venture companies - led Wing Tai Holdings to a 45 per cent drop in second quarter net profit, to $48.4 million from $88.7 million last year.

Earnings per share were 6.17 cents compared with 11.32 cents a year ago. Revenue for the three months ended Dec 31, 2013, fell 23 per cent to $247.6 million.

The quarter saw share of profits of associated and joint venture companies plummet to $5.7 million from $39.7 million a year ago. For the half-year, the share from such entities was $13.6 million, down from $79.6 million a year ago. In the corresponding period last year, the share of profit from Wing Tai Properties included one-off gains from the disposal of its apparel branded business and its listed subsidiary in Hong Kong.

For the half year, net profit was 55 per cent lower at $73 million, while revenue declined 17 per cent to $470.4 million.

- By Felda Chay

Ascendas opens India building

Source: Business Times / Companies

Ascendas India Trust yesterday officially opened its 'Aviator' building at the International Tech Park Bangalore IT Special Economic Zone. The 601,360-square-foot building is fully leased to two tenants, Mu Sigma Business Solutions and Affiliated Computer Services of India. When fully operational, the building is expected to house about 6,000 employees.

Starhill Global Reit

Jan 27 close: $0.77

OCBC Investment Research, Jan 27

STARHILL Global Reit (SGREIT) turned in a firm set of Q4 2013 results last Friday. Net property income (NPI) rose by 3.4 per cent y-o-y to $38.8 million due to higher contribution from Singapore properties and Plaza Arcade acquired in Q1 2013, while distributable income climbed 9.5 per cent to $27.2 million.

Mapletree Greater China Commercial Trust

Mapletree Greater China Commercial Trust booked $65.7 million revenue in Q3, 10 per cent better than forecast, while net property income (NPI) was ahead by 13 per cent at $53.8 million and distribution income by 17 per cent at $40.6 million. 9M FY2014 profit is 78 per cent of our full-year estimate.

K-Reit said to be seeking buyers for Prudential Tower

Source: Bloomberg / Personal Finance

Keppel REIT (KREIT), the second-biggest office property trust in Asia excluding Japan, is seeking buyers for its 30-story Prudential Tower in Singapore’s financial district, according to two people familiar with the matter.

Keppel REIT owns a 92.8 percent stake in the tower, which was valued at S$490 million ($384 million) as of Dec. 31 by independent valuers, according to the company’s filing on Jan. 20. The property is fully occupied, the report showed.

“Keppel REIT does from time to time receive interest to acquire our properties,” the trust said in an e-mailed response to Bloomberg News queries yesterday. “We will consider all potential divestments and acquisitions, and will make an announcement if and when any such deals materialize.”

The Singapore real estate investment trust is seeking to sell the building after the city’s office rents increased about 1.3 percent last year following a 1.3 percent decline in 2012, according to government data. Leasing rates in the central business district bottomed last year and are set to increase in 2014 and 2015, property brokerage Cushman & Wakefield Inc. said in a report last month.

Keppel REIT’s shares fell 0.9 percent to S$1.135 at the close of trading in Singapore, while the benchmark Straits Times Index (FSSTI) rose 0.7 percent.

The REIT is looking to sell older assets to help fund acquisitions, Chief Executive Officer Ng Hsueh Ling told reporters on Jan. 20. The REIT may approach Keppel Land Ltd., its biggest shareholder, to buy Keppel Land’s stake in the city’s Marina Bay Financial Centre Tower 3, she said.

New Acquisitions

“Keppel REIT is looking to sell assets so it will have to raise significantly lower equity to fund new acquisitions,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. “If they get a good price, then the asset sales, revaluation gains and debt will minimize the equity raising needed for funding a possible acquisition of a stake in Marina Bay Financial Centre Tower 3.”

The acquisition of the building in the Marina Bay area, the city’s new financial center, could be funded by debt, Singapore-based analysts Kai Yip and Regina Lim at Standard Chartered Plc said in a note to clients on Jan. 21.

“We believe KREIT could fund a potential S$1.24 billion acquisition from its sponsor with 100 percent debt if it divests Prudential Tower for S$490 million,” they said.

Price Tag

Keppel REIT is seeking S$2,400 a square foot for Prudential Tower, one of the people said, declining to be identified as the information is private. The price would value the trust’s stake at S$531 million, based on the 221,241 square feet of space it owns in the building, according to the filing on Jan. 20.

Tenants include Prudential Assurance Co. and UniCredit Bank AG, according to the trust’s website.

Singapore office rents may rise 10 percent over the next two years, property brokerage DTZ Holdings Plc said in a statement on Jan. 13. Capital values for offices rose by an average 3.6 percent in 2013, the broker said.

Keppel REIT has a market capitalization equivalent to $2.5 billion, making it the biggest office REIT in the region after CapitaCommercial Trust, which said last week it expects rental growth to accelerate in the second half.

- By Pooja Thakur

OUE Commercial Reit makes weak debut in S'pore

Source: Bloomberg / News

OUE Commercial Real Estate Investment Trust (OUECT), the second trust Singapore developer OUE Ltd. has listed in the past six months, opened lower on its first day of trading amid concerns that the yield and credit rating are below those of its peers.

The units traded at 77 Singapore cents, 3.8 percent beneath the initial stock offering price of 80 Singapore cents apiece. They closed unchanged. The REIT raised S$346.4 million ($271 million), offering 208 million units to the public and selling an additional 225 million units to cornerstone investors.

The trust has a provisional rating of Ba1 from Moody’s Investors Service, one level under investment grade. The rating is in a range that’s speculative and subject to substantial credit risk, according to its prospectus. OUE Commercial plans to offer a dividend yield of 6.8 percent for this year with income support from OUE, while without the support, the yield is 5.56 percent, it said.

“The yield without income support isn’t that attractive,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. “That coupled with a credit rating that is below investment grade is also affecting the sentiment.”

OUE Commercial will be backed by the OUE Bayfront office tower in downtown Singapore and the Lippo Plaza property in Shanghai, according to the prospectus.

OUE Hospitality Trust (OUEHT), which owns a hotel and mall in the city’s Orchard Road shopping district, raised S$600 million from an IPO in July last year. It closed unchanged at 87.5 Singapore cents. In the past six months, the stock has fallen 1.7 percent, compared with the 6.2 percent decline in the Singapore benchmarkStraits Times Index. (FSSTI)

OUE bought the U.S. Bank Tower in Los Angeles, California’s tallest building, for $367.5 million last year. It is controlled by Executive Chairman Stephen Riady, the son of Lippo Group founder Mochtar Riady. Indonesia-based Lippo Group’s businesses include real estate, financial services and food across Asia.

-By Pooja Thakur

OUE C-REIT closes flat on debut

Source: Today Online / Business

OUE Commercial Real Estate Investment Trust (OUE C-REIT), the first REIT listing on the Singapore Exchange this year, opened weakly on its debut yesterday amid the broad sell-off in regional markets, but clawed back the early losses to close unchanged.

OUE C-REIT units fell to as low as 77 cents each, 3.8 per cent beneath its initial public offering price of 80 cents, even after strong demand had resulted in the retail tranche of the IPO being subscribed 4.7 times. Over 22 million units had changed hands by the close of trading.

The REIT had raised S$346.4 million from selling 208 million units to retail and institutional investors and an additional 225 million units to cornerstone investors.

OUE C-REIT has a provisional rating of Ba1 from Moody’s Investors Service, one level below investment grade. The rating is in a range that is speculative and subject to substantial credit risk, according to its prospectus. The trust plans to offer a dividend yield of 6.8 per cent for this year with income support from OUE, while without the support, the yield is 5.56 per cent, it said.

OUE C-Reit’s initial portfolio comprises OUE Bayfront in Singapore and Lippo Plaza in Shanghai.

Views, Reviews & Forum

Rental rates depend on supply, demand

Mr Lawrence Loh Kiah Muan ("Rising rents hurting businesses"; last Saturday) seems to believe that landlords can raise rents simply because they bought properties at high prices or are real estate investment trusts that need to deliver higher dividends to unitholders.

Global Economy and Global Real Estate News

GLP lands tenants for China properties

Source: Business Times / Companies

MAINBOARD-listed Global Logistic Properties (GLP) has leased 43,000 square metres (sq m) of space across China to three companies.

In a regulatory filing yesterday, the company said one of the three lease agreements inked was with third-party logistics service provider Sankyu Logistics, which is taking up 16,000 sq m of space at two parks in Tianjin.

The latest arrangement with Sankyu has made it one of GLP's top 10 customers. Sankyu will use the space in Tianjin to expand service for its customers in the automotive, electronics and consumer product industries.

GLP also signed a deal with New York Stock Exchange-listed online retailer for 15,000 sq m of space at GLP Park Suzhou. This is the first tie-up between the two companies.

- By Ong Chor Hao

High-rise farming idea gains ground

Architect's ideas for self-sustaining cities have gained traction

Source: Business Times / Property

Imagine stepping out of your high-rise apartment into a sunny, plant-lined corridor, biting into an apple grown in the orchard on the fourth floor as you bid "good morning" to the farmer off to milk his cows on the fifth.

You take the lift to your office, passing the rice paddy and one of the many gardens housed in the glass edifice that not only heats and cools itself, but also captures rainwater and recirculates domestic waste as plant food.

No, this is not the setting for a futuristic movie about humans colonising a new planet.

It is the design of Belgian architect Vincent Callebaut for a 132-floor "urban farm" - the answer, he believes, to a healthier, happier future for the estimated six billion people who will live in cities by 2050.

- From Paris, France

New home sales in December fall more than forecast

Sales drop 7% to a 414,000 annualised pace after a 445,000 rate in November

Source: Business Times / Top Stories

Purchases of new homes in the US fell more than forecast in December, ending the industry's best year since 2008 on a sour note.

Sales decreased 7 per cent to a 414,000 annualised pace after a 445,000 rate in November that was weaker than previously calculated, the Commerce Department reported yesterday.

For all of last year, demand jumped 16.4 per cent to 428,000, the most in five years.

The housing rebound has cooled as bad weather slowed the market and as buyers adjust to higher borrowing costs and rising property values, which have hurt affordability. Nonetheless, builders such as KB Home remain optimistic about the outlook for the market, which will need to expand to meet the needs of a growing population.

- From Washington, US

China developer to invest £3b in UK

Source: Business Times / Property

Dalian Wanda, the property developer headed by China's richest man, plans to invest up to £3 billion (S$6.3 billion) in regeneration projects in Britain, Britain's prime minister said on Friday.

Prime Minister David Cameron unveiled the investment after meeting Dalian Wanda's chairman Wang Jianlin in Davos this week. It comes after Mr Cameron led the largest-ever British mission to China last December that involved about 100 business people. "When I met chairman Wang Jianlin during my recent trade visit to China, I encouraged him to make further investment into Britain. So I'm delighted that Wanda has decided to invest £2-3 billion in regeneration projects so soon after my visit," Mr Cameron said. "This will help to create jobs in Britain and it's a great example of how we can benefit from foreign investment."

Last year, Mr Cameron launched a government-backed body to help foreign investors identify and fund UK regeneration projects after securing international funds for the Battersea Power Station project and Chinese investment for London's Nine Elms and Royal Albert Dock and Manchester City Airport.

He said that £100 billion worth of possible projects were on the table but on Friday he did not outline where Dalian Wanda's investment would go.

- From London, UK

Asia's 1st luxe Nobu Hotel to open in Manila complex

Source: Business Times / Property

Luxury boutique hotel chain Nobu will set up its first Asia hotel in a US$1.3 billion Philippines gambling complex operated by Melco Crown Entertainment Ltd, mainly targeting wealthy Chinese punters.

The Manila-based City of Dreams casino-resort is a joint venture of Melco Crown and local leisure firm Belle Corp. The Nobu hotel will be one of three in the complex, which aims to open by the middle of the year and will also feature the largest nightclub in the city and a Hollywood-style theme park.

"This is a bet on the Philippines and it is a bet on China," James Packer, Melco Crown's director, told reporters during a launch ceremony attended by celebrity Chef Nobuyuki "Nobu" Matsuhisa and his partner in the hotel group, Hollywood film star Robert De Niro. "We really need it to work for the people of Manila and to also be an attraction that is good enough to get the Chinese market to come here and have fun."

Chinese are among the biggest-spending gamblers in the world, helping to turn China's special administrative region of Macau into the world's biggest gaming hub.

- From Manila, The Philippines

Mall developer MAF to pump 3b dirhams into Dubai

Source: Business Times / Property

Dubai mall developer Majid Al Futtaim (MAF) said that it will invest another three billion dirhams (S$1.04 billion) over the next five years to expand its business in the emirate, seeking to take advantage of a trade and tourism boom at its home base.

MAF, famous for building an indoor ski slope in Dubai, is expanding aggressively in the Middle East and aims to double the size of its business by 2018.

It has been helped by a tourism-led recovery in Dubai's economy since 2011, which benefited from a safe-haven status amid the regional Arab Spring uprising. About 70 per cent of MAF's assets are currently based in the United Arab Emirates.

The unlisted firm, which has the sole franchisee of Carrefour hypermarkets in the region, plans to invest over three billion dirhams on extending its Dubai businesses over the next five years, it said in a statement yesterday.

- From Dubai

Japan Beyond Tokyo Luring BlackRock With Overseas Money

Source: Bloomberg / Personal Finance

BlackRock Inc. (BLK), the world’s biggest money manager, is helping to drive a revival in Japan’s property market as investors bet Prime Minister Shinzo Abe’s plan to sustain economic growth will boost real estate returns.

BlackRock is looking for investments outside of Tokyo this year as it seeks higher yields, said John Saunders, managing director and head of Asian real estate. Japan real estate investment trusts, or J-REITs, acquired properties worth 2.23 trillion yen ($21.6 billion) in 2013, almost triple the previous year, after raising a record amount of cash from equity sales, according to the Association for Real Estate Securitization.

Real estate investment has climbed since Abe pledged to end more than a decade of deflation and the Bank of Japan eased monetary policy, sparking growth in commercial land values and a drop in office vacancy rates. Acquisitions made by overseas investors will account for about 20 percent of all transactions this year, up from 13 percent in 2013, and commercial-property sales may grow to the highest level since 2007, according to brokerage Jones Lang LaSalle Inc.

“Japan is experiencing a bit of a renaissance right now,” said Christian Mancini, chief executive officer of North East Asia at brokerage Savills Asia Pacific Ltd. “There is favorable policy movement that has restored sentiment. All of a sudden, the market is pricing that forward.”

The Bank of Japan has pumped $546.3 billion into the financial system since April, boosting business sentiment to the highest since 2007.

“When you have monetary easing, that is incredible because you suddenly put oxygen into a starved environment,” Hong Kong-based Saunders said in an interview. He declined to comment on individual investments. BlackRock acquired private-equity property investment adviser MGPA last year to expand in Asia, including Japan.

Transactions Surging

Property transactions may rise as much as 30 percent to about 5 trillion yen this year from 4 trillion yen in 2013, said Takeshi Akagi, a director at Jones Lang LaSalle in Tokyo.

Alpha Investment Partners Ltd., a unit of Singapore-based Keppel Land Ltd. (KPLD), is among overseas firms interested to buy in Japan. Alpha manages $7.3 billion of assets with 22 of 51 properties in Japan, according to its website.

“The flow of capital from overseas, as well as domestic sources such as J-REITs, private REITs, corporations and developers is enormous,” said Asao Mikami, president and chief executive officer of Alpha’s local arm in Tokyo, declining to provide details. “The real estate market will be very, very active this year and next year. I am very optimistic.”

J-REITs Buying

J-REITs were among the biggest property buyers in 2013 as a 36 percent gain in the Tokyo Stock Exchange REIT Index made it easier to sell equity. J-REITs raised a record 1.19 trillion yen in initial share sale and public offerings last year for acquisitions, according to data compiled by Bloomberg.

Mori Trust Sogo REIT Inc. (8961), which invests in office and commercial properties, in April acquired a building in Shibuya that houses the flagship store of Swedish retailer Hennes & Mauritz AB (HMB) for 32 billion yen, with an estimated net operating income of 1.36 billion yen, according to a statement.

CLSA Capital Partners, which has $2.6 billion under management including real estate, is also seeking to buy, said Tokyo-based Hirotaka Uchiyama, head of Japan for Fudo Capital, manager of CLSA’s Asian real estate investment funds.

“The banks are very keen to lend to the real estate sector,” Uchiyama said. “Even though the market is getting competitive, it hasn’t reduced the attractiveness of the investment.”

‘Road to Hell’

Not everyone is confident that Abenomics, as Abe’s reflationary policies to kick-start an economy stagnant for two decades became known, will deliver. Yoji Otani, an analyst at Deutsche Bank AG, wrote in a Jan. 17 report titled “Road to Hell Is Paved With Good Intentions” that Abenomics will become dysfunctional this year.

“Though the balance of bank lending is rising and the Japanese economy is headed toward normalization, these will likely be overshadowed by fiscal reform planned for FY2014 in the form of budget austerity and higher taxation,” Otani wrote. The consumption tax will rise in April to 8 percent from 5 percent and to 10 percent next year.

The best time for real estate investment may have passed, Otani said in an interview. The Topix Real Estate Index, which gained 80 percent in 2012 and 71 percent in 2013, is one of the worst performers among 33 industry groups this year, declining 11 percent. That’s a signal the real estate direct investment market will start to deteriorate, he said.

“It’s not a good time to invest in the real estate market,” Otani said. “Investors have come too late.”

The Topix Real Estate Index rose for the first time in five days today, closing 0.4 percent higher in Tokyo.

Vacancies, Rents

Investors are being encouraged by an improvement in the outlook for the office market, where rents had been in decline since 2008. Office vacancies, a measure of unoccupied space, in Tokyo fell to 7.3 percent in December from 8.7 percent a year earlier, according to brokerage Miki Shoji Co.

Tokyo’s average rents for grade-A offices, or those considered to be the most stable, high-income producing properties, will rise about 10 percent this year, according to an estimate by Jones Lang LaSalle. The office vacancy rate for grade-A buildings in central Tokyo dropped to 4.3 percent in the three months ended September, pushing rents 2.2 percent higher in the quarter, according to Jones Lang LaSalle.

Rising Prices

Sellers “recognize rental increases in high-quality buildings in Tokyo,” said Akagi. “We expect further improvement in rents, capital value and transaction volume.”

The capitalization rate, a measure of investment yield, for office buildings in Tokyo fell to 4.98 percent in December from 5.21 percent a year earlier, according to New York-based Real Capital Analytics Inc. A drop in the cap rate, which is a property’s net income divided by the purchase price, usually signals an increase in real estate prices.

Property prices for “well located, good quality, medium size” office buildings in Tokyo have gained more than 15 percent in the past year, estimated Andy Hurfurt, a Tokyo-based executive director at broker CBRE Group Inc.

A surge in property prices in Tokyo has prompted investors to look at other major cities. BlackRock, which started investing in Japan property two years ago, in August bought an office and residential building in Osaka and is exploring investment opportunities in other cities Saunders declined to name.

Japan Recovery

“If you are a believer in recovery in Japan, which we are, then what you’ve seen happened in Tokyo will ripple out into the secondary cities,” he said.

MGPA, the firm acquired by BlackRock, bought two Tokyo office properties last year, the South Shin Otsuka and Shinjuku TX buildings, according to a statement dated April 15, 2013, on the website of law firm Clifford Chance, which advised the investment firm on the purchases.

It paid 12 billion yen for eight office buildings in Japan in 2012, two people familiar with the transaction said at the time. Seven of the properties were in Tokyo, MGPA said that June. The other one was in Yokkaichi city in Tokai region near Nagoya, said the people.

LaSalle Investment Management is proceeding carefully, said Yasuo Nakashima, chief executive officer for Japan. The company, with $47.6 billion of assets under management, has focused on distribution centers in Japan.

More Difficult

“Abenomics has only affected the capital market so far; there is no change in terms of fundamentals such as demand and supply,” Nakashima said. “That means finding the right opportunities to invest has become very difficult.”

Property transactions in the Tokyo metropolitan area more than doubled to 1.51 trillion yen for the six months ended September from the same period a year earlier, while sales in the rest of the country gained 75 percent to 446.5 billion yen during the period, according to a survey by Urban Research Institute Corp.

Mitsubishi Estate (8802) Co., Japan’s biggest developer by market value, on Nov. 29 sold a nine-story retail building in Fukuoka City’s Tenjin shopping area to Tokyo-based United Urban Investment Corp., a real estate investment trust, for 4.35 billion yen with a yield of 7 percent.

‘Early Stages’

“In regional markets you couldn’t really sell properties, but now you can as capital is flowing in,” Mitsubishi Estate Chief Executive Officer Hirotaka Sugiyama said in an interview. “The real estate market has become very active.”

Land values rose at 107 locations out of 150 sites monitored by the government in the three months through Oct. 1, the most since the government increased the number of sites it monitors in 2008.

As part of Abe’s “third arrow” of a three-pronged strategy, the government has promised deregulation and structural reforms to sustain a recovery triggered by fiscal and monetary stimulus.

The recovery in the real estate market will broaden to other types of properties such as logistics and suburban shopping malls as consumer demand grows, Jones Lang LaSalle’s Akagi said.

The government on Jan. 17 raised its assessment of the Japanese economy for the first time since September, citing improvements in private consumption and business investment.

“We see Japan as a good opportunity,” said BlackRock’s Saunders. “The recovery is still in its early stages, so you can expect us to continue to increase our investment there.”

- By Kathleen Chu and Katsuyo Kuwako

Caterpillar 2014 Forecast Tops Estimates

Source: Bloomberg / News

Caterpillar Inc. (CAT), the largest maker of mining and construction equipment, forecast earnings and revenue for 2014 that topped analysts’ estimates as the recovery in the U.S. building industry spurs sales of bulldozers and excavators.

Sales will be about $56 billion plus or minus 5 percent, the company said in a statement today. The average of 13 estimates compiled by Bloomberg was $55.5 billion.

Profit will be $5.85 a share excluding $400 million to $500 million in restructuring costs. That’s more than the $5.77 average estimate. Peoria, Illinois-based Caterpillar also said it approved a $10 billion share buyback plan through 2018 and will repurchase about $1.7 billion in stock in the first quarter that will complete its previous authorization.

Caterpillar rose 5.9 percent to $91.29 in New York, the biggest gain since November 2011.

“The buyback, restructuring and slightly better-than-expected results combined will make it a better report than expectations, especially after selling off on macro fears into the report,” Larry De Maria, a New York-based analyst for William Blair & Co. who recommends buying the stock, said in an interview today.

The shares dropped 2.6 percent on Jan. 24 amid a general decline in equities. A selloff in developing-nation currencies last week led to concern that financial markets will become more volatile.

Mining Slump

Caterpillar today forecast world economic growth at about 3 percent in 2014, up from about 2 percent last year. It predicted sales in its power systems and construction industries units will rise 5 percent. The resources segment, which consists mainly of mining equipment, will see revenue fall about 10 percent, it said.

Speaking today in an interview on Bloomberg Television, Chairman and Chief Executive Officer Doug Oberhelman said that while the depth of the mining slump is “surprising,” the worst of the cost cuts for the company is “behind us.”

Fourth-quarter net income was $1.54 a share, compared with $1.04 a year earlier. The average of 20 analysts’ estimates was for earnings of $1.27. Sales dropped to $14.4 billion from $16.1 billion, beating the $13.6 billion average projection.

Today’s report is being interpreted as a bottom for Caterpillar as the improvement in construction and power systems offsets the decline in mining, Stephen Volkmann, a New York-based analyst for Jefferies & Co. who recommends holding the shares, said in an interview.

Inventory Cuts

Construction industries sales rose 20 percent in the fourth quarter because dealers didn’t cut as much inventory as a year earlier and deliveries to customers in Latin America, North America and China rose, Caterpillar said.

U.S. construction spending in November was the highest since March 2009, according to the latest Census Bureau data. Both residential and non-residential construction in the U.S. will improve, according to Seth Weber, an analyst for RBC Capital Markets LLC in New York.

Construction machinery made up 33 percent of Caterpillar’s 2013 sales, according to data compiled by Bloomberg. North America and China, which account for half of global construction-equipment demand, should lead market growth in 2014, Karen Ubelhart, a Bloomberg Industries analyst said in a report on Dec. 3.

Bucyrus Deal

In contrast, capital expenditure by the mining industry fell more than 25 percent in 2013 and is expected to drop at least 20 percent this year, Ann Duignan, a New York-based analyst for JPMorgan Chase & Co., said in a Jan. 16 report.

From 2006 to 2012, mining companies spent $676 billion, up from $174 billion in the previous seven years, Duignan said. Toward the end of that boom, Oberhelman acquired two companies to expand Caterpillar’s range of mining equipment.

In its largest deal, Caterpillar paid $8.6 billion for Bucyrus International Inc. in 2011. The following year it acquired ERA Mining Machinery Ltd. in China for $790 million. The company later took a $580 million goodwill impairment charge after discovering accounting misconduct at part of ERA.

Meanwhile the slowdown in mining orders has led to job cuts and plant closures. Caterpillar said in October the company fired more than 13,000 workers in the preceding 12 months.

Oberhelman said in today’s interview he doesn’t regret buying Bucyrus. Given the cyclical nature of the mining industry, Caterpillar said it doesn’t make sense at the bottom of the cycle to make “large-scale physical changes” to its plants because current production is far below the expected replacement level and mine production is continuing to increase.

They company will look at “relatively small” acquisition possibilities, particularly in power systems, Oberhelman said during a conference call with analysts today.

- By Shruti Date Singh

Hudson’s Bay to Sell Toronto Store for C$650 Million

Source: Bloomberg / News

Hudson’s Bay Co. (HBC), Canada’s oldest company, said it’s still committed to creating a real estate investment trust after agreeing to sell its main store and adjoining office tower in downtown Toronto for C$650 million ($585 million).

“We continue to actively work on it,” Tiffany Bourre, a Hudson’s Bay spokeswoman, said today in an e-mail. “This transaction gives the company more flexibility with respect to REIT timing, REIT size, and REIT structure in that the cash component of such a transaction has diminished importance in light of the Queen St. transaction.”

Hudson’s Bay said earlier today it would sell the retail and office complex to Cadillac Fairview Corp., a Canadian real estate company owned by the Ontario Teachers Pension Plan Board, and lease it back for 25 years. The building is next to the Toronto Eaton Centre, a shopping mall and tourist attraction in the downtown core.

The Toronto-based retailer plans to open a 150,000-square-foot (46,000-square-meter) Saks inside the current store in the fall of 2015. The announcement comes two weeks after Nordstrom Inc. (JWN), another luxury retailer, said it would take over Sears Canada Inc. (SCC)’s Eaton Centre location in 2016, the latest in an influx of U.S. retailers into Canada.

The 750,000-square-foot store is the company’s largest.

‘Insatiable Appetite’

“This sale-leaseback provides HBC with resources to deleverage and accelerate investment in our growth initiatives,” Hudson’s Bay Chief Executive Officer Richard Baker said in the statement. “We continue to explore other options to create additional value through the power and potential of our real estate assets.”

Saks also has agreed to lease space in Toronto’s Sherway Gardens for a full-line Saks store, according to the statement.

“It’s a great example of the insatiable appetite that Canadian pension funds” have for property, John Crombie, national retail director for real estate-services firm Cushman & Wakefield Inc., said by phone.

Proceeds of the deal, expected to close about Feb. 25, will be used to reduce debt and for growth, Hudson’s Bay said. The shares rose 1.2 percent to C$16.89 at the close in Toronto.

The two Saks stores announced today are the first of six or seven that Hudson’s Bay said it would open after announcing it was buying the New York-based luxury retailer for $2.4 billion in July. The Toronto-based company, descended from a 350-year-old beaver pelt trading monopoly, also said it plans to open as many as 25 Saks Off 5th discount luxury stores.

Nordstorm Plans

Hudson’s Bay is facing pressure as Nordstrom, a high-end retailer based in Seattle, begins opening stores in major Canadian urban centers such as Vancouver, Montreal and Calgary and as Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT) expand in Canada.

Baker said in April the company was looking at following other Canadian retailers in creating a real estate investment trust. Sporting-goods retailer Canadian Tire Corp. last year raised C$263.5 million in an initial public offering after creating a REIT from about 72 percent of its real estate portfolio and grocer Loblaw Cos. raised C$400 million in its REIT offering.

Splitting the store into separate Saks and Hudson’s Bay sections will increase its appeal, Crombie said.

“It’s going to be different customers at the end of the day, but drawing a wider variety of customers will benefit both properties,” he said.

Cadillac Fairview

Cadillac Fairview CEO John Sullivan approached Baker about buying the store and opening a Saks, Cadillac spokeswoman Janine Ramparas said in an e-mail.

“The acquisition of the property and addition of Saks will extend and significantly enhance the Toronto Eaton Centre customer experience,” Ramparas said. Company executives in the deal are at a retail conference in Whistler and unavailable to comment.

The deal means Cadillac Fairview will be able to market the Hudson’s Bay store as part of the Eaton Centre, which Cadillac Fairview already owns. All the stores in the Eaton Centre will benefit as customers walk between Nordstrom and Saks at either end of the mall, Crombie said.

“We believe there is significant and untapped opportunity for retailers such as Saks in Canada,” Sullivan said in the statement.

- By Gerrit De Vynck

Drop in U.S. New-Home Sales Caps the Best Year Since 2008

Source: Bloomberg / Personal Finance

Sales of new U.S. homes dropped more than forecast in December as cold weather helped put a chill on an industry at the end of its best year since 2008.

Purchases decreased 7 percent to a 414,000 annualized pace, lower than any estimate of economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. For all of 2013, demand jumped 16.4 percent to 428,000.

The coldest December in four years discouraged sales at the same time affordability weakened as prices and interest rates climbed. While the weather has worsened this month, builders such as KB Home (KBH) have been optimistic about the outlook for the residential market, which will need to expand to meet the needs of a growing population.

    “I wouldn’t panic, but it’s obviously not a good report,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York, the best forecaster of new-home sales over the past two years, according to data compiled by Bloomberg. “I don’t feel like this is the beginning of the end of the housing recovery by any stretch.”

    The slackening shows the challenges faced by Federal Reserve officials as they trim stimulus aimed at boosting the expansion. Policy makers, who begin a two-day meeting tomorrow, have said they’ll take measured steps in reducing monthly bond purchases.

    Mortgage Rates

    Borrowing costs for prospective buyers have climbed since U.S. central bankers last year signaled they would pare purchases of mortgage-backed securities and other bonds, a process that began this month. The Fed probably will stick to its plan to gradually reduce asset purchases, tapering by $10 billion over the next six meetings before announcing an end to the program no later than December, according to a Bloomberg survey of economists.

    “We know they are concerned about interest-rate sensitive indicators of the economy,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Now that they have started, the problem is how do they explain tapering the original $85 billion to $75 or $65 billion is not really tightening?”

    Stocks fell, extending losses following the worst week for benchmark indexes since 2012. The Standard & Poor’s 500 Index declined 0.5 percent to 1,781.56 at the close in New York.

    The median forecast of 75 economists surveyed by Bloomberg called for 455,000 new-home sales last month. Estimates ranged from 420,000 to 475,000. October and November purchases were weaker than initially reported.

    Bad Weather

    Inclement weather probably dealt a setback to some builders. The extent of snow cover in the contiguous U.S. was the eighth-largest on record for the month, according to the National Oceanic and Atmospheric Administration. It also marked the coldest December since 2009, the agency said.

    Such conditions weighed on construction as well. Housing starts fell 9.8 percent last month to an annualized rate of 999,000 following November’s 1.11 million pace, which was the highest since November 2007, the Commerce Department said earlier this month. Work on single-family houses dropped 7 percent to a 667,000 rate from 717,000 the prior month.

    Today’s report showed the median sales price of a new home rose 4.6 percent from December 2012 to $270,200. Higher prices, along with borrowing costs, have made purchases more difficult for some buyers. The average rate for a 30-year fixed mortgage was 4.39 percent last week, up from 3.35 percent in early May, according to data from Freddie Mac in McLean, Virginia.

    New-home sales, which account for about 7 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing properties.

    Existing Homes

    Purchases of previously owned homes climbed in December for the first time in five months, rising 1 percent to a 4.87 million annual pace, the National Association of Realtors reported Jan. 23. Combined sales of existing and new dwellings increased to 5.52 million in 2013, the strongest year for residential real estate since 2006.

    Caterpillar Inc., the largest maker of mining and construction equipment, today forecast earnings and revenue for 2014 that topped analysts’ estimates (NHSLTOT) as the recovery in U.S. homebuilding spurs sales of bulldozers and excavators.

    The Peoria, Illinois-based company forecast world economic growth at about 3 percent this year, up from about 2 percent in 2013. It predicted sales in its power systems and construction industries units will rise 5 percent.

    New-housing demand has rebounded from a record-low 306,000 homes sold in 2011. That compares with a record peak of 1.28 million in 2005 at the height of the housing boom.

    By Region

    December purchases dropped in three of four regions, led by a 36.4 percent plunge in the Northeast, the smallest market. The two largest areas, the South and West, also declined, while the Midwest jumped 17.6 percent.

    The supply of homes at the current sales rate rose to 5 months, the most since September, from 4.7 months in November. There were 171,000 new houses on the market at the end of December, the fewest since July.

    Builders see plenty of room for growth this year, said Jeffrey Mezger, chief executive of KB Home in Los Angeles.

    “The fundamental drivers of a housing recovery remain in place, although conditions are not as favorable as they were six months ago,” Mezger said on a Dec. 19 earnings call. While borrowing costs and home prices have increased, “affordability is at attractive levels, demographics remain strong and there’s pent-up demand.”

    While higher borrowing costs and prices are keeping some people out of the market, that pause should be short-lived, Mezger said.

    “In the meantime, we feel that less upward pressure on home prices is healthy for a measured, sustainable housing recovery,” he said.

    - By Lorraine Woellert

    Gehry Designs Tallest German Residential Building in Berlin

    Source: Bloomberg / Luxury

    A design by Frank Gehry, the architect responsible for the Guggenheim Museum in the Spanish city of Bilbao, will be used for a building on Berlin’s Alexanderplatz that will be Germany’s tallest apartment tower.

    The 39-floor property will have a height of 150 meters (490 feet) and contain about 300 apartments, a hotel and a spa, Hines said today in a statement. The Houston-based developer plans to spend as much as 250 million euros ($340 million) on the project, which is due to start in 2015.

    “Berlin is becoming more of an international metropolis and this project is a sign of that,” Regula Luescher, Berlin’s Senate building director, said in an interview after a briefing to announce the plan. “This building will be a landmark.”

    Alexanderplatz is a square surrounded by Soviet-style office blocks and one of Berlin’s most famous structures, the needle-like Fernsehturm television tower. It’s also the setting for Berlin Alexanderplatz, a 15-hour film by Rainer Werner Fassbinder.

    Gehry’s cream-colored, stone-clad building will turn on its axis at the top 12 stories with four connected towers in a design that Luescher and the developer likened to a cloverleaf.

    Construction Boom

    Germany is going through a construction boom as developers take advantage of rising rents and prices, and the government invests in development of affordable homes to meet a housing shortage. About 225,000 homes were built in 2013, the most since 2004, according to data compiled by the ZDB and HDB construction associations.

    The apartments in the building on Alexanderplatz will probably be sold to private individuals, said Christoph Reschke, Hines’ Germany managing director. Buyers from outside Germany will likely be attracted to the building, said Luescher.

    “Berlin is certainly a hotspot for developers right now,” Reschke said in an interview at the event. “There’s a well-functioning German economy and a catch-up effect in housing, so it’s not just German investors but also international investors who are coming to do projects.”

    Gehry’s tower will overtake the 140-meter tall Colonia Tower in Cologne, currently Germany’s tallest residential skyscraper, according to Hines.

    - By Dalia Fahmy

    Dubai Prime Housing Value Growth Slows on State Cooling

    Source: Bloomberg / Luxury

    Dubai luxury-home prices increased at the slowest pace in more than a year in the last quarter of 2013 as government measures to cool the emirate’s rebounding property market took effect.

    Values of prime apartments and villas rose 15 percent in the fourth quarter from a year earlier, Knight Frank LLP said in a statement today. Prices will increase by 10 percent to 15 percent this year, the London-based broker estimated.

    Dubai’s government has taken steps including doubling the transaction tax on homes to 4 percent as it tries to avoid a repeat of the property bubble that burst in 2008. The central bank also imposed limits on the size of mortgages being offered to foreigners buying properties in Dubai.

    Fourth-quarter value growth was the weakest since mid-2012 and a drop from an average increase of 21 percent during the previous four quarters, Knight Frank said. Despite the government moves, prices will continue to rise as the supply of new properties dwindles and business confidence is boosted by Dubai’s selection as the site of the Expo 2020 world fair. Prime-home prices are still about a third lower than they were at the market’s peak, the broker said.

    - By Ross Larsen

    Ski Resorts Seen as Buyout Targets Amid U.S. West Drought

    Source: Bloomberg / Sustainablity

    Michael Simpson arrived at Alpine Meadows at Lake Tahoe earlier this month and found little more than dirt. Except for one ski run maintained by machines, the drought-parched California mountain was devoid of snow.

    “It’s about as bad as I’ve ever seen it,” Simpson said after his trip to the resort owned by KSL Capital Partners LLC.

    Simpson, 49, half of the Dust Brothers duo known for producing albums including the Beastie Boys’ “Paul’s Boutique,” has skied the area for more than a decade. “My barometer is the parking lot,” he said. “We parked right at the entrance every single day. The lot was never full.”

    The same winter that brought blizzards and the polar vortex to the East Coast has left ski destinations in California and Nevada largely dry. Resorts are making do with the least snow in more than four decades and a 50 percent drop in attendance in some areas. Smaller, independent owners may struggle to hold out for a better season next year, said Smedes Rose, an analyst at Evercore Partners Inc. in New York.

    “It wouldn’t be out of the range of possibilities that some of the resorts would become capital-constrained, and that we will see some consolidation because of that,” he said.

    After three years with little precipitation, California Governor Jerry Brown this month declared a drought emergency. Snowfall at the 25 ski resorts in the most-populous U.S. state is the lowest since the 1971-72 season, according to the California Ski Industry Association.

    Mammoth Snow

    Only 48 inches (122 centimeters) of snow have fallen at Mammoth Mountain Ski Area since the start of the ski season in early November, compared with an average of 400 inches a year, said Joani Lynch, a spokeswoman for the resort. The Diamond Peak resort, with six lifts overlooking Lake Tahoe in Incline Village, Nevada, has received 42 inches this season, compared with an annual average of 325 inches, according to its website.

    The lack of snow is putting the toughest strain on the western states’ smaller, independent resorts, according to Rose. That may allow bigger, more diversified operators such as Vail Resorts Inc. to snap up their struggling rivals, he said.

    “We are always looking,” Robert Katz, chief executive officer of Vail Resorts, said in a phone interview. “Seasons like this can be an opportunity, but acquisitions in the ski industry are often the result of long-term discussions. Owners are usually very passionate about their business. Negotiations can take a long time. It’s not like a hotel or an office.”

    Vail Acquisitions

    Vail Resorts has spent the last couple years helping roll up the industry. Last May, it entered a long-term lease to operate Canyons Resort in Park City, Utah, and in December 2012 bought urban ski areas Afton Alps in Minnesota and Mount Brighton in Michigan for $20 million in cash. Also in 2012, it acquired Kirkwood Mountain Resort in Lake Tahoe, along with adjoining development sites, for about $18 million.

    The Broomfield, Colorado-based company, which operates eight destination resorts, including Heavenly Mountain Resort and Northstar at Lake Tahoe, wants to add more urban ski areas as well as larger, stand-alone resorts, Katz said. Lake Tahoe straddles the California-Nevada border, with ski areas in both states.

    Visits at Vail’s resorts since the season began in November are down 0.7 percent from a year earlier, the company said in a Jan. 13 statement. A 7.4 percent increase at Colorado and Utah properties was countered by a 23 percent drop at Tahoe-area resorts.

    Rose, the Evercore analyst, on Jan. 15 cut his 2014 estimate for Vail Resorts earnings to $1.06 from $1.32 as snowfall in Tahoe runs 85 percent lower than last year. He has a hold rating on the stock.

    ‘Different Areas’

    “This is an industry where it’s hard to make it on your own and, in general, it’s always better to have exposure to many different areas,” Rose said. “This type of season presents some opportunities for the bigger guys.”

    The largest U.S. ski-resort operators include Denver-based KSL Capital, which acquired California’s Squaw Valley USA, host of the 1960 Winter Olympics, in December 2010. CNL LifeStyle Properties Inc., a closely held real estate investment trust based in Orlando, Florida, owns properties including Sierra-at-Tahoe Resort and Mountain High Resort in the San Gabriel Mountains near Los Angeles.

    Sherry Magee, a spokeswoman for CNL, declined to comment on the company’s ski operations. Steven Siegel, a partner at KSL, didn’t return a telephone call seeking comment.

    Vail Resorts’ season-pass program has helped counter the impact of a lack of snow in California because it allows holders to use ski-lift tickets at any of the company’s resorts.

    Skier Flexibility

    “Having different resorts in areas with different weather patterns helps us and creates flexibility for our customers,” Katz said.

    In Southern California, Mt. Baldy Ski Lifts Inc., which operates four lifts in the San Gabriel Mountains about 46 miles (74 kilometers) northeast of downtown Los Angeles, has had its visitor numbers drop by about half from last year, which was already a slow season, General Manager Robby Ellingson said. The mountains, usually snow-capped in January and visible from much of Los Angeles, have been barren, deterring potential visitors, he said.

    “People don’t come up here when the mountains aren’t white,” Ellingson said.

    He declined to discuss the resort’s finances or say whether the closely held property’s dozens of investors have discussed any transactions. He declined to identify its investors.

    Making Snow

    The Snow Summit and Bear Mountain resorts, owned by Snow Summit Ski Corp. in Southern California’s San Bernardino Mountains, have “massive” snow-making capabilities that draw from Big Bear Lake, eliminating the need for well water, said Chris Riddle, the company’s marketing director. Visits are down about 9 percent from last year, he said. About 80 percent of ski and snowboarding runs are open with man-made snow.

    Riddle declined to comment on the financial impact of the ski season on the resorts’ about 400 owners.

    Mammoth, the No. 3 U.S. ski resort by visitors, behind Vail and Breckenridge in Colorado, is expecting about 950,000 skier visits this season, down from an average of 1.3 million, Lynch said. Only half of the mountain’s 28 chairlifts are open because of the lack of snow. A venture led by Barry Sternlicht’s Starwood Capital Group purchased Mammoth Mountain Ski Area, about 250 miles north of Los Angeles and visited by celebrities including Tom Cruise, for $365 million in 2005.

    ‘Dialing Down’

    “We try to stay profitable during slow seasons by dialing down our operations and labor costs,” Lynch said. “But we are optimistic that snow will come and with the economy recovering, we are in a better space than we were a couple of seasons ago.”

    Sternlicht’s original plans to add hotels and restaurants to transform the town into the most-visited U.S. ski area have been slowed by the recession and sluggish economic recovery since, Lynch said.

    The nearby city of Mammoth Lakes filed for bankruptcy protection in 2012 as the second-lowest snowfall in two decades kept tourists away from the region during the 2011-12 ski season. Starwood now expects to complete some of its original plans in the next five to 10 years, Lynch said.

    Tom Johnson, a spokesman for Starwood, declined to comment on the firm’s plans.

    At Lake Tahoe, music producer Simpson, who’s leased a condominium at Alpine Meadows through the end of April, canceled a second visit he had planned for this month and has put on hold any further trips until there’s more snow.

    “There was a long run open, which was surprisingly good for the first couple of hours each day,” Simpson said. “But otherwise there was literally no snow at all. If you somehow fell off the lift, you’d land on dirt and on top of jagged rocks.”

    - By Nadja Brandt and James Nash