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12th July 2014

Singapore Real Estate

Cooler demand could hit EC launches

Source: Straits Times 

The stricter buying rules that have hit executive condominium sales could also end up hurting upcoming launches, property consultants say. There were 779 launched but unsold exec condo units as at May 31 - the highest level for three years.

Unlocking the Gate to the city's charms

Source: Straits Times 

The impending launch of the City Gate mixed development in Jalan Sultan is drawing attention back to the Kampong Glam district. Its charm as a historical and cultural zone may give it a head start over many areas but it is its location - on the edge of the city centre and close to retail and entertainment amenities - that is its strongest suit, property consultants said.

Upcoming luxury hotel for Farrer Park

Source: Straits Times 

A new high-end hotel is poised to transform Farrer Park later this year. The upcoming five-star One Farrer Hotel and Spa development of 250 rooms is expected to open in stages from the end of next month. It is part of the $800 million Connexion mixed-use complex being built on top of the Farrer Park MRT station.

Real Estate Companies' Brief


Source: Business Times

The main losers, in our view, will be SMEs that do not qualify as anchor tenants, as they may end up having to pay higher rents as the supply of industrial space available to non-anchor tenants dips. For the Reits, under the previous 50 per cent subletting policy, they could only lease out less than 50 per cent of their industrial buildings to non-anchor tenants.

Higher returns as SPH Reit beats forecasts

It posts DPU of 1.35¢ for Q3, which translates to annualised distribution yield of 5.28%

Source: Business Times / Companies

SPH Reit has rewarded its unitholders with higher returns, thanks to steady and resilient operational performance.

The real estate investment trust yesterday posted a distribution per unit (DPU) of 1.35 cents for its third quarter ended May 31.

This was higher than the 1.31 cents it forecast in its prospectus when it was spun off from Singapore Press Holdings and listed in July last year.

-By Lee Meixian

Frasers Hospitality Trust IPO 19x subscribed

Source: Business Times / Companies

FRASERS Hospitality Trust, which will start trading on the Singapore Exchange on Monday at 2pm, has completed its initial public offering with "strong support" from retail and institutional investors, the firm said. The IPO was about 19 times subscribed, with the public offer of 45.5 million stapled securities being 13.8 times subscribed and the placement tranche of 139.6 million stapled securities being about 20.7 times subscribed.

Starwood to double China, India hotels over 4 years

Source: Business Times / Singapore

STARWOOD Hotels and Resorts Worldwide will almost double the hotels it operates in China and India over the next four years to meet growing demand in Asia's biggest emerging economies.

The owner of the St Regis and W brands, which runs 133 hotels in China, has more than 120 planned or under construction in the world's second-biggest economy, said Matthew Fry, senior vice-president of acquisitions and development for Asia. In India, where the Stamford, Connecticut-based company has opened 40 hotels since 1973, it will add more than 30, he said.

China's rising incomes and growing middle class are offering companies like Starwood a bigger pool of potential customers. In India, investors are betting that the biggest electoral mandate since 1984 will help Prime Minister Narendra Modi fix the nation whose infrastructure is ranked below that of Guatemala and Namibia by the World Economic Forum.

-From Sydney, Australia

UK home-price growth slows in June: poll

Some of London's most costly areas post falls on new rulings

Source: Business Times / Wealth

UK house-price growth slowed in June as new mortgage regulations dampened activity and some of London's most expensive areas posted declines, a survey shows.

Values in England and Wales rose 0.7 per cent from May, when they increased one per cent, according to data complied by Acadata Ltd.

Prices gained 9.6 per cent from a year earlier to £268,637 (S$571,450), the real-estate research firm and LSL Property Services plc said in a report yesterday.

-From London, UK

Fancy homes in playground for the rich on southern coast of UK

Source: Business Times / Wealth

THE peninsula of Sandbanks is often described as a millionaires' tiny playground: a half a square mile of sand between Poole Harbour, in Dorset, and the English Channel.

But despite the glamour of this exclusive second-home neighbourhood - a little more than two hours from London by train, and the home of such notables as Harry Redknapp, manager of the Premier League soccer club Queens Park Rangers - the real estate market in Sandbanks has been slow in recent years.

There has been little demand for homes of more than £2 million (S$4.25 million) and selling prices have generally been more than 6 per cent below their 2007 peak, according to Savills Estate agency's prime market index.

-From England, Uk

Google to Expand San Francisco Office Space in Two Deals

Source: Bloomberg / Tech

Google Inc. (GOOG), owner of the world’s biggest search engine, bought a San Francisco office building and agreed to lease space at a nearby tower as it expands its real estate presence in the city.

Google purchased 188 The Embarcadero from Ares Management LP and USAA Investment Management Co. for $65 million in a transaction completed two days ago, said two people with knowledge of the deal, who asked not to be identified because the details are private. The company also will lease 250,000 square feet (23,200 square meters) at the 42-story Spear Tower in the One Market Plaza complex.

“We are excited to expand in San Francisco, and we will continue to work hard to be a good neighbor in the communities where we work and live,” said Caitlin Adair, a Google spokeswoman, who confirmed the purchase and lease but declined to give details.

The deals give the Mountain View, California-based company a cluster of offices within blocks of each other near San Francisco’s waterfront. The eight-story Embarcadero property sits at the corner of the bayside boulevard and Howard Street, within view of the landmark Ferry Building. It’s about two blocks from Hills Plaza, Google’s main offices in the city.

Margot Olcay, a spokeswoman for San Antonio, Texas-based USAA, confirmed the Embarcadero building was sold and declined to comment further. Bill Mendel, spokesman for Los Angeles-based Ares, declined to comment, as did Ted Koltis, senior vice president for Paramount Group Inc., Spear Tower’s majority owner.

Rising Rents

San Francisco office properties are in demand for investors as leasing climbs among technology-industry tenants. Prime rents in the second quarter rose 9.6 percent from a year earlier to an average $60.07 a square foot in a “rapidly rebounding, tech-centric marketplace,” according to brokerage Cushman & Wakefield Inc.

JPMorgan Chase & Co.’s asset-management unit paid $415 million last month for 22 Fourth St., which includes offices, a hotel, retail space and a development site. In May, Shenzhen, China-based Genzon Property Group Co. Ltd. acquired a 95 percent stake in 225 Bush St. in a deal that valued the office building at $350 million.

It’s not clear what Google’s plans are for the new space. The Embarcadero property has about 88,000 square feet and is two-thirds empty, said a person familiar with the deal.

At the Spear Tower building, Google will occupy floors two through 16, according to the person with knowledge of the lease. The tower is the biggest component of the One Market Plaza office complex. Blackstone Group LP (BX) bought a 49 percent stake in the property earlier this year.

-By Dan Levy and Brian Womack

American Homes CEO Sees More Takeovers Amid Consolidation

Source: Bloomberg / Luxury

American Homes 4 Rent (AMH)’s major source of growth will be taking over smaller competitors’ houses as the companies leave the market, Chief Executive Officer David Singelyn said.

Already the second-biggest U.S. single-family landlord, the company bought Beazer Pre-Owned Rental Homes Inc. for about $263 million in debt and stock. The purchase, announced earlier this month, included more than 1,300 houses and was the landlord’s largest bulk acquisition so far.

As large investors such as American Homes gain access to lower-cost capital and develop greater management efficiencies, they will be positioned to buy smaller operators, said Singelyn, whose Agoura Hills, California-based company owned 25,505 homes at the end of the first quarter. Rising home prices and the costs of managing scattered rental properties are causing some landlords to seek an exit, he said.

“You’re starting to move into that consolidation phase,” he said in a telephone interview. “There’ll be more and more transactions by us and others as time goes on.”

Private-equity firms, hedge funds and real estate investment trusts have raised more than $20 billion to acquire as many as 200,000 rental homes since early 2012, according to Jade Rahmani, a Keefe Bruyette & Woods Inc. analyst. Investors took advantage of home prices that fell as much as 35 percent from their June 2006 peak, and demand rose for rentals after more than 5 million homes were lost to foreclosure.

Now that housing prices have rebounded 26 percent from their post-recession trough in March 2012, some single-family landlords are seeking buyers for their properties.

‘A Problem’

Beazer Pre-Owned, whose investors were led by Beazer Homes USA Inc. (BZH) and buyout firm KKR & Co. (KKR), “ran into a little bit of a problem because they didn’t have the scale, having 1,350 homes or so, to be able to compete for financing capital with players like ourselves,” Singelyn said.

American Homes 4 Rent raised $812 million in its initial public offering almost a year ago, and issued $481 million of debt backed by its rental properties in May. Blackstone Group LP (BX)’s single-family rental unit, Invitation Homes, is the industry’s largest landlord, having spent $8.5 billion on about 45,000 homes.

American Homes has the advantage of being able to offer stock to smaller landlords who want to sell properties while keeping a stake in the rental-housing market, according to Steve Stelmach, an Arlington, Virginia-based analyst with FBR & Co.

Taking Stock

“The pool of available buyers is relatively small relative to a very large pool of potential sellers,” Stelmach said in a telephone interview. “When we look at potential sellers, and those sellers who will accept stock as a form of payment for their homes, they’ll want to partner with the best operators or the stock that trades with the best prospects of going up.”

Singelyn said his company will continue to buy about 2,000 homes per quarter one by one at foreclosure auctions and in the open market. Acquisitions through company takeovers are “going to be lumpy,” he said.

American Homes yesterday rose 0.2 percent to $18.21, a record. The company went public last July 31 at $16.

-By John Gittelsohn

London Seeks New Spenders as Russians Skip $719 Champagne

source: Bloomberg / Luxury

To gauge London’s place in the global economy, you could examine World Bank statistics, canvass investors and analyze trade volumes. Or you could visit Mahiki, a Polynesian-themed nightclub in upmarket Mayfair where a bottle of Cristal Champagne goes for $719 -- and Russian customers are being supplanted by revelers from countries including China and Nigeria.

“We’re seeing a lot less Russian surnames on the booking sheet,” said Michael Evans, the creative director of the club, where the likes of Rihanna and Prince Harry have been spotted after dark. “It’s very easy to see what’s going on in the world from the markets we attract.”

With violence continuing in Ukraine and President Vladimir Putin pushing to reduce reliance on the West, wealthy Russians are buying fewer high-end goods from furs to Ferraris, and doing less business with the city’s law firms and investment banks. That leaves London, uniquely connected to faraway, fast-growing economies, looking for new patrons, with China and sub-Saharan African countries pitched as possible successors.

Takeovers involving Russian companies, often handled by the London offices of global banks, tumbled 39 percent in the first half of 2014 to $16.6 billion, Bloomberg data show. Russian firms are having a tougher time raising money too. HSBC Holdings Plc (HSBA) and Lloyds Banking Group Plc (LLOY) last month pulled out of a loan to back a $1.5 billion oil-supply deal for state energy group OAO Rosneft due to concerns about Ukraine, according to a person with knowledge of the matter.

Russian Spending

Escalating tensions in Ukraine’s east may bring Russian economic growth to a near-standstill this year, the country’s Finance Ministry said yesterday. The U.S. and European Union are threatening further sanctions, potentially targeting entire industries, unless the unrest eases.

In another sign of the slowdown, retail spending by Russian visitors to the U.K. between January and May declined 22 percent from a year earlier, according to Global Blue, which runs tax-rebate services. Chinese spending climbed 8 percent in the same period.

Still, Chinese citizens in London may not replicate the tidal wave of wealth that Russians brought with them.

Personalized Ferraris

“The wealthiest Chinese residents of Britain are mostly between 18 and 24” -- students from rich families attending U.K. universities, said Alex Cheatle, chief executive officer of Ten Group, which provides luxury concierge services. Russians, by contrast, tend to be older professionals with businesses who settle in the U.K. with their families at least part-time, and spend accordingly. One Russian client ordered custom-made Christmas gifts that opened to reveal “several thousand pounds worth of jewelry” for a staff holiday party, Cheatle said.

A few years ago, Russians’ orders for customized Ferraris or Lamborghinis “with your own leather, gilt-edged instrument dials, personalized with your initials, with tailor-made Louis Vuitton (MC) luggage” to match, were a mainstay for dealers, said Simon Empson, managing director of London luxury car broker Broadspeed Ltd.

One customer spent 150,000 pounds customizing a 70,000-pound Range Rover. Another was sent an order form for options on a BMW.

“He faxed it back blank except for writing ‘Give me everything,’” with an American Express number appended below, Empson said. “The sanctions have ended that business” as wealthy Chinese prefer chauffeured cars and African buyers are more restrained in their spending, he said.

Emerging Markets

Meanwhile, Putin is urging “strategic” companies to limit their use of overseas banks. In recent years, Russia’s big businesses had grown ever more reliant on foreign -- and especially British -- legal and banking systems, which they viewed as more reliable than those at home.

“The government was already keen to bring more Russian business back,” said Logan Wright, managing partner for Moscow at law firm Clifford Chance. The sanctions have added to that resolve, highlighting “the exposure they have to the international financial system.”

There’s no single candidate to fill Russia’s role in London’s economy, though several other emerging markets have been increasing in prominence.

April saw the London initial public offering of Nigerian oil producer Seplat Petroleum Development Co. (SEPL), making it the country’s first company to be listed in both Britain and at home. Another business from the region, the African unit of Portuguese construction group Mota-Engil SGPS SA, is planning an eventual London IPO. And society bible Tatler magazine late last year ran a 4,000-word feature on Nigerians’ adventures with Bentleys and Mayfair real estate. Mahiki, for its part, is planning a club in Lagos.

Finance Hub

The biggest prize is China. Whereas London is the undisputed foreign hub for Russian business, it competes with Hong Kong, New York, Toronto and Sydney for Chinese attention.

“We are now seeing very large investments from China into the U.K. that just weren’t happening six or seven years ago,” said William Buckley, a partner at law firm Linklaters.

Better political relations have helped, and London has succeeded, Buckley said, in convincing Chinese firms it can serve as a platform for further global expansion. One example: developer ABP China (Holding) last year announced a 1 billion pound plan to build a 35-acre hub for Asian businesses on former industrial land in east London.

Champagne Fountain

George Osborne, the chancellor of the exchequer, has said he wants to make Britain the main hub for Chinese finance outside of Asia, and the government has moved to relax visa rules after lobbying from retailers, hotels and airlines.

Even in large numbers, Londoners shouldn’t expect new arrivals from China to fully assume the role that wealthy Russians have held in the city’s economy, cautions Peter Wetherell, CEO of real-estate agency Wetherell. For the most part, he said, they aren’t spending enough to become players in storied districts like Kensington and Knightsbridge, choosing instead to stick to less-prestigious zones on the fringes of the central city.

“The Russian market was like a Champagne fountain,” Wetherell said. “The money was coming into the top and flowing down.”

-By Matthew Campbell