Real News‎ > ‎2014‎ > ‎July 2014‎ > ‎

17th July 2014

Singapore Economy

Restructuring process on track: MTI

Source: Today Online / Business

SINGAPORE — Responding to TODAY’s queries, a Ministry of Trade and Industry (MTI) spokesperson stressed that the restructuring process is on the right track.

“We have made steady progress in our economic restructuring. The Government has put in place several schemes to encourage businesses to improve process improvements and adopt technological innovations. However, it will take time for productivity gains to materialise,” he said, adding that some sectors have already experienced solid productivity growth in recent years.

Productivity in the precision engineering industry has been growing by 7.8 per cent annually since 2009, while food services sector has achieved 3.4 per cent annual improvement over the same period, MTI data shows.

And it appears that businesses are facing the reality of the challenge: Based on engagements with SMEs and through surveys, the MTI said that mindsets have changed.

“Many businesses have accepted the reality of a tight labour market and SMEs are increasingly taking up government schemes to improve their productivity. To date, more than 17,000 companies have benefited from the various productivity initiatives under the National Productivity and Continuing Education Council”, including the Productivity and Innovation Credit scheme, with its take-up rate improving from 33 per cent in 2011 to 40 per cent last year, the spokesperson said. “The Government has taken a calibrated approach to the tightening of foreign worker policies to reduce the impact on businesses. Companies have been given time to adjust as the foreign worker measures were announced in advance and progressively implemented,” he added.

“We remain confident that the economy will be able to restructure successfully over time to be more productivity-driven. This will ensure more efficient use of labour, which will not only help to relieve labour constraint, but also support higher wages without eroding the competitiveness of our economy.” 

-By Wong Wei Han

Headwinds build as cost of economic restructuring bites

Data show push to transform economy by raising productivity, reducing reliance on foreign labour a drag on growth

Source: Today Online / Business

SINGAPORE — Faced with a severe labour crunch and rising business costs, Chye Choon Foods is uncertain about its future in Singapore.

“We’re very close to relocating to a neighbouring country, likely before the middle of next year. We really can no longer sustain ourselves here, not with increasing worker levies on top of rising rentals and wages for local staff,” said managing director Mr Jimmy Soh, just two weeks after another round of foreign worker levy hikes was introduced on July 1.

Mr Soh, who is also the deputy president of the Singapore Food Manufacturers’ Association, added that many other companies are experiencing similar challenges stemming from the ongoing process to restructure the economy. “The labour and cost constraints here have forced many of the association’s members to shelf their growth plans,” he said.

The headwinds that are being experienced on the ground by companies such as Chye Choon Foods, which makes rice vermicelli and noodles, are increasingly being felt at the macroeconomic level, with recent data indicating that the push to transform the economy by raising productivity and reducing reliance on foreign labour is acting as a drag on growth.

On Monday, the Ministry of Trade and Industry (MTI) announced that GDP grew by 2.1 per cent in the second quarter, below the consensus estimate of 3.1 per cent.

While a number of factors contributed to the worse-than-expected result, many analysts said the restructuring was a key issue, with DBS economist Mr Irvin Seah pointing out that the process has created persistent supply-side constraints.

“Many have been too optimistic about our growth due to pockets of positive signs, but they forgot that we’re still going through the restructuring,” he told TODAY.

“And this will remain the key reason why we will continue to underperform in the region when it comes to economic growth.”

The weak GDP growth in the second quarter was mainly due to a slowdown in manufacturing, which grew on-year by a paltry 0.2 per cent while contracting on-month by 19.4 per cent, MTI data showed, while the services and construction sectors also slowed from the first quarter’s expansion.

“The costs of restructuring — coupled with an appreciating Singapore dollar and higher rentals — are making Singapore too expensive in terms of exports and an investment destination for multinational corporates,” said Mr Seah.

“Our manufacturers are losing their competitive edge globally, and that’s why the electronics cluster has performed badly.

“The impact is even more glaring on the services sector, which has seen on-year decline for the past four or five quarters because a lack of manpower has rendered many unable to function properly, he added. “Last but not least, the construction sector has been bearing the worst brunt of foreign worker levy hikes, and it’s not surprising if companies couldn’t grow.”

Reflecting on the same issues, the Singapore Business Federation’s chief operating officer, Mr Victor Tay, agreed that the collateral damage resulting from the restructuring process is a concern.

“Since the productivity push began in 2010, more companies have been unable to sustain the impact. Data by the Department of Statistics shows that company closures have doubled in 2011 and 2012 across all sectors. The mass casualty of companies means less contribution to GDP and weaker economic competitiveness,” Mr Tay noted.

“The government has aimed to achieve productivity-led growth by 2020, so this is really just the mid-way mark of the restructuring. Looking at the interim report card, we need to see GDP or at least productivity growth bottoming out this year or next,” he said,

“If not, the prolonged weakening will be bad news for everyone, and Singapore may have to rethink its strategies and policies — even though that has yet to happen despite the economy not reacting too well to the medicine.”

The Government has put in place a number of schemes to help companies navigate their way through the restructuring and raise productivity, but it is firmly committed to seeing through the process in the push to create a more robust economy.

“This will continue until we finally see a significant improvement in productivity,” said DBS’ Mr Seah. “Honestly, no one will know when the process will end — a process which we’re likely only halfway through.”

Despite the issues on the ground, restructuring has progressed well and businesses are changing their mindsets, the MTI told TODAY, adding that further improvements will take time.

Meanwhile, although pain is being felt by businesses and in the wider economy, the benefits of the restructuring should eventually be felt, Barclays’ senior economist Leong Wai Ho stressed.

“As far as I can remember, we have always lived and survived by economic restructuring — to make that quantum leap to put us in front. This time, the quantum leap has to be made in terms of productivity and innovation,” Mr Leong said.

“We can calibrate the pace of adjustment and restructuring to synchronise more closely with global business cycles. But whether we swallow slowly or quickly, we need to finish the full course of medicine.”

-By Wong Wei Han

Singapore is 6th-most attractive for business expansion: Survey

Affluence of citizens and the potential customer base contribute to Singapore’s competitive edge, finds communications company BT.

Source: Channel News Asia / Business

SINGAPORE: The Republic has been ranked as the sixth-most desirable country in the world and third in Asia Pacific by companies looking to expand their business overseas, a survey by communications company BT found.

Released on Wednesday (July 16), the survey said respondents cited Singapore’s potential customer base and affluence of citizens as the most crucial factors contributing to the country’s high ranking. The nation’s IT skills,  quality of governance and IT security, were also named as factors attracting businesses to expand here.

About 41 per cent of the respondents in India chose Singapore as an excellent destination to grow their business. Furthermore, 47 per cent of respondents in India and 48 per cent in China are currently or planning to expand into Singapore, the survey found.


Among the Singapore respondents, 76 per cent believe that international expansion is highly essential for the success of their organisation. A total of 84 per cent said that growth opportunities are the main reason prompting them to expand overseas.

Singapore businesses chose the United States and Hong Kong as their desired destinations for expansion due to their potential customer base, followed by China, Indonesia and Thailand.

Respondents to the survey indicated that the lack of an adequately competent IT infrastructure was one of the key challenges hindering their overseas growth. A total of 96 per cent of Singapore respondents said they were hindered to some extent by the digital infrastructures of their most desired markets.

The report surveyed 1,150 business leaders in 13 regions, including 350 respondents from Asia Pacific. The survey was conducted online between April and May this year.

- CNA/cy

Singapore Real Estate

Most young Singaporeans want to live with or near parents after marriage: MND survey

Incentives for elderly parents who want to move to non-mature estates to be nearer to their children could be one way to help extended families live nearer to one another, said MND Minister Khaw Boon Wan. 

Source: Channel News Asia / Singapore

SINGAPORE: In a door-to-door survey commissioned by the Ministry of National Development (MND), the majority of young unmarried Singaporean respondents said they planned to live with or near their parents after marriage.

However, among Singaporeans who are married, only 35 per cent of the respondents currently live with their parents, and a mere 28 per cent with their own, separate homes live in the same town as their parents or nearer.


Following the release of the survey results, MND Minister Khaw Boon Wan acknowledged in a blog post that “there is room for us to do more to help extended families live nearer”. 

At a discussion on housing on Tuesday (July 15), he had responded positively to a participant's suggestion that priority be given to seniors who are willing to move to non-mature estates to be closer to their children. "If some parents are quite prepared to leave their comfortable surroundings in the mature estates to move to a non-mature estate, I think we should try to facilitate and even reward them for moving out." 

MP Lee Bee Wah, who is Chairman for the Government Parliamentary Committee for National Development, said one way to help seniors willing to make this move is to provide a grant for those interested in buying a HDB resale flat. Absolute priority could also be considered for those those interested in new Build-To-Order flats.

"When I post this question on Facebook, there are quite a lot of my friends who share with me the difficulties of their relatives who want to live near their children, but could not get the flat. That means they balloted unsuccessfully," she said. "So if it is new BTO, we can consider giving them absolute priority. If they were to go for a new BTO flat they will know that if they were to choose a new BTO flat they will definitely get a flat."

Some 2,000 Singaporeans were surveyed in the latest MND poll, including unmarried and married adults, and elderly parents.

Results showed that 55 per cent of unmarried children surveyed planned to live with their parents after marriage, with 41 per cent citing looking after their parents as the reason.



Of those who planned to set up their homes after marriage, 65 per cent want to live near their parents, and 96 per cent of unmarried children said they would see their parents at least once a week after marriage.


Among Singaporeans who are married, 35 per cent currently live with their parents. Only 28 per cent with their own, separate homes live in the same town as their parents or nearer.


Among the seniors with unmarried children surveyed, 73 per cent said they wanted to live with their child after his or her marriage


In his blog post, Mr Khaw called the results “heart-warming”. “The state of family bonding in Singapore is healthy and strong. They affirm that Singaporean families value mutual care and support and want to live near to one another,” he wrote. “MND will study the survey findings in greater detail, and together with the feedback we have received from our housing conversations, see how best we can help fulfil Singaporeans’ aspirations to live near their extended families for better mutual care and support.”  

During Tuesday's discussion, he had noted that in non-mature estates, the greater availability of land and various incentives should be able to satisfy the needs of couples who wish to live near their parents.

"But for mature estates it is a real problem, it is a real challenge. For the simple reason that I just do not have the land available to build more. But wherever I can I'll try to do so. What it means is, many will have to depend on the resale flats," he said.  

One option for mature towns was the Selective En bloc Redevelopment Scheme (SERS), which would allow for the building of greater numbers of new flats. In Queenstown, for example, SERS will enable HDB "to build many more than the 3,000 or 4,000 flats that will have to give way", he said. That opens up the possibility of more children able to live near their parents.

"That explains why it is so important, where it makes sense, to do this massive en-bloc - partly to satisfy these needs for putting families together as children grow old, and partly to intensify land use, because traditional blocks are very low-rise, and poor use of land."

- CNA/xy

Consider rewarding older couples who move to non-mature estates: Khaw

Doing so could free up units in mature estates, help families live close together, says Minister

Source: Today Online / Singapore

SINGAPORE — Incentivising older couples to move out of mature estates to live with or near their married children in non-mature estates could be one way to help families stay closer to one another, said National Development Minister Khaw Boon Wan.

He cited this as a possibility to free up units in mature estates, so that more newlyweds can buy homes near their parents — allowing closer living between married couples and their parents was one of the Government’s goals set out in the President’s Address.

“If some parents for various reasons are quite prepared to leave their comfortable surroundings in a mature estate to non-mature estates with their children, I think we should try to facilitate and, perhaps, even reward them,” he said.

Mr Khaw was speaking at the fourth and final focus group session his ministry held on Tuesday, to find out the preferences of young and old couples for living close together, as well as possible policy changes to meet the demand.

Although participants of the focus group discussions had reacted coolly to the possibility of building more Three-Generation (3Gen) flats to allow families to live together, Mr Khaw noted that there is still a minority who wish to do so and added that such flats will continue to be rolled out — albeit at smaller numbers.

“Our policy decision to continue to build larger flats, what we call 3Gen flats, for those who want to stay together, I think is a right move. But I think the numbers required will not be huge,” Mr Khaw said. He also added that the Government will site these flats in mature estates, where possible.

Separately, a survey commissioned by the Ministry of National Development (MND) involving more than 2,000 Singaporeans showed that 55 per cent of singles plan to live with their parents after marriage, while 65 per cent of young, unmarried couples who intend to move out after marriage want to live in the same town as their parents or nearer.

The Housing and Development Board Sample Household Survey for last year also showed that while more are living together with or close to their parents in the past decade — the proportion has risen from 31 to 37 per cent — some were still unable to do so. Only 53 per cent of married couples surveyed currently live with, or in the same town as their parents.

Commenting on the survey results in a blog post yesterday, Mr Khaw said it was “heartwarming” to see the survey confirming that “the state of family bonding in Singapore is healthy and strong”. “They affirm that Singaporean families value mutual care and support and want to live near to one another,” he added.

Acknowledging that his ministry could do more to help families live closer together, Mr Khaw said: “MND will study the survey findings in greater detail, and together with the feedback we have received from our housing conversations, to see how best we can help fulfil Singaporeans’ aspirations to live near their extended families for better mutual care and support.”

-By Laura Elizabeth Philomin

Singapore Gen-X consumers value recommendations for property decisions: Survey

Consumers here aged between 34 and 54 are more likely to consider recommendations from trusted sources when making property choices, compared to other brand decisions.

Source: Channel News Asia / Singapore

SINGAPORE: A survey released on Wednesday (July 16) showed that Singapore's Generation X consumers - aged between 34 and 54 - are more likely to be influenced by recommendations when making property decisions.

The survey, by brand strategist Brand Alliance, gathered the views of more than 3,000 Singapore citizens and Permanents Residents who fall under the Gen-X category. Results showed that one in five respondents were more likely to consider recommendations from trusted sources when deciding on property developers or agencies.

Brand Alliance also released a list of more than 100 Top Influential Brands in Singapore, based on its findings about Generation X consumer preferences. The list includes homegrown brands such as Singapore Airlines and NTUC Foodfare, as well as international chains including IKEA and BMW.

Brand Alliance found that Gen X consumers valued convenience despite being price-sensitive. Consumers looked at factors such as location, accessibility and user-friendliness of online platforms when making their choices, over price.

It was also noted that online and social platforms are on the rise to becoming top news sources for Gen X, compared to print.

- CNA/ek

Centurion to buy UK student dorm assets for £77m

Source: Business Times / Companies

DORMITORY operator Centurion Corporation is spreading its geographic wings to the United Kingdom, unveiling yesterday a proposal to buy four accommodation properties in Manchester and Liverpool for £77 million (S$164.5 million), its biggest acquisition so far.

The three student accommodation assets in Manchester and one in Liverpool have 1,906 beds in total.

Based on a pro forma illustration, the move is expected to add about $10 million to the company's earnings, which means a net yield of about 6 per cent.

All assets are fully operational and have a "strong track record of achieving high occupancy rates" over the past three years, Centurion said. There are also opportunities to redevelop the dorms and add bed capacity.

-By Cai Haoxiang

Spring Grove up for en bloc sale at $1.39b

Analysts not optimistic, given several recent failed billion-dollar sales

Source: Business Times / Property

SPRING Grove condominium in the prime Grange Road area has officially been launched for sale by tender with an asking price of more than $1.39 billion.

If it goes through, this will beat Farrer Court's record $1.34 billion en bloc sale in 2007. But several condos before Spring Grove have similarly asked for ambitious reserve prices and seen their deals lapse and expire without a buyer. The same fate seems likely for Spring Grove, consultants say.

Yesterday, Knight Frank, the marketing agent representing the condo unit owners, promoted the site as being "one of the few residential plots remaining in the Orchard area to be made available for redevelopment into a large-scale luxury condominium".

"Spring Grove is located in the very heart of the core central region (CCR) where there is a limited supply of land," Knight Frank's director & head of investment and capital markets, Ian Loh said.

-By Lee Meixian

Spring Grove could be largest en bloc sale in Singapore

Knight Frank Singapore says the owners are expecting offers in excess of S$1.39 billion.

Source: Channel News Asia / Business

SINGAPORE: Spring Grove, a condominium along Grange Road, has been put up for sale by tender. According to its marketing agent Knight Frank Singapore, the owners are expecting offers in excess of S$1.39 billion. This includes a lease top-up premium for a fresh 103-year lease.

That will make it the the largest ever enbloc sale in Singapore, in terms of value. Spring Grove sits on a site with a land area of about 263,600 square feet (sq ft).

Knight Frank says it is the largest residential plot along Grange Road to be put up for sale. Currently, there are three blocks of 20-storey apartments with 325 residential units on the site. It also includes the conserved Spring Grove House, built in the late 19th century, which has been integrated with the existing development as a clubhouse.

(Photo: Knight Frank)

A price of S$1.39 billion translates to S$2,512 per square foot per plot ratio, based on the maximum permissible gross floor area of about 553,377 sq ft. Knight Frank says, the breakeven cost is expected to be around S$3,400 psf to S$3,500 psf. 

- CNA/ly

Grange Road condo tests market with record en bloc price

Source: Today Online / Business

SINGAPORE — Amid the current cautious property environment, sentiment towards the luxury housing sector is set to be tested following the launch of an en bloc sale of Spring Grove, a condo situated along Grange Road.

The owners of the District 10 complex are hoping for offers in excess of S$1.39 billion, which, if successful, would be the largest en bloc deal here.

But potential buyers are expected to tread with caution, analysts said, as the health of the high-end property market looks uncertain, with many unsold units proving hard to shift.

The price tag is inclusive of a premium to top up Spring Grove’s remaining lease of 75 years to 103 years. If successful, the deal will beat Farrer Court’s record S$1.34 billion en bloc in 2007.

The Core Central Region (CCR) has been the worst hit by the curbs, with new private home sales falling to a mere 46 transactions last month, compared with 119 deals a year ago, according to latest figures released by the Urban Redevelopment Authority (URA) on Tuesday.

Mr Ku Swee Yong, CEO of Century 21, said: “Developers may pay attention due to the unique size and the conservation house within the site, but going by current market conditions, developers may not have a large appetite.”

The 325-unit development, comprising three 20-storey blocks and the conserved Spring Grove House, sits on a land area of around 263,513sqf. With a gross plot ratio of 2.1, the site can be developed up to a maximum permissible gross floor area of around 553,377sqf.

“Being the largest residential plot along Grange Road, the site offers an exceptional redevelopment opportunity for developers … It is also one of the few residential plots remaining in the Orchard area to be made available for redevelopment,” said Mr Ian Loh, director and head of investment and capital markets at Knight Frank, the marketing agent of the sale.

Analysts TODAY spoke to acknowledged the attractiveness of the site, but noted that it may be challenging to find a buyer in the current market conditions where demand for high-end homes has waned due to the cooling measures and loan restrictions.

Mr Nicholas Mak, executive director at SLP International, said the softening private housing market may prove too risky for developers to jump on the opportunity. “Location-wise, this is very unique and it’s not often that we see a large plot on Grange Road for sale. But the price is the sticking point. The absolute price is a large sum and I think very few developers will be willing to come in,” he said.

“Given the land size, this could be a 300- to 400-unit project, probably priced at S$4-5 million a unit, which is quite challenging to sell in the current market because the average Singaporean will find it difficult to afford and foreign demand has gone down because of the measures.”

High asking prices amid an increasingly cautious sentiment have resulted in a muted en bloc segment with no successful deal so far this year. Last year, the value of en bloc deals fell to S$574 million from S$1.37 billion in 2012 and S$2.8 billion in 2011, based on by Square Foot Research.

But Mr Loh said the limited supply of land for development in the city centre should draw some interest. He added that URA data showed the number of upcoming residential units in the region is expected to fall by about 19.8 per cent from 4,565 homes this year to 3,660 next year.

-By Lee Yen Nee

JTC partners SUTD to set up innovation centre

The SUTD-JTC Industrial Infrastructure Innovation Centre will promote the advancement of innovative and sustainable industrial infrastructure solutions in Singapore.

Source: Channel News Asia / Singapore

SINGAPORE: JTC Corporation is joining hands with the Singapore University of Technology and Design (SUTD) to set up an innovation centre. This is to promote the advancement of innovative and sustainable industrial infrastructure solutions in Singapore.

The SUTD-JTC Industrial Infrastructure Innovation Centre will provide a structured platform for conducting research and development and demonstration projects in three areas. These are Urban Innovation, Integrated Architecture and Engineering, and Design and Technology.

The centre will be co-located and managed by the Lee Kuan Yew Centre for Innovative Cities, and it will be funded by JTC with an annual operations budget of S$1.5 million over five years.

It is the third Industrial Infrastructure Innovation Centre set up by JTC in partnership with local universities, the other two being with NUS and NTU.

JTC and SUTD will also work together on an integrated masterplan for Changi Business Park. 

- CNA/by

Real Estate Companies' Brief

Property development and investment sector

Source: Business Times

418 private new homes (excluding executive condominiums) were launched and 482 units were sold in June. For the first half of 2014, a total of 4,455 units were sold, down 58 per cent y-o-y from H1-2013. Take-ups of newly launched projects The Crest and Trilive were poor, with only 35 and 19 units sold, respectively. Top-selling projects included Coco Palms and The Panorama, clearing 55 and 49 units, respectively.

Office Reit eyes mainboard listing

Source: Business Times 

IREIT Global, a local real estate investment trust, plans to raise gross proceeds of $372.4 million through an initial public offering (IPO) on the mainboard and the issuance of units to cornerstone investors. In a preliminary prospectus lodged with the Monetary Authority of Singapore, the trust's manager, IREIT Global Group Pte Ltd, said it plans to offer 169,254,000 units at 88 cents apiece. This offering also includes an international placement of units to investors outside the US.

Sabana Reit's Q2 distribution per unit lower at 1.86 cents

Lower net property income, higher profit expense among reasons

Source: Business Times / Companies

SABANA Reit yesterday posted a distribution per unit (DPU) of 1.86 cents for its second quarter ended June 30, 2014 - down 22.5 per cent from the 2.4 cents it paid out a year ago.

The three months saw income available for distribution fall 16.6 per cent to $13 million. Reasons cited include lower net property income and higher profit expense incurred on higher borrowings.

The Syariah-compliant industrial Reit said that the Q2 DPU was largely unchanged from Q1's 1.88 cents. "This was despite an increase in unit base by approximately 2.7 million as a result of new units issued in Q2 2014 under the distribution re-investment plan established in April this year," it said.

Higher property expenses led net property income to fall 9.3 per cent to $18.4 million.

-By Lee Meixian

Three partners cancel Cambodian JV

Source: Business Times / Companies

A JOINT venture investment involving Lian Beng Group, Heeton Holdings and KSH Holdings to redevelop a plot of land in Cambodia has been terminated. The firms said yesterday that the various parties to the joint venture agreement and the sale and purchase agreement for the land have "mutually agreed" not to carry on with the proposed transactions.

The instalments of the purchase price paid by Imperial South East Asia Investment (ISEA) for the property have been refunded. ISEA is 32.65 per cent owned by Heeton Holdings, 32.65 per cent owned by Lian Beng Group and 34.7 per cent owned by KSH Holdings. The bonds issued to ISEA shareholders under the terms of the exchangeable bond agreement will also be cancelled.

SBI set to deliver EPCC job by end-July

Global Economy & Global Real Estate

Magnate allays fears of Iskandar building glut

This comes against a backdrop of roll-out of mammoth projects by big Chinese developers

Source: Business Times / Top Stories

[SINGAPORE] The rosy narrative on Malaysia's hot spot Iskandar development region is wilting on a looming supply glut. No thanks to overzealous building by mainland Chinese developers.

Adding to the flux is that Iskandar's property boom - partly led by buyers across the Causeway who were lured by sprawling homes amid rolling hills, and in some cases, a spectacular sea view at a lower cost - is taking a breather after prices trooped upwards by 25 per cent last year.

But the edginess about oversupply and the downbeat prognosis that asset values could slip in Malaysia's bustling Johor state may be overdone - that is, if one believes what the boss of Iskandar Waterfront Holdings (IWH), the master developer of Danga Bay where many Chinese developers have homed in, has to say.

"To me, the worry that there is going to be a glut ... I don't think that will happen. These developers are deep-pocketed enough to hold back their launches, if need be," said IWH chief executive Lim Kang Hoo, one of the early backers of the Iskandar project, in an interview with The Business Times.

-By Anita Gabriel

Does Iskandar really need more reclaimed land?

Source: Business Times / Top Stories

[SINGAPORE] Too much of a good thing is bad.

The fixation over waterfront properties in the Iskandar region, which has led to frenetic land reclamation, is threatening to undermine the prospects of the growth corridor launched in Johor eight years ago.

Iskandar Malaysia's value proposition - polished further by its proximity to Singapore - remains intact, but may not do so if development there is left unchecked.

At 2,217 square kilometres, Johor state's southern development corridor is thrice the size of Singapore; in sports parlance, that is about the size of 400,000 football fields.

-By Anita Gabriel

Tallest L.A. Tower to Get Highest Deck in the U.S. West

Source: Bloomberg / News

The owner of the U.S. Bank Tower in Los Angeles, the tallest building west of Chicago, will add an outdoor observation deck and restaurant to three top floors as part of a $50 million makeover.

Overseas Union Enterprise Ltd. (OUE), the Singapore-based investor headed by billionaire Stephen Riady, paid $367.5 million for the 1,018-foot (310-meter) tower in March 2013. Renovations at the 72-story building, purchased from MPG Office Trust Inc., are likely to be completed in the third quarter of 2015, said Richard Stockton, chief executive officer for the Americas at Overseas Union Enterprise.

“It’s a bona fide tourist attraction that would be adding to downtown,” he said in a telephone interview. “We’d expect a minimum 500,000 visitors a year.”

The tower, completed in 1989, was depicted as being blown up in the 1996 movie “Independence Day.” Renovation plans call for observation areas on the 69th and 70th floors, with an outdoor deck on the lower story, and a restaurant on the 71st floor. The 72nd floor will continue to be leased by its current tenant, a computer-server company that Stockton wouldn’t identify. The lobby will be remodeled and entrances reconfigured to keep office tenants and tourists separated.

The U.S. Bank Tower will soon be surpassed as Los Angeles’s tallest building. The 73-floor Wilshire Grand Center, a $1 billion hotel-and-office complex developed by Korean Air Lines Co. (003490), is scheduled to open in 2017 with a “sky lobby” offering similar views.

Willis Tower

The U.S. Bank Tower observation deck will be the highest in the western U.S. The world’s tallest observation deck, at 1,600 feet, is the Canton Tower in Guangzhou. The tallest U.S. observation deck, at 1,354 feet, is at the Willis Tower in Chicago, 103 floors up. The Empire State Building (ESRT)’s top deck, on the 102nd floor, is 1,224 feet above the ground.

The U.S. Bank Tower is about 56 percent leased in a downtown district where the vacancy rate hovers around 20 percent, Stockton said. The tower landlord will push harder for new tenants when the renovations are finished, Stockton said.

Net rents in top-tier buildings in downtown Los Angeles are about $22 to $24 per square foot, and would need to rise about $10 a foot to justify construction of new office towers, Stockton said.

The seller of the U.S. Bank Tower, MPG -- the company once known as Maguire Properties Inc. -- was purchased last October by Brookfield Office Properties Inc. in a deal valued at about $2.2 billion. The tower was developed by an MPG predecessor company, Maguire Thomas Partners.

-By John Gittelsohn

Building for tomorrow

As CapitaLand marks its 20th year in China, JASON LEOW reviews the group's diversified real estate portfolio there, and looks ahead to new opportunities and challenges

Source: Business Times / Focus

CHINA is one of CapitaLand's two core markets and the group's largest market outside Singapore. This year marks CapitaLand's 20 years in China. Since its entry into China in 1994, CapitaLand has established itself as one of the largest foreign-funded real estate developers in China with a diversified real estate portfolio of integrated developments, shopping malls, serviced residences, offices, homes, real estate investment trusts (Reits) and funds.

As at end-March 2014, CapitaLand has more than S$15.8 billion in assets in China, accounting for 38 per cent of the group's total assets. It also has one of the largest real estate fund management businesses in China, with two Reits and 12 private equity funds that have a China focus for investors to participate in China's real estate business development.

China is a unique market given its size and pace of development. To succeed, it is critical to have a strong local team, a differentiated business and a strong brand name. At CapitaLand, we are proud and fortunate to have an experienced team with strong integrity and local knowledge to handle local issues and challenges.

Scaling the China Wall was not easy. We were constantly challenged, but the tenacity and belief in the goals we set out to achieve spurred us on. From developing mainly residential projects in Shanghai during our early days in China, CapitaLand is now known in China for its range of real estate.

Quality portfolio for an urbanising China

Source: Business Times / Focus

SINCE establishing a presence in China in the early 1980s, Keppel has been participating in the country's urbanisation and has contributed to the creation of vibrant, liveable and sustainable urban communities. Today, Keppel has established a presence in 23 Chinese cities and is a partner of choice, committed to share its expertise, experience and leading-edge technologies.

Property development

Keppel Land, the property arm of the Group, has been building quality homes and commercial developments in China since the early 1990s. Keppel Land China, a wholly owned subsidiary of Keppel Land, was set up in 2010 to strengthen the focus on the Chinese market.

Keppel Land China's quality portfolio of developments and properties includes residential, commercial, township, waterfront and golf courses developments in over 10 key cities in China.

Riding the wave of a globalising China

Chinese companies are tapping Singapore as a springboard for expansion and it's a trend that should be encouraged, says CHUA THIAN POH

Source: Business Times / Focus

IN THE past year alone, Singapore has garnered significant attention from several top Chinese technology firms, including Xiaomi, Alibaba and TenCent, which are escalating their investment efforts in Singapore.

These are not the first Chinese firms to find Singapore an attractive destination. Huawei, a leading global information and communications technology (ICT) solutions provider, first entered Singapore in the late nineties as part of its global expansion plans, pioneering the internationalisation of operations and sales for Chinese enterprises.

More than a decade later, Huawei now employs approximately 800 employees in Singapore and considers Singapore a regional hub for its business, serving the needs of clients in the South Pacific region.

Huawei is currently focusing on Singapore as a potential market to achieve its goal of growing its enterprise business. Singapore's advanced infrastructure, systems and policies are the key reasons why Huawei has been in Singapore for more than 13 years now and continues to remain committed towards enriching the lives of people through communications.

Property blues, high debt may hurt China

Source: Straits Times

Facilitating China-S'pore trade

Source: Business Times / Focus

WITH the theme of "China at the crossroads: the way forward", Singapore will hold the prestigious annual FutureChina Global Forum on July 17-18, 2014, providing a high-level platform for government and business leaders, academia, and media representatives to discuss China's economic drivers of change and evolution.

The topic is a timely one, with the Chinese government's new economic development strategy focused on quality and sustainability, while introducing a reform package to maintain steady economic growth in the short term and enhance fundamentals for the long run. It is also highly relevant, as the economic and trade ties between China and Singapore become increasingly stronger. Case in point: in 2013, China became the No 1 trading partner of Singapore, with bilateral trade reaching US$91.43 billion, according to International Enterprise Singapore.

With its deep roots and a strong presence in both China and Singapore, Standard Chartered is well positioned to play a unique role in facilitating the trade and investment flows between the two nations, in particular by promoting the use of the yuan or renminbi (RMB) in cross-border trade among its clients, which is an important component of China's financial reform and liberalisation.

The most recent example is the signing of the bank's first contracts on June 20, 2014, with two clients in Suzhou Industrial Park (SIP) to provide cross-border RMB loans between China and Singapore. This came immediately after a new initiative was announced by the People's Bank of China (PBoC) Nanjing Branch, to allow eligible companies and individuals in the SIP to conduct cross-border RMB transactions with Singapore.

Dublin suburb site offered for sale at 220m euros

162ha site is part of larger land parcel in fast-track zone

Source: Business Times / Property

[LONDON] A site for a new suburb of Dublin was offered for sale with an asking price of more than 220 million euros (S$369.7 million). The completed project will be valued at about 2.5 billion euros, according to Savills plc, the broker managing the deal.

The buyer of the 162 ha site at Cherrywood can build 37,800 sq m of stores, more than 3,800 homes and about 220,000 sq m of office buildings, Savills plc said in a statement yesterday. 

The project, covering an area larger than London's Hyde Park, needs local government approval.

"Cherrywood is a suburban development unlike any other in Ireland," Mark Reynolds, a director at Savills, said in the statement. "No opportunity of this scale is ever likely to be presented again in Dublin."

Irish real estate is recovering from western Europe's worst property crash as a shortage of new homes and prime office buildings pushes up values and rents in Dublin. The Irish capital needs as many as 10,000 new homes a year compared with only 1,600 built last year, Ireland's National Asset Management Agency chairman Frank Daly said on July 4.

-From London, UK

UK buy-to-let investors warned of mayhem

Repossessions of private-landlord homes feared if BOE hikes interest rates

Source: Business Times / Property

[LONDON] Shahram Kordestani, who owns seven UK rental homes, has advice for investors eager to join the swelling ranks of landlords: Do so at your peril.

Mr Kordestani, who has been renting homes in London and south-east England for about 12 years, said when interest rates rise, the jump in mortgage payments will hammer buy-to-let investors who have helped push up property values. "There is going to be mayhem," said Mr Kordestani, 52. "Whoever pays those prices is going to suffer."

The loan-to-income cap that Bank of England (BOE) governor Mark Carney introduced last month to cool Britain's housing market does not apply to buy-to-let - the fastest-growing type of mortgage by value.

Economists say a hike in the central bank's benchmark interest rate or falling prices could result in a repeat of the past, when repossessions of private-landlord homes hit a record high after the 2008 financial crisis.

-From London, UK

Sydney set for biggest hotel boom since 2000

Demand soaring and city to have 20% more rooms by end of this decade

Source: Business Times / Property

[SYDNEY] Fourteen years after the last major hotel opened in Sydney's centre, 42 developers are competing to turn a pair of century-old government office buildings into accommodations as demand soars.

Elsewhere in the city, developers including China's Greenland Holding Group and Singapore-based M&L Hospitality Trust plan to add more than 5,300 rooms during the next five years. If they are completed, the city's supply of rooms will rise by about 20 per cent by the end of the decade - the most since Australia's largest city hosted the Olympics in 2000, according to broker CBRE Group's hotels division.

Hotel construction is picking up as the number of visitors to Australia grows at the fastest pace in at least nine years, sending occupancies in Sydney to a record and the highest in Asia after Hong Kong and Tokyo. Sydney's average hotel occupancy is set to reach 88.8 per cent by end-2016, the highest since at least 2000, according to economics advisory firm Deloitte Access Economics.

"The hotels are all full, so there's more than enough demand for more rooms," said Michael Kum, chairman of Singapore-based M&L, which is adding a third tower at its 683-room Four Points by Sheraton, Australia's biggest hotel, in Sydney. The new developments planned for the city's centre mean "the whole area will be totally transformed", he said.

-From Sydney, Australia

China's June home sales up 33% on price cuts

Source: Business Times / Property

[SHANGHAI] China's home sales rose 33 per cent in June from the previous month as price cuts by developers lured buyers.

The value of homes sold climbed to 591.2 billion yuan (S$118.3 billion) last month from 446.1 billion yuan in May, according to the difference between the National Statistics Bureau's data for the first half of the year and the first five months. That was the biggest monthly gain this year. The value of sales in the first six months fell 9.2 per cent to 2.56 trillion yuan from a year earlier, the data showed.

"We are seeing signs the market is stabilising," said Johnson Hu, a Hong Kong-based property analyst at CIMB Securities Research yesterday.

"A series of property indicators are likely to narrow losses further in the second half given the economy and credit conditions are improving."

-From Shanghai, China

China trust funds slash loans to developers

This closes off a crucial funding avenue just as the housing market cools; may spell trouble for sector, broader economy

Source: Business Times / Property

[HONG KONG] China's shadow banking firms slashed lending to property developers in the first half of this year, closing off a crucial funding avenue just as the housing market cools, potentially spelling trouble for the sector and the broader economy.

Trust companies, which pool money from rich people and companies to make high-interest loans and are part of China's vast and opaque shadow banking system, were a ready source of cash during the housing boom, particularly for smaller developers that had trouble borrowing from banks. But in the first half of this year, trusts lent real estate firms 39 per cent less than in the previous six months, according to trust research company Use Trust based in Nanchang. At the same time, the average interest on 48.3 billion yuan (S$9.67 billion) in loans made through wealth management products climbed 16 basis points to 9.67 per cent.

That bodes ill for Chinese developers who must repay nearly 600 billion yuan worth of trust loans next year, according to brokerage firm Jefferies. "Default risk is heightening because trusts rely heavily on house prices rising," said Xie Ya Xuan, an economist at China Merchants Securities' Research and Development Center in Shenzhen.

Trust firms, under greater scrutiny from regulators worried about rapid growth of shadow banking, are finding it harder to raise money themselves and growing wary of lending to developers, particularly smaller ones, while the market cools.

-From Hong Kong, China

BlackRock Fund Said to Be Seller in Mortgage-Bond Auction

Source: Bloomberg / News

BlackRock Inc. (BLK) is winding down one of the biggest wagers made on bonds backed by souring U.S. mortgages during the financial crisis.

The world’s largest money manager sold $3.7 billion of the $22 billion of securities it bought from UBS AG six years ago to Credit Suisse Group AG in yesterday’s auction of mostly subprime-mortgage bonds, according to a person with knowledge of the transaction, who asked not to be named because the information wasn’t public.

BlackRock, whose clients were told at the time it was targeting annual returns of more than 15 percent, sold the securities after gains fueled partly by a recovery in U.S. housing and unprecedented stimulus from the world’s central banks. The New York-based firm realized “significant” performance fees in the first quarter on a plan to liquidate a separate 2007 mortgage fund, Chief Financial Officer Gary Shedlin said today on a conference call with analysts.

Farrell Denby, a spokesman for BlackRock, declined to comment, as did Megan Stinson, a spokeswoman in New York at UBS and Jack Grone of Credit Suisse. Data on market trades yesterday from the Financial Industry Regulatory Authority signal Credit Suisse placed the bonds with clients, with a similar amount of debt being bought and sold by dealers.

BlackRock’s RMBS Opportunities Master Fund LP paid $15 billion for the total pool of securities in May 2008, using $3.75 billion of cash raised from investors and a loan from the Swiss bank, according to disclosures at the time by the lender.

‘Best Idea’

While home-loan bonds slumped further after the purchase in the wake of Bear Stearns Cos.’s collapse, many buyers in that period don’t regret it, said David Castillo, a Los Angeles-based managing director at Odeon Capital Group LLC responsible for mortgage sales and trading.

“I can remember three different times in my career when buying seemed like probably the best idea ever, and during the crisis was the best of the three,” Castillo said in a telephone interview. “From 2008 through now, almost every mortgage-backed security has appreciated in price, if it hasn’t been wiped out by losses.”

UBS saw the deal as a way to move the debt off its books, in the face of losses on U.S. mortgages and other risky assets that would later swell to almost $60 billion and help trigger its bailout.

Then-UBS CFO John Cryan said on a conference call with analysts in November 2008 that he didn’t expect the assets subject to the arrangement with BlackRock to come back. “Although, those are famous last words,” he said. “You never know.”

Toxic Assets

This week’s sale is the latest sign that banks and funds are putting the market seizure behind them. In October 2008, after Lehman Brothers Holdings Inc.’s bankruptcy widened the crisis, UBS jettisoned $38.7 billion of other toxic assets into a fund supported by Switzerland’s government and central bank. Last November, the company agreed to buy back the Stability Fund’s assets for $3.8 billion.

UBS’s loan to the BlackRock fund, which originally totaled $11.25 billion, had shrunk to $2.2 billion as of March 31 as the bonds paid down, according to disclosures by the bank in May. The size of the borrowing was less than 55 percent of the value of the collateral, with the loan accounting for just $300 million of the bank’s risk-weighted assets under regulatory capital rules.

BlackRock, which after the crisis has managed or advised on large mortgage-bond sales for other investors and governments including the Federal Reserve Bank of New York and the Netherlands, sold the bonds this week in an “all or nothing” auction, meaning dealers had to bid on the entire block, either to hold on their own books or to fill client orders.

Largest Auction

Yesterday’s offering was the largest widely marketed auction of non-agency securities sold in a single block since at least 2010, according to Empirasign Strategies LLC, which tracks securitization-market trading. Including sales where bonds could be bought individually or in smaller groups, it was the 10th-largest since then.

The BlackRock fund still holds other mortgage bonds from the purchase, the person said.

Credit Suisse paid more than 73 cents on the dollar, said another person with knowledge of the sale, who asked not to be named because the transaction was private. While the discount to face value was less than the 32 percent paid by BlackRock’s fund, calculating returns would also require knowing the value of remaining securities, as well as how much of the debt had been repaid at par with the proceeds from foreclosure sales and refinancings and how much principal had been lost to defaults.

The types of subprime securities sold by UBS in 2008 have returned about 69 percent since the end of 2010, rising 7.8 percent this year, according to Barclays Plc index data.

-By Jody Shenn

Billionaire Khosla Spars With Surfers Over Pacific Beach

Source: Bloomberg / Luxury

Billionaire Vinod Khosla, the co-founder of Sun Microsystems Inc., made his last stand to block public access to a northern California beach on a 56-acre plot he bought for $32.5 million.

Khosla, who started his own venture capital firm a decade ago, is fighting a lawsuit brought in state court by the nonprofit Surfrider Foundation, which describes its mission as “the protection and enjoyment of oceans, waves and beaches through a powerful activist network.”

The group claims that by locking a gate on a beach access road about 33 miles (53 kilometers) south of San Francisco, Khosla is effectively engaged in beach development without the permit required by the California Coastal Act. Surfrider is seeking fines of as much as $15,000 a day since October 2010, or about $20 million to date.

Today, lawyers for the foundation and for the Indian-born businessman squared off in final arguments before Superior Court Judge Barbara J. Mallach in Redwood City following a nonjury trial.

“How do you force Mr. Khosla to comply with the law?” Joseph Cotchett, a lawyer for Surfrider, asked the judge. “Somehow, somewhere justice has to rain down on this individual, Mr. Khosla, and go to the Coastal Commission and unlock that gate,” he said. Cotchett then invoked U.S. President Ronald Reagan’s plea to Mikhail Gorbachev to tear down the Berlin wall. “Take off that lock, Mr. Khosla! If not, you’re going to pay a fine.”

Constitutional Right

Khosla, whose Khosla Ventures LLC has invested in dozens of alternative-energy startups, argues he has a constitutional right to exclude the public from private property.

“Repainting a billboard or maintaining a fence or gate” that have been at the beach since the 1950s don’t constitute development and are exempt from state permitting requirements, he said in a court filing.

“My client’s property is not a state park,” Jeffrey E. Essner, a lawyer for Khosla, told the judge. Essner argued that the county and state Coastal Commission’s “leveraging” of public access in exchange for construction permits, along with the Surfrider lawsuit, together amount to “coercion and extortion” forbidden by legal precedent.

“The threat of an activist organization to impose tens of millions of dollars in fines” for protecting private property is “the type of blackmail and extortion that the U.S. Supreme Court has found unconstitutional,” Essner said.

Theatrical Performances

Cotchett is known for theatrical court performances and his claim to only take cases involving what he calls “just principle or causes.” His law firm, as well as the beach and the court, are in San Mateo County.

Surfrider traces the roots of the controversy to 2008 when Khosla formed two entities, Martins Beach 1 LLC and Martins Beach 2 LLC, to buy the property. Public access to the beach on Martins Road, which runs through the property, was gradually restricted and finally enforced by security guards hired in 2013, according to court documents filed by the organization.

“We are representing the public and using our meager funds to do so,” Angela Howe, legal director at Surfrider, said in a phone interview.

Previous Owner

Surfrider points to policies of the previous owner, the family of Richard Deeney, which charged cars a small fee for use of the beach road and let pedestrians pass for free, to argue Khosla has developed the beach area.

Khosla cites the same policies to contend it wasn’t considered “development” when Deeney’s family locked the gate during winter when parking attendants weren’t available and when he found dealing with car traffic inconvenient.

The California Coastal Commission told Khosla before the lawsuit was filed that he’s required to get a permit to close off access to the beach, Sarah Christie, a spokeswoman for the agency, said in a phone interview.

“The property owner has not submitted the application that we’ve been looking for,” she said.

Khosla issued a statement today rebutting his adversaries’ arguments and blaming them for not reaching a compromise.

“They’ve refused to collaborate and they’ve refused to negotiate,” according to the statement. “All they offer are threats and litigation and the cynical rhetoric of class warfare -- when all they really want is to permanently and irreparably upset the balance between public access and private property rights in our state.”

In the meantime, some beachgoers have ignored the gate without serious repercussions. Members of the public have been ticketed for trespassing, though San Mateo County District Attorney Steve Wagstaffe said in an e-mail that violators won’t be prosecuted -- yet.

“The sheriff’s office is not citing, and we are not prosecuting, any trespass cases until this case is resolved and the court rules on whether the access can be denied,” Wagstaffe wrote.

The case is Surfrider Foundation v. Martins Beach LLC, CIV520336, California Superior Court, San Mateo County (Redwood City).

-By Joel Rosenblatt