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22nd July 2014

Singapore Economy

Q1 tourist arrivals stay flat on low China volumes

Source: Business Times / Top Stories

[SINGAPORE] Dragged down by lower volumes from China, visitor arrivals to Singapore remained flat in the first quarter of this year at 3.9 million, although tourism receipts edged up 5 per cent year on year to S$6 billion.

According to a report released yesterday by the Singapore Tourism Board (STB), tourist arrivals from China dropped 14 per cent due to the ongoing impact from tourism laws implemented in October, albeit narrowing from the 31 per cent dive in the fourth quarter of last year.

These laws include curbs on zero-dollar-tours, which try to attract Chinese tourists with bargain prices but tack on services with additional fees.

Stripping out China, visitor arrivals to Singapore would have risen 2.8 per cent.

Travel demand out of China - Singapore's second biggest source market - has also weakened recently in the wake of the disappearance of Malaysia Airlines flight MH370 in March this year.

"The biggest drop in inbound numbers has come from China, which is particularly concerning as it has been Singapore's fastest growing source market for tourists," noted the Centre for Aviation (CAPA) in a recent report on Changi Airport.

Meanwhile, STB's release yesterday showed that visitor arrivals from Indonesia - Singapore's top visitor generating country - climbed 6 per cent. But visitor arrivals from other popular source markets such as Malaysia, Australia and Japan declined one per cent, 2 per cent and 2 per cent respectively.

However, visitor arrivals from South Korea (17 per cent) and Vietnam (13 per cent) both recorded double digit growth. In the case of South Korea, the appreciation of the Korean won and budget carrier Scoot adding Seoul to its network last year has helped bolster travel. Meanwhile, outbound travel from Vietnam has been on an upward trend.

Preliminary numbers on the STB website also showed that visitor arrivals for January to April were down 0.6 per cent at 5.13 million. On average, visitor arrivals from China were down nearly 22 per cent for the four-month period.

Where tourism spend is concerned, the S$6 billion chalked up in the first quarter was largely driven by sightseeing, entertainment and gaming, which was up 19 per cent. Spend by the business travel and MICE segment also climbed 4 per cent after corporate cutbacks last year.

In the hotel industry, gazetted hotel room revenue for Q1 came in at S$0.8 billion, up 12 per cent. The average room rate (ARR) worked out to S$261, up 2.7 per cent, and the average occupancy rate (AOR) was nearly flat at 86 per cent. Revenue per available room (RevPAR) thus edged up 2.2 per cent industrywide to S$224.

Of the various hotel tiers, luxury hotels posted the biggest gains in ARR (9.5 per cent), AOR (two percentage points) and RevPAR (11.9 per cent) in 1Q14. The ARR for this tier worked out to S$467, while the 90 per cent occupancy gave rise to a RevPAR of S$420.

Economy hotels, on the other hand, suffered the biggest drops in AOR and RevPar, down 5.2 percentage points to 79 per cent and 1.8 per cent to S$83 respectively. This was despite a 4.7 per cent climb in ARR to S$105.

-By Nisha Ramchandani

Tourists to Singapore spent S$6b in first quarter of 2014: STB

Revenues from Sightseeing, Entertainment and Gaming recorded the largest on-year increase in the first quarter among the five major components, bringing in S$1.6 billion, says Singapore Tourism Board.

Source: Channel News Asia / Singapore

SINGAPORE: Tourism receipts for the first three months of 2014 grew 5 per cent on-year to S$6 billion, according to the latest Tourism Sector Performance report by the Singapore Tourism Board (STB).

Growth in tourism receipts was driven by Sightseeing, Entertainment and Gaming (SEG), which recorded a 19 per cent year-on-year growth to rake in S$1.6 billion in revenue, the STB said in the report released on Monday (July 21). Both integrated resorts reported an increase in their overall gaming revenues.

SEG was followed by Other TR Components – which include expenditure on airfares, port taxes, local transportation, medical, business, education and transit visitors – that generated S$1.4 billion in revenue, it added.  

Declines in spending on Shopping, which saw a 6 per cent drop, and Food and Beverage, which dipped 1 per cent, were seen in the quarter though, STB said.

A senior lecturer at Ngee Ann Polytechnic's Tourism and Resort Management programme said, "Singapore is also facing a lot of competition from regional countries for shopping so people have choices now."

Dr Chiam offered suggestions to boost these areas. "One is more targetted in terms of tourists who would like to try our local cuisine," he said. "On the area of shopping we could re-invent ourselves by having different brands come to Singapore, new brands that locals or people in this region are not exposed to. We also have to be a little bit more competitive in terms of pricing as compared to our regional countries."


In terms of international visitor arrivals for the first quarter, the agency said the figure held steady at 3.9 million. Visitor arrivals in the three months were mainly impacted by the 14 per cent decline in arrivals from China “due to the continuing impact of the tourism law that was introduced on Oct 1, 2013”, it said.

The law stipulates, among other things, that tours sold in China for domestic and overseas travel clearly list itineraries, duration and details of transport, hotels and meals.

Excluding visitors from China, visitor arrivals grew 2.8 per cent on-year, with South Korea (17 per cent) and Vietnam (13 per cent) showing strong growth, according to the report. Indonesia continued to top the visitor arrivals list at 749,000 in the first three month.

The growth for South Korea was boosted by an appreciation of the South Korean won and also the introduction of Scoot, the only low cost carrier plying the Singapore-Seoul route. Meanwhile, the growth of Vietnam could be because travel as a lifestyle activity is gaining popularity among the Vietnamese."

Despite the drop in visitor numbers, China was still the top tourism receipt-generating markets in the first quarter with S$800 million spent by Chinese tourists. The figure excludes expenditure on the Sightseeing, Entertainment and Gaming component due to “commercial sensitivity” of the information, STB said.

Indonesia and India made up the top three, with the former contributing S$658 million and the latter S$284 million, according to the report. Indonesia’s tourism receipts fell 12 per cent on-year because it was impacted by a drop in per capita spend, while India’s 3 per cent dip on-year was primarily driven down by a fall in arrivals and per capita spend of leisure visitors.

STB also said gazetted hotel room revenue showed a strong 12 per cent growth to hit S$800 million in the first quarter. This was aided by a rise in Average Room Rate, which stood at S$261 in the first three months, a 2.7 per cent hike year-on-year.

However, Average Occupancy Rate stood at 86 per cent, a 0.4-percentage-point decline over the same period last year, the report stated.

- CNA/kk

Singapore Real Estate

Shophouse in Telok Ayer put up for sale

Euro Group's asking price for 999-year leasehold property is S$20-22m

Source: Business Times / Singapore

EURO Group, which is involved in a range of businesses including real estate, has appointed Cushman & Wakefield to find a buyer for a three-storey shophouse located a stone's throw from Telok Ayer MRT Station.

The indicative asking price for No 25 Boon Tat Street, a 999-year leasehold property, is S$20-22 million.

Euro Assets Holdings (S), the owner, is selling the property with vacant possession. Located in the Chinatown-Telok Ayer Conservation Area, the shophouse is currently being spruced up.

Approval has been obtained from the authorities to use the first and second storeys and roof terrace as restaurant space, while the third storey is approved for office use.

-By Kalpana Rashiwala

Three GB Building office floors up for sale

Source: Business Times / Singapore

ABOUT 16,000 square feet of office space spanning three contiguous floors in GB Building in the Central Business District (CBD) have been put on the market for between S$32.1 million and S$33.7 million, or between $2,000 and $2,100 per square foot.

Each floor of the space, occupying the 20th to 22nd storeys of the Cecil Street building, ranges from 5,210 sq ft to 5,425 sq ft in size, is rectangular and column-free.

DTZ Debenham Tie Leung (SEA) is marketing the property, which is being sold with vacant possession.

GB Building comprises a 23-storey office tower atop three storeys of commercial space and has 67 years left on its lease.

-By Sheena Tan

Real Estate Companies' Brief

CapitaCommercial Trust

Source: Business Times

Capitacommercial Trust (CCT) posted Q2 2014 revenue growth of 3.2 per cent and distributable income growth of 7.6 per cent y-o-y.At half-time, the group's results made up 50 per cent of our full-year estimates. CCT's growth will be driven by the modest recovery in the office rental market as well as new contributions from CapitaGreen starting FY2016.

Ascott Reit's post-rights Q2 DPU falls to 2.19 cts

Trust declares DPU of 3.94 Singapore cents for the first half of this year

Source: Business Times / Companies

ASCOTT Reit's distribution per unit (DPU) fell 11 per cent to 2.19 Singapore cents for its second quarter ended June 30, due to a dilution following a one-for-five rights issue last December.

This is compared to the 2.45 Singapore cents it paid out a year ago.

The CapitaLand-linked unit said that after adjusting for the effects from the rights issue and excluding one-off items, its DPU would have inched up 5 per cent in Q2.

The Reit, which makes semi-annual payouts, has declared a DPU of 3.94 Singapore cents for the first half of this year - to be paid on Aug 25. This is a drop from 4.7 Singapore cents a year ago.

-By Lee Meixian

K-Reit sees upside in office rents

Q2 DPU falls 3.6% on lower rental support from sponsor

Source: Business Times / Companies

KEPPEL Reit (K-Reit) is expecting strong upside in office rents as leasing activities, especially in Singapore's CBD, remain buoyed by the tight office supply situation.

But it is not losing out on time and has, for the first half of this year, undertaken early renewals for about 164,000 sq ft of net lettable office space that were due to expire in the next three years.

"We are getting steady demand, but they are not the traditional tenants we are talking about, so we have to monitor the situation," said Ng Hsueh Ling, chief executive officer of the Reit's manager. "If Singapore's GDP continues to be good and (office) supply is quite limited, we may be able to get some upside this year and next year and 2016."

Ms Ng was speaking at K-Reit's Q2 results briefing, where the Reit reported a 3.6 per cent dip in distribution per unit (DPU) for the quarter ended June 30 to 1.9 cents, mainly due to lower "rental support" from its sponsor Keppel Land.

-By Lynette Khoo

Keppel REIT's property income up 14% to S$94 million

The rise was mainly attributed to an improved performance from Ocean Financial Centre and Prudential Tower, as well as additional income from 8 Exhibition Street in Melbourne.

Source: Channel News Asia / Business

SINGAPORE: Keppel REIT, one of the largest real estate investment trusts listed on the Singapore Exchange Securities Trading, has seen its property income rise 14 per cent year-on-year to S$94.1 million in the first half of 2014.

This was mainly attributed to an improved performance from Ocean Financial Centre and Prudential Tower, as well as additional income from 8 Exhibition Street in Melbourne, which was acquired in August 2013.

Keppel's annual distributable income increased 3 per cent to S$108.3 million.

Total return before tax rose 10.1 per cent on-year to S$82.9 million, as a result of higher net property and interest income, as well as lower amortisation and trust expenses. However, the gains were diminished by lower rental revenue and higher borrowing costs and management fees due to an enlarged portfolio compared to a year ago.

For the office market, Keppel says that the limited supply of new Premium offices, coupled with the relatively high islandwide occupancy, should underpin the office leasing market, especially in the central business district.

According to CBRE, an American commercial real estate company, the average Grade A office rents increased by approximately 3.4 per cent quarter-on-quarter to S$10.60 per square foot per month in the second quarter of 2014, due largely to stable demand amid tightening vacancies.

Industry experts are of the opinion that the pick-up in office rents is likely to continue for the rest of this year and 2015.

Keppel has attained an overall tenant retention rate of 87 per cent and maintained a strong occupancy level of 99.4 per cent for its entire portfolio for the past six months.

In Singapore, it owns 99.9 per cent interest in Ocean Financial Centre, one-third of interest in Marina Bay Financial Centre Phase One and One Raffles Quay, another 92.8 per cent interest in Prudential Tower, and all of Bugis Junction Towers.

- CNA/ek

FrasersCom's Q3 DPU stays at 2.19 cts

Source: Business Times / Companies

FRASERS Commercial Trust (FCOT) reported a flat distribution per unit (DPU) of 2.19 Singapore cents for the third quarter ended June 30, as the cost savings from its buyback of convertible perpetual preferred units (CPPU) were offset by lower net property income (NPI).

Its NPI for the quarter slipped 0.7 per cent to S$22.9 million, dragged by weakness in the Australian dollar and higher expenses incurred from the repair and maintenance works at the Caroline Chisholm Centre, an office complex in Canberra, Australia.

But FCOT's Singapore properties continued to do better, chalking an NPI growth of 4.9 per cent in the third quarter from a year before, thanks mainly to improved performance in China Square Central. In Singapore, demand for commercial space came from tenants in sectors as diverse as IT, multimedia and telecommunications, consultancy, oil-and-gas and the insurance sectors, FCOT said.

New, renewed or committed tenants in the third quarter included Xiaomi Singapore, SThree, Chain IQ Holding AG, and Yuan Tai Petrochemical.

-By Lynette Khoo

Tee Land Q4 earnings soar to S$5.6m

Source: Business Times

Tee Land's net profit for the fourth quarter ended May 31 soared to S$5.6 million from S$723,000 in Q4 2013. This was buoyed by share of associates results, which more than doubled to S$4.6 million from S$2 million a year before. But revenue for the quarter fell 44 per cent to S$8.6 million due to higher progressive revenue recognised a year before.

MLT's Q1 DPU up on improved results

Source: Business Times / Companies

MAPLETREE Logistics Trust (MLT) posted improved results for the first quarter ended June 30, with available distribution per unit (DPU) rising 5.6 per cent from 1.80 Singapore cents to 1.90 Singapore cents.

This was on the back of amount distributable to unitholders increasing by 6 per cent to S$46.6 million from S$44 million a year ago.

Net property income (NPI) rose 5.6 per cent from S$65.3 million to S$69 million. This was boosted by a 7.4 per cent increase in gross revenue to S$81 million, although property expenses rose 19 per cent to S$12 million.

The increase in gross revenue was mainly due to contribution from Mapletree Benoi Logistics Hub, positive rental reversions mainly in Hong Kong and Singapore, contributions from one Korea property acquired in Q2 FY13/14, and higher revenue from four Japan properties which completed the installation of solar panels last year.

-By Mindy Tan

Mapletree Log to buy Henan property

Source: Business Times / Companies

MAPLETREE Logistics Trust has signed a memorandum of understanding (MOU) with its sponsor, Mapletree Investments Pte Ltd, to acquire Mapletree Zhengzhou Logistics Park (MZLP) in Henan, China, for 205.6 million renminbi (S$41.1 million). The MOU is subject to the execution of a formal sale and purchase agreement. The logistics facility has a gross floor area of about 79,000 sq m and is 99.2 per cent occupied.

Views, Reviews & Forum

Make new towns more appealing to home buyers

Source: Today Online / Voices

I refer to the report “Consider rewarding older couples who move to non-mature estates: Khaw” (July 17).

Freeing up resale units in mature estates by encouraging older residents to join their children in new towns does little to address the reasons behind the persistent appeal of mature estates.

We should not ignore the sentiments of many who do not currently reside in these estates, but desire to do so in the future. These home buyers, mostly young families in outlying estates, are prepared to pay for the privilege for several reasons.

Most mature towns have well-developed transport links that provide residents with easy travel options — people may have a choice between multiple bus routes and MRT lines.

Mature estates also enjoy closer proximity to Singapore’s economic centres, as these suburbs grew naturally out of the city. Many flats in older towns are also larger. Some have layouts that give a semblance of greater privacy for example, cluster units instead of flats laid out in rows. Residents do not feel suffocated and enjoy more personal space.

Mature estates also enjoy well-developed services and eateries that increase an estate’s intangible value to current and aspiring residents. Over time, the concentration of such facilities will elevate the status of a neighbourhood.

Asking older Singaporeans to move to new towns is akin to asking them to leave behind their lifelong community and social links. It may be difficult for them to fit in with the younger crowd in their new housing areas.

They may also be deprived of meaningful social interaction with their peers, which is crucial to positive ageing. If we want the housing demand in mature estates to moderate on its own, we must make the new towns more appealing.

Non-mature estates have yet to catch up in terms of efficient transport links, estate and building design, and facilities and services provided. Once all these factors are equal, market forces will create an equilibrium without the need for policy intervention.

-By Jaclyn Toh Ai Lin

Global Economy & Global Real Estate

Focus on high-rise in Australia's housing boom

Rising land cost, ageing population and foreigners cause shift to apartments

Source: Business Times / Property

[SYDNEY] Australia is enjoying a long-desired housing renaissance as a record amount of new building gets under way, and a shift in fashion toward high-rise living should lengthen its life span even if it tempers its immediate benefits.

In the past, the focus was all on detached houses which gave a concentrated burst to economic growth of one to two percentage points over 12-18 months. Apartment towers take far longer to get approved and built, spreading the gains over several years.

That's inconvenient for the Reserve Bank of Australia (RBA), which had hoped housing would be running hotter right now to help offset a cooling mining sector, and only adds to the case for it keeping interest rates at a record low of 2.5 per cent for longer.

The wait has already been interminable. While the central bank began cutting rates in late 2011, it took until the start of this year for home construction to come to life.

-From Sydney, Australia

London home prices fall in July for 2nd month

Source: Business Times / Property

[LONDON] Asking prices for London property fell for a second month in July as an increase in the number of homes for sale softened the market for sellers, Rightmove plc said.

Prices sought in the UK capital fell 0.4 per cent from June to an average £587,174 (S$1.25 million), the property website operator said in a statement yesterday.

Across England and Wales, prices fell 0.8 per cent, their first decline since December.

The report adds to signs the UK property market is losing steam, after the Bank of England said it posed the greatest risk to the economic recovery.

-From London, UK

Shipping containers may provide affordable housing

But it remains to be seen if people enjoy living in repurposed steel husks

Source: Business Times / Property

[WASHINGTON] They are the building blocks of the global economy, 20 million big steel boxes sloshing across oceans on mammoth container ships.

Starting yesterday, the first of 18 dented outcasts are set to be stacked in a dug-out Washington, DC, basement, turning a deteriorating student group house into an experiment in creating eye-catching housing, fast and on the cheap.

Among the questions raised by the effort: Can hundreds of thousands of discarded sea containers, long talked up by designers, really help create more affordable housing, or is it mostly a gimmick? And just how do you bring humanity to the confines of an 2.4-by-12-metre box?

If the economics work and people actually enjoy living in lovingly repurposed steel husks, the architects on the project have bigger dreams, including floating hundreds of sea container apartments on a barge in the Potomac River and creating a homeless village on the river to serve Georgetown.

-From Washington, US

World's 'largest indoor arena' opens in Manila

Source: Business Times / Property

[MANILA] Philippine President Benigno Aquino yesterday presided over the opening of what is billed as the world's largest indoor stadium, erected by a politically-influential religious sect.

The US$175 million Philippine Arena, which can seat 55,000 people, was hailed as a showcase that will serve as a major venue for concerts and sports events as well as gatherings for its owners, the Iglesia ni Cristo (Church of Christ) sect.

"You have proved that the Filipino can reach great heights, that we can have achievements as lofty as any in the world," Mr Aquino said in a speech to Iglesia members.

He hailed the 15-storey structure as "the largest domed arena in the whole world", saying its capacity was "even double that of the Staples Center in Los Angeles", a major sporting and entertainment venue.

-From Manila, The Philippines

NYC Trade Center Tower Gets First Private-Sector Tenant

Source: Bloomberg / News

MediaMath Inc., a digital-advertising company, agreed to a 15-year lease at 4 World Trade Center, becoming the lower Manhattan skyscraper’s first non-government tenant.

MediaMath is taking 106,000 square feet (9,800 square meters) and plans to move its more than 300 New York-based employees from three locations in Midtown to the 72-story tower, developer Silverstein Properties Inc. said today in a statement.

The agreement brings occupancy in the 2.3 million-square-foot building, which opened in November, to 53 percent. Demand for offices in lower Manhattan surged in the first half of the year, in part because of leases at the Brookfield Place complex, where Bank of New York Mellon Corp. and Time Inc. took more than a million square feet combined. Downtown’s vacancy rate of 10 percent is now lower than Midtown’s 11 percent, which is a rarity, according to brokerage Cushman & Wakefield Inc.

“MediaMath’s decision to relocate to 4 WTC proves that New Yorkers were right to bet on downtown,” Larry Silverstein, chairman of Silverstein Properties, said in the statement. “The new World Trade Center is emerging as the commercial heart of the city’s hottest neighborhood.”

Previously, the skyscraper’s only two tenants were New York City and the Port Authority of New York and New Jersey, owner of the World Trade Center site. They agreed to rent 600,000 and 520,000 square feet, respectively.

Silverstein last month said he will resume construction on 3 World Trade Center after a financing deal with the Port Authority. The bi-state agency agreed to let the developer use $159 million in insurance proceeds that had previously been held in escrow until the planned 80-story tower was finished.

The nearby 1 World Trade Center, scheduled to open by year’s end, is about 56 percent leased following the addition of three tenants in the past few months, including advertising firm KiDS Creative LLC. The Durst Organization and the Port Authority are developing the skyscraper, which is the Western Hemisphere’s tallest at 1,776 feet (541 meters).

-By Jonathan Lamantia

Amazon Said Close to Agreement With Brookfield for London Office

Source: Bloomberg / Tech

Brookfield Asset Management Inc. (BAM) is close to an agreement for Inc. (AMZN) to rent about 400,000 square feet (37,160 square meters) of office space near the London technology hub known as Silicon Roundabout, according to a person with knowledge of the talks.

The world’s biggest online retailer, based in Seattle, would occupy more than two-thirds of Brookfield’s Principal Place development, near the northern edge of the London’s main financial district, also known as “Tech City,” said the person, who asked not to be identified because the negotiations are private.

Henry Wallers, a Brookfield spokesman, declined to comment. A spokeswoman for Amazon declined to comment.

Companies from the technology, media and telecommunications sectors have buoyed London’s commercial property market as financial-services firms put off expansion plans. Media and technology companies agreed to lease more office space than any other industries during the first quarter, led by Google Inc.’s deal to lease an additional 160,000 square feet at its Kings Cross development, according to broker Knight Frank LLP.

Cushman & Wakefield Inc. is advising Amazon on the London lease talks, according to the person. Allsop LLP and Cushman & Wakefield are advising Brookfield.

Estates Gazette reported the lease talks on July 18.

-By Patrick Gower

Millionaire Hunters Lure Rich Chinese to Australia

Source: Bloomberg / News

Call him the Chinese millionaire hunter.

Berrick Wilson is one of at least 30 fund managers who have jumped into the business of luring China’s wealthy to Australia using a new visa program that helps Chinese invest abroad. Wilson has flown to China three times this year from the Melbourne headquarters of investment firm KordaMentha Pty. He’s looking for millionaires to invest at least A$5 million ($4.7 million) and qualify for residency, which gets around China’s restrictions on converting currency and sending it abroad.

“The interest is increasing by the day,” said Wilson, who planned to make his fourth trip this week to corral Chinese investors into the firm’s commercial real estate fund targeted at $100 million and aiming for a 9 percent annual return. Referrals in Shanghai, Beijing and Shenzhen have netted miners, property developers and agribusiness entrepreneurs, he said.

The flow of money into Australia could reach as much A$10 billion a year, according to law firm Baker & McKenzie LLP. More than 1,000 people, almost all from China, have applied so far, and more are expected after Canada canceled a similar program in February amid a flood of applications. The number also may be boosted by a government review to hasten approvals. More than 60 funds have been started to capture the money, including by the largest banks in Australia.

Convincing Them

“These are not your usual equity or private-equity type of investors,” said Bill Fuggle, a partner at Baker & McKenzie in Sydney who advises immigrants on the process and asset managers on compliance with visa rules. “Fund managers need to visit China and convince them of investing not just for a visa, but in turn to preserve their wealth and improve their lifestyle.”

Australia’s Significant Investor Visas, which are similar to U.S. EB-5 visas that come with a $500,000 investment minimum and a requirement to create jobs, are designed to attract overseas capital and eventually allow permanent residency in the country.

Immigrants are required to put the A$5 million into government bonds or complying funds that invest in assets such as infrastructure, real estate and agribusiness, for four years, according to the Department of Immigration website. The initial visa requires residency of at least 40 days a year over the period, after which permanent residency can be granted.

The first 188 visa, so-called because the number eight in Chinese sounds similar to the word for making a fortune and is considered lucky, was awarded to an unidentified Chinese toymaker in 2013, according to the government. In May, the government announced a review to “reboot” the investor visa program and ease implementation.

Stepped Up

The pace of visa approvals has stepped up since the Liberal-National coalition government was elected in September, with 282 granted in the 12 months through June, compared with just four in the program’s first seven months.

Investment inflows from people with approved visas as well as those expected from 610 people on the waiting list totaled A$4.5 billion as of the end of June. About 39 percent of that money went into managed funds as of March, according to data from the office of Michaelia Cash, assistant minister for immigration and border protection.

Chinese nationals accounted for 91 percent of applications and 86 percent of grantees as of the end of June, according to the minister’s office.

Applicants from Hong Kong, who are counted separately, make up 4 percent of those seeking the visas, while people from Malaysia, South Africa and the U.K. represent 1 percent each.

Hedging Bets

About 60 percent of high-net-worth Chinese -- those with at least 10 million yuan ($1.6 million) -- have left China or are considering it, according to a report by Bain & Co. released last year. More than half of such individuals without overseas investments planned to make them, while 60 percent of those who have them planned to increase them, it said.

“The rich feel it is time to hedge their bets,” said Fuggle. “The closest option for them is Australia, a country which enjoys a special and very long relationship with the Chinese populace.”

Wealthy immigrants can chose from offerings by private fund managers as well as banks:Westpac Banking Corp. (WBC), Australia & New Zealand Banking Group Ltd. (ANZ),Macquarie Group Ltd. (MQG), Commonwealth Bank of Australia and National Australia Bank Ltd. (NAB) The inflows are “material,” said Fuggle, adding that the visa plan “opens up a new and unclaimed pool of money” that otherwise wouldn’t reach Australia.

Lots More

“Every single visa applicant I’ve worked with so far has a lot more than A$5 million to bring in,” he said. “I would say the average net wealth of the people willing to come in is A$20 million plus.”

NAB, Australia’s largest lender by assets, offers more than 20 such funds for immigrants, ranging from equities to fixed-income. “To ignore the SIVs will be to ignore the financial opportunity the applicants are bringing into Australia,” said Prini Acharrie, a director in the lender’s private-wealth unit.

Commonwealth Bank (CBA) has seven SIV funds, including two focused on property, according to its wealth-management unit Colonial First State’s (CFSIMPI) website. Fees range from 0.4 percent to 1.2 percent, it said.

Westpac offers SIV Flexible Investment accounts with a range of options and dedicated bankers who speak Mandarin or Cantonese, according to its website.

“We are very pleased with the level of interest from our clients,” said Elissa Crowther-Pal, head of wealth services at Westpac subsidiary BT Financial Group Ltd., which handles the accounts.

Opal Fund

ANZ offers the Opal fund as a complying investment product, while its wealth unit offers portfolio services that also comply, Victoria Kanevsky, a spokeswoman for the bank, said by phone.

“We expect that the SIV investment itself will represent a relatively small proportion of total foreign investment in Australia,” said Jason King, executive director at Macquarie’s specialist investments unit, which offers six such funds. “But the associated benefits from additional investments and ventures undertaken by successful applicants could be significant.”

China’s foreign-exchange rules cap the maximum amount of yuan that individuals can convert into other currencies every year at the equivalent of $50,000 and ban them from transferring currency abroad directly.

Secret Path

This month, the Bank of China Ltd. confirmed the existence of a previously unannounced program allowing Chinese to send their currency overseas for purposes of emigration or residential home purchase. The bank said the transfers have been permitted by China’s regulators since 2011 as part of a trial program in southern Guangdong province.

The Chinese government has taken steps in recent years to allow freer movements of capital in and out of China. The goal of free convertibility of the yuan has been announced by policy makers since the 1990s, and is a step toward stated plans to make Shanghai a global financial capital by 2020.

Applicants for Australia’s program must be sponsored by one of the country’s eight provinces, which want to draw some of the foreign money into their own bonds.

New South Wales, where Sydney is the capital and which has nominated 400 applicants, requires successful foreigners to invest 30 percent of their A$5 million in state bonds, according to an e-mail from Ben Shine, a spokesman for Deputy Premier Andrew Stoner. The money will help fund infrastructure including the North West Rail Link in Sydney and an upgrade of the Pacific Highway along the state’s coast, Shine said.

Lamb, Beef

Investors are interested in property, including offices, hotels and resorts, as well as agribusiness and energy, according to Deloitte Touche Tohmatsu Ltd., which provides consulting advice for SIV applicants.

“The investments my clients are looking at range from agribusiness focused on high protein, meat products -- lamb and beef -- and soy, and clean energy, largely solar and wind,” said Catherine Chow, Deloitte’s Sydney-based partner for the Chinese Services Group.

While the purchase of a home in Australia doesn’t qualify as part of the A$5 million investment, the visa applicants typically buy houses, too, Baker & McKenzie’s Fuggle said.

Chinese investment in Australian property climbed 42 percent to A$5.9 billion in the year to June 2013, surpassing Americans as the biggest group of buyers, the Foreign Investment Review Board said in its latest annual report.

Alternative Destinations

The government’s new attention to processing visas should encourage applicants looking for alternative destinations after Canada shut its door on a similar program, said Mark Wright, head of Deloitte’s immigration practice in Sydney.

In February, Canada stopped issuing investor visas, halting the program with more than 65,000 pending applications, according to a Feb. 11 statement from the country’s citizenship and immigration minister, Chris Alexander.

“Immigrant investors pay less in taxes than other economic immigrants, are less likely to stay in Canada over the medium-to-long term and often lack the skills, including official language proficiency, to integrate as well as other immigrants from the same countries,” the statement said.

Canada’s plan required a willingness to lend C$800,000 ($744,000) interest-free to one of the country’s provinces for five years, and a total net worth by applicants of C$1.6 million.

“If Australia gets this right, it will clearly be a benefit for generations to come,” Deloitte’s Wright said. “Putting a stop to the Canadian program, if anything, has increased the level of interest for the Australian one.”

Still Small

The anticipated A$10 billion a year in Chinese immigrant investment, even when accompanied by additional purchases of residential property, is still small when compared with Australia’s A$1.7 trillion pension sector, the fourth-largest in the world. Total foreign investment in Australia was A$135.7 billion in the year through June 2013.

KordaMentha hired more than 30 real estate and investment advisers in the past decade from Macquarie, Deutsche Bank AG and Lend Lease Group, and is now opening a China office, Wilson said. That investment, including Wilson’s trips to China, is paying off for the firm, which has managed more than A$7 billion in property assets. Wilson declined to say how many Chinese investors he has found or how much they invested.

“Last year we spent a lot of time in Asia to understand the demand to fine tune our offering,” he said. “We are reaping the benefits of all that.”

-By Narayanan Somasundaram

CBS Outdoor to Buy Van Wagner Billboards for $690 Million

Source: Bloomberg / News

CBS Outdoor Americas Inc. (CBSO), the billboard company spun off from broadcaster CBS Corp., agreed to acquire some advertising assets from Van Wagner Communications LLC for $690 million in cash.

The purchase gives CBS Outdoor about 1,100 large billboard displays in 11 U.S. markets, according to a statement today. The deal requires regulatory approval and is expected to be completed next year.

Chief Executive Officer Jeremy Male said earlier this year that CBS Outdoor intends to acquire smaller billboard companies as it competes with Lamar Advertising Co. and Clear Channel Outdoor Holdings Inc. The assets acquired from closely held Van Wagner generated $206 million in revenue last year, New York-based CBS Outdoor said.

“This deal might spark further consolidation in the outdoor advertising sector,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “CBS Outdoor, Clear Channel Outdoor and Lamar Advertising together control more than 85 percent of the industry’s revenue but there are still several regional companies that can be rolled up.”

CBS Outdoor shares have advanced 23 percent since the company’s initial public offering in March. They rose 4.5 percent to $34.52 at the close in New York.

CBS Outdoor raised $644 million in the IPO including the over-allotment and has converted into a real estate investment trust. Last month, CBS Corp. took the final step in the spinoff of the billboard company, with a plan to fully divest its 81 percent ownership.

Centerview Partners LLC, Peter J. Solomon Co. and Goldman Sachs Group Inc. served as CBS Outdoor’s financial advisers, while Jones Day acted as legal counsel. Evercore Partners Inc. served as Van Wagner’s financial adviser and Fried Frank Harris Shriver & Jacobson provided legal counsel.

-By James Callan

Sterling May Need to Sell $500 Million in Property: CFO

Source: Bloomberg / News

Donald Sterling may have to sell $500 million in real-estate holdings after he revoked a family trust to try to prevent his wife from selling the Los Angeles Clippers without his consent, an executive for Sterling said.

Darren Schield, the chief financial officer of Beverly Hills Properties, testified today that he told one of Sterling’s lawyers that revoking the family trust “would open up a Pandora’s box” because it would violate the terms of the loans with Bank of America Corp. and two other banks.

Sterling, 80, revoked the trust after his wife had him declared mentally incapacitated and removed him as a co-trustee so she could proceed with the $2 billion sale of the National Basketball Association franchise to former Microsoft Corp. Chief Executive Officer Steve Ballmer. Shelly Sterling needs a ruling that she has sole authority to sell the team.

“When we have to unload $500 million of apartment buildings, it will have an impact on the the Los Angeles real-estate market,” Schield said today when Shelly Sterling’s lawyer, Pierce O’Donnell, asked whether the buildings could be sold at fair market value.

Sterling’s Beverly Hills Properties has about $2.5 billion worth of holdings, Schield said. If the lenders, which also include Union Bank and City National Bank, call in their loans, Sterling may end up having to pay 1.5 percentage points more than he does now to refinance the loans because of the recent negative publicity, he said.

‘Reputational Issue’

“There’s a huge reputational issue,” Schield said.

Gary Ruttenberg, one of Sterling’s lawyers, said none of the banks has called in the loans.

Shelly Sterling testified earlier in the trial she would use the proceeds of the Clippers sale to Ballmer to pay the bank loans because the trust doesn’t have the cash to do so.

The trial before California Superior Court Judge Michael Levanas in Los Angeles resumed today after a week’s hiatus. Levanas last week ruled that Sterling’s lawyers couldn’t call his wife’s attorneys to testify about their contacts with the doctors who in May examined Sterling and found he suffered from Alzheimer’s disease.

Sterling’s lawyers have argued that he was duped by his wife to participate in the examinations. They want Levanas to rule that Shelly Sterling can’t be allowed to conclude the sale. The deadline for the sale to close is Aug. 15 and the NBA has said that, if the deal is still not completed by Sept. 15, it may seize the team.

Forced Sale

Sterling testified earlier in the trial that he will never approve of the sale of the team he has owned since 1981. The NBA in June dropped plans of a forced sale when his wife agreed to sell the team to Ballmer.

The NBA fined Sterling $2.5 million and banned him for life after after reported that he told a girlfriend in a secretly recorded conversation that he didn’t want her to bring black people to Clippers games or post photos online of herself with former NBA All-Star Earvin “Magic” Johnson.

The case is In the Matter of the Sterling Family Trust, BP152858, California Superior Court, Los Angeles County (Los Angeles).

-By Edvard Pettersson