Singapore Economy Economy set for 2-4% growth this year: MAS Slippage in H1 due to two factors: extreme weather in US, and tightening in China Source: Business Times / Top Stories [SINGAPORE] The Republic's economy is on track to grow 2-4 per cent this year while inflation will narrow to 1.5-2 per cent from the earlier forecast of 1.5-2.5 per cent, the Monetary Authority of Singapore (MAS) said yesterday. But while overall inflation has moderated, underlying price pressures persist. So the forecast for core inflation is unchanged at 2-3 per cent, it said. The economy has already averaged 3.4 per cent growth in the first half on a year-on-year basis, MAS managing director Ravi Menon said, explaining why full-year growth remains on track. Last year, the economy grew 3.9 per cent while inflation was 2.4 per cent. In the second quarter, the Singapore economy performed worse than the market expected - expanding 2.1 per cent compared to a year ago - according to advance estimates of gross domestic product (GDP) released by the Ministry of Trade and Industry (MTI) last week. This was slower than the 4.7 per cent growth seen in Q1. Most full-year GDP growth forecasts have now been revised to hover around the 3.5 per cent mark. Speaking at the MAS annual report 2013/14 press conference yesterday, Mr Menon said the slippage in H1 was due to two factors: extreme US weather, and tightening in China. "Latest indicators show modest recovery . . . when the two main engines of global growth are functioning, then regional growth will benefit," he said. In the US, recent data indicates continued economic expansion including modest rise in business spending; this is "important because corporate America is a key driver of growth". In China, growth should come within the consensus range of 7-7.5 per cent as the government provides targeted support amid ongoing structural reforms. China's factory activity expanded at its fastest pace in 18 months in July as new orders surged, a preliminary HSBC survey showed yesterday - the latest indication that the economy is picking up as government stimulus measures kick in. On inflation, MAS and MTI on Wednesday jointly said that headline inflation is "expected to come in at the lower half" of the 1.5-2.5 per cent forecast range. But the 2014 forecast for core inflation (which strips out accommodation and private road transport costs) is expected to remain at 2-3 per cent. "This is higher than the historical norm, and is underpinned by the persistence of a tight labour market while improvements in productivity growth take time," MAS said. MAS will remain vigilant in ensuring that cost pressures are contained over the medium term, and inflation expectations are well anchored, it added. "Our monetary policy stance has been consistent with that aim," it said. MAS has maintained a modest and gradual appreciation in the Singapore dollar's nominal effective exchange rate (S$NEER) - the value of the Singapore dollar relative to currencies of its major trading partners and competitors - since April 2010. MAS said the modest and gradual appreciation path of the local currency since April 2010 has restrained but not fully offset temporary inflationary pressures from economic restructuring. Elaborating, Mr Menon said core or underlying inflation - which hits lower- income earners harder, and is the focus of MAS monetary policy - has two sources: imported and domestic. Imported inflation has been flat, he said. "On average, imported inflation has been zero so far this year, compared to the same period last year due to the appreciation of the Singapore dollar, (which) has completely neutralised the impact of foreign prices on domestic prices." But we know this is not the case when we go to the supermarket, he said. The prices of non- cooked food items - although imported - have been volatile and generally higher, Mr Menon said. Papaya prices went up 16 per cent (year-on-year) in H1, while banana prices rose 18 per cent. This was due to the effects of adverse weather in Thailand and Malaysia. At the same time, the prices of oranges went down 7 per cent and tomatoes, 10 per cent. Looking beyond fruits and vegetables, sugar prices were down, wheat prices were up, while the price of Thai white rice was broadly stable. The Singdollar appreciation cannot offset these kinds of increases (due to adverse weather conditions), Mr Menon said. Taking all non-cooked food items together, prices went up 2.8 per cent in the first half of 2014. This is higher than overall inflation, he said. "The greater volatility reflects the periodic shocks in global food prices that have become more frequent in recent years." But domestic inflationary pressures - mainly from higher wages passing through to consumer prices - remain firm, he said. "The cost of services is most affected, given their high labour content. As a result, the cost of eating out, education, healthcare and recreation rose at a faster rate compared to overall inflation in the first half of 2014." Mr Menon expects core inflation to be higher than the historical average of 2 per cent during the period of economic restructuring in the next few years. "The aim of our monetary policy is to keep core inflation expectations anchored at around 2.5 per cent.
"Inflation may exceed this level from time to time but we aim to ensure that it does not do so on a sustained basis," he said. -By Siow Li Seh http://www.businesstimes.com.sg/premium/top-stories/economy-set-2-4-growth-year-mas-20140725 Singapore Real Estate Too early to ease property cooling measures: MAS Risk factors have not changed, property prices still at elevated levels Source: Business Times / Top Stories [SINGAPORE] The Monetary Authority of Singapore said it is too early to ease property cooling measures as prices remain high. Risk factors have not changed, MAS managing director Ravi Menon said at the MAS annual report 2013/2014 press conference yesterday. Property prices remain at elevated levels although they have started to soften, he said. Prices went up 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, he said. Global interest rates are still at historical lows, and "if you relax property measures in the current easy environment, you may set off another spiral of price increase," he said. The level of debt among highly leveraged households remains high, though the growth of debt has moderated, he said. For these highly leveraged households, reducing the level of debt will take time and they need to work with their banks and commit to debt repayment plans, he said. "On the whole, MAS's view is that it's premature to ease property cooling measures now." Mr Menon's comments come amid increasing calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer's stamp duty and the seller's stamp duty. Early this month, the National Development Ministry responded by saying it was still too early to roll back property cooling measures. It said that although home sales have decreased, prices have remained relatively stable. Yesterday, Mr Menon said that it is important to secure gains in stabilising the market and restoring financial prudence. The number of over-leveraged households to property purchases remain broadly similar to last year - 5-10 per cent, he said. Over-leveraging is seen when total debt servicing payments exceed 60 per cent of monthly income. "It's stopped getting worse," but people take time, "a couple of years" to adjust and reschedule their debt repayments. That's why it's important to be pro-active in cooling the market, Mr Menon said. The property cooling measures have helped to strengthen overall household balance sheets in two ways, he said. First, they have tempered the growth of household debt. Year-on-year growth of household debt has moderated from nearly 13 per cent in the third quarter of 2011 to 5.5 per cent in the first quarter of this year. Second, the risk profile of new housing loan borrowers has improved. Almost all new housing loans granted since the introduction of total debt servicing ratio or TDSR, were within 60 per cent threshold. Mr Menon also said that there's no timeline or target on when the government might decide to relax some of the measures. A sharp reduction in property prices will impact the economy. He said that the MAS does not want to see a collapse in the property market, it's not good for the economy. Banks here are resilient to property market shocks, he said. Stress tests of our banks during last year's Financial Sector Assessment Programme by the International Monetary Fund showed they were resilient against various stress scenarios. These stresses included a combination of domestic interest rates increasing by more than 200 basis points; the unemployment rate rising above 10 per cent; cumulative decline in equity prices up to 70 per cent over three years; and cumulative decline in residential property prices up to 50 per cent over three years. MAS's own stress test this year - assuming more disorderly unwinding of quantitative easing in the US and higher levels of US dollar funding squeeze - shows similar results, he said. Latest data show a big jump in private home purchase in Q2 over Q1. DTZ's analysis of URA Realis caveats data showed a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.
Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is less than half the 13,651 units transacted in the first-half of last year - reflecting the dent on transactions created by the TDSR framework since its introduction in late-June 2013, noted Lee Lay Keng, regional head (SEA), research at DTZ. -By Siow Li Seh Too early to relax property curbs: MAS
Risks remain, it says; modest pick-up in overall economic growth expected Source: Straits Times / Top Of the News PROPERTY cooling measures of recent years are helping to rein in housing prices and household debt, but it is too soon to ease restrictions, a top official says. Monetary Authority of Singapore (MAS) managing director Ravi Menon, speaking at the release of the MAS annual report yesterday, noted that housing prices have moderated but that risk factors are largely unchanged. "Property prices remain at elevated levels... Prices have gone up 60 per cent in the past four years, and they've declined just 3.3 per cent in the past three quarters," he noted. "Global interest rates are still extremely low, and if you relax property measures in the current, very easy liquidity environment, it might set off another spiral of price increases." Also, high-debt households are still cleaning up their finances and need time to pay off their loans. Still, he said, property cooling measures have helped strengthen overall household balance sheets. First, household debt growth has moderated. In the third quarter of 2011, for example, households took on 13 per cent more debt than they did in the same quarter of 2010. But in the first three months of this year, debt grew just 5.5 per cent. Second, new housing loan borrowers are better placed to repay loans. Almost all new housing loans granted since the introduction of the total debt servicing ratio - designed to stop borrowers from overextending themselves - were within the 60 per cent limit. The moderation in property prices, along with a fall in car prices, has seen MAS narrow its forecast range for headline inflation to 1.5 per cent to 2 per cent, from 1.5 per cent to 2.5 per cent before. This comes amid a somewhat brighter economic outlook, with growth set for a modest pickup in the second half, Mr Menon said. The economy is on track to grow 2 per cent to 4 per cent this year, with both major engines of world growth, the United States and China, holding up, he said. Sectors relying on regional demand, including some financial services, business services and chemicals, should do well, he added. And those looking to the home market should stay resilient. But the likes of electronic production will keep seeing slower growth as economic restructuring forces firms to face a new reality of higher labour costs, he said. "What is happening now is the 'servicisation' of manufacturing, where production is shifted offshore but control centres continue to be located here." Looking at the Middle East, Ukraine and Thailand, CIMB economist Song Seng Wun noted that external risks remain. Even so, Singapore has fared well as a financial centre. Financial and insurance services grew 10.8 per cent last year.
MAS, which manages Singapore's foreign reserves, reversed a $10.6 billion loss to post an overall profit of $15.8 billion for the financial year. Stripping away the effect of currency translation, it made foreign investment gains of $10.6 billion, up slightly from $9.4 billion previously. -By Yasmine Yahya Finance Correspondent ‘Too early’ to ease property cooling measures: MAS Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says. Source: Channel News Asia / Singapore SINGAPORE: The property market may be stabilising but it is still "too early" to ease the cooling measures that were introduced in recent years, the Monetary Authority of Singapore (MAS) said on Thursday (July 24). This is because home prices remain elevated while global interest rates are at historical lows, MAS Managing Director Ravi Menon said. Speaking at the release of MAS' annual report for the 2013/14 financial year on Thursday (July 24), Mr Menon said property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters. He also said relaxing property measures at a time of low interest rates may set off another spiral of price increases. "The prices are just beginning to soften,” said Mr Menon. “Levels of prices remain very high, interest rates remain very low, debt levels remain high for the highly leveraged households. It will take time for this to adjust, some further adjustment in prices is not unexpected; we will watch very closely supply and demand conditions - not just levels. but also changes; we will look very carefully at the credit and liquidity environment and a variety of other factors to make a continual judgement. “As I stated, the objective is not to see a collapse in prices
but at the same time to have an orderly correction and stabilisation of the
market which is now beginning to take place.” Some Singapore households remain highly leveraged, and they
would need time to reduce their debt levels, he added. On the whole, it would be premature to ease property cooling measures now as it was important to secure the gains made in stabilising the market and restoring financial prudence. - CNA/cy/rw
http://www.channelnewsasia.com/news/singapore/too-early-to-ease/1280068.html Analysts say JTC price, rental indices give inadequate picture Industrial prices, rentals continue to moderate in Q2 as occupancy slides Source: Business Times / Top Stories [SINGAPORE] Prices and rentals of industrial space continued to moderate in the second quarter, as occupancies hit lows not seen since 2007 amid an increased land and space supply. JTC data released yesterday showed prices rising marginally by 0.7 per cent from Q1, compared to the preceding quarter's gain of 3.8 per cent. Year-on-year, prices rose 3.9 per cent in Q2, slower than the average increase of 18.8 per cent annually over the past four years. Rentals have stabilised, dipping by 0.1 per cent in Q2, after registering a slight 0.4 per cent growth in Q1. Year-on-year, they rose 5 per cent, still slower than the average 10.2 per cent increase annually over the past four years. The increase in industrial prices in Q2 was partly driven by multiple-user factory space, whose prices rose by 2.5 per cent because a larger proportion of those transacted in the quarter were freehold properties compared to Q1. This led several analysts to flag problems with JTC's price index which does not distinguish between different lengths of tenures. This may pose problems in future as industrial land tenures have been capped at 30 years, down from up to 60 years before, and shorter-tenure spaces tend to have lower selling prices. Savills Singapore research head Alan Cheong said: "The index is still not satisfactory. We have to wait until JTC starts stratifying the index according to tenure and backtrack it." Meanwhile, industrial occupancy rates fell for a third consecutive quarter by 0.9 percentage points to a seven-year low of 90.7 per cent from Q1. Year-on-year, they were also down by 1.7 percentage points, from 92.4 per cent a year ago. This came as industrial space released exceeded the rise in occupied stock during the quarter, which will likely continue. In the second half of this year, about 1.8 million sqm of space is estimated to come onstream. After that, between 2015 and 2017, an average of around 1.6 million sq m of industrial space will come on every year, representing 3-4 per cent of the current available stock. It is also higher than the average annual supply of 1.3 million sqm and demand of 900,000 sqm over the past three years. Chia Siew Chuin, director of research and advisory at Colliers, said the dip in occupancies of multiple-user factories to 87.3 per cent in Q2 - itself also a seven-year low - is cause for concern. This happened because completed redevelopment projects in the private sector, from the red-hot 2010-2012 period when developers were plunging headlong into building strata-titled factories to feed speculators' appetite, have started coming onto the market, she said. The government has since moved to clamp down on their permissible uses. "Now landlords, agents, occupiers want to be careful not to flout the regulations, so they go through a more stringent and lengthy process, which affects the lead time to a successful deal and eventual occupancy." JTC's recent moves to limit the amount of space that can be sub-let may lead to similar caution and stringent checking processes for JTC premises and properties on JTC land, she added. Savills' Mr Cheong believes that occupancy rates are more reflective of the state of the market, over rentals. This is because a lot of vacancies are coming from some "speculative grade factories" boasting manufacturing-unrelated "extras" like air-con ledges, planter boxes, high ceilings and private enclosed spaces and which ask for rents north of S$3 psf. Most conventional spaces do not charge above S$2 psf. The rental index, however, does not reflect their higher asking rents because transactions are not being closed at those prices, he said. He expects vacancy rates to further widen to double digits. As more supply comes onstream, it will be the "run-of-the-mill" multi-tenant light industrial factories, properties without a strong positioning, or shorter-tenure factories that will suffer as there is already an ample supply of them in the market, analysts say.
But prices for buildings with better locations or specifications or with longer tenures will likely hold up better due to their scarcity. -By Lee Meixian Industrial land supply up, stabilising rents and prices Occupancy rates down to levels not seen since 2007: JTC data Source: Straits Times / Money THE increase in the supply of industrial land has stabilised rents and prices in some categories while sending occupancy rates down to levels not seen since 2007. The occupancy rate of the overall industrial property market dipped to 90.7 per cent in the second quarter, according to data from state industrial landlord JTC yesterday. Occupancy for multiple- user factory space - intended for light industry and most commonly used by small and medium-sized enterprises - is at 87.3 per cent. JTC attributed this to the increase in supply of land by the Government in recent years. Ms Chia Siew Chuin, the director of research and advisory at Colliers International, said the buoyant strata-titled industrial sales market from 2010 to 2012, which resulted in more redevelopment projects in the private sector, was another contributing factor. The dip in occupancy might also have been due to stricter enforcement over who qualifies to use the space as well as the time lag between project completion and physical occupation of the space, said Ms Chia. Rents stabilised in the first half of the year, in line with lower occupancy, going up just 0.3 per cent. This was much lower than the 4.7 per cent increase in the second half of last year, and the 4.3 per cent hike in the first half of last year. Industrial rents slipped 0.1 per cent in the three months to June 30 from the first three months of the year but they were still 5 per cent higher than in the same period last year. This was slower than the average increase of 10.2 per cent per year over the past four years, JTC said. Prices of industrial space have also settled down. They rose just 0.7 per cent in the second quarter from the first and were 3.9 per cent higher than the second quarter last year. These rises are also a far cry from the average increase of 18.8 per cent per year over the past four years, JTC said. The leasing market could continue to see healthy activity over the next six months, said Ms Chia, thanks to Singapore's attractiveness as a base for regional headquarters and research and development centres for firms looking to grow their footprint in South-east Asia. Industrial rents are expected to remain stable or ease marginally over the next six months, as industrialists are likely to remain cost-conscious, given the still-uncertain global economic environment, added Ms Chia. Besides releasing more land, the Government "will also ensure that upcoming industrial developments better serve the needs of industrialists", JTC said yesterday.
About 1.8 million sq m of industrial space will become available in this half of the year, of which 400,000 sq m will be multiple-user factory space. -By Chia Yan Min Prices, occupancy of industrial space decline in Q2The Government will continue to monitor the overall
industrial property market and, where necessary, release more land with a range
of sizes to suit different industry needs, JTC says. Source: Channel News Asia / Business SINGAPORE: Prices and rentals of industrial space continued to moderate in the second quarter, as industrial occupancy rates continued to fall, according to a quarterly report by JTC. Released on Thursday (July 24), the report said industrial occupancy rates in the second quarter fell by 0.9 percentage point from the previous quarter to 90.7 per cent – the lowest level since late 2007. For multiple-user factory space, the occupancy rate fell by 1.1 percentage points to 87.3 per cent. On a year-on-year basis, the occupancy rate of the overall industrial property market fell by 1.7 percentage points, from 92.4 per cent to 90.7 per cent. For multiple-user factory space, the occupancy rate fell by 3.1 percentage points, from 90.4 per cent a year ago to 87.3 per cent in the second quarter.
PRICES, RENTALS STABILISE Rentals of industrial space in the second quarter fell 0.1 per cent from the previous quarter, while rentals of multiple-user factory space remain unchanged. On a year-on-year basis, rentals of industrial space rose by 5 per cent in the quarter, significantly slower than the average increase of 10.2 per cent per year over the past four years. For multiple-user factory space, rentals rose 4.3 per cent on a year-on-year basis, also significantly slower than the average increase of 9.8 per cent per year over the past four years.
Prices also continued to stabilise in the second quarter, rising marginally by 0.7 per cent on a quarter-on-quarter basis. For multiple-user factory space, prices rose by 2.5 per cent from the last quarter, mainly due to a higher proportion of freehold properties transacted. On a year-on-year basis, prices for industrial space rose by 3.9 per cent, significantly slower than the average increase of 18.8 per cent per year over the past four years. Similarly, the 6.2 per cent year-on-year increase in prices of multiple-user factory space was also significantly slower than the average increase of 19.1 per cent per year over the past four years.
UPCOMING SUPPLY According to JTC, the Government will continue to monitor the overall industrial property market and where necessary, release more land with a range of sizes to suit different industry needs. JTC also said it will continue to develop more specialised industrial land with features such as shared facilities and services to support the growth of key industry clusters and catalyse new ones. About 1.8 million sqm of industrial space is expected to come on-stream in the second half of this year, out of which 400,000 sqm are multiple-user factory space. Between 2015 and 2017, an average of about 1.6 million sqm of industrial space is expected to come on-stream every year.
- CNA/cy http://www.channelnewsasia.com/news/business/singapore/prices-occupancy-of/1279904.html Kheam Hock Gardens put up for en bloc sale Source: Business Times / Property [SINGAPORE] Private residential development Kheam Hock Gardens off Dunearn Road was launched for sale by tender yesterday. The 41,245 sq ft site has a S$59 million reserve price, which translates to a per-sq-ft price of S$1,430. Located at 38 Kheam Hock Road, the freehold development - a regularly-shaped plot was designated as "residential, two-storey mixed landed" under the Master Plan 2014 - comprises 19 apartments. More than the required 80 per cent of owners have consented to the collective sale.
The gross plot ratio is 1.05, and its gross floor area (GFA) is 43,300 sq ft. If the GFA of the redevelopment exceeds this, development charges will be payable. Based on the Urban Redevelopment Authority's typical plot size for a terrace unit, developers can build up to 25 strata terrace units; they may also go for any alternative combination of detached, semi- detached and terrace units. http://www.businesstimes.com.sg/specials/property/kheam-hock-gardens-put-en-bloc-sale-20140725 2016 'expiry date' for Dakota Crescent flats Residents of 17 low-rise rental blocks can choose to rent or buy new flats Source: Straits Times / Singapore DAKOTA Crescent, one of Singapore's oldest public housing estates, is making way for developments under Mountbatten's estate renewal plans. Residents of the 17 low-rise rental blocks off Old Airport Road must leave by end-2016. Those who choose to buy a new flat anywhere else will get a relocation grant of up to $15,000. Only about 400 of the 648 units, built by the Singapore Improvement Trust in 1958, are occupied and about two-thirds of the households have at least one member aged 60 and above. Retiree Lee Choong Hian, 68, who lives alone in a two-room rental flat, will miss the estate where he has lived for 20 years. "The environment is good. At night it's peaceful, and transport is convenient," he said. Those who want to keep renting will get priority and their rents will not go up. Their options of one- or two-room flats include those in a new block in nearby Cassia Crescent, to be completed in 2016. They can also choose to buy a new flat from the HDB. Eligible first-timers will get a Central Provident Fund relocation grant of $15,000 for families or singles jointly buying a place; lone singles get $7,500. This grant is being offered for the first time in this relocation exercise. All tenants will also get a moving allowance of $1,000. The estate was named by experts as a piece of public housing history that should be saved. It was also one of the sites deemed "sacred" by readers in a Straits Times poll. The HDB said Blocks 13 and 21 "will be retained for interim use, as there is no immediate redevelopment plan". "Purely from a heritage point of view, I think it certainly has value," said Dr Yeo Kang Shua, conservation architect and Singapore Heritage Society secretary, while agreeing that the state has to balance competing needs. Mountbatten Member of Parliament Lim Biow Chuan said: "Those who like the heritage mostly don't live here." Even residents who do not welcome the move acknowledge that it has been a long time coming. Mr Yap Boon Hoo, 59, said: "We've lived here so many decades, we knew it was just a matter of time." The HDB said it would "take cognisance of the social memories of the area when redevelopment takes place in the future".
The estate's landmarks include an old-school playground with a blue mosaic-tiled dove design and a provision shop dating back to 1959, revived as a cafe last month. -By Janice Heng Real Estate Companies' Brief Keppel Land Source: Business Times Keppel Land's (KepLand) H1 2014 results were broadly in line, with core net profit at 53 per cent of our and 48 per cent of consensus full-year forecasts. While residential sales were slow, the group was active on the capital recycling front. Moving forward, the potential divestment of MBFC3 at attractive prices could provide short-term upside, but we remain cautious on the residential markets in Singapore and China.
http://www.businesstimes.com.sg/premium/singapore-markets/others/brokers-take-20140725 CapitaRetail China Trust puts up strong Q2 show Source: Business Times / Companies CAPITARETAIL China Trust (CRCT) achieved an 8.8 per cent rise in distribution per unit (DPU) for the second quarter ended June 30 to 2.59 Singapore cents on the back of strong rental reversions and tenant sales. This translates to an annualised distribution yield of 6.6 per cent based on the unit price of S$1.58 on July 23. Increased shopper traffic and tenant sales suggest that recent concerns over the impact of e-commerce in China are overblown, CRCT chief executive Tony Tan said yesterday. The retail operator in China remains open to expanding its portfolio, which is worth 10.4 billion yuan (S$2.1 billion) as at June 30, by acquiring malls from its sponsor CapitaLand or external third parties, he told analysts and reporters. "But the asking price remains sticky on the upside," Mr Tan said, adding that there are not many distressed assets for the picking in China.
In the second quarter, CRCT racked in a 29.5 per cent growth in net property income to S$34.2 million and its distributable income grew 18.7 per cent to S$21.3 million from a year ago, thanks to the new contribution from CapitaMall Grand Canyon and stronger revenue from the reopened CapitaMall Minzhongleyuan. -By Lynette Khoo CapitaRetail China Trust's payout up 8.8% Source: Straits Times / Money STRONG growth at its multi- tenanted malls as well as added contributions from new and upgraded malls in China boosted CapitaRetail China Trust's second-quarter results yesterday. The real estate investment trust (Reit) owns 10 shopping malls across six cities in China, including Beijing and Shanghai. It posted a distribution per unit (DPU) of 2.59 cents for the three months to June 30, 8.8 per cent higher than in the preceding year. Distributable income rose 18.7 per cent to $21.3 million for the period compared with the previous year. Net property income jumped 29.5 per cent from the preceding year to $34.2 million, partly due to the stronger yuan against the Singapore dollar in the second quarter, the trust said yesterday. Mr Tony Tan, chief executive of the Reit manager, said in a statement that the healthy performance was partly the result of strong growth at its multi-tenanted malls. It was also underpinned by new contributions from the purchase of CapitaMall Grand Canyon and the upgrading of CapitaMall Minzhongleyuan, he said. The Reit bought CapitaMall Grand Canyon, in Beijing, on Dec 30 last year. CapitaMall Minzhongleyuan, in Wuhan in Hubei province, was reopened on May 1 this year after its revamp was completed. Mr Tan said the Minzhongleyuan mall "now boasts modern facilities ... while retaining the charms of a heritage building". Its committed occupancy rate was 91.2 per cent as at June 30, below the overall occupancy rate of 98.1 per cent across the malls in the Reit's portfolio. The Reit managed to raise rents by 24.9 per cent on average upon lease renewal at its multi-tenanted malls, except at Minzhongleyuan. Tenants in the Reit's malls, excluding Minzhongleyuan, also pulled in 13.6 per cent more sales in the quarter compared to the previous year. Mr Victor Liew, chairman of the Reit manager, said in a statement yesterday that the Reit "remains upbeat on China's retail sales prospects" given the Chinese government's "strong commitment to balanced and sustainable long-term growth". Distributions will be paid out on Sept 25 this year.
CapitaRetail China Trust units closed 3.5 cents higher at $1.615 yesterday. -By Melissa Tan
http://www.straitstimes.com/premium/money/story/capitaretail-china-trusts-payout-88-20140725 Cambridge Industrial Trust's DPU up 0.9% in Q2 Source: Business Times / Companies CAMBRIDGE Industrial Trust (CIT) yesterday posted a 0.9 per cent rise in second-quarter distribution per unit (DPU) to 1.251 Singapore cents. Distributable income for the three months ended June 30 was 3 per cent higher at S$15.7 million. Gross revenue remained flat at S$24.6 million, but net property income (NPI) fell 5.6 per cent to S$19.66 million. Excluding straight line rent adjustments of S$0.2 million and S$0.8 million for Q2 2014 and Q2 2013, respectively, gross revenue actually rose S$0.6 million (about 2.5 per cent) to S$24.4 in Q2 2014, but was offset by a 31.1 per cent rise in property expenses, a CIT spokeswoman told BT. Higher marketing service commission due to increased leasing activities, higher land rents, as well as provision for doubtful debts, legal and professional fees jointly accounted for the rise in property expenses, the spokeswoman said.
The Q2 financial statement shows performance fees 87.9 per cent lower at S$1.68 million. A footnote said that the fees were payable to the trust's manager during the half year ended June 30. Borrowing costs dropped 23.1 per cent to S$4.17 million. -By Jacquelyn Cheok Cambridge Industrial Trust raises Q2 payout by 0.9% Source: Stratis Times / Money CAMBRIDGE Industrial Trust is raising its distribution per unit for the second quarter by 0.9 per cent from a year ago to 1.251 cents, its manager said yesterday. Distributable income for the industrial property trust rose 3 per cent in the quarter from the year before to $15.7 million, while revenue was flat at $24.6 million. Net property income, however, dipped 5.6 per cent to $19.7 million for the three months to June 30. This was partly due to higher property manager's fees, which included marketing service commissions for securing new leases and lease renewals for the properties. Utilities costs also rose, as did legal and professional fees, and the trust set aside a $0.25 million provision for doubtful debts. For the first half of the year, distribution per unit amounted to 2.502 cents, up 1.1 per cent from the previous year. Distributable income climbed 3.1 per cent to $31.3 million, but net property income slid 8.4 per cent to $38.6 million and revenue edged down 2.5 per cent to $48.1 million. The trust has completed two acquisitions totalling $73 million since January and renewed 1.3 million sq ft of leases, or about 16 per cent of its portfolio. It has also finished asset enhancement for 3 Pioneer Sector 3 Phase 1 ahead of schedule and has four other ongoing enhancement works to be completed over the next few months. The trust is also planning to focus more on markets outside of Singapore, its manager said. "As we look forward, we recognise the limitations of the Singapore market and will increase our focus on other markets," said Mr Philip Levinson, chief executive officer of Cambridge Industrial Trust Management. "Our initial focus will be on Australia, Japan and Malaysia which mirror Singapore's sovereign risk and transparency characteristics," he added.
The units closed unchanged at 75 cents yesterday. -By Fiona Chan
Mapletree Comm Trust's Q1 DPU up 11.2% Annualised distribution yield of 5.6%; gross revenue rises 6.6% Source: Business Times / Companies MAPLETREE Commercial Trust (MCT) has posted distribution per unit (DPU) of 1.95 Singapore cents for the first quarter ended June 30, up 11.2 per cent from the same year-ago period. This reflects 5.6 per cent annualised distribution yield based on Wednesday's closing price of S$1.385. The counter ended 0.5 Singapore cent higher at S$1.39 yesterday. MCT released its results after the stock market closed. Unitholders can expect to receive their Q1 distribution on Sept 4. Books closure is on Aug 4. The stock goes ex-dividend on July 31.
The trust owns VivoCity mall, Bank of America Merrill Lynch HarbourFront, PSA Building and Mapletree Anson. -By Kalpana Rashiwala Mapletree Commercial Trust's DPU rises 11.2% Source: Straits Times / Money HIGHER income from its properties helped Mapletree Commercial Trust (MCT) post stronger first-quarter earnings yesterday. The firm, managed by Mapletree Commercial Trust Management, posted a distribution per unit (DPU) of 1.95 cents for the three months to June 30, up 11.2 per cent from the preceding year. This will be paid to unitholders on Sept 4. Income available for distribution in the quarter rose 12.9 per cent from the previous year to $41 million. Net property income was up 9.7 per cent at $51.7 million and gross revenue increased 6.6 per cent to $68.7 million from the corresponding period last year. The trust's manager said in a statement that its better performance was largely due to stronger contributions from its VivoCity mall in HarbourFront, PSA Building in Alexandra Road and Mapletree Anson office tower in Tanjong Pagar. New brands at the VivoCity mall helped boost shopper traffic by 5 per cent from a year earlier, sending sales at its shops up 4.9 per cent, said Ms Amy Ng, chief executive of the trust's manager. The PSA Building remained fully leased, while new rentals secured during the quarter lifted Mapletree Anson to full occupancy. Property operating expenses were 1.8 per cent down to $17 million in the same period, thanks to lower consumption and expenditure on marketing activities. The trust's retail operations made up 67 per cent of its net property income for the quarter, up from 64.9 per cent a year ago. This resulted in a corresponding dip in contributions to net property income from its office properties, which fell from 35.1 per cent to 33 per cent in the same period. Earnings per unit for the three-month period ended June 30 was 1.83 cents, up from 1.646 cents for the same period a year ago. Net asset value per unit as at June 30 remained unchanged at $1.16 from March 31. MCT's manager also said that unitholders can choose to buy new units by receiving all or part of the distributions in the form of units, instead of cash.
The units closed 0.5 cent up at $1.39 yesterday. -By Cheryl Ong http://www.businesstimes.com.sg/premium/companies/others/mapletree-comm-trusts-q1-dpu-112-20140725
http://www.straitstimes.com/premium/money/story/mapletree-commercial-trusts-dpu-rises-112-20140725 Soilbuild wins S$168m HDB contract Source: Business Times / Companies SOILBUILD Construction Group has been awarded a S$168.4 million contract by HDB for the construction of nine 13-storey blocks (total of 1,294 units), one commercial building, two blocks of multi-storey carpark/electrical substation/communal facilities and precinct pavilion at Yishun Avenue 4/Yishun Ring Road. Works are scheduled to commence next month and is expected to be completed by the second quarter of 2017. http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140725 Views, Reviews & Forum Unlock value of property to boost retirement cash Source: Today Online / Voices I refer to the report “Is ‘generous’ use of CPF funds a threat to retirement adequacy?” (July 23). As per my quote accompanying the report, the issue is how to achieve perpetual income for retirees. There are approximately three generations of Singaporeans. The pioneers had low wages and fewer job opportunities, thus their Central Provident Fund (CPF) balances are low and they mostly depend on their children for retirement income. The second category is the asset-rich, cash-poor generation, who were fortunate to buy their property before prices appreciated, but their CPF is mostly used for housing. Then we have Generations X and Y, who have high salaries but also face high property prices. With “perpetual income” in mind, the old-old have their children as their asset, the old have property, and the young-old have cash if they have not overcommitted in housing. It is accepted that CPF alone will be insufficient for retirement here because of the rising cost of living and longer life expectancy. One must look at how to obtain cash flow from one’s assets. The bulk of our assets would be in property, and both ministers at the CPF and Retirement Adequacy Forum acknowledged that we must find a way to unlock this value. The panellists, mostly academics, acknowledged that this is more difficult with public housing, which is leased. The only asset residents have is the remaining lease of their flat, which is depreciating. This means that the authorities must adopt a radical approach to allow residents to monetise their asset. This is not only a CPF issue but involves the Housing and Development Board and maybe even a government mandate.
We need a dedicated forum to search for solutions. Tuesday’s forum had to satisfy too many parties and too many issues. -By Geoffrey Kung http://www.todayonline.com/voices/unlock-value-property-boost-retirement-cash Global Economy & Global Real Estate New-home sales fall in June Source: Business Times / World [WASHINGTON] Sales of new homes in the United States sank in June and prices fell, signalling weakness in the struggling housing market, official data released yesterday showed. Sales of new single-family houses fell to an annual pace of 406,000 in June, down 8.1 per cent from May, the Commerce Department said. Sales in May were revised down sharply to a rate of 442,000 houses from the prior estimate of 504,000, according to the monthly data, which tend to be volatile. Year-over-year, the June sales level was down 11.5 per cent.
The median sales price of new houses sold in June was US$273,500, falling from US$282,600 in May. The stock of homes on the market rose to a 5.8-month supply at the current sales pace. In May the inventory ratio was 5.2 months. -From Washington, US http://www.businesstimes.com.sg/premium/world/new-home-sales-fall-june-20140725 Venezuela's vertical slum may be demolished Squatters living in tower to move to government housing outside the capital Source: Business Times / Property [CARACAS] An abandoned Caracas skyscraper dubbed the world's tallest shanty-town after a squatters' takeover could be demolished once its inhabitants are out, Venezuela's leader said on Wednesday. Soldiers and officials began this week moving out the first 160 of more than 1,150 families living inside the 45-storey "Tower of David" in central Caracas. They are going to government-provided low-income housing outside the capital. "The Tower of David is famous. It's a symbol of a strange situation, a vertical barrio (neighbourhood)," President Nicolas Maduro said. "It was viewed negatively by society. We resolved it, as these things should be resolved, with dialogue and understanding." Originally intended to be a bank centre, but left unfinished in 1994, the vast concrete skeleton was viewed by many Venezuelans as a focus for crime and symbol of property "invasions". Police occasionally raided it hunting kidnappers.
The squatters said that the tower was a safe refuge from dangerous slums and something of a model community. They built carefully divided apartments and established shops and services inside, bricking up holes to keep children safe. -From Caracas, Venezuelans New York City fast losing heritage buildings to developers Rising property value, housing demand to blame Source: Business Times / Property [NEW YORK] Pieces of a ceiling known for its carved neoclassical images of floating angels and windswept women is all that is slated to remain of one of the oldest independent bookstores in New York City, officials said. The rest of the century-old Rizzoli Bookstore's interior in midtown Manhattan will likely soon be reduced to rubble, said Manhattan Borough president Gale Brewer. After a long and unsuccessful battle by community members and politicians to save the space, Rizzoli recently joined a growing number of iconic New York businesses displaced or permanently shuttered by soaring property values and a rising demand for luxury housing.
As wealthy prospective buyers search for dwindling space to transform into high-end retail or apartment sites, city historians and sentimentalists fear that the shops and restaurants from some of Manhattan's most notable eras have been marked for extinction. -From New York, US Change in HK Reit rules could divert HK$34b to development Reits can now invest 10% of gross asset value in property development, repair Source: Business Times / Property [HONG KONG] A change to Hong Kong's real estate investment trust rule may free HK$34 billion (S$5.4 billion) for property development and rebuilding, according to Victor Yeung, who runs Admiral Investment Ltd that invests in Reits. Of the amount, HK$27 billion could come from trusts with Hong Kong assets, Mr Yeung, a former managing director at LaSalle Investment Management, said in an e-mail response. Hong Kong-based Admiral is seeking US$200 million for a fund to invest in regional Reits.
Reits will be allowed to invest as much as 10 per cent of their gross asset value in property development or redevelopment, Hong Kong's Securities and Futures Commission said in a statement posted on its website on Tuesday. -From Hong Kong, China Architecture buffs stumble on 'unique architect's house' Personal interest won them lease for Emmons house Source: Business Times / Property [SAN FRANCISCO] By now, it is almost universally acknowledged that affordable apartments near San Francisco are difficult, if not impossible, to find. And overlooked architectural gems? At this point, surely nothing in the Bay Area has been overlooked. But every now and then the impossible happens. And so it was in the autumn of 2011, when Charles DeLisle and Ralph Dennis stumbled upon a listing for a home in Mill Valley on Craigslist. The language was somewhat vague: "unique architect's house", it read. Still, it was worth a look. "We came up the hill, went up the stairs, walked into this glass-and-cedar house with 180-degree views of Oakland," Mr DeLisle recalled, "and got really excited." And not just about the views. The house, it turned out, had been built in 1951 by Donn Emmons, a highly regarded midcentury architect, for his young family. A 1,200 sq ft, two-story cedar structure, it had a ship's ladder instead of a staircase and a facade that was almost entirely glass, to take advantage of the views. It was still owned by the Emmons family, so it was in its original state.
Sure, that meant it had drafty old doors and a less-than-stellar heating system, but the rent was US$2,800, significantly less than the going rate for most two-bedroom houses in the area - and exactly what the pair had been paying for their much smaller apartment in the city, which they shared with two big dogs. -From San Francisco, US London Housing Market Stagnates as Hometrack Sees Rapid Cooling Source: Bloomberg / Luxury London house prices stagnated in July, the first month with no growth since December 2012, as demand plunged and properties took longer to sell, Hometrack Ltd. said. The survey of real-estate agents showed values were unchanged in the capital in July after increasing 0.5 percent in June. Higher-value markets in the west and southwest slid, taking the number of postcodes registering declines to 11 percent. Areas recording price gains slumped to 12.1 percent from 40.6 percent in June. London had propelled U.K. house prices over the past year and today’s data add to evidence that measures to cool the market are working. The Bank of England introduced measures in June to limit riskier mortgages and new rules came into force in April requiring tougher mortgage-affordability tests. “Seasonal factors always lead to a slowdown in demand and market activity in the summer months, but it is clear that there are bigger forces at work with a pronounced loss of momentum in the London housing market,” said Richard Donnell, director of research at Hometrack. The slowdown is “in part due to warnings from the Bank of England and others of a possible house-price bubble,” he said. London PeaksThe rate of growth in London peaked at 1.1 percent in February, the data showed. In July, homes took an average 4.3 weeks to sell, up from 2.7 weeks in March. The slowdown will probably “linger” as the market in the capital “cools rapidly,” the report said. Across England and Wales, prices grew 0.1 percent in July, compared with an increase of 0.3 percent in June. That makes this the slowest month since February 2013. The number of new buyers registering with estate agents fell 0.9 percent. “The gap between overall supply and demand has narrowed sharply in the last three months, pointing to a reduction in the upward pressure on house prices,” Hometrack said. “The measure of demand has moved into negative territory.” Buyers are also becoming more cautious amid the prospect of rising interest rates, Hometrack said. The BOE will probably increase its benchmark rate from a record low in February, according to futures contracts. -By Jack Aldane Subway Inn Closing After 77 Years in Midtown Manhattan Source: Bloomberg / Luxury Subway Inn, the New York City institution that clung to its dive bar roots even as its Upper East Side neighborhood sprouted steel-and-glass office and apartment towers, is serving its last drink. The bar, which opened in 1937, will close Aug. 15 and will seek another location, according to a notice on its Facebook page. A bartender who would only give his name as Steven S. and said he was the son of the owner, confirmed today that the building’s landlord had given it notice. A spokesman for World-Wide Group, the building’s owner, declined to comment. “This place is New York,” said Alex Kalich, 32, as he sat at the bar sipping a vodka and soda today. “This is what New York used to be like. It’s a place with a soul.” The bar is the latest casualty of rising rents and fierce competition for space to build housing and offices in Midtown. Rodeo Bar, the Murray Hill honky-tonk, said this month that it will close this weekend after 27 years in business. Across from Bloomingdale’s at 60th Street and Lexington Avenue, and adjacent to a subway entrance, Subway Inn’s neon sign has beckoned patrons daily, from its 10 a.m. opening time. Inside, a photograph of Marilyn Monroe recalls the legend that it was among her neighborhood haunts while filming the 1955 film “The Seven-Year Itch.” Elias Gutierrez, a 44-year-old interior designer at Thomas Britt Inc., said he first came to the bar about 10 years ago after an argument with his boss. He ordered a rum-and-Coke, and when he returned two months later the bartender remembered his drink. After becoming a regular, he said he became close friends with the bartenders. No local bar has the same welcoming atmosphere, he said. “This is an American icon,” Gutierrez said as The Eagles’ “Hotel California” played on the jukebox. “People walk to and by this block for this place.” The Subway Inn will seek out another location in the neighborhood to cater to the many regulars, who live and work in the area, the bartender said. -By Jonathan Lamantia http://www.bloomberg.com/news/2014-07-24/subway-inn-closing-after-77-years-in-midtown-manhattan.html U.S. Mortgage Rates Little Changed Source: Bloomberg / Luxury U.S. mortgage rates were little changed, keeping borrowing costs close to the lowest this year as housing rebounds after a slow start to 2014. The average rate for a 30-year fixed mortgage held at 4.13 percent, Freddie Mac said in a statement today. The average 15-year rate rose to 3.26 percent from 3.23 percent, according to the McLean, Virginia-based mortgage-finance company. The decline in 30-year loan costs from a high of 4.56 percent last August is helping to revive demand for homes. Purchases of previously owned houses rose to an eight-month high in June, the National Association of Realtors said this week. “Lower rates will provide an enticement for potential homebuyers who are sitting on the sidelines to move into the market,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC, said yesterday in a telephone interview. -By Prashant Gopal http://www.bloomberg.com/news/2014-07-24/u-s-mortgage-rates-little-changed.html Sales of U.S. New Homes Fell in June After Large Revision Source: Bloomberg / Luxury Fewer U.S. new homes than forecast were sold in June and data for the prior month was revised down by a record, painting a troubling picture of a market struggling to gain traction. Sales declined 8.1 percent to a 406,000 annualized pace, the fewest since March and lower than any projection in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. That followed a May rate of 442,000 that was 12.3 percent less than estimated last month. Restrictive lending rules, limited land supply, higher mortgage rates and more expensive properties are restraining housing, underscoring Federal Reserve Chair Janet Yellen’s concern that the industry is underperforming. Other data showed the fewest Americans in more than eight years filed applications for unemployment benefits last week, probably reflecting a pickup in auto-making during a typically slow time of year. “The housing data on balance has looked weaker than some of the other indicators on the economy,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. “The tightness in credit conditions has limited the pool of prospective buyers.” The Standard & Poor’s 500 Index extended a record as Facebook Inc. rallied on higher revenue, and growth in global manufacturing offset the drop in home sales. The S&P 500 rose 0.1 percent to 1,987.98 at the close in New York. The S&P 500 Homebuilding Sub Index dropped 4.9 percent. Global ManufacturingEuro-area manufacturing and services activity strengthened in July, signaling confidence that further stimulus by the European Central Bank will consolidate a fledgling economic recovery, figures from London-based Markit Economics showed today. A Chinese manufacturing gauge rose this month to an 18-month high, bolstering the government’s chances of meeting its 2014 economic-growth target, preliminary figures from HSBC Holdings Plc and Markit Economics also showed today. The Markit Economics preliminary index of U.S. manufacturing in July retreated from a four-year high the prior month, the London-based group said today. The average over the past three months was the strongest since mid-2010. “U.S. manufacturers are enjoying a summer of scorching growth,” Chris Williamson, chief economist at Markit, said in a statement. “The growth rebound that the survey has signaled for the second quarter therefore looks to have been sustained into the third quarter.” AutomakersAmong manufacturers, a pickup in auto-making is probably behind the drop in the number of people applying for unemployment benefits. Jobless claims fell by 19,000 to 284,000 in the week ended July 19, the fewest since February 2006, a Labor Department report showed today in Washington. The timing and extent of closings to retool auto factories for the new model year are typically difficult for the government to gauge, causing claims to gyrate at this time of year. Michigan, New Jersey and Ohio were among states that reported the biggest decreases in claims in the week ended July 12 amid fewer dismissals in manufacturing and transportation industries, today’s report showed. That may indicate more auto plants than usual remained open this year to meet improving demand. “Today’s jobless claims data likely informs us more about production than employment,” Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York, said in a note after the report. “Auto production is in overdrive at a time when factories are normally shut down to retool for new makes and models. We would expect a significant pick-up in motor-vehicle production and manufacturing employment in July.” Survey ResultsThe drop in new-home sales was larger than any estimate in the Bloomberg survey. The median forecast of 76 economists called for a decrease to 475,000. Projections (NHSLTOT) ranged from 440,000 to 525,000. The May reading was revised down from a previously reported 504,000 pace that would have been the strongest since June 2008. Purchases decreased in all four regions in June, with a 20 percent drop in the Northeast and a 9.5 percent decline in the South leading the way, today’s report showed. The supply of homes at the current sales rate climbed to 5.8 months, the highest since October 2011, from 5.2 months in May. There were 197,000 new houses on the market at the end of June, the most since October 2010. The data corroborate Yellen’s Senate testimony last week that progress in the housing market has been lackluster. Yellen’s DisappointmentWhile housing has recovered from its lows, “activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing,” Yellen said last week during her semi-annual testimony to the Senate Banking Committee. The average rate for a 30-year fixed mortgage was 4.13 percent in the week ended July 24, according to Freddie Mac in McLean, Virginia. While down from 4.53 percent at the start of the year, it’s higher than 3.35 percent at the start May 2013. The median price of a new home increased 5.3 percent last month from a year ago to $273,500, according to today’s report. Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final. Purchases of existing homes increased 2.6 percent to a 5.04 million annual rate last month, led by gains in all four U.S. regions, figures from the National Association of Realtors showed earlier this week. Prices advanced at the slowest pace since March 2012 and inventories rose to an almost two-year high. First-Time BuyerJeffrey Mezger, chief executive officer at KB Home (KBH), said last month he’s seeing some signs that the first-time homebuyer is returning. The Los Angeles-based company reported a profit for its fiscal second quarter as selling prices and orders increased. “While these favorable trends are very encouraging, it is still going to take some time until we reach historical new home activity levels,” Mezger said in a June 27 earnings call. “As a result, many outlooks on the housing industry are measured, but we are optimistic as we are building a real growth story in the current environment.” -By Victoria Stilwell and Nina Glinski Blackstone Said to Prepare $700 Million Sale of Home Debt Source: Bloomberg / Luxury Blackstone Group LP (BX), the largest U.S. landlord of single-family homes, is working with Deutsche Bank AG (DBK) to sell about $700 million of securities tied to mortgages on rental properties, its third such deal, according to a person with knowledge of the plans. Deutsche Bank may start marketing the debt to investors this month, said the person, who asked not to be identified because the details are private. The offering would be the sixth of bonds backed by rental homes, the largest of which was a $993 million sale in May, also by New York-based Blackstone. Wall Street has issued $3 billion of securities backed by houses owned by Blackstone, Colony American Homes Inc. and American Homes 4 Rent (AMH) since last year. Blackstone, which has amassed 45,000 houses since early 2012 through its Invitation Homes LP unit, became the first to tap the securitization market in November by selling $479.1 million of debt. Securitization was a “huge, watershed event for the industry,” Justin Chang, chief executive officer of Colony American Homes, which has more than 17,000 houses, said in a telephone interview. “The process of companies buying massive amounts of homes and accessing capital markets has all happened really quickly. With the multifamily industry, it took many years for leaders to emerge. This has all happened in 24 months.” Denise Dunckel, a spokeswoman for Blackstone’s Invitation Homes, and Amanda Williams, a Deutsche Bank spokeswoman, declined to comment on Blackstone’s bond-sale plans. Businesses BuiltHedge funds, private-equity firms and real estate investment trusts have acquired as many as 200,000 homes, mostly in the past two years, and used them to build rental businesses from the rubble of the U.S. foreclosure crisis. Other Wall Street-backed landlords are looking to the debt market for capital to purchase more houses and increase returns by adding leverage to the properties they bought with cash. Morningstar Inc. is expecting as many as 10 deals to come to market this year, according to Brian Grow and Becky Cao, managing directors at the Chicago-based company. Top-rated tranches of the securities allow landlords to borrow for less than 2 percent above the London Interbank Offered Rate. Silver Bay Realty Trust Corp. (SBY), the first single-family landlord to go public, said on July 22 that it’s planning an offering of securitized loans. The deal will be for $312.7 million in debt on 3,089 homes, according to a presale report by Morningstar. Sternlicht’s CompanyStarwood Waypoint Residential Trust, managed by an affiliate of Barry Sternlicht’s Starwood Capital Group, also intends to sell bonds backed by its rental properties. The company owned 7,358 homes and first-lien nonperforming loans on 2,095 houses as of March 31. American Residential Properties Inc. (ARPI), a landlord with about 7,000 homes, and Progress Residential LP, which was started by former Goldman Sachs Group Inc. partner Donald R. Mullen Jr. and owns more than 10,000 homes, also have announced plans to issue securities. Companies lending to single-family landlords, including Cerberus Capital Management LP, Colony American Finance and Blackstone’s rental-lending arm, B2R Finance LP, are racing to package debt on homes for the first multiborrower bond sale. All three have said they expect to sell their first bonds this year. The market for bonds backed by rental houses may eventually exceed $30 billion a year, according to Jade Rahmani, an analyst at Keefe, Bruyette & Woods Inc. -By Heather Perlberg and John Gittelsohn |
