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10th June 2014

Singapore Real Estate

Dark condos shine light on rising vacancy

Suburban areas worst hit; softening rentals seen

Source: Business Times / Top Stories

[SINGAPORE] As dusk descends upon the Singapore skyline, the excess capacity building up in the private housing market is evident. Dark patches in some condominium developments completed six to 12 months ago, or even longer, point to significant vacancy.

Analysts cite a host of factors, including strong investment demand for real estate after the global crisis, escalation in private home completions of late, and slower expatriate inflow. Vacancies are set to climb and rents fall in general. Suburban locations, where most of the supply is, will be the worst hit.

"If increasingly there are a lot of empty units," says Lee Lay Keng, DTZ regional head (SEA) research, "it could indicate we're not making the best use of our limited land resources."

After the global crisis, investors sought refuge in trusty assets such as real estate. Fuelled by the low interest rate environment, some took to hoarding property at new launches and are hence not bothered whether they can find a tenant after taking possession of their units, say observers. Some high net worth foreign buyers treat their Singapore property as a holiday home and leave it unoccupied most of the time.

But there are others who leave units vacant because they are not able to find tenants. As Ms Lee notes: "Competition for tenants is increasingly intense, with both demand and supply factors at work. On the demand side, changes in labour policies have slowed down the flow of foreign professionals into Singapore while on the supply side, there is a higher-than-average number of private home completions."

JLL national director Ong Teck Hui highlights that "those who bought for rental returns would find themselves in a more competitive leasing market today, where units in mediocre locations would be more difficult to lease and therefore remain vacant for a longer duration, especially during this period of strong supply".

Ku Swee Yong, CEO of Century 21, explains that those who acquired private homes, say in 2010, would already be sitting on profits. "If they bought for capital gains, they may prefer to keep their unit empty rather than rent it out because it is quite usual for a fresh tenant to have a clause in the lease agreement protecting them from viewings by the landlord in the first six or even 12 months."

R'ST Research director Ong Kah Seng says that, due to low rents, some owners have left their units empty, especially the cash-rich set who did not take any housing loan for their purchase. "A vacant unit may deteriorate faster but leasing it out at a low rent may not be feasible since it will incur high maintenance costs. High-end properties have the finest finishes, so maintenance and repair costs may be hefty. Selected fit-outs and finishings such as tiles may be of limited collection and difficult to replace if it is damaged by the tenant."

Developers left with unsold units, especially in the slow high-end segment, also contribute to vacancies as these projects are completed. Other factors may also be at play in specific projects. But the overall trend of rising vacancies and softening rents is clear amid climbing private home completions since last year.

The 13,150 private homes that received TOP last year was 27.3 per cent above the previous year's 10,329 and 40 per cent above the past 10-year average of 9,395. The figure for Q1 this year was 4,114 and the full-year tally is expected to hit 17,138, based on estimates submitted by developers to the Urban Redevelopment Authority. Thereafter, completions are slated to climb further to 21,738 next year and 26,252 in 2016 before easing the following year.

URA figures show that the pool of vacant private homes has risen to 19,284 at end-Q1 2014 from 18,003 at end-Q4 2013 and 14,532 at end-Q1 2013. The islandwide vacancy rate rose to 6.6 per cent at end-Q1 this year from 6.2 per cent a quarter earlier and 5.2 per cent at end-Q1 2013.

CBRE executive director (residential) Joseph Tan says that the latest quarter's increase could be due partly to families that had yet to move to the new homes that were completed in Q1.

Rising vacancies have been accompanied by softening rentals. For the first time since Q3 2009, URA's private home rental index contracted in Q4 last year. The index dipped 0.5 per cent quarter-on-quarter, followed by a further 0.7 per cent drop in Q1.

CBRE predicts a 5-8 per cent drop in rents generally this year. JLL predicts a 4-8 per cent decline; Century 21's Mr Ku reckons competition for tenants will drive rents down by 8-10 per cent, followed by a further drop of up to 25 per cent in 2015.

Against the backdrop of the large supply, says DTZ's Ms Lee, some landlords could become more flexible on their rents, particularly after the removal of the vacancy tax refund with effect from Jan 1, 2014. "Landlords now have to pay property tax on their vacant units and some may accept a lower rent and have the unit rented out instead of leaving it empty."

This could create downward pressure on rents.

JLL's Mr Ong predicts the vacancy rate could be around 7-9 per cent at end-2014.

Mr Ku reckons vacancy will head towards 7.5-8 per cent mid to late next year, adding that price drops are likely to be limited to 5-10 per cent per year - assuming the economy is fine.

Competition for tenants is likely to be more intense in suburban projects, as the bulk of completions last year as well as the potential supply pipeline are in Outside Central Region (OCR). 

URA's Q1 rental index for non-landed private homes in OCR was down 2.3 per cent from a year ago. This compares with a decline of 0.3 per cent for Core Central Region (CCR) and a rise of one per cent in Rest of Central Region (RCR).

Of the 67,507 homes under construction at end-Q1, about 59 per cent were in OCR, 22 per cent in RCR and 19 per cent in CCR. Four years earlier, of the slightly over 36,000 units under construction, the respective shares were 30, 36 and 34 per cent, notes JLL's Mr Ong. "The heavy buying in OCR in the past few years has resulted in units under construction in this submarket surging 270 per cent over the past four years. While it is true that a high proportion of purchases in OCR is for owner-occupation, the level of investment purchases in the past few years has also been substantial.

"Based on rental contracts registered last year, OCR's share of the leasing market was about 31 per cent. Hence, the disproportionate oncoming supply may be expected to impact on this submarket more significantly."

Ms Lee, too, expects a bigger impact on rents and vacancy rates in the suburbs, "although rental demand will still be supported by budget-conscious foreign professionals as the rental quantum for suburban condos is lower than city-fringe or prime condos".

-By Kalpana Rashiwala

Tips on dealing with that empty condo

A new property left vacant deteriorates faster: Century 21 CEO

Source: Business Times / Top Stories

[SINGAPORE] "When we bring potential tenants for viewings these days, we have to look at double the number of properties compared with, say, two years ago," said Century 21 chief executive Ku Swee Yong.

"There are lots of choices from newly completed projects. And as long-term expats move to newer condos, older properties are also coming to the market for tenants. So vacancies are also rising."

One reason some investors are keeping their units in newly completed projects empty is that they intend to sell the property to realise the nice capital appreciation they may be sitting on.

In that case, it may be easier to keep the unit vacant in the interim, since this will facilitate viewings for potential buyers. Also, potential buyers keen on occupying the unit may not like a property with an ongoing lease that has some way to run.

-By Kalpana Rashiwala

Let there be light

Source: Business Times / Top Stories

[SINGAPORE] No official statistics are available on vacancy rates in individual completed condominium projects. But BT's lensmen put together a snapshot of "dark condos" in Singapore when they photographed a selection of projects between 8pm and 9.30pm on weekdays in the last week of May, before the start of the school holidays - and it's a telling picture.

Nine of the 10 projects featured here were completed, that is, received Temporary Occupation Permit (TOP), between January and September last year. The 10th, Hilltops, was completed in 2011.

While a rise in vacancies can be seen as overcapacity reflecting a ramp-up in completions since last year and fervent property investment demand post-global crisis, other factors may also be at play for specific projects.

The 10 projects photographed are mostly in the Core Central Region, though a few are in city-fringe or suburban areas.

-By Kalpana Rashiwala

Resale condo volume, prices slide in May

Rental volume up slightly but rents slip amid weak leasing conditions

Source: Business Times / Singapore

LOAN-RESTRICTION measures and buyers' stamp duties aside, two other factors - aggressive discounts offered by developers on new units and weak leasing conditions - drove resale transactions and prices of non-landed private homes down last month.

The developers of a few major condominium projects recently cut prices to drive up sales and clear their stock by their deadlines, failing which they would have to pay extension charges. This move has siphoned some demand away from the resale market, analysts said.

It has also not helped the resale market that purchases there take a few months to complete, by which time the market would have entered the second half of the year, when leasing activity is traditionally slower, given that fewer expatriates come here then than in the first half. This further tempered demand.

Flash figures released by the Singapore Real Estate Exchange (SRX) yesterday showed that the number of condo units resold in May fell 7.5 per cent month-on-month to 421 units. This is 42.6 per cent lower than the 734 units resold in May last year.

-By Lee Meixian

Resale prices, volume for non-landed private homes fall in May

The number of resale transactions for non-landed private homes in May fell by 7.5 per cent from April, while prices dipped 0.3 per cent to mark a 17-month low, the Singapore Real Estate Exchange estimated.

Source: Channel News Asia / Singapore

SINGAPORE: Resale transactions for non-landed private residential units fell by 7.5 per cent month-on-month in May, and prices dipped slightly to mark a 17-month low since December 2012, according to Singapore Real Estate Exchange (SRX).

In its flash report for May released on Monday (June 9), SRX said an estimated 421 transactions were registered, down from the 455 transactions in April. This represented a 42.6 per cent drop from the 734 units resold in the same month last year, it added.

Commenting on this, real estate agency ERA said: "Buyers may have diverted their attention to hot new projects that were launched by developers at attractive prices, for example Commonwealth Towers, as well as projects relaunched by developers at lower revised prices such as Sky Habitat."

Overall resale prices dipped slightly by 0.3 per cent, with the city area leading the drop with 2.9 per cent and the suburbs seeing a 0.3 per cent dip. The city fringes climbed by 0.6 per cent though, the report stated.

The majority, or 16 of 25 districts, experienced negative Transaction Over X-value in May, led by District 9 (Orchard, Cairnhill, River Valley) and 14 (Geylang, Eunos), SRX said.

Bucking the trend, units in the Bukit Timah, Holland Road and Tanglin district (District 10) posted the highest positive Transaction Over X-value among districts with more than 10 transactions with S$80,000. This was followed by those in Upper Bukit Timah and Ulu Pandan (District 21) with S$29,000, it noted.

"Resale prices have continued to fall with sellers becoming more realistic about reduced demand. The private resale market remains gloomy and prices may continue to moderate to the loan curbs like the Total Debt Servicing Ratio (TDSR)," ERA said.

- CNA/kk

Non-landed private home resale prices hit 7-month low

Source: Straits Times

Chill winds continued to blow over the private housing resale market, with prices slumping to a seven-month low last month. Resale prices of non-landed private homes, such as condominium units, slipped 0.3 per cent last month compared with April, according to the Singapore Real Estate Exchange.

Sheng Siong buys Tampines property

Source: Business Times

Supermarket chain Sheng Siong Group has exercised an option to buy a three-storey Housing and Development Board commercial property at Block 506 Tampines Central 1 for $65 million. Sheng Siong said the acquisition will help it establish a presence in Tampines, a large potential market in Singapore.

Sheng Siong to buy Tampines property for $65m

Supermarket chain Sheng Siong to set up a new outlet at Tampines Central, to be opened in the first quarter of 2015.

Source: Channel News Asia / Business

SINGAPORE: Supermarket group Sheng Siong intends to purchase a three-storey Housing and Development Board (HDB) commercial property in Tampines Central for S$65 million, it said in a statement on Monday (June 9).

Sheng Siong said it has paid an option fee of S$650,000 for the 3,876 square metre leasehold property to the vendor, S-11 Wan Jin Investment. The property is near Tampines MRT station.

The proposed acquisition will allow the group to establish a presence in Tampines, one of Singapore's largest residential districts.

Sheng Siong said it plans to open a new outlet of around 910 square metres at the Tampines property in the first quarter of 2015. The outlet will be incrementally enlarged in tandem with the scheduled expiry of various tenancies in 2016 and 2017.

Sheng Siong, which is one of Singapore's largest supermarket operators, reported a 19.3 per cent year-on-year increase in net profit to S$12.5 million for the three months ended March, as higher turnover and improved gross margins offset higher costs.

- CNA/ly

Two directors of land banking firm sentenced to jail for cheating

Plan does not amount to Ponzi scheme, but false representations led investors to part with money, says judge

Source: Today Online / Singapore

SINGAPORE — The criminal prosecution against three directors of land banking firm Profitable Plots for cheating investors of about US$2.5 million (S$3.1 million) reached a juncture yesterday, with jail terms handed down to two of them, while the third was acquitted.

Briton Timothy Nicholas Goldring, 60, was sentenced to seven years in prison, while his compatriot John Andrew Nordmann, 55, was sentenced to eight years’ imprisonment for 18 cheating charges, following a trial that ran from April last year to January this year.

But State Courts judge Chay Yuen Fatt acquitted Nordmann’s Singaporean wife, Geraldine Anthony Thomas, 45, ruling that she had no role in making false representations about the investment scheme in question.

However, the trio still face outstanding charges. The court’s decision yesterday related only to 18 out of 86 charges pressed against each of them.

Yesterday, the judge said the investment scheme involving a fuel additive called boron did not amount to a Ponzi scheme, as argued by prosecutors.

Rather, it was dishonest only to the extent of two false representations they had made to investors: That money invested would be used exclusively for the purchase of boron products and that the products had already been pre-sold to major corporations.

The latter misrepresentation gave the impression that the investment was safe and able to generate returns of 12.5 per cent in six months for investors. In reality, the money invested was largely used for Profitable Plots’ expenses and the boron products were never pre-sold to corporations, from their launch in November 2008 until the scheme was terminated in August 2010, when the company was raided by the Commercial Affairs Department.

Prosecutors, however, had argued that the entire scheme was a sham hatched to deal with Profitable Plots’ cash-flow problems caused by money owed to investors in a separate land banking scheme.

The trio also used a shell company incorporated in Dubai to bear the contractual obligations of the boron scheme, while Profitable Plots took and kept investors’ funds, prosecutors contended, in calling for Goldring and Nordmann to each be sentenced to 12 to 14 years’ jail.

Although he disagreed that the entire boron scheme was bogus, the judge ruled that the false representations were enough to dishonestly induce investors into parting with their money. He also rejected Nordmann’s defence that the criminal charges were nothing more than contractual breaches.

Nordmann and Goldring said they would appeal against the court’s decision. Their bail was increased from S$200,000 to S$240,000 yesterday and Thomas’ bail was extended because of the remaining charges.

In court yesterday, Profitable Plots investors made up the majority in the full public gallery, including some who had not purchased boron products.

-By Neo Chai Chin

Real Estate Companies' Brief

Frasers Hospitality Trust IPO could raise up to US$358m: sources

Source: Business Times / Companies

[SINGAPORE] Thai billionaire Charoen Sirivadhanabhakdi's Singapore real estate company Frasers Centrepoint Ltd (FCL) could raise as much as US$358 million by listing a hospitality industry trust business in the Republic, two people with direct knowledge of the matter said.

The deal size is slightly below an earlier estimate for the initial public offering, made before Frasers Hospitality Trust (FHT) began pre-marketing last week. The trust comprises six serviced residences controlled by FCL and six hotels such as Singapore's InterContinental Hotel, owned by Mr Charoen's TCC group.

FCL indicated to investors the newly listed firm will have a market capitalisation of between S$1.02 billion and S$1.12 billion, one of the people told Reuters. The parent plans to sell a 30 per cent to 40 per cent stake in FHT to investors, raising up to S$448 million, both people said.

The sale could be formally launched as early as next week, they said. A formal indicative range is yet to be disclosed, but one source said FHT could offer an indicative dividend yield of 6.5 per cent to 7.5 per cent.

Saizen Reit completes strategic review

Source: Business Times

Saizen Reit said it will focus on cash management and debt levels after completing a strategic review. It may consider buying back units "at times of unit price weakness", it said. The counter closed at 96.5 cents, up half a cent, yesterday.


Source: Business Times

Over the weekend, CapitaLand (CAPL) announced that, together with concert parties, it has by 5pm on June 6, 2014, owned, controlled or have agreed to acquire (including acceptances) an aggregate of 3,784,462,936 shares of CapitaMalls Asia (CMA), which represents 97.1 per cent of CMA's issued share capital. Therefore, its stake in CMA is now above the threshold to compulsorily acquire the remaining shares that it does not own.

Views, Reviews & Forum

Curb sale of land for private housing

Source: Straits Times

In recent years, there has been a proliferation of private housing developments all over Singapore. And as land becomes more scarce, we start to see housing developments on very small plots of land, as well as the clearing of forests and pockets of greenery to build more swanky condominiums.

Global Economy & Global Real Estate

S Korea's Lotte to open four malls in Indonesia by 2018

Department store operator aims to tap country's growing consumer spending

Source: Business Times / Indonesia

[JAKARTA] Lotte Shopping Co, South Korea's largest department store operator, plans to open four shopping malls in Indonesia by 2018 to tap growing consumer spending in a nation where half the population is younger than 30.

PT Lotte Shopping Avenue Indonesia will build two in Jakarta in the next three years, with the others in the country's second-biggest city, Surabaya, and in Medan on Sumatra island, president director Suh Chang Suk said in an interview here last week. There is a lot more potential for malls in the world's fourth-largest population, Mr Suh said.

A growing middle class is increasingly attracting retail and consumer manufacturing companies to South-east Asia's largest economy, replacing natural resources as the key prospective industry for overseas money, Mahendra Siregar, Indonesia's investment chief, said in April. Ikea, the world's largest furniture retailer, plans to open a store this year.

"For the retail industry, it's great because the population of the young generation is big," Mr Suh said.

-From Jakarta, Indonesia

Slowdown hits Korean home lease system

More landlords are seen demanding monthly payments, threatening the future of 'jeonse' contracts

source: Business Times / Property

[SEOUL] A lengthy property market slump and low interest rates are threatening the future of a uniquely South Korean home lease system that traces its roots back to the 19th century.

Jeonse contracts have been a mainstay of the South's housing market for decades, offering tenants the enticing, and at first sight startling prospect of not actually paying rent.

Instead, the tenant forks out a hefty, up-front deposit - typically around 40 per cent of the property's value - which is then refunded in its entirety, or renewed, after two years.

At its peak in the mid-1990s, two-thirds of all housing rents and leases in South Korea were using the jeonse system.

-From Seoul, Korea

S&P sees China home prices falling this year

Source: Business Times / Property

[SHANGHAI] China home prices will fall this year as developers cut prices to meet sales targets amid a cooling property market, Standard & Poor's said.

Home prices will fall 5 per cent this year compared with an 11.5 per cent gain in 2013, the New York-based ratings company said in a report yesterday. Sales volume will improve in the second half of the year and rise 10 per cent for the full year, boosted by price cuts, according to the report.

"Prices are likely to continue to slide because of large inventory in some markets," Hong Kong-based analysts, led by Bei Fu, wrote in the report. "Many small unrated developers will feel the heat the most because their sales and financing capacities are substantially weaker than their larger peers'. Some lower-tier cities with limited demand and abundant supply could see deeper downward price adjustments."

The pressure on Chinese developers was underscored by the collapse of a builder in a city south of Shanghai in March. After four years of government restrictions to cool the housing market, home sales and property construction are sliding and have become a drag on the economy, which recorded its slowest growth in six quarters in the first three months of the year.

-From Shanghai, China

Supply pressures to drive down China home prices

Source: Today Online / Business

BEIJING — Home prices in China will fall this year as developers cut them to meet sales targets amid a cooling property market, ratings agency Standard & Poor’s said in a research report published yesterday.

Home prices in the world’s second-largest economy will decline 5 per cent this year, compared with an 11.5 per cent gain last year, the report said. Sales volume will improve in the second half of the year and rise 10 per cent for the full year as the discounts attract buyers sitting on the fence, it added.

“Prices are likely to continue to slide because of the large inventory in some markets. Many small unrated developers will feel the heat the most because their sales and financing capacities are substantially weaker than their larger peers’. Some lower-tier cities with limited demand and abundant supply could see deeper downward price adjustments,” the report said.

The pressure on Chinese developers was underscored by the collapse in March of Zhejiang Xingrun Real Estate, which owed 3.5 billion yuan (S$700 million) to creditors that included more than 15 banks.

After four years of government restrictions to cool the housing market, home sales and property construction are sliding and have become a drag on the economy, which recorded its slowest growth in six quarters in the first three months of the year.

There are signs that the government is taking action to limit the real estate slowdown. The central bank last month called on the country’s biggest lenders to accelerate the granting of home mortgages, while Southern Weekly reported that the Housing Ministry has allowed some cities to adjust home-buying curbs as they see fit.

Home prices in China fell 0.3 per cent last month from April, the first month-on-month drop since June 2012, said SouFun Holdings, the country’s biggest real estate website owner.

Developers set a target 20 per cent higher than their average 2013 sales but achieved only 27 per cent of it in the first four months of the year, said S&P, which tracks 27 developers.

“We expect most large national players to be able to weather the market correction ahead. Among the rated developers, companies with more aggressive debt-funded growth appetite or weak execution ability will face downgrade risks,” it said.

The S&P report comes after rival ratings agency Moody’s Investors Service last month revised its credit outlook for Chinese developers to negative from stable. 

-By Bloomberg

Chinese property sector faces surge in maturing debt

Source: Today Online / Business

BEIJING — China’s property developers face a record surge in maturing debt next year, as the country’s banking regulator steps up monitoring risks from the cooling real estate market.

The amount of United States dollar-denominated bonds that must be repaid next year will jump to US$2.83 billion (S$3.54 billion), the most in data compiled by Bloomberg from 1993.

Most Chinese builders listed on the mainland or in Hong Kong are behind fiscal year sales targets and achieved less than a third of their targets in the first four months, analysis based on Bloomberg data showed.

The China Banking Regulatory Commission will monitor the financial and cash-flow conditions of developers and support the borrowing needs of first-time home buyers, its vice-chairman Wang Zhaoxing said last Friday.

Chinese Premier Li Keqiang must balance efforts to staunch off-balance-sheet lending, known as shadow banking, a key source of funding for many smaller property firms, while preventing widespread debt defaults.

The collapse of developer Zhejiang Xingrun Real Estate in March fuelled speculation that a shakeout among the nation’s almost 90,000 real estate companies could follow.

The country’s builders raised 49 per cent less through trusts in the last quarter as the collapse highlighted default risks. Issuance of property-related trusts, which target wealthy investors, slid to 50.7 billion yuan (S$10.2 billion) in the first quarter from 99.7 billion yuan in the fourth quarter, data compiled by Usetrust showed. 

-By Bloomberg

Property on China island bucks trend

As the market slumps elsewhere, Chenjia Town near Shanghai thrives; but at the expense of swelling debt that's threatening local-govt finances

Source: Business Times / Property

PROPERTY prices are booming in an island town of 60,000 people near Shanghai while the market slumps elsewhere. It comes at a cost: swelling borrowing that's threatening local-government finances.

Tang Chunmei, a 43-year-old real estate agent in Chenjia Town, 45km from China's financial hub, said average apartment prices may rise 35 per cent in seven years. That contrasts with cooling nationwide, as home prices fell 0.3 per cent in May in the first monthly drop since June 2012. Chenjia financed its expansion in part with an 800 million yuan (S$160 million) bond sold through a financing unit last year, exceeding the town's 120 million yuan of fiscal revenue, to build affordable apartments for farmers as rice fields are turned into tourist attractions.

"We've been so busy we can't even take days off on holidays," said Ms Tang, who now lives and works in a neighbourhood whose name means wealthy and grand, after relocating from a rural house nearby two years ago. "I don't know if I'm concerned about the local-government debt. Life is better than before."

-From Shanghai, China

Demand for Spanish shopping malls starts picking up

Purchases of large-scale complexes may reach 1.5b euros this year

Source: Business Times / Property

[MADRID] After a six-year slump, demand for Spanish shopping malls is showing signs of picking up as buyers bet that more and more consumers will return.

Purchases of large-scale retail complexes may reach as much as 1.5 billion euros (S$2.6 billion) this year as investors like Orion Capital Managers LP and Intu Properties plc anticipate a recovery in consumer lending, said Gema de la Fuente, an analyst at real estate agent Savills in Madrid. That's at least 10 times more than in 2012.

Growth in Europe's fifth-largest economy is gaining momentum, kindling consumer demand by creating jobs and allowing the government to ease the toughest austerity measures in more than three decades.

Spanish borrowing costs have dropped, with yields on 10-year government bonds last week hitting their lowest since Bloomberg began compiling the data in 1993.

-From Madrid, Spain

Hui Pursued Deal During SHK-MPF Lease Talks, Court Told

Source: Bloomberg / News

Rafael Hui negotiated a private consulting agreement with the billionaire brothers running Sun Hung Kai Properties Ltd. (16) at the same time the Hong Kong pension authority he headed agreed to renew its lease with the company in 2003, the city’s High Court was told.

“Perhaps it was a good deal, perhaps it was the best deal the Mandatory Provident Fund Authority could have ever got,” prosecutor David Perry said yesterday. “It doesn’t matter.” A public official seeking a favor creates an obligation, he said.

Hui, the government’s No. 2 official from 2005 to 2007, received more than HK$35 million ($4.5 million) in the form of payments and unsecured loans from Thomas and Raymond Kwok, the billionaire co-chairmen of Sun Hung Kai, according to the Independent Commission Against Corruption. The three men, and two others on trial for charges including conspiracy to commit misconduct in public office and to offer an advantage to a public servant, have pleaded not guilty.

Hong Kong’s pension authority, known as MPFA, signed a six-year lease at HK$103 million on June 10, 2003, Perry told the court. When the lease was signed, Hui was already living in a rent-free Sun Hung Kai flat, Perry said. MPFA said in an e-mail it doesn’t comment on any court case.

‘Look Mean’

Hui told investigators he didn’t recuse himself from discussions on MPFA’s office because he didn’t see a conflict of interest as he hadn’t agreed to work for the Kwoks yet, Perry told the nine-member jury yesterday, the 19th day of proceedings after preliminary applications and jury selection.

A second jury was selected last week after the first was discharged when one member asked to be excused for medical reasons. The trial is estimated to take until October, Judge Andrew Macrae told jurors.

Raymond Kwok claimed he made one HK$4.1 million payment to Hui before he became chief secretary because “he didn’t want to look mean,” Perry told the jurors on June 6. It was a special bonus for Hui’s consulting work, Kwok claimed, according to Perry.

Hui, 66, was “living way beyond his means,” spending on luxuries, including HK$33,000 for a dinner at an Italian restaurant and HK$42,000 on a watch, Perry said June 6. Hui had 14 bank accounts and 25 credit cards when he started his term as chief secretary in June 2005. In the year ended June 2007, his cash withdrawals and credit card spending exceeded his official income, Perry said.

Hui deliberately misled anti-corruption investigators when they spoke to him in late 2009 and again in early 2010 about his relationship with the Kwoks, Perry said yesterday. At the time, investigators had only uncovered a small portion of the payments the Kwoks had made to Hui, Perry said.

Cultural Hub

Hui was involved in two projects as chief secretary that Sun Hung Kai was interested in -- the development of the multibillion dollar proposal to build a cultural hub in West Kowloon and another on Ma Wan Island in Hong Kong’s west, Perry told the jurors. Hui, when he acted as consultant for Sun Hung Kai, had advised the developer about the West Kowloon project, Perry said, citing Raymond Kwok’s representations.

Sun Hung Kai owns the city’s two tallest buildings where companies including Morgan Stanley, Credit Suisse Group AG and UBS AG have their Hong Kong offices. The company, which also builds luxury apartments and shopping malls, has said the case has not and will not affect its operations.

The case is Hong Kong Special Administrative Region v Rafael Hui, Thomas Kwok, Raymond Kwok, Thomas Chan and Francis Kwan, HCCC98/2013, in Hong Kong’s High Court.

-By Shai Oster and Michelle Yun

Clegg Pledges to Borrow to Build Houses as he Sets Stall

Source: Bloomberg / News

U.K. Deputy Prime Minister Nick Clegg pledged to borrow money to build homes as he sought to “break the taboo” over state support for housebuilding.

The money could be spent buying land or supporting construction by housing associations and local councils, Clegg said in an interview yesterday after a speech in which he outlined the first elements of his Liberal Democrat party’s economic platform for next year’s election.

“Let’s break the taboo, certainly that exists in the Conservative Party, of doing the necessary to build the houses we need,” Clegg said. “This is now emerging as one of the big long-term structural problems with the economy. Not only is it unfair because it prices young people out of the market altogether, it’s actually a threat to the systemic stability of our financial system.”

Clegg committed his party, the junior coalition partner of Prime Minister David Cameron’s Conservatives, to reducing Britain’s debt ratio every year if the economy expands and to eliminating the structural budget deficit by 2018. Balancing the budget will still allow for investing in areas such as infrastructure and housing, Clegg told his audience, made up of members of both the business community and his party.

With a national election slated for May and his party struggling in opinion polls, Clegg is seeking to differentiate his economic plans from what he called the Conservatives’ preference for a shrinking state and the opposition Labour Party’s “reckless borrowing.” He is trying to regain support after placing fifth in last month’s European elections and coming under pressure from some parts of his own party to resign.

‘Sensible Rate’

“If this five-year parliament was about rescuing the British economy, the next will be about renewing it,” Clegg said in the speech at Bloomberg LP’s European headquarters in London. “So long as the economy is in a good state, we’ll get debt down to safe levels at a sensible rate.”

The U.K.’s debt will amount to 91.8 percent of output this year, according to European Commission forecasts.

While Clegg said future spending on public services should grow roughly in line with the economy, his party will make an exception in the case of investing in areas where national infrastructure is weak, such as railways and housing supply.

The U.K. needs as many as 300,000 new homes a year to meet demand, according to Clegg’s estimates, and Bank of England Governor Mark Carney and IMF Managing Director Christine Lagarde have warned of the risk the strength of the housing market poses to the economy.

‘Financial Stability’

“We will give ourselves permission to borrow for capital investment in infrastructure which boosts growth and maintains financial stability,” Clegg said in the interview. “I’m incredibly clear, given the warnings we’ve had from Carney, Lagarde and others, we should count housing in.”

In a survey of financial institutions by the BOE published yesterday, 40 percent of respondents said falling house prices were a key risk for the economy, up from 36 percent in the second half of 2013 and 25 percent a year ago.

Clegg denied his commitment to limit government borrowing to the amount needed for investment was the same as the “Golden Rule” pledged by the previous Labour administration under Tony Blair and Gordon Brown.

The Liberal Democrats would target investment that’s “absolutely indispensable to spurring growth” such as roads, power generation and affordable housing, he said in answers to questions after his speech.

“It’s quite different to the indiscriminate borrowing under Labour,” Clegg said. “It’s smart, it’s new, it’s distinctive and it combines responsibility with a commitment to investing in the kinds of things we need.”

Mansion Tax

Clegg reiterated the Liberal Democrat plan to focus any fiscal retrenchment on “those with the broadest shoulders,” such as by taxing the most expensive homes.

Just 7 percent of respondents in a YouGov Plc poll released June 1 said they would support the Liberal Democrats in the next election, down from 23 percent in 2010, while Clegg’s net approval rating fell to minus 65, its lowest on record. Matthew Oakeshott, an upper-house lawmaker, quit the party last month after being condemned for commissioning and leaking polls aimed at pushing Clegg out of his job in favor of Business Secretary Vince Cable.

-By Thomas Penny and Simon Kennedy

Facebook Buys Land Adjacent to Menlo Park Office Campus

Source: Bloomberg / Tech

Facebook Inc. (FB), the world’s biggest social network, bought land next to its headquarters expansion site in California’s Silicon Valley with plans to hold it as a real estate investment.

The Menlo Park, California-based company purchased about 59 acres (24 hectares) adjacent to a 1 million-square-foot (92,900-square-meter) complex designed by architect Frank Gehry that’s set to open next year, Genevieve Grdina, a Facebook spokeswoman, said in a telephone interview.

Grdina declined to disclose the price for the land, which was sold by TE Connectivity Ltd. (TEL)The Schaffhausen, Switzerland-based company, which makes products such as USB cables and electronic connectors, will lease back 10 buildings located on the parcel, Grdina said.

The acquisition is “an investment in our future,” and Facebook doesn’t have plans to develop the property, she said.

Jane Crawford, a spokeswoman for TE Connectivity, didn’t immediately return calls and an e-mail seeking comment.

-By Dan Levy

Prudential Venture Buys NYC Property in High Line Wager

Source: Bloomberg / Luxury

Prudential Financial Inc. (PRU) said a joint venture including the insurer’s real-estate arm purchased property in Manhattan’s Chelsea neighborhood for $160 million.

Prudential Real Estate Investors and L&L Holding Co. bought three interconnected buildings on West 25th Street comprising 200,000 square feet (18,600 square meters), the companies said today in a statement. Stephen Ross’s Related Cos. said it was the seller.

The property is adjacent to the High Line, the elevated park built on the site of a former rail line, with plans for an extension that will trace the western edge of Hudson Yards, Related’s $20 billion development. The planned 17 million-square-foot project is driving investment on Manhattan’s far west side, a largely industrial section that developers are transforming into an office district and residential enclave.

“The unique location of these offices in one of New York’s most prominent art-gallery districts, combined with the favorable market conditions, and the value L&L brings, made this an extremely attractive transactions for our investors,” David Pahl, a managing director with Prudential Real Estate Investors, said in the statement.

The operation had $41 billion of net assets under management as of Dec. 31, according to Newark, New Jersey-based Prudential, the second-largest U.S. life insurer. The Chelsea property was purchased on behalf of German institutional investors, the Prudential unit said.

Tesla, Beckham

The office properties purchased by Prudential, which were constructed between 1910 and 1917, were renovated over the last two years and have views of the High Line, the company said. Tenants include Target Corp. and fashion designer Victoria Beckham’s company, said John Chartier, a Prudential spokesman. Tesla Motors Inc. has a ground-floor showroom there, he said.

Related purchased the properties in 2012 for $93 million, said Joanna Rose, a spokeswoman for the company.

-By Craig Giammona

Home Depot Issues $2 Billion of Debt to Buy Back Shares

Source: Bloomberg / Luxury

Home Depot Inc. (HD), which signaled three weeks ago that it’s optimistic about the U.S. housing recovery, borrowed $2 billion with a bond sale that may fund share repurchases.

The nation’s largest home-improvement retailer issued equal portions of five-year, 2 percent notes and 4.4 percent debentures due in 2045, according to data compiled by Bloomberg. Proceeds will be used for general corporate purposes including stock buybacks, Atlanta-based Home Depot said in a regulatory filing.

Home Depot shares have underperformed the broader market this year, handing investors a 1 percent loss while the Standard & Poor’s 500 index rose 6.5 percent. The company repurchased $1.25 billion of stock in the first quarter. Today’s transaction may leave Home Depot with about $22 billion of adjusted debt, S&P analysts led by Andy Sookram wrote in a report that rated the new bonds A.

The company’s five-year securities yield 0.4 percentage point more than similar-maturity Treasuries, and its 2045 notes pay an extra 1.05 percentage points, Bloomberg data show. The rates were about the same as borrowing costs for similarly graded issuers whose businesses cater to discretionary consumer spending, the data show.

The retailer blamed lackluster first-quarter revenue on the harsh winter, not a slowdown in the housing market. Sales gained 2.9 percent to $19.7 billion, according to a May 20 company statement. Analysts on average estimated about $20 billion.

-By Charles Mead

Three Irish Hotels Offered for Less Than One Sold for in 2006

Source: Bloomberg / Luxury

The Malton, where Jacqueline Kennedy and her children vacationed in the 1960s, and two other Irish hotels were put on sale for 30 million euros ($41 million). That’s 10 million euros less than The Malton alone sold for in 2006.

The hotel, opened in 1854, is in Killarney about 290 kilometers (180 miles) southwest of Dublin and it’s where parts of “Ryan’s Daughter” starring Robert Mitchum was filmed. The 172-bedroom Malton is being sold together with the Metropole Hotel in Cork and the Kilkenny Ormonde Hotel in the city of the same name, broker Savills Plc (SVS) said in a statement today.

“This is the first portfolio of Irish hotels to be offered for sale in almost a decade,” said Tom Barrett, head of Savill’s hotel and leisure unit in Ireland. The hotels are profitable and “considerable interest” is expected, he said.

Irish commercial property values fell by as much as two-thirds after a real estate bubble burst in 2008. An improving economy is boosting demand for business properties, which gained the most since 2006 in the first quarter. Revenue per available room, a hotel-industry measure of occupancy and rates, rose 11 percent to 71 euros at Irish hotels last year, according to data compiled by researcher STR Global.

The decision to sell the properties was made after domestic and overseas investors approached the current owners to ask about purchasing them, according to Savills. The owners weren’t identified.

Free Travel

The Malton sold for about 40 million euros in 2006, according to broker CBRE Group Inc. Originally named The Railway Hotel, it was built on land acquired from Lord Kenmare on the condition that he and his family would have free rail travel and that trains would be held at the station if he was running late, according to the hotel’s website.

Other guests to have stayed at The Malton include Princess Grace of Monaco, actor Charlie Chaplin and former Irish prime minister Jack Lynch. The presidential suite is named the Kennedy Suite.

The properties can be purchased individually or as a portfolio, according to Savills. The 118-bedroom Kilkenny hotel includes a parking garage with 712 spaces. The Metropole has 112 bedrooms, the broker said in the statement.

The value of Irish hotels that will be sold this year will be more than 350 million euros, compared with about 200 million euros in 2013, London-based Savills said in a separate statement today.

-By Neil Callanan