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20th June 2014

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14,000 new HDB flats coming up in next six months: Khaw

Source: Channel News Asia / Singapore

SINGAPORE: In a blog post on Thursday (June 19), National Development Minister Khaw Boon Wan wrote that 14,000 new Housing and Development Board (HDB) flats have been completed so far this year, and another 14,000 new flats are on track to be completed in the next six months.

This is in line with the Government's plan of building 28,000 new flats this year, Mr Khaw added.

He also commented on the recent housing dialogue sessions, saying the MND found out that most couples would like to live in the same town or neighbourhood as their parents, and that the Government's job is to help them realise their wish.

Earlier, Minister of State for National Development Mohamad Maliki Osman said tweaking the quota system is one option the government could look into, to improve the chances of those hoping to live near their parents.

Mr Khaw said the Government has been able to facilitate multi-generational living through schemes like the Studio Apartment Priority Scheme, where half of studio apartments are reserved for seniors applying for one near their current home or married children.

There is also the Multi-Generation Priority Scheme, which allows parents and their married children to book a flat each in the same BTO project, he added.

- CNA/xy

Singapore Real Estate

Are shorter industrial leases a problem?

Property watchers say price cuts for some city fringe and suburban projects are likely to be done in a "very limited way" despite a lower take-up rate of such new homes over the past year.

Source: Channel News Asia / Business

SINGAPORE: Developers in Singapore have been cutting prices for some city fringe and suburban projects.

Property watchers Channel NewsAsia spoke to say price cuts are likely to be done in a "very limited way" in the city area despite a lower take-up rate of new homes there over the past year.

Developers have been launching fewer units in the city area.

For instance, in the first five months of this year, 231 units have been launched as compared to 807 new private homes in the same period last year.

The number of new private homes being bought in the city area is also getting fewer.

For example, from January to May this year, 203 units were bought compared to 1,017 new private homes sold in the same period last year.

Some analysts say the Additional Buyer's Stamp Duty has played a crucial role in keeping high-end buyers away.

Mr Ku Swee Yong, CEO of Century 21 Singapore, said: "Firstly, they (homes in the city area) appeal to foreigners, and foreigners are not back in due to that 15 per cent tax (Additional Buyer's Stamp Duty). Secondly, many of these units in the core central region are still designed with large format of 1,500, 2,000 square feet."

Some developers have turned to cutting prices to attract buyers.

Developer MCL Land of the Hallmark Residences in the Bukit Timah area trimmed prices by some 10 per cent earlier this year.

It has sold about 30 units since.

However, property watchers say developers of these luxury homes are unlikely to go to town offering discounts.

"The Qualifying Certificate (QC) which compels them (developers) to build within five years and sell within two years of TOP (Temporary Occupation Permit) - there is a penalty," said Mr Ku.

He added: "At this moment, for most developers who are holding on to their stock, paying the penalty is still worthwhile compared to giving a discount. Once you have given a discount on one unit, it hurts the valuation of the remaining units that are unsold."

Mr Desmond Sim, Head of CBRE Research Singapore, explained: "Generally by not giving direct discounts, it will help overall in the value of the project so at the end of the day, when the market turns, the value of the project is maintained and preserved."

Developers with deeper pockets, or are not hitting the deadlines stipulated under the QC scheme, may choose other strategies.

SLP's Executive Director of Research and Consultancy Nicholas Mak said some of the developers of these prime properties may choose to lengthen their marketing period, and in the meantime, turn to other areas for development such as the city-fringe or even overseas projects.

About six projects in the city area will be launched in the next few months, according to Savills Singapore's latest residential sales report.

This includes the Marina One, a mixed development at Marina Way.

The developer for this project is also behind the 660-unit Duo Residences in Bugis, which sold 600 units in the month it was launched.

The condominium was launched in November last year and according to figures from the Urban Redevelopment Authority, the 600 units were sold at prices between S$1,513 and S$2,596 per square foot (psf).

This compares to an average of S$2,300 psf the other projects in the vicinity were going for.

- CNA/fa

Vibrant taking majority stake in Cecil House

Transaction through 51% owned firm values the property at $110m

Source: Business Times / Companies

CECIL House is changing hands, through a sale of shares in the company that owns the property. The deal values the 11-storey office block on a site with a balance lease term of about 66 years, at $110 million.

Vibrant Group, formerly known as Freight Links Express, is teaming up with DB2 Group to purchase Cecil House from Cheong Sim Lam, whose family developed International Plaza in the 1970s.

In a filing with the Singapore Exchange yesterday, Vibrant said it has subscribed for a 51 per cent stake in the share capital of Shentoncil Pte Ltd, which has entered into a sale and purchase agreement with Mr Cheong to acquire 100 per cent of the share capital of Ececil Pte Ltd, the owner of Cecil House.

A company search listed Shentoncil's shareholders as Dennis Leong Chee Seng and Tan Swee Meng. The two are also known to be shareholders of property group DB2.

-By Kalpana Rashiwala

Real Estate Companies' Brief

Two new Reits set for SGX listing

Source: Straits Times

Two new real estate investment trusts (Reits) are lining up to list on the Singapore Exchange (SGX). I Reit Global Management is preparing for an initial public offering (IPO) that could raise about US$300 million (S$375.6 million), Bloomberg reported yesterday, citing unnamed sources with knowledge of the matter.

I Reit Global plans US$300m Singapore IPO

Source: Business Times / Companies

[SINGAPORE] I Reit Global Management, backed by office buildings in Germany, is preparing an initial public offering (IPO) in Singapore that may raise about US$300 million, sources with knowledge of the matter said.

The property trust has received listing approval from the Singapore Exchange and is testing investor demand for the sale, the sources said, asking not to be named as the process is private.

Shanghai Summit Property Development, led by Chinese real estate tycoon Tong Jinquan, may buy more than half of the IPO, they said. Calls to Shanghai Summit's main office went unanswered.

Real estate investment trusts (Reits) and business trusts were the biggest fundraisers in Singapore's IPO market in the past year, according to data compiled by Bloomberg. The FTSE Straits Times Real Estate Investment Trust Index, comprising 32 trusts, has risen 6.6 per cent this year while the benchmark Straits Times Index has advanced 3.6 per cent.

-From Singapore

Global Economy & Global Real Estate

Empire State goes for hot and hip with in-house gym

Iconic building hopes to shed its dowdy image as just a tourist landmark

Source: Business Times / Property

[NEW YORK] Workers inside the Empire State Building may soon be able to imagine testing their weightlifting prowess or other muscle-building regimens against the mythical feats of King Kong, who once scaled this building's facade.

This summer, a 15,000-square-foot fitness centre for tenants and their employees will open in the concourse of the building, part of an effort to reinvent the 83-year-old tower as a modern day urban campus.

The gym, with white, undulating tile walls and dark wood finishes, can accommodate the building's roughly 10,000 workers. Executives who don't want to work out with the rank-and-file will have access to a private gym suite.

Other changes to the art deco landmark are also meant to appeal to a high-end market. Empire State Realty Trust, which owns and operates the building, is also adding a conference centre on the 67th floor and a 100-seat white-tablecloth restaurant on the lobby level, with private dining below. The restaurant, State Bar & Grill, wants to cater to a business clientele, rather than the millions of tourists who visit the observatory every year (about 4.3 million in 2013).

-From New York, US

NY luxury condos boast Eden-like gardens

Some projects are so exclusive they are off-limits even to the residents

Source: Business Times / Property

[NEW YORK] Deborah Nevins is one of the most sought-after landscape designers in the world. She has seeded and sodded estates for the likes of David Geffen, Stavros Niarchos and Rupert Murdoch, and her haute habitats dot townhouse backyards and pre-war rooftops from Greenwich Village to Park Avenue.

For her latest project, she is turning what would otherwise be a barren air shaft inside a new Tribeca loft building, the Sterling Mason, into a lush 1,000-square-foot courtyard. Hawthorn trees telegraph the seasons, from rich white blossoms to lush green leaves, red berries and spindly branches. Ivy creeps along the ground, framing a sculptural stream.

"It should be a remarkably peaceful space," said Dan McInerney, a vice-president for Taconic Investment Partners, which is building the 32-unit Sterling Mason.

To keep that peace, this most inviting oasis will be off-limits, and not just to the general public. Even residents of the building, where apartments are going for up to US$23 million, will be allowed to enjoy it only from the ground floor lobby and library or their bedroom windows upstairs.

-From New York, US

Hotels Lacking Amenities Lure Buyers Seeking High Returns

Source: Bloomberg / Luxury

Hotels with the fewest amenities are proving among the most attractive to U.S. lodging investors as they search for higher returns.

Blackstone Group LP (BX), the world’s largest alternative-asset firm, is close to an agreement to buy a group of select-service hotels from Clarion Partners LLC for about $800 million, adding to its already sizable portfolio of such properties, a person with knowledge of the deal said yesterday. Barry Sternlicht’s Starwood Capital Group said today that an affiliate agreed to acquire TMI Hospitality Inc., including more than 180 limited-service hotels owned by the Fargo, North Dakota-based company.

Investors are drawn by the lower operating costs and higher returns at select-service hotels compared with more upscale properties. The segment -- which lacks restaurants and have limited beverage and other service offerings -- includes brands such as La Quinta, Super 8 and Days Inn. Purchasing such properties and boosting their profitability is often easier than acquiring and remaking higher-end hotels.

“The returns are very attractive and the financing for these deals is much easier and cleaner to underwrite,” said Samantha Fisher, a Los Angeles-based senior vice president at investment-services firm Jones Lang LaSalle Hotels. “Limited service doesn’t have a big food and beverage component. These things can almost run themselves. Whoever is the buyer doesn’t have to put much into them to see returns quickly.”

Highest Total

Last year’s $6.2 billion in select-service hotel deals was the highest total since before the last recession, according to Jones Lang LaSalle data. The sector accounted for 30 percent of all U.S. hotel-transaction volume in 2013, on par with the peak years of 2006 and 2007. Jones Lang expects transactions to grow to $6.5 billion this year.

Starwood Capital’s acquisition of TMI Hospitality’s properties for an undisclosed amount adds to the 103 select-service hotels Starwood and its investors already own.

The purchase “offers Starwood Capital the exciting opportunity to build on our investments in select-service and extended-stay lodging,” Suril Shah, senior vice president of acquisitions at Starwood Capital, said in a statement today.

NorthStar Realty

Among other buyers in the sector is NorthStar Realty Finance Corp. (NRF), which said earlier this month that it bought 47 limited-service hotels for $933.9 million in a joint venture with Chatham Lodging Trust. Also this month, American Realty Capital Hospitality Trust Inc., said it’s paying$1.93 billion for a group of 126 hotels, most of which are limited-service properties, including Hampton Inn, Hilton Garden Inn and Homewood Suites locations.

Andrew Backman, an American Realty spokesman, and Joe Calabrese, a NorthStar Realty spokesman, didn’t return telephone calls seeking comment on their companies’ purchases.

The U.S. hotel industry has recovered since the financial and real estate market meltdown. Room rates in the first five months of this year hit a record, according to Jan Freitag, senior vice president at research firm STR Inc. This year through May, the average price for a hotel stay nationwide jumped to $113.58 a night, up 4.1 percent from a year earlier, according to Hendersonville, Tennessee-based STR.

Blackstone’s agreement would be for 47 extended-stay Residence Inn and Homewood Suites hotels, with a majority located in the top 25 U.S. markets, said the person with knowledge of the negotiations, who asked not to be identified because the deal hasn’t been completed.

Hampton Inn

Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on the talks. Paula Schaefer, a spokeswoman at New York-based Clarion Partners, didn’t return telephone calls seeking comment.

The deal would follow a transaction in September, when a Blackstone affiliate agreed to buy 16 hotels, including Hampton Inn and Holiday Inn Express properties, from Hersha Hospitality Trust for $217 million. Blackstone’s $1.3 billion acquisition of hotel owner Apple REIT Six Inc. was completed last May, which followed a $1.9 billion deal in 2012 for the Motel 6 and Studio 6 budget chains.

The Apple REIT Six hotels “generate 15 to 20 percent more revenue than the competitive set they compete against, they have higher gross operating profit margins and they offer very attractive cash-flow yields,” A.J. Agarwal, senior managing director at Blackstone’s real estate division, said in an interview last year. “We’re just economic investors, focused on providing the best returns for our limited partners, and these assets accomplish that.”

Goldman Sachs

American Realty is acquiring the Equity Inns lodging portfolio from subsidiaries of Whitehall Real Estate Funds, which are sponsored by Goldman Sachs Group Inc. (GS) The purchase consists of 126 hotels with 14,934 rooms in 35 U.S. states.

“There has been a large amount of money pent up, and finally big portfolios this year and last have come to market, and investors had a possibility to go after them,” said Fisher of Jones Lang LaSalle Hotels. “Everybody is seeing that operating performances are still going up, that there is still growth. I suspect we’ll see more of this.”

-By Nadja Brandt

U.S. Home Sales Seen Dropping First Time in Four Years

Source: Bloomberg / Luxury

Sales of new and existing homes in the U.S. will fall in 2014 for the first time in four years, the Mortgage Bankers Association said in a forecast today.

The MBA lowered its outlook to 5.28 million homes -- a decline of 4.1 percent from the previous year. The industry group also said mortgage lending for purchases would total $595 billion this year, down 8.7 percent from 2013, and the first retreat in three years, according to today’s MBA projection.

Rising home prices and stagnant wages make it difficult for Americans to get mortgages amid tight credit standards. The median price of an existing home gained 11.5 percent last year, second only to the 12 percent gain in 2005, the highest on record, according to the National Association of Realtors. The median U.S. household income rose less than 1 percent in 2013, according to data from Sentier Research LLC in Annapolis, Maryland.

“Even though we’re technically in a recovery, household income is lower now than it was in the recession,” said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics. “It makes it a lot harder to buy a house.”

-By Kathleen M. Howley

Colony Sells $559 Million of Rental Bonds in Fifth Deal

Source: Bloomberg / News

Colony Capital LLC’s Colony American Homes Inc. completed the fifth-ever sale of bonds backed by U.S. rental homes, with a $558.5 million offering in the new market.

The company sold $291.2 million of top-rated floating-rate notes to yield 95 basis points, or 0.95 percentage point, more than a benchmark rate, said a person with knowledge of the deal, who asked not to be named because they’re not authorized to speak publicly. That was 5 basis points less than the previously tightest spread for AAA notes in such transactions, which was garnered last month in sales by both Blackstone Group LP’s Invitation Homes and American Homes 4 Rent. (AMH)

Colony’s securities carried loss protection known as credit enhancement of 47.9 percent, compared with 44 percent for the comparable part of the American Homes transaction and 52 percent for the similar portion of the Blackstone deal, the person said. The lowest ranking slice of the Colony deal priced at a spread of 335 basis points, compared with 325 basis points in the American Homes deal and 375 in the Blackstone deal, which was the largest at $993 million.

Blackstone last year became the first among the hedge funds, private-equity firms and real-estate investment trusts that expanded in the rental business amid the U.S. foreclosure crisis to tap the securitization market. Issuance now totals about $3 billion. Scottsdale, Arizona-based Colony American Homes issued $513.6 million of rental-home bonds in April in the second such deal.

-By Jody Shenn and Christopher DeReza

Premium Point’s WinWater Sells Jumbo-Mortgage Securities

Source: Bloomberg / Luxury

Premium Point Investments LP’s WinWater Home Mortgage LLC sold its first U.S. mortgage securities without government backing in a deal tied to about $250 million of loans, showing the market isn’t wholly frozen.

WinWater, created last year to buy jumbo mortgages to package into bonds, sold $81 million of top-rated notes paying 3.5 percent coupons at 100.4 cents on the dollar, according to a person with knowledge of the offering who asked not to be identified citing a lack of authorization to speak publicly. That’s about 1.8 cents on the dollar less than comparable benchmark Fannie Mae-guaranteed bonds, according to data compiled by Bloomberg.

After reviving from the paralysis caused by the 2008 financial crisis the debt helped spark, issuance of non-agency securities has slowed as banks seek jumbo loans to hold as investments and bond buyers pay less. Prices on recently-issued AAA securities fell to as low as 4 cents on the dollar below similar agency bonds toward the end of last year, after fetching higher prices early in 2013, according to JPMorgan Chase & Co.

Redwood Trust Inc. (RWT), the biggest issuer last year, ended its four-month absence from the market in March, selling some top-rated notes at about 2.7 cents on the dollar less than Fannie Mae bonds. That debt carried less protection against losses known as credit enhancement than the $81 million of WinWater notes, totaling 10.4 percent compared with 15 percent.

WinWater’s deal also included $16.8 million of top-rated 3.5 percent securities with 8.3 percent credit enhancement that priced at 99.4 cents on the dollar, the person said.

Issuance Collapse

The New York-based company is partly owned by certain principals of Premium Point, the hedge fund run by former Deutsche Bank AG (DBK) banker Neil Ahuja, and shares resources, employees and offices with that firm, according to a report by Kroll Bond Rating Agency, which joined Standard & Poor’s and DBRS Ltd. in planning to grade the debt.

While total issuance of non-agency securities tied to new loans jumped to $13.4 billion last year from $3.5 billion in 2012, the sales collapsed after September, Bloomberg data show. Issuance totals about $2 billion so far this year. Sales peaked at $1.2 trillion in both 2005 and 2006.

Citigroup Inc. (C) is also planning a jumbo-mortgage deal tied to $219 million of loans, its second of the type since the crisis, according to DBRS.

Jumbo mortgages are those larger than allowed in government-supported programs. Limits range from $417,000 to $625,500 for Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments.

-By Jody Shenn

BlackRock, Pimco Sue Banks for Mortgage-Bond Trustee Role

Source: Bloomberg / Personal Finance

BlackRock Inc. (BLK), the world’s biggest money manager, and Pacific Investment Management Co. are among investors that sued banks including Citigroup Inc. (C) and Deutsche Bank AG (DBK) over their roles as mortgage-bond trustees, as investors continue to try to recover losses from the financial crisis.

The banks knew the loans underlying trillions of dollars of residential mortgage-backed securities were misrepresented and failed to invoke their rights to force the sellers to buy them back or act against servicers, causing billions of dollars in losses, according to complaints filed yesterday in New York State Supreme Court in Manhattan.

Bank of New York Mellon Corp., as trustee for more than 1,000 trusts backed by almost $1 trillion worth of residential mortgages, “ignored pervasive and systemic deficiencies” in the pools of loans and their servicing and failed to take any action, according to the complaint against it.

The bank “did nothing to protect the trusts and certificate holders, choosing instead to deliberately ignore the egregious events of default for its own benefit and to the detriment of the trusts,” the investors said in the complaint.

Pools of home loans securitized into bonds were central to the housing bubble that helped send the U.S. into the worst recession since the 1930s. The housing market collapsed and the market for the securities evaporated.

Too Early

It’s too early to gauge the potential outcomes for investor suits against trustees given that the suits were recently filed and the range of outcomes is wide, Nomura Securities International analysts, including Paul Nikodem and Pratik Gupta, said in a note to investors today.

However, the cases could have broader implications for the residential-mortgage backed securities market, including the potential disclosures of agreements to extend statues of limitations for suits on specific deals, other potential settlements and possible delays in reviewing proposed settlement offers, the Nomura analysts said.

Ron Gruendl, a spokesman for New York-based BNY Mellon, and Renee Calabro, a spokeswoman for Deutsche Bank, declined to comment on the suits. Representatives of other banks named as defendants also declined to comment, including Juanita Gutierrez, of HSBC Holdings Plc (HSBA) in New York, Robert W. Julavits, of Citigroup, and Teri Charest, of U.S. Bancorp.

Wells Fargo

“We strongly disagree that Wells Fargo is in any way respondible for any losses incurred on these transactions,” said Ancel Martinez, a spokesman for the San Francisco-based bank.

The Association of Institutional Investors, whose members include Pimco, asked Congress in April to create an “unambiguous fiduciary standard” for trustees of mortgage bonds without government backing as a Senate committee considered a bill to overhaul the $9.4 trillion home-loan market by replacing U.S.-controlled Fannie Mae (FNMA) and Freddie Mac.

The money managers are pushing for Congress to step in as they did with the corporate-bond market in 1939, when the Trust Indenture Act created new duties and responsibilities for debt administrators to protect investors and give them the confidence to extend credit following evidence of misdeeds after the stock market crash of 1929.

Mortgage-bond investors are seeking the shift after finding they needed to band together to prod trustees into action to receive compensation from banks for loans that were riskier than promised. They also seek to change allegedly poor management of the debt by servicers.

The cases are Blackrock Allocation Target Shares: Series S Portfolio v. U.S. Bank National Association, 651864/2014; Blackrock Balanced Capital Portfolio (FI) v. Deutsche Bank National Trust Co., 651865/2014; BlackRock Allocation Target Shares: Series S Portfolio v. Bank of New York Mellon, 651866/2014; BlackRock Allocation Target Shares: Series S Portfolio v. Wells Fargo Bank N.A., 651867/2014; BlackRock Balanced Capital Portfolio (FI) v. Citibank N.A., 651868/2014; and BlackRock Core Active Libor Fund B v. HSBC Bank USA, 651869/2014, New York State Supreme Court, New York County (Manhattan).

-By Chris Dolmetsch

Sex Workers Protest as Soho Swaps Sleaze for Champagne

Source: Bloomberg / Luxury

London’s property wave is swamping the world’s oldest profession.

The central Soho district’s prostitutes and sex cinemas are being overwhelmed by upscale restaurants, bars, hotels and apartments in an echo of Rudy Giuliani’s celebrated 1990s transformation of Times Square in New York.

“When I started 30 years ago, there was a long run of peep shows,” said Paul Giorgio, 61, who runs a fish-and-chip shop in the area. “Now people come in here and ask me, where’s Soho? If you take the sex industry away from here, you take away Soho, but I suppose they’ve got to if they want to make the money.”

Soho is the latest once down-at-the-heel area transformed by the boom. Kings Cross, where Google Inc. will build its U.K. headquarters, shed its reputation as a red-light district. Clapton, part of which was known as Murder Mile, is dotted with wine bars and a creperie. A two-bedroom flat in Brixton, scene of race riots in the 1980s, can cost 550,000 pounds ($937,000).

The property outfit created by Paul Raymond, the founder of the district’s first legal strip club, is leading the transformation. Soho Estates Holdings Ltd. is turning Walker’s Court, a 50-meter (164-foot) alley once renowned for its sex shops and adult cinema, into a high-end enclave.

King of Soho

At his death in 2008 at the age of 82, Raymond’s collection of property in the area had contributed to a fortune that the Sunday Times estimated at 650 million pounds. Nicknamed the King of Soho, he was portrayed in the 2013 movie “The Look of Love” by Steve Coogan.

Raymond’s son-in-law, John James, is now the company’s managing director. During an interview in his Soho office, he expressed little patience for any wistfulness for the way things used to be. An association known as the Soho Society objected to the damage that development would do to the neighborhood’s “unique character.”

“The public backlash is ill-founded and based in nostalgic, romantic bollocks,” James said, adding that the proliferation of sex on television and the Internet had accelerated an industry decline that began in the 1980s.

There was no romance in the air on Dec. 4, when almost 20 brothels in Soho were raided and shut by police.

“They bashed down doors, came in in full riot gear and with dogs, handcuffed women to the floor, were telling women they were going to tell family at home, pulled women wearing underwear outside in the street,” said Laura, a spokeswoman for the English Collective of Prostitutes, which campaigns for the abolition of prostitution laws.

Police Raid

In an interview at the group’s Kentish Town office, she declined to give her surname or say if she’s a sex worker, citing organization policy. The sale and purchase of sexual services is legal in the U.K.; brothels, soliciting and advertising related to prostitution are prohibited.

The metropolitan police entered 40 premises in all and made 31 arrests in an operation targeting a stolen-goods ring, they said in a December statement. The police later sought “to close the addresses linked to serious crimes including rape and human trafficking,” according to the statement. The police on June 5 declined to comment on whether anybody has been prosecuted for those offenses.

Prostitution is big bucks in the U.K -- though not as big as property. Paid sex contributed about 5.3 billion pounds to gross domestic product in 2009, the first time its value was estimated, about 60 percent more than BAE Systems Plc, Europe’s largest weapons-maker, did the same year. Real-estate transactions worth 6.2 billion pounds were completed, according to data compiled by Investment Property Databank Ltd.

Property Holdings

Soho Estates’ holdings are now worth at least $800 million, according to James. The company, owned by Raymond’s family trusts, had net assets of almost 375 million pounds through March 2013, the latest available, a filing at the company-registration office showed.

It plans to spend 10 million pounds to turn the bar, adult-movie theater and apartments previously used for trysts at Walker’s Court into a theater, restaurant and homes whose prices will start at 450 pounds a week to lease.

James likes the Walker’s Court plan so much that Soho Estates plan to move in, with a neon Raymond Revuebar sign on the street providing a backdrop to meetings in the boardroom. The Box, a burlesque nightclub, is being retained; Polpo Ltd., the restaurant group created by Russell Norman and Richard Beatty, will open a restaurant at the site.

‘Grit and Grime’

“It’s a wonderful location, part of real Soho: seedy colorful and hidden,” Norman said by e-mail. A fan of Soho’s “grit and grime,” nevertheless “I really don’t get on with the crack peddlers on Rupert Street. And if a little gentrification can improve the area in this respect then I support it.”

Soho, also London’s main area for gay nightlife, started out very differently. It was made a royal park in 1536 by King Henry VIII and its name derives from a hunting cry. Developed as homes for the aristocracy in the 17th Century, it stretches from Oxford Street to Shaftesbury Avenue. By the 1800s, it was known for its poverty after the affluent moved to neighborhoods like Mayfair. In the 1960s, it became part of the Swinging London scene that grew out of Carnaby Street.

It’s been home to Karl Marx and Mozart. John Logie Baird developed what became the television in an apartment there. There’s also the seedier side: the world’s first venereal-disease treatment clinic for men opened there in 1862.

Absinthe Cocktail

The district’s tradition as a red-light district contrasts with new luxury hotels and restaurants with names like Burger & Lobster and Randall & Aubin, which serves oysters and champagne. London-based Firmdale Hotel Plc’s new Ham Yard Hotel serves a cocktail mixing bourbon, absinthe, mint and homemade fig syrup for 12 pounds. The Windmill, owned by Soho Estates where more than 100 dancers strip nightly, is across the street.

An apartment on Brewer Street, adjacent to Walker’s Court, is valued at about 1.4 million pounds, compared with less than 1 million pounds in 2009, property website Zoopla Ltd. shows. The cost of renting an empty store rose 40 percent last year, according to broker CBRE Group Inc. Office-building values have almost tripled in the last five years and rents have doubled.

The Crossrail train line that will link Heathrow Airport to the Canary Wharf financial district also appeals. The station at Tottenham Court Road will be about 200 meters from the Regents Sounds guitar store on Soho’s Denmark Street where The Rolling Stones recorded their eponymous first album.

The returns on real estate contrast with the lives of those working in the sex industry. Politicians’ “priority hasn’t been to ask why women with children in this country are going hungry because of cuts to welfare,” said Cari, a spokeswoman for the prostitutes’ collective.

For Soho Estates, it’s time to move on. “I respect the 50 years of work Paul Raymond did, but that doesn’t reflect the next 50 years,” James said. “What I’ve got to do now is look at the property and say: Is there a better use for this?”

-By Neil Callanan and Patrick Gower

Manhattan’s 530 Fifth Ave. Building Sold for $595 Million

Source: Bloomberg / News

A partnership including Thor Equities LLC agreed to buy a 26-story office and retail building on Manhattan’s Fifth Avenue for $595 million.

The deal for the 500,000-square-foot (46,000-square-meter) building at 530 Fifth Ave. is expected to close in mid-September, sellers Rockwood Capital, Jamestown, Murray Hill Properties and Crown Acquisitions said in a statement today. Thor, based in New York, is joining with Chicago-based General Growth Properties Inc. (GGP) and Scott Rechler’s RXR Realty LLC in the purchase, said three people with knowledge of the terms, who asked not to be identified because the deal isn’t complete.

Thor, a closely held real estate company headed by Joseph Sitt, negotiated the sale off-market, then brought in RXR and General Growth, the second-biggest U.S. shopping-mall owner, as partners, one of the people said. The investors plan to separate the office and retail portions of the building, with Uniondale, New York-based RXR owning the offices and Thor and General Growth controlling the retail, according to the person.

The current owners bought the building, two blocks west of Grand Central Terminal between 44th and 45th streets, in January 2012 for $390 million, according to New York-based research firm Real Capital Analytics Inc. The group spent more than $10 million on renovations to the property, according to today’s statement.

“Fifth Avenue will always serve as an iconic location in NYC for retail and office space,” Michael Phillips, chief operating officer of Atlanta-based Jamestown, said in the statement. “Once we repositioned the 530 Fifth Ave. property with a renovated lobby, internal upgrades and amenities,” the investors saw an opportunity to profit from a sale.

Eastdil Secured LLC represented the sellers, according to the statement.

JPMorgan, Fossil

The building is about 68 percent occupied, according to CoStar Group Inc. (CSGP), a Washington-based research firm that tracks commercial-property leasing. Office tenants include Massachusetts Mutual Life Insurance Corp. and Diageo North America Inc., an alcoholic-beverage merchant, according to the statement. A JPMorgan Chase & Co. branch and fashion merchants Desigual and Fossil are among the retail tenants.

About 40,000 square feet of retail space and about 100,000 square feet of offices are available to be leased, providing the buyers with an opportunity to increase revenue, the people with knowledge of the agreement said.

Average retail rents along Fifth Avenue from 42nd Street to Rockefeller Center, cheaper than the upscale corridor to the north, have about doubled to more than $1,000 a square foot in three years, according to reports by the Real Estate Board of New York, a trade organization representing the city’s landlords. The market has attracted such fashion retailers as H&M, Urban Outfitters and Tommy Bahama.

David Keating, a General Growth spokesman; Ed Tagliaferri, a spokesman for RXR; and Stefan Friedman, a spokesman for Thor, declined to comment on the partnership terms. General Growth is the biggest U.S. mall owner after Simon Property Group Inc.

-By David M. Levitt and Nadja Brandt

New York’s 5 Times Square Sale Is Biggest Deal Since 2010

Source: Bloomberg / News

New York’s 5 Times Square, the headquarters for accounting firm Ernst & Young LLP, sold for $1.5 billion in the biggest transaction for an entire building in the city since 2010.

A partnership led by New York real estate investor David Werner bought the tower from AVR Realty Co., said Allan Rose, AVR’s owner and chief executive officer. The price is 17 percent more than what AVR paid in 2007, when it bought the building from Boston Properties Inc. (BXP)

Buyer demand for high-quality buildings in the heart of midtown Manhattan has pushed office values in the area up 14 percent in the past year to peak levels, according to research firm Green Street Advisors Inc. In September, Norway’s sovereign-wealth fund agreed to buy a 45 percent stake in nearby 7 Times Square for $684 million from Boston Properties.

The 5 Times Square tower at Seventh Avenue and 42nd Street, known for the Ernst & Young sign with red letters down its side, was completed in 2002 and has 1.1 million square feet (102,000 square meters) of office space. The accounting firm is the primary occupant, according to AVR.

By dollar amount, the sale is the biggest of an entire building in New York since Google Inc.’s purchase of 111 Eighth Ave. in 2010, according to Real Capital Analytics Inc. Doug Harmon and Adam Spies of Eastdil Secured LLC served as investment bankers on the transaction, which was reported yesterday by the Wall Street Journal.

Complicated Deal

The sale required approvals from the city government, Empire State Development Corp. and the loan servicer Wells Fargo & Co., Rose said in a telephone interview.

“I’ve been doing this for 50 years. We’ve done everything you can possibly do -- housing, multifamily, shopping centers, office buildings -- this was the most complicated deal we’ve ever done,” Rose said. “It was also the largest deal we’ve ever worked on.”

Werner didn’t return phone calls seeking comment on the deal. He has made almost $10 billion of property acquisitions since 2001, according to data compiled by Real Capital.

His holdings include the former Milford Plaza hotel on Eighth Avenue, and part ownership of 1250 Broadway in Herald Square. The Wall Street Journal reported in April that he was part of a partnership that agreed to pay $900 million for the Socony-Mobil Building, across the street from the Chrysler Building in east Midtown.

-By Jonathan LaMantia

Credit Suisse Said to Lead Funding America’s Biggest Mall

Source: Bloomberg / News

A group of Wall Street banks are vying to lend $1.4 billion to the owner of the biggest U.S. shopping mall.

Credit Suisse Group AG, Citigroup Inc. and Wells Fargo & Co. are poised to fund the 4.2 million-square foot Mall of America in Bloomington, Minnesota, according to three people with knowledge of the matter who asked not to be identified because negotiations are private. Switzerland’s second-biggest bank is financing more than half of the mortgage, which will be sliced into bonds and sold to investors, the people said.

The deal is the latest example of lenders competing for plum lending assignments linked to commercial properties across the U.S. Borrowers are benefiting as banks, insurers and foreign investors pour cash into real estate amid a global search for yield, enabling landlords to pay off debt early and lock in low rates.

Representatives from Credit Suisse, Citigroup and Wells Fargo declined to comment.

Triple Five Group, the Edmonton, Alberta-based development company that owns the Mall of America, plans to use the new 12-year loan to pay off $775 million in existing debt, the people said. The current mortgage, originated in 2006, doesn’t mature until December 2016, according to data compiled by Bloomberg.

A representative from Triple Five couldn’t immediately be reached.

Loosening Terms

Firms that write property loans to be bundled into commercial-mortgage backed securities are being stymied by stiff competition. They’re loosening terms to win business as issuance fails to keep pace with projections made after sales of bonds doubled to $80 billion last year. Bank of America Corp. analysts last month cut their 2014 issuance forecast by $20 billion to $60 billion.

Wall Street banks are chasing large loans like those for the Mall of America to meet origination targets. Deutsche Bank AG, the top underwriter of U.S. CMBS offerings, is marketing a $1.4 billion transaction this week linked to a group of Hawaiian hotels. The lender beat out Credit Suisse, JPMorgan Chase & Co. and Citigroup to get the deal.

The Mall of America, dubbed the Hollywood of the Midwest on its website, has more than 500 stores and a children’s theme park. The complex, which could hold seven Yankee Stadiums, gets more than 40 million visitors annually, including one-third traveling for more than 150 miles, according to Triple Five’s website.

The property, built in 1992, was valued at $1 billion in 2006, Bloomberg data show.

-By Sarah Mulholland

China Property Collapse Seen as $33 Billion in Trusts Due

Source: Bloomberg / News

Chinese property trusts face record repayments next year as the real-estate market cools, fueling speculation among bond funds that more developers will collapse.

The trusts, which channel money from wealthy individuals to smaller builders that have trouble obtaining financing elsewhere, must repay 203.5 billion yuan($32.7 billion) in 2015, according to Use Trust, a Chinese research firm. That’s almost double the 109 billion yuan due this year. New issuance of the products slumped to 40.7 billion yuan this quarter, the least in more than two years, Use Trust data show.

“Trust loan defaults will rise substantially,” said Fiona Cheung, head of Asia credit at Manulife Asset Management’s fixed-income team which oversees $44 billion globally. “It won’t be surprising if there are more collapses of China’s property companies. Those companies that suffer from weak sales, that bought land too aggressively last year funded by debt and that have poor access to capital markets will potentially experience cash flow pressure.”

JPMorgan Chase & Co. says the real-estate industry poses the biggest near-term risk to growth in the world’s second-largest economy after new home prices dropped in the most cities in two years last month. China’s banking regulator said on June 6 it will monitor developer finances, a sign of concern defaults may spread after the March collapse of Zhejiang Xingrun Real Estate Co., a builder south of Shanghai.

‘Turning Point’

Prices fell in 35 of the 70 cities tracked by the government last month from April, according to a statement by the National Bureau of Statistics on June 18, the most since May 2012. In the financial center of Shanghai, prices decreased 0.3 percent from April, the first decline in two years.

“It’s unavoidable that property trusts will have defaults this and next year,” said Yao Wei, Hong Kong-based China economist at Societe Generale SA. “The industry has come to a turning point. The imbalance between supply and demand is so big that adjustments are needed.”

China is cracking down on off-balance sheet lending known as shadow banking, which includes trust companies and wealth management products issued by banks. The industry was worth 38.8 trillion yuan as of the end of last year, according to a Barclays Plc report last month. Concern that defaults could spread mounted in January after a 3 billion-yuan trust product called Credit Equals Gold No. 1, which had raised money for a failed coal miner, had to be bailed out days before maturing.

The yuan has fallen 2.8 percent against the dollar this year, the worst-performing Asian currency. The yield on the benchmark 10-year government bond has dropped 50 basis points to 4.05 percent in the same period as investors seek safe havens.

Smaller-Developer Vulnerability

Defaults on shadow-bank borrowings including trust loans by property companies will increase, with smaller builders particularly vulnerable, according to Frank Chen, head of China research at CBRE Group Inc., a commercial real-estate services company based in Los Angeles.

“The key risk lies with small- and medium-sized local developers which have limited access to bank lending and capital markets,” said Chen in Shanghai. “The slowdown in the residential market is more acute in lower-tier cities.”

While many larger Chinese developers are able to tap the international bond market to raise funds, offerings there have also declined. Offshore note issuance from developers in China and Hong Kong has dropped 32.5 percent to $5.27 billion this quarter from the previous three months, Bloomberg-compiled data show.

‘Higher Risk’

“The decline in issuance is due in part to the weaker sentiment among investors,” said Franco Leung, an analyst in Hong Kong at Moody’s Investors Service. “Investors are seeing higher risk in the property sector than last year.”

Moody’s revised its credit outlook for Chinese developers to negative from stable on May 21. The Shanghai Stock Exchange Property Index, which tracks 24 developers listed in the city, has slumped 7 percent this year, exceeding the 4.3 percent decline for the Shanghai Composite Index.

CBRE’s Chen said while the central government may not officially lift restrictions on home purchases meant to prevent overheating of the market, local governments have been trying to provide support in a subtle way, according to CBRE’s Chen.

Nanning, capital of the southern province of Guangxi, has allowed residents in some nearby cities to purchase apartments in the city, where only people with the city’s hukou are permitted to buy, the Xinhua News Agency reported on May 2.

‘Big Impact’

“Local governments are keen to see a stabilizing property market,” Chen said. “At the end of the day, the property sector and related industries are critical to China’s economy. No country in the world would like to see a crash in the property market, which would be disastrous.”

Outstanding property trust products totaled 1.15 trillion yuan as of March 31, accounting for 10.4 percent of all types of trusts, according to data posted on the website of China Trustee Association.

“There may be corrections in the property market of some cities,” said Societe Generale’s Yao. “Given the amount of bank loans and shadow banking lending developers have borrowed, the weakening property sector will definitely have a big impact on the financial system.”

-By Bloomberg News

Lew Seeks Demand Boost as Schaeuble Warns on German Home Prices

Source: Bloomberg / Luxury

Low interest rates may fuel “dangerous” housing prices in Germany, Finance Minister Wolfgang Schaeuble said, underscoring disagreement with the U.S. on boosting demand in the global economy.

“We continue to believe that there is a demand problem in the world and continue to believe that policies that would help strengthen demand would be helpful,” Treasury Secretary Jacob J. Lew said in Berlin today after talks with Schaeuble. The U.S. housing market has lagged in the economic recovery and needs “that extra increment of activity,” he said.

Lew reprised policy differences on growth and fiscal discipline between the U.S. and Germany, Europe’s biggest economy, that have persisted since the financial and debt crises began in 2008. Schaeuble is Chancellor Angela Merkel’s point man for balancing Germany’s federal budgetnext year.

“Naturally in Germany, as a result of low interest rates and low inflation, there are signs especially in the real estate market of price developments that are dangerous,” Schaeuble said at a joint news conference with Lew. At the same time, the euro “is no longer a source of anxiety for financial markets” and growth “must improve,” he said.

-By Brian Parkin and Birgit Jennen