Real News‎ > ‎2014‎ > ‎June 2014‎ > ‎

21st June 2014

Singapore Economy

Singapore to ensure its economy remains competitive: DPM Teo

Source: Business Times / Singapore

SINGAPORE will continue to move towards higher value-added activities and innovation to ensure that the economy remains competitive so that good jobs are created for Singaporeans, said Deputy Prime Minister Teo Chee Hean yesterday.

"As a maturing economy, we cannot rely on a linear increase in labour, land, or resources such as energy to grow our economy," said Mr Teo, who was speaking at a luncheon during the Singapore International Chamber of Commerce's (SICC) 173rd annual general meeting at the Grand Copthorne Waterfront Hotel.

He added: "We will continue to build our fundamentals, but we must also evolve with changing circumstances, to position ourselves where we can add most value."

Four key attributes of Singapore's business environment - Trust, Knowledge, Connectivity and Liveability - will help it to do so.

-By Raphael Lim

Singapore Real Estate

Plush and minus

Source: Straits Times

Sales of luxury condominiums tumbled drastically in the first half of the year after new property curbs deterred buyers, but experts say there is much scope for a recovery. "Historically, the luxury market is more likely to be supported by foreign demand," said Mr Desmond Sim, research head at CBRE. "The enforcement of the Additional Buyer's Stamp Duty (ABSD) has turned away some of this foreign demand as well as local demand."

Paya Lebar Central generating buzz

Source: Straits Times

Interest in Paya Lebar Central is rising fast as plans to develop it into a major commercial hub take shape. Its location near the city centre and upcoming developments around it make it an attractive target for investors, analysts said.

BCA releases ‘green’ guidelines for landlords, tenants

Source: Channel News Asia / Singapore

SINGAPORE: The Building and Construction Authority (BCA) has released environmentally-friendly guidelines for landlords and tenants that can be adapted as part of a Green Lease agreement.

A Green Lease agreement ensures that the landlords and tenants list down their commitments to, for example, cut energy use.

All tenants at 313@Somerset in Orchard Road are bound by a Green Lease agreement.

The Green Lease agreement formed part of the leasing contract when the mall opened in 2009.

It commits both parties to improve energy-saving practices and for the landlord to provide resources to encourage tenants to adopt energy-efficient equipment and materials.

Building owner Lend Lease said initial challenges include engaging the tenants and changing their mindsets.

Tenants in its other malls -- Jem in Jurong East and Parkway Parade in Marine Parade -- are also on Green Lease.

Thirukumaran Jallendra, head of Sustainability (Asia) at Lend Lease, said: “We have a team of retail design managers and a centre management team who will work with them, who will share with them our guidelines and take them through the process, make them understand what works, what doesn't work.

“From our assessment of all three malls, we're averaging something between 20 and 30 per cent of energy savings on a monthly basis. So that's how much tenants tend to save if they comply with the requirements that we set out for them."

Speaking at the opening of the Green Building Exhibition on Friday (June 20), Second Minister for Environment and Water Resources and Minister in the Prime Minister's Office, Ms Grace Fu also said that two new Government Land Sales sites -- in Woodlands Regional Centre and Punggol -- will have to meet BCA Green Mark Gold Plus standards. 

- CNA/nd

Fixed deposit rates versus Sibor: Win, lose or draw?

Source: Straits Times

Home buyers who like the certainty of a more fixed mortgage rate have another option to consider in the form of a new package rolled out by DBS Bank. Its fixed deposit home rate, or FHR, is pegged to the bank's fixed deposit interest rate and not the Singapore Interbank Offered Rate, commonly known as Sibor.

Real Estate Companies' Brief

How interest rate rise affects Reits

Source: Straits Times

Singapore real estate investment trusts (SReits) have long been identified as an instrument providing decent returns for investors. As with investments in stocks, bonds and properties, SReits are not spared from the effects of the expected rise in interest rates in the market. The price of SReits have been volatile over the past year, correcting about 20 per cent from highs last seen in May 2013 after the US Federal Reserve announced a scale-back of stimulus which in turn heightened the likelihood of higher interest rates.

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

Singapore office sector

Source: Business Times / Wealth

Credit Suisse | June 18

Is it time to take profit?

Office Reits have outperformed YTD on expectations of strong rent growth, but we believe this was driven more by multiple expansion than earnings upgrades. In this report, we look at the risk of demand missing expectations, which we believe is quite likely, given the falling appeal of Singapore due to higher costs and labour limitations.

Views, Reviews & Forum

3Gen flats? Parents prefer bigger grants, priority for kids

Source: Straits Times

A total of 50 three-generation or 3Gen flats will be among the new Housing Board apartments that will be launched in new town Tampines North later this year. These 3Gen flats, introduced last September to encourage multiple generations to live under one roof, are larger than a five-room unit.

Global Economy & Global Real Estate

India's 'One Hyde Park' kicks into gear

Slum redevelopment project to feature hotel, luxury homes

Source: Business Times / Wealth

OBEROI Realty Ltd will team up with Marriott International Inc to open Mumbai's first Ritz-Carlton hotel as part of a slum redevelopment that includes luxury homes.

"This will be India's One Hyde Park; they will be the most-expensive apartments in the country," Oberoi Realty's billionaire chairman Vikas Oberoi said in an interview in Mumbai, referring to the UK's most-expensive housing complex in London. The penthouses in the condominium project will be the "most expensive in India", he said.

Oberoi Realty, India's second-biggest developer by market value, and Sahana Group, a Mumbai-based firm that specialises in redevelopment, is developing the site in South Mumbai's Worli area, Mr Oberoi said. The 238-room Ritz-Carlton, the hotel brand owned by the Marriott, will operate in one of the two towers in the project.

-From Singapore

HLH Group's associate company buys plot in Cambodia

Source: Business Times / Companies

AN ASSOCIATE company of agriculture and property company HLH Group has acquired a piece of land in Cambodia, with plans for office tower and luxury condominium developments and food and beverage (F&B) and retail buildings on the site.

The 49 per cent owned associate, D'Lotus Development, signed an agreement with Shukaku Inc on Thursday to buy the 13,541 square metre freehold site for about US$14.9 million.

The land is situated in Boueng Kak, Sangkat Sras Chork, Khan Daun Penh in the heart of Phnom Penh city centre.

-By Mindy Tan

China property trust defaults seen rising, given record repayments due next year

Source: Business Times / World

CHINESE property trusts face record repayments next year as the real-estate market cools, fuelling 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 (S$40.9 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 US$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."

-From Shanghai, China

Australian mall giant Westfield gets shareholder nod for strategic split

Source: Business Times / Wealth

A PLAN by Australian shopping centre giant Westfield Group to split its empire was given the nod by shareholders yesterday in a tight vote that highlighted concerns about the restructure. 

The split was announced in December and will see Westfield's Australian and New Zealand businesses, including 47 malls, merge with Westfield Retail Trust, which was spun off from the main company in 2010.

The move will see Westfield Retail Trust become a US$26 billion entity named Scentre that will be listed on the Australian stock market, with a development pipeline for projects worth some US$3 billion.

Westfield Group will be renamed Westfield Corporation with total assets of US$17.6 billion, comprising interests in 44 shopping centres in the US, the UK and Europe. Westfield Retail Trust shareholders voted 76 per cent in favour of the deal, just above the 75 per cent needed from each firm.

-From Sydney, Australia

Canada Fund Said Buying Stake in NYC Park Avenue Tower

Source: Bloomberg / News

Canada Pension Plan Investment Board is close to buying a 49 percent stake in Manhattan’s 1 Park Ave., a prewar office tower controlled by Vornado (VNO) Realty Trust, according to a person with knowledge of the deal.

Vornado would keep the majority stake in the 20-story, 925,000-square-foot (86,000-square-meter) building, said the person, who asked not to be named because the negotiations are private. The transaction, which is close to completion, would value the property at $565 million, the person said.

The purchase by Canada’s largest pension fund would be the latest demonstration of that country’s demand for U.S. real estate, particularly in New York City, said Dan Fasulo, managing director at research firm Real Capital Analytics Inc. Canadians are the biggest foreign buyers of commercial property in America, spending $11.4 billion in 2013, Real Capital data show.

“Canadians, particularly institutional money managers, REITs, pension funds, are flush with capital due to the strong environment in Canada, and frankly they’ve run out of things to buy,” Fasulo said in a telephone interview. “It shouldn’t surprise anyone that they would look to the U.S. to allocate some of that money.”

Of their $11.4 billion in purchases last year, $1.4 billion was planted in New York, making Canada the market’s second-largest source of foreign real estate capital, behind the $2.4 billion in deals by the Chinese, according to Real Capital.

Mae Chong, a spokeswoman for Canada Pension, said the Toronto-based fund “does not comment on deals that may or may not be taking place.” Mark Semer, a spokesman for New York-based Vornado, declined to comment.

‘Savviest Guys’

Canada Pension’s most recent New York acquisition was in early 2012, when it bought a stake in 10 East 53rd St. The majority owner of the 388,000-square-foot tower is SL Green Realty Corp., Manhattan’s largest office landlord.

“There’s a theme of Canadian investors partnering with some of the savviest guys in the business,” Fasulo said.

Last month, Oxford Properties Group, the Toronto-based arm of Ontario Municipal Employees Retirement System, was part of a joint venture that paid $546 million for 450 Park Ave., which at $1,698 a square foot made it one of the most valuable skyscrapers ever sold. Oxford is also a partner with Related Cos. on Hudson Yards, the $20 billion development on Manhattan’s far west side.

Ivanhoe Cambridge Inc., the Montreal-based real estate unit of pension fund Caisse de Depot et Placement du Quebec, in October acquired a 51 percent interest in the News Corp. Building at 1211 Avenue of the Americas, near Rockefeller Center, in a deal that valued the tower at about $1.7 billion.

Partial Sale

While Vornado sought a buyer for the entire 1 Park Ave. tower, it also considered offers for partial interests, said the person with knowledge of the pending sale.

Vornado bought a 95 percent stake in the tower in 2011 in a deal that valued it at about $427 million. One of the sellers, Norman Sturner’s Murray Hill Properties, kept a 5 percent stake, which under the current negotiations would become part of Canada Pension’s share, the person said.

New York University’s Langone Medical Center, which occupies about half the building and is its largest tenant, extended its lease to 2041 after Vornado’s purchase. About 135,000 square feet is listed as available, according to CoStar Group Inc. (CSGP), a Washington-based firm that tracks office leasing.

The sellers were represented by Doug Harmon and Adam Spies of Eastdil Secured LLC. Martha Wallau, a spokeswoman for the brokerage, declined to comment. Edna Lassiter, a Murray Hill Properties spokeswoman, didn’t immediately return a voice-mail seeking comment.

Canada Pension manages retirement savings for 18 million Canadians from every province but Quebec. The firm managed $219.1 billion of assets as of March 31, with 11.6 percent in real estate, according to its website.

-By David M. Levitt

Lone Star Wins $3.8 Billion of Bad FHA Loans at Auction

Source: Bloomberg / Luxury

Lone Star Funds, the private-equity firm founded by billionaire John Grayken, submitted winning bids for $3.9 billion of soured home loans sold this month by the Department of Housing and Urban Development.

It was the first time that a single bidder won each of the pools of loans offered in such a sale of debt previously insured by the Federal Housing Administration, HUD said today in an e-mailed statement. Dallas-based Lone Star’s bids on the 16 pools auctioned on June 11 averaged 77.6 percent of the estimated current prices of the homes and 65.8 percent of the unpaid loan balances, HUD said.

The offering “was the most competitive sale to date, drawing a larger number of bidders and bids per pool than previous sales,” HUD said in the statement sent by spokesman Brian Sullivan.

Jed Repko, a Lone Star spokesman at Joele Frank Wilkinson Brimmer & Katcher, declined to comment.

The firm’s offers crowded out other investors such as hedge funds and rival private-equity firms that have been seeking to buy defaulted mortgages to earn higher returns amid bond yields that central bank stimulus measures have depressed. For HUD, its auctions represent an attempt to simultaneously improve the finances of the FHA, which last year required the first taxpayer subsidy in its 80-year history, and to pursue its public mission of averting foreclosures on the underlying properties.

27 Investors

The auctions are conducted in a “sealed bidding process,” in which potential buyers aren’t identified until their offers are ranked, according to HUD’s statement. A total of 27 investors submitted 163 bids on the pools sold this month. Since 2012, average winning bids have risen from about 50 percent of property values, the department said.

Lone Star was expecting to raise about $7 billion for its Lone Star Fund IX, according to the minutes of a March meeting of the New Mexico Educational Retirement Board, which committed to a $100 million investment. Bob Jacksha, the chief investment officer of the NMERB, described Lone Star at the meeting as “one of the best, if not the best” in the business of profiting from soured home loans.

Lone Star uses mortgage servicer and lender Caliber Home Loans, which it backs, in its bad-loan investing, the minutes show. Caliber today sold $1 billion of bonds backed by soured mortgages, with most of the debt yielding 3.25 percent, according to person with knowledge of the offering, who asked not to be named without authorization to speak publicly.

Newsletter Asset-Backed Alert reported the firm won the HUD auctions earlier today.

-By Jody Shenn

Housing Market Falters Amid Rising Prices, Lower-Paying Jobs

Source: Bloomberg / Personal Finance

The two-year-old U.S. housing recovery is faltering.

The Mortgage Bankers Association yesterday lowered its forecast for combined new and existing home sales in 2014 to 5.28 million -- a decline of 4.1 percent that would be the first annual drop in four years. The group also cut its prediction on mortgage lending volume for purchases to $595 billion, an 8.7 percent decrease and the first retreat in three years.

Bullish forecasts in early 2014 from MBA,Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs. The share of Americans who said they planned to buy a home in the next six months plunged to 4.9 percent last month from 7.4 percent at the end of 2013, the highest in records going back to 1964, according to the Conference Board, a research firm in New York.

“The big housing rally wiped itself out because prices increased too quickly for buyers to keep up,” said Richard Hastings, a consumer strategist at Global Hunter Securities LLC in Charlotte, North Carolina, who predicted the slowdown eight months ago. “The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said.

The best-qualified homebuyers jumped into the market last year to grab near-record low mortgage rates that averaged about 3.5 percent after delaying their moving plans during the housing slump, said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado.

Stagnant Wages

The median price of an existing home gained 11.5 percent last year, second only to 2005’s 12 percent increase, the highest on record, according to the National Association of Realtors. This year, price appreciation probably will slow to 5.6 percent, NAR said. U.S. 30-year fixed mortgage rates probably will average 4.5 percent, up from 4 percent last year, according to the MBA forecast.

As prices climb, the ability of Americans with stagnant wages to buy homes wanes.

The median U.S. household income rose less than 1 percent in 2013, according to data from Sentier Research LLC in Annapolis, Maryland. In April, the median income was $52,959. When adjusted for inflation, that’s almost 6 percent lower than in June 2009, which marked the beginning of the economic recovery, said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics.

“Even though we’re technically in a recovery, household income is lower now than it was in the recession,” Green said. “It makes it a lot harder to buy a house.”

Changing Forecasts

Three major housing forecasters -- MBA and government-run mortgage financiers Freddie Mac and Fannie Mae -- began the year projecting an average home-sale gain of 10 percent in 2014.

In May, after monthly reductions in their estimates, Fannie Mae and MBA for the first time projected an annual decline, amounting to less than one percent.

Freddie Mac this week lowered its 2014 home sales forecast to 5.4 million -- a 1.8 percent drop from 2013. The company also cut its prediction on mortgage lending volume for purchases to about $751 billion.

While home purchase applications have picked up recently with the traditional home buying season now underway, they’re still 13 percent below last year, Freddie Mac chief economist Frank Nothaft and deputy chief economist Leonard Kiefer said in the forecast.

“For this reason, we’re lowering our overall homes sales forecast” for 2014, the economists said.

Next year, new and existing home sales probably will increase to 5.8 million, according to the forecast.

The pullback by the largest investors, who raised about $20 billion to purchase as many as 200,000 properties in the past two years, has also cooled the market.

Blaming Weather

With home prices up 31 percent since a post-bubble low in January 2012 and bargains harder to find, Blackstone Group LP has reduced its pace of buying by 70 percent since last year. The firm is focusing its acquisitions for rentals on five markets -- Seattle, Atlanta and the Florida cities of Tampa, Orlando and Miami, Jonathan Gray, the firm’s global head of real estate, said in March.

As signs of a housing slowdown appeared early this year, economists initially blamed severe weather. The winter was the coldest in four years and some U.S. cities had snow accumulations at near-record levels, according to Commodity Weather Group LLC in Bethesda, Maryland.

“Winter weather explanations are valid, but they’re not endless,” said Hastings of Global Hunter. “When prices go up too much in an environment where families can’t pay them, the rally cancels itself out.”

Low-paying Jobs

The economy, which contracted 1 percent in the first quarter, is mostly generating lower-paying jobs.

In May, payrolls increased by more than 200,000 for a fourth consecutive month, the first time that’s happened since early 2000, according to the Labor Department. The number of workers in May rose to 138.5 million, surpassing the level in 2008 before the financial crisis wiped out 8.7 million jobs.

The gain was led by low-paying positions such as nursing home orderlies and temporary office jobs, both at records, according to government data.

Even with job increases, “a broader assessment of indicators suggests that underutilization in the labor market remains significant,” Federal Reserve Chair Janet Yellen said at a June 18 press conference in Washington following a meeting of the Federal Open Market Committee.

High-wage sectors haven’t rebounded. Compared with 2008, there were 1.6 million fewer people working in manufacturing in May and 340,000 fewer people working in finance, according to government data.

Economic Growth

“The real shocker is the labor market,” said Behravesh of IHS. “We’re barely back up to where we were before the recession began. A lot of the people without good jobs are the ones who should be buying homes right now.”

Even with mortgage rates that have averaged 4.3 percent this year, housing affordability has eroded. In the first quarter, 66 percent of new and existing homes were affordable to families earning the national median income, down from 74 percent a year earlier, according to the National Association of Home Builders in Washington.

Economic grow this year would create additional jobs and allow more people to buy homes. The pace of growth will exceed 3 percent in the final three quarters of the year, according to economists surveyed by Bloomberg.

The Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, in May announced new rules to encourage lenders to relax credit standards. The rules are designed to reduce the risk that lenders will have to buy back soured mortgages due to underwriting errors -- an issue that has kept standards tight.

Relaxing Standards

The average credit score for borrowers in May who bought homes was 755 on a scale of 300 to 850, according to a report this week from Ellie Mae, a loan processor in Pleasanton, California. That compared with 756 in December, the last time it was higher.

A decade ago before the housing bubble, the average score was about 715, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.

“Making credit more available is vital to the housing recovery, which is vital to the economy,” said Zandi.

-By Kathleen M. Howley

U.K. Stamp-Duty Tax Revenue Surges on Rising Home Values, Sales

Source: Bloomberg / Luxury

The goverment’s decision to tax luxury properties more heavily is paying off as home values surge and more buildings change hands.

Stamp duty, a real estate transaction tax, raised 879 million pounds ($1.5 billion) in May, 36 percent more than a year earlier, according to data compiled by the Office for National Statistics.

Chancellor of the Exchequer George Osborne raised stamp duty to 7 percent from 5 percent for properties priced at more than 2 million pounds in 2012 and last year introduced a 15 percent rate for empty U.K. homes owned by companies. London house prices rose at the fastest pace since July 2007 in the 12 months through April and values gained 9.9 percent across the U.K.

The tax on company-owned homes worth more than 2 million pounds that are left vacant raised five times the amount forecast in the fiscal year through March as the government found significantly more properties liable for the tax than expected.

“The sharp increases in prices in London and the southeast over the last 12 months are particularly relevant, as it is these areas where the biggest burden of stamp duty falls,” said Grainne Gilmore, head of U.K. residential-property research at Knight Frank LLP. “Only 1 percent of Londoners escape paying stamp duty when they buy a home.”

More than 62,000 homes were sold in England and Wales in February, almost 40 percent more than a year earlier, according to the Land Registry.

-By Neil Callanan