Real News‎ > ‎2014‎ > ‎June 2014‎ > ‎

27th June 2014

Singapore Real Estate

Hyflux enters sale and lease-back deal for global HQ

Source: Business Times / Companies

BARELY two years since Hyflux unveiled its new global headquarters in July 2012, the water specialist yesterday said that it will sell Hyflux Innovation Centre to Ascendas Real Estate Investment Trust (A-Reit) for $170 million in cash and lease it back for 15 years in a move to unlock capital to fund growth.

The sale and lease-back deal - entered with HSBC Institutional Trust Services (Singapore) Limited in its capacity as A-Reit's trustee - will reap a divestment gain of $84 million for Hyflux, which retains the naming rights for the property as its largest tenant.

Hyflux will lease back 50 per cent of the gross floor area of 43,434 sq m for 15 years. All third-party tenants - which include NEC and American Express - will be assigned to A-Reit. The 10-

storey building at Kallang Industrial Estate will have an occupancy rate of 83.9 per cent. Hyflux will provide rental support for the remaining vacant space for three years.

-By Angela Tan

Hyflux Innovation Centre to be sold to A-Reit for S$170m

Source: Today Online / Business

SINGAPORE — Hyflux is selling its eponymous Hyflux Innovation Centre at Bendemeer Road to Ascendas Real Estate Investment Trust (A-Reit) for S$170 million in cash and will lease the property back for 15 years, the water treatment specialist said yesterday.

The deal, inked with HSBC Institutional Trust Services (Singapore) as trustee of A-Reit, will net a gain of about S$84 million over book value, rental support, and other expenses and charges, Hyflux said. It will free up funds for Hyflux to buy new technology and investments in research and development, allow it to expand and automate its membrane manufacturing operations in Tuas Hub and fund its infrastructure project tenders.

The property is about 83.9 per cent occupied and Hyflux will provide rental support for the remaining vacant space for three years, it said.

Hyflux executive chairman and chief executive Olivia Lum said: “The sale and lease-back transaction is part of our capital recycling strategy to enhance the efficiency of our balance sheet and to redeploy capital for strategic investments.

“Hyflux Innovation Centre will continue to be the nerve centre of our global operations and we intend to remain at Hyflux Innovation Centre for the long term.

A-Reit will also be paying an upfront premium of S$21.2 million for the remaining land lease to Jurong Town Corp. With 100 per cent occupancy, the acquisition is expected to generate a net property income yield of about 6.98 per cent in the first year, it said.

Following the acquisition, A-Reit’s weighted average lease term to expiry is expected to increase from 3.85 years to 3.96 years, it said. A-Reit will own a total of 103 properties in Singapore and two business park properties in China.

Just over 30 units sold at The Crest

Source: Business Times / Companies

A WING TAI-LED consortium is understood to have granted options for a tad over 30 units in The Crest condominium project along Prince Charles Crescent.

The sales were clinched at a preview over the weekend. The showflat was closed this week but will open again tomorrow for this weekend's sales.

So far one tower has been released, comprising around 130 units, say sources.

The average price for the 99-year leasehold project is believed to be in the region of $1,750-1,800 per square foot before reimbursement of up to 7 per cent for additional buyer's stamp duty (ABSD). The reimbursement will be made upon buyers showing proof of the ABSD payment. This means the effective price to Wing Tai would be lower, at $1,628-1,674 psf assuming the maximum 7 per cent ABSD refund on all units.

-By Kalpana Rashiwala

3 residential plots launched for tender

2 are in Sengkang and the other, for exec condos, is in Choa Chu Kang

Source: Business Times / Singapore

TWO private residential sites in Sengkang and an executive condominium (EC) plot along Choa Chu Kang Drive, which together can yield about 1,700 homes, were launched for sale yesterday.

The three 99-year leasehold sites are the last on the confirmed list of the H1 2014 Government Land Sales programme to be released for tender.

Of the twin private residential sites in Fernvale Road in Sengkang, one is 16,604 square metres in size and the other, 17,414 sq m. Together, they can yield more than 1,100 units. Both their tenders close on Aug 7.

Given the scale of the two sites combined, SLP International executive director Nicholas Mak said he expects the batched tender to attract either big developers or consortiums of developers.

-By Lee Meixian

Government releases 3 residential sites for sale

The sites – two located in Sengkang and one in Choa Chu Kang – can collectively yield up to 1,700 residential units.

Source: Channel News Asia / Singapore

SINGAPORE: The Government on Thursday (June 26) announced the launch of three residential sites for sale this month under the first half of the Government Land Sales (GLS) Programme.

The two residential sites at Fernvale Road in Sengkang and one Executive Condominium site at Choa Chu Kang Drive – which can collectively yield up to 1,700 housing units – were launched under the confirmed list, the Urban Redevelopment Authority (URA) and Housing and Development Board (HDB) said in a joint statement.

The tender for the two Fernvale sites will close on Aug 7, while the tender for the Choa Chu Kang site will close on Sept 4, the statement said.

- CNA/cy

HDB ramps up solar leasing with latest tender

Experts say the move is a shot in the arm for energy development here and proves that the concept is economically viable.

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Development Board (HDB) has called for the largest solar-leasing tender to date, under which solar photovoltaic (PV) panels will be installed on the rooftops of about 500 HDB blocks managed by the Marine Parade, Jurong, Tampines and Sembawang town councils.

The 20 megawatts-peak (MWp) of electricity generated – enough to power more than 4,000 four-room HDB flats – could be used in common areas, to power lifts, corridor and staircase lights, for example, in these blocks as well as the Toa Payoh HDB Hub, the Woodlands Civic Centre and a factory building in Bedok North.

The tender, which was published on May 23 on the Government Electronic Business (GeBIZ) portal and closes on July 11, eclipses an earlier one put up by the HDB in August last year for a company to own and operate 5MWp for 125 blocks – which was then touted as the single largest project – in Ang Mo Kio, Sengkang, Serangoon North and Buangkok.

The pace at which HDB is ramping up solar leasing is a shot in the arm for the development of solar energy here and proves that the concept is economically viable, experts said.

When contacted, an HDB spokeswoman confirmed that the tender is the largest to date. More details will be announced later, she said.

In the August tender, the HDB would offset up to 30 per cent of the start-up costs and buy the electricity from the successful bidder for 20 years at a lower price than the prevailing market rate.

The HDB has not announced the award of this tender.

Dr Thomas Reindl, Deputy CEO of the Solar Energy Research Institute of Singapore, said after Singapore achieved grid parity in 2012 – where the cost of installing and maintaining solar PV panels is on a par with using conventional electricity – solar leasing has established itself as a viable business model in the country.

He added: “As soon as it makes economic sense, the private sector will take care of the market uptake and fast adoption (of the technology).”

Other prominent solar-leasing projects under way include that at the newly opened Sports Hub, to which solar company Phoenix Solar Singapore leases 707kWp.

The firm’s commercial director Chee Yeen Yee said that while the solar-leasing model is still relatively new here, its introduction has opened up a new market that is largely driven by government tenders. Increasingly, commercial building owners are also showing interest, she added.

Sunseap Leasing, a solar-system developer, expressed interest in bidding for the latest HDB tender. The company was awarded a tender in January last year to lease 3MWp to 80 blocks of flats in Punggol Eco-Town, among other solar-leasing projects on its books.

Its business development manager Shawn Tan noted that the latest tender documents did not provide an option for bidders to state an amount they require the HDB to subsidise as part of start-up costs. He felt this could possibly indicate the authorities’ confidence in the viability of the solar-leasing model for housing blocks.

Instead, bidders are assessed on the efficiency of their systems and the amount of discounts they can offer on the tariffs, he noted.

Town councils involved in the latest tender said the use of solar energy is not only good for the environment, but will also reduce their electricity bills, which have ballooned in recent years due to higher tariffs.

With economic viability no longer a challenge, Professor Subodh Mhaisalkar, executive director of the Energy Research Institute at Nanyang Technological University, said the intermittency of solar energy – it could be affected by cloud cover, for example – could become a constraint if Singapore ramps up its use of such renewable energy.

One of the solutions include looking at storing energy that is generated, he added.


Good use of waste at old dump site

Source: Straits Times

The first thing you notice about Sarimbun Recycling Park is the dust. Wood dust, charcoal dust and recycled-concrete grit, kicked up by trucks and blown aloft by wind, coat every surface. -

Real Estate Companies' Brief

Reits, stapled trusts outperform market in YTD total return

Source: Business Times / Companies

REAL estate investment trusts (Reits) and stapled trusts have averaged a 9.3 per cent year-to-date total return, according to a Singapore Exchange My Gateway report.

The 26 Reits and five stapled trusts outperformed the market, which had an average year-to-date total return of 5.98 per cent. Comparatively, the Straits Times Index had a year-to-date total return of 5.11 per cent.

The 31 trusts have a combined market capitalisation of $62 billion and their median year-to-date total return is 8.4 per cent. The three largest trusts are CapitaMall Trust, Ascendas Reit and CapitaCommercial Trust, with respective index weightings of 12.1 per cent, 10.8 per cent and 7.8 per cent on the FTSE ST Reit Index.

CapitaMall Trust had a year-to-date total return of 6 per cent. The return is 8.4 per cent for Ascendas Reit and 18.5 per cent for CapitaCommercial Trust. All three have a combined market capitalisation of $17.2 billion.

-By Sheena Tan

Mapletree Logistics Trust

Source: Business Times / Singapore Markets

June 26 close: $1.155

OCBC Investment Research, June 26

MAPLETREE Logistics Trust (MLT) recently proposed to acquire Daehwa Logistics Centre from vendor Daehwa Logistics Co Ltd. This represents MLT's ninth property investment in South Korea.

Chinese property firm to list on SGX

Source: Straits Times

A chinese developer eyeing the local property market is poised to be the first S-chip in about two years to list on the Singapore Exchange. The Chiwayland Group, which mainly develops residential and commercial property in Shanghai and other parts of the Yangtze River Delta region, will soon complete a $399 million reverse takeover of mainboard-listed oil and gas firm RH Energy.

Views, Reviews & Forum

Rule of law must prevail in reclamation

Source: Straits Times

Two massive reclamation projects on the Malaysian side of the Johor Strait naturally have raised concerns in Singapore. Malaysian Foreign Minister Anifah Aman has responded to Singapore's concerns, which were reportedly conveyed earlier through diplomatic and political channels and were voiced by the Republic's Ministry of Foreign Affairs last Saturday.

CPF scheme an obstacle to home-loan financing

Source: Straits Times

I recently turned 55 and was shocked to find out that my Central Provident Fund (CPF) Ordinary Account and Special Account had been transferred to the Retirement Account. I am still servicing my HDB housing loan using my Ordinary Account and now have a problem meeting the monthly payments.

Cheers to property savings along the NEL

Source: Today Online / Business

Cheers to property savings along the NEL

If you like to have a drink or two before you return home after a hard day’s work, Clarke Quay is as good a place as any. It is great for people-watching and there are plenty of bars and restaurants to choose from.

Clarke Quay has the added advantage of having its own station on the North East MRT Line (NEL). Even if you have had one too many, you can still safely return home to any condominium within walking distance of this line.

If you like your beer, you would want to maximise your time in the pub and minimise your time getting home. This means the ideal location for your condo would be Clarke Quay: No commuting time on the MRT. The problem, though, is that condos in the area rank second-highest in terms of price per square foot among all condos within 1km of an MRT station on the NEL.

So it is best to choose a home farther out: In general, as you head towards Punggol, prices drop.

There are two exceptions. First, Boon Keng offers greater savings, but you will have a longer walk, on average, to your condo than in the case of other stations. Second, Serangoon offers less savings since it is an MRT interchange with Nex mall and an interesting mix of landed and non-landed homes nearby.

If you really love your beer, you could justify the long commute from Clarke Quay to Buangkok by consoling yourself with the notion that by saving so much money on property, you will have more to spend on your favourite beverage. In terms of beer, your property savings on a 1,000sqf flat would be equivalent to the cost of 59,610 pints at S$14 a pop. Yes, a home is not the only thing that is expensive in Clarke Quay.

That is a huge quantity of beer. If you drink two pints a night, it would take you 81.7 years to consume your property savings. Even with the recent advances in medicine, it would be challenging to drink this much in a lifetime.

So maybe in your case, there is a station on the NEL that would allow you to achieve a better balance between price, commuting time to Clarke Quay and property savings for beer.

It is your decision. However, I would think twice about Chinatown. Condos there are more expensive than those near Clarke Quay, so you start 1,714 pints in the hole and it will take you 2.35 years to catch up.

-By Sam Baker, Co-founder of SRX

Global Economy & Global Real Estate

1MDB unit partners Lend Lease in RM8b property project

Source: Business Times / Malaysia

[PETALING JAYA] 1MDB Real Estate (1MDB RE) has appointed Lend Lease as its major partner to commence work on its RM8 billion (S$3.1 billion) TRX Lifestyle Quarter project at the Tun Razak Exchange (TRX) in Kuala Lumpur.

The lifestyle project will comprise a hotel, three residential towers, a new retail mall that connects to TRX's multi-layer central park and a dedicated MRT station, Malaysia's The Star reports.

"We expect it to attract some US$1 billion in foreign direct investments," 1MDB group chief executive officer Mohd Hazem Abd Rahman said in a press statement.

The TRX is a 70-acre mixed-use development in Kuala Lumpur comprising a new financial and business district with commercial, residential, leisure and cultural components.

-From Petaling Jaya, Malaysia

Pengerang key to M'sia's development

An LNG trading terminal will be built at the seaside town

Source: Business Times / Malaysia

FIVE years ago, the place was mostly water, mud and several sorry-looking houses belonging to fishermen who had plied their trade in these waters for years.

Yesterday, however, Pengerang had an oil tanker berthed along a jetty stretching hundreds of metres out to the sea, and the mournful calls of gulls echoed across  200 hectares of reclaimed land on which squatted enormous tanks capable of storing over 800,000 cu m of petroleum products. (By year's end, this capacity will be 1.3 million cu m.)

This place, Pengerang Independent Terminals (PIT), is the face of this seaside town today.

PIT is a public-private partnership between the Johor state government (20 per cent), Holland's Royal Vopak, the world's largest terminal firm and Malaysia's Dialog Group.

-By S Jayasankaran in Pengerang, Johor

Japan firm plans 100b yen boost to hotel ventures

Rising inbound tourism, government hospitality targets prompt Hulic's move

Source: Business Times / Property

[TOKYO] Hulic Co is seeking to invest as much as 100 billion yen (S$1.2 billion) over the next five years in hotels in Japan amid rising inbound tourism in the country.

Hulic, the second-best performer among Japanese real estate firms in the past two years, is looking to acquire properties for hotel development, said Noritaka Takahashi, general manager of the real estate planning department at the Tokyo-based company.

The developer, which spun off from Mizuho Bank, owns buildings that house the bank's branches and may redevelop them in key locations into hotels, he said.

The hospitality business is becoming one of Japan's fastest-growing industries as the government targets inbound tourists to reach 20 million by 2020, when Tokyo hosts the Olympic Games.

-From Tokyo, Japan

LA River plan driving land prices up

Source: Business Times / Property

[LOS ANGELES] Ben Stapleton frames the shot with his hands like a movie director, sharing his vision of a junkyard he's trying to sell for US$3.5 million. He sees artist workspaces, retail shops and apartments with Los Angeles skyline views, steps from a riverfront oasis.

Right now the river of his dreams is the concrete flood channel where an 18-wheeler chased Arnold Schwarzenegger on a Harley in Terminator 2: Judgment Day, one of the movies that used the 60-metre ditch to depict industrial bleakness. A US Army Corps of Engineers plan to return the Los Angeles River to a more natural state would cost US$1 billion and has speculators circling even before the funding's in place.

"The private money is already moving," said Mr Stapleton, a vice-president at commercial property brokerage Jones Lang LaSalle. "They're looking for opportunities. It's the private money that's going to make the vision happen."

While revived waterfronts have driven development from San Antonio to New York, it's hard to picture the Los Angeles River being a party to anything like that. Untamed, it looks more like a desert arroyo than London's River Thames. Even in the wet season it doesn't exactly gush, and much of the liquid in it is from waste-treatment plants.

-From Los Angeles, US

Spanish REIT Axia Seeks 400 Million Euros With Offering

Source: Bloomberg / News

Axia Real Estate SOCIMI SA, a Spanish REIT, will seek to raise 400 million euros ($544 million) with a stock offering as it taps demand from investors seeking to bet on a recovery in the country’s property market.

Axia will issue as many as 40 million ordinary shares at 10 euros each in an offering being led by Citigroup Inc. and JB Capital Markets, the company said in a prospectus for the offering approved by Spain’s market regulator today. The shares are due to start trading on July 9.

Axia, led by Chief Executive Officer Luis Alfonso Lopez de Herrera-Oria, will seek to invest in undermanaged high-quality commercial real estate mainly in Madrid and Barcelona, according to the prospectus. Axia is the latest Spanish REIT to offer shares as Merlin Properties SA seeks to raise about 1.5 billion euros in an initial public offering next week following sales in March by Lar Espana Real Estate Socimi SA and Hispania Activos Inmobiliarios that raised 900 million euros.

Axia said it had received commitments from investors to subscribe for 247 million euros of shares in the offering. They include Perry European Investments SARL, which agreed to acquire 10.5 million shares, and Taube Hodson Stonex LLP, which pledged to buy 4 million shares.

From 1986 to 2002, Lopez de Herrera-Oria was executive director of Prima Inmobiliaria, a real estate company that merged with Vallehermoso Renta in 2000 to become Testa Inmeubles en Renta, unit of Sacyr SA. He was until recently CEO of Alza Real Estate.

-By Charles Penty

Foreign Buying of Australian Housing on the Rise, RBA Says

Source: Bloomberg / Luxury

Australian approvals of home purchases by foreigners is on the rise, driven by increasing wealth globally and better integration with Asia, according to central bank assistant governor Christopher Kent.

“The data clearly show an increase in the level of approvals for foreign residential purchases over time,” Kent said in a statement to a parliamentary panel in Sydney today. “But it is difficult to know how much this has boosted net demand for Australian housing.”

Kent was testifying at an inquiry by lawmakers into foreign buying of domestic real estate in response to concerns by locals that overseas demand, particularly from China, is driving up prices and reducing affordability. Chinese buyers overtook Americans to become the biggest purchasers of Australian commercial and residential property last financial year as investment surged 42 percent to A$5.9 billion ($5.6 billion), according to the Foreign Investment Review Board.

The Reserve Bank of Australia cut its overnight cash-rate target by 2.25 percentage points between late 2011 and August to a record-low 2.5 percent to aid domestic demand and boost industries including residential construction. Dwelling prices climbed 10.7 percent across Australia’s eight state and territory capitals in the 12 months to May 31 to a median A$545,000, according to the RP Data-Rismark home value index.

Local Demand

“The rise in prices has primarily reflected increased housing demand from Australian residents and citizens, partly owing to low interest rates,” Kent said today. The RBA “wouldn’t welcome further strong price growth of this level year after year.”

A long, sharp increase in home prices, a surge in credit and a significant drop in lending standards are needed to put the housing market at risk, he said. While the increase in prices so far has led to a small rise in credit, that growth remains relatively modest, according to Kent. There also hasn’t been a “wholesale and significant drop in lending standards,” he said.

Overseas purchasers bought a record 13.9 percent of new properties and 9.5 percent of established homes in the first three months of the year, a survey of real estate professionals by National Australia Bank Ltd. released April 16 showed.

The influx of foreign capital, combined with limited new supply and continued low interest rates, mean the housing market is “increasingly likely to get caught up in a positive price-feedback loop and eventually could face a correction,” Steven Hess, senior vice president for sovereign risk at Moody’s Investors Service, said in a statement yesterday.

Supply Constraints

Kent attributed the rise in prices to “robust” population growth of about 1.7 percent a year and a lag in supply. A “pretty noticeable pickup” recently in building approvals and a subsequent increase in dwelling investment look set to continue and will help ease supply constraints, he said.

Building approvals rose a seasonally adjusted 1.1 percent in April from a year earlier, following a 21 percent surge the previous month, data from the statistics bureau showed.

Foreign demand for housing has also supported the local construction industry, and has drawn developers from overseas into the domestic market, Kent said.

Australia tightened rules on foreign investment in real estate in 2010, requiring offshore buyers to purchase only new properties, and introduced penalties to enforce the changes. It also said temporary residents must obtain approval from the Foreign Investment Review Board to buy homes, and must sell when leaving the country.

Data from the Foreign Investment Review board show foreign purchase approvals have remained between five percent and 10 percent of national housing turnover in value terms and about half that in terms of numbers, Kent said today. Actual purchases by foreigners are also likely to be lower than the data suggest, as not all approvals lead to a purchase, he said.

-By Michael Heath and Nichola Saminather

Canadian Funds Buy Stakes in Two Manhattan Office Towers

Source: Bloomberg / News

Canada’s two largest pension funds are expanding their holdings of New York real estate, announcing separate deals today to buy stakes in Manhattan office towers.

Ivanhoe Cambridge Inc., the Montreal-based real estate unit of pension fund Caisse de depot et Placement du Quebec, agreed with its joint-venture partner to acquire a 49 percent interest in 330 Hudson St. for about $150 million, according to a statement today. Canada Pension Plan Investment Board, the country’s largest pension fund, is taking a 45 percent stake in 1 Park Ave., controlled by Vornado Realty Trust. (VNO)

Canadians were the biggest foreign buyers of commercial property in America last year and the second-largest in New York, behind the Chinese, according to Real Capital Analytics Inc. Ivanhoe Cambridge has made five U.S. office deals through its partnership with Callahan Capital Properties as it seeks to boost its real estate investments.

“Canada has tremendous financial resources with which to invest and they’re some of the largest sovereigns in the world,” Doug Harmon, a broker with Eastdil Secured LLC who worked on both deals, said in a telephone interview. “They’ve had a big head start as far as investable dollars and making friends and relations in New York.”

Ivanhoe Cambridge’s Manhattan deals include an October agreement for a 51 percent stake in the News Corp. building at 1211 Avenue of the Americas. The transaction valued the tower at $1.7 billion.

330 Hudson

The company’s investment in 330 Hudson, located in the in-demand midtown south neighborhood, values the 16-story building at $306 million. Beacon Capital Partners, represented by Eastdil in the transaction, recently led a redevelopment of the 467,000-square-foot (43,400-square-meter) tower, including the addition of eight column-free floors.

Ivanhoe Cambridge was interested in the property because of its potential to lure tenants from the technology, media and information industries, Adam Adamakakis, Ivanhoe Cambridge’s executive vice president for U.S. investments, said in a telephone interview. Those companies have been New York’s most active office renters in recent years.

“We like the neighborhood, we like the asset and we like tenants that it attracts,” Adamakakis said.

Manhattan has about 400 million square feet of office space, roughly equal to the office space in all of Canada, helping to lure the nation’s investors, Adamakakis said.

Other Cities

Through its partnership with Callahan, Ivanhoe Cambridge is looking to invest in nine U.S. markets, including Washington, D.C., San Francisco and Los Angeles, he said.

Toronto-based Canada Pension invested $108 million to boost its stake in 1 Park Ave., a 925,000-square-foot property east of Herald Square, to 45 percent, the company said in its statement today. It previously held an indirect interest of about 11 percent through an investment in a Vornado fund. Eastdil’s Harmon and Adam Spies were the brokers on the deal for Vornado.

The investors value the building at $560 million, including the assumption of $250 million in debt. New York-based Vornado bought a 95 percent stake in the tower in 2011, which valued it at $427 million.

“For us, and perhaps other institutional investors, the strength of New York and the resilience of New York in the long term is very attractive,” Peter Ballon, vice president and head of real estate investments in the Americas for Canada Pension, said in a phone interview. “The real estate conditions right now in terms of fundamentals are very strong and we believe that it’s a market that’s going to be around for the long run.”

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

-By Jonathan LaMantia

Lennar Earnings Beat Estimates as Home Prices Increase

Source: Bloomberg / Luxury

Lennar Corp. (LEN), the biggest U.S. homebuilder by stock-market value, reported a quarterly profit that beat analysts estimates as the company raised its prices and delivered more properties.

Net income for the three months through May was $137.7 million, or 61 cents a share, little changed from a year earlier, the Miami-based company said in a statement today. The average of 14 analysts’ estimates was for earnings of 52 cents a share, according to data compiled by Bloomberg. Revenue jumped 27 percent to $1.8 billion.

“The homebuilding recovery continued its progression at a slow and steady pace,” Chief Executive Officer Stuart Miller said in the statement.

U.S. new-home sales surged to an annualized pace of 504,000 in May, the highest level in six years, as the market recovered from a weather-induced slowdown in the first quarter and consumer confidence improved, the Commerce Department reported this week. Publicly traded builders including Lennar have been increasing prices to take advantage of a tight supply of new and existing homes while using their economies of scale to reduce costs and widen profit margins.

Lennar’s orders in the fiscal second quarter climbed to 6,183 units worth $2 billion, an 8 percent increase in volume and a 21 percent gain in value.

Buyer Demand

U.S. home sales started slowing in May 2013 after mortgage rates jumped a percentage point. Lennar’s orders were less than some analysts expected, “indicating core buying demand was relatively flat compared to last year’s spring selling season,” Adam Rudiger, an analyst at Wells Fargo & Co., wrote in a note today from Boston.

The number of houses delivered by Lennar in the quarter increased 12 percent from a year earlier to 4,987. The average sale price rose to $322,000 from $283,000.

Lennar’s year-earlier results included a one-time tax allowance that added $41.3 million, or 18 cents a share, to its earnings for the period.

The company builds homes for first-time and move-up buyers, retirees and multiple-generation households in 18 states. It also invests in apartments, master-planned communities, mortgage financing and commercial real estate.

Lennar fell 0.5 percent to $41.32 today. The shares have risen 4.5 percent this year, compared with a 0.7 percent gain for the Standard & Poor’s Supercomposite Homebuilding Index.

-By John Gittelsohn

BNY Mellon to Move Headquarters to Brookfield Place

Source: Bloomberg / News

Bank of New York Mellon Corp. will move its headquarters to lower Manhattan’s Brookfield Place as part of an effort to scale down its office space and streamline operations.

The world’s biggest custody bank signed a 20-year lease for about 350,000 square feet (33,000 square meters) at 225 Liberty St., BNY Mellon said today in a statement. The building, formerly known as 2 World Financial Center, is part of a complex owned by Brookfield Property Partners LP. (BPY-U)

The agreement ends the bank’s years-long search for a cost-effective alternative to its headquarters at 1 Wall St., which last month it agreed to sell to a venture led by Macklowe Properties for $585 million. For Brookfield, downtown Manhattan’s largest office landlord, it fills another part of about 3 million square feet of space at the complex left when leases by Merrill Lynch & Co. expired last year.

The move “gives us the opportunity to create a corporate campus with state-of-the-art facilities to serve our clients for decades to come,” said Gerald L. Hassell, BNY Mellon’s chairman and chief executive officer. “Our employees will have an exceptional work experience at 225 Liberty.”

The company’s predecessor, Bank of New York, has been in lower Manhattan since it was founded in 1784 by Alexander Hamilton. BNY Mellon had considered an office building on the Jersey City, New Jersey, waterfront, and had received a proposal of financial incentives from that state’s government, people with knowledge of those discussions said last month.

State Incentives

BNY Mellon was offered $23 million in tax credits and other incentives to stay in New York, according to Jerry Russo, spokesman for the Empire State Development Corp., which oversees corporate-retention efforts. Brookfield will get a rent credit of $1 million a year for 10 years beginning in 2016, he said in an e-mail.

Kevin Heine, a BNY Mellon spokesman, declined to discuss what, if any, any sweeteners the bank received.

BNY Mellon also owns a 25-story office building at nearby 101 Barclay St. The rent at 225 Liberty St. wasn’t disclosed.

Time Inc. (TIME) decided last month to move its headquarters to the same Brookfield Place building after more than half a century in the Time & Life Building across from Rockefeller Center in Midtown. The magazine publisher agreed to lease 700,000 square feet at 225 Liberty St.

In a regulatory filing today, Time Inc. said it expects cash rental payments to Brookfield to start on Jan. 1, 2018, even though the lease takes effect at the beginning of 2015.

Leasing Momentum

Free-rent periods, along with payments to cover at least some office-finishing expenses, are a common incentive landlords provide to attract tenants. Melissa Coley, a Brookfield spokeswoman, declined to comment on any incentives provided to Time Inc. or BNY Mellon.

The BNY Mellon lease, “combined with additional leases in advanced and progressing negotiations, will bring the occupancy level of the complex to nearly 90 percent, with positive momentum behind it,” Dennis Friedrich, CEO of Brookfield Office Properties Inc., a division of Brookfield Property Partners, said in a separate statement.

If deals expected in the next couple of months are completed, less than 400,000 square feet of the Merrill vacancy will remain, a person with knowledge of Brookfield’s efforts said this month.

BNY Mellon said it intends to restructure the floors at Brookfield Place to create an “open workplace,” taking advantage of natural light and designing areas for employee collaboration and mobility.

-By David M. Levitt

U.K. Homebuilders Gain as Carney Quells Investors’ Concerns

Source: Bloomberg / Luxury

U.K. homebuilders rose after Bank of England Governor Mark Carney introduced measures to cool the housing market that were less stringent than some investors had expected.

Persimmon Plc (PSN), the largest company by market value on the Bloomberg EMEA Homebuilders Index, was up 5 percent to 1,259 pence at the 4:30 p.m. close of trading in London. Redrow Plc (RDW) was the biggest gainer in the index with a 6.5 percent advance to 267.6 pence, while Taylor Wimpey Plc (TW/) jumped 5.2 percent to 109.9 pence.

Homebuilders erased the past month’s losses after Carney said at a press conference that the government would act to limit riskier mortgages and prevent an unsustainable buildup of debt by consumers. Today’s announcement is the biggest recent effort by a major central bank to actively tackle the threat of an asset bubble and avoid a repeat of the credit crisis.

“Homebuilders sold off quite heavily in advance of this, so there was a lot of negative news priced in,” said Colin Sheridan, an analyst at J&E Davy Holdings Ltd. in Dublin. Measures by regulators won’t significantly limit mortgage lending in the short term, he said. “They’re more focused on reckless lending in the future than anything going on at the moment.”

Bloomberg’s EMEA Homebuilder Index rose 4.4 percent, the biggest gain since Aug. 16, 2013, when it added 5.9 percent.

Booming Demand

The BOE’s action was prompted by booming demand for residential real estate and an increase in high loan-to-income mortgages, with Carney saying debt levels had put the economy in a vulnerable position.

In the first of two recommendations announced today, the U.K. government said lenders must limit the proportion of mortgages at 4.5 times income to no more than 15 percent of their home loans. It also said banks must decline mortgages to borrowers who fail a new repayment test.

In a separate announcement, Chancellor of the Exchequer George Osborne said that mortgages taken out under Help to Buy, a government program that guarantees loans to homebuyers with small down payments, will be capped at 4.5 times income.

The move to limit mortgages are “tentative measures” that won’t significantly affect the housing market, analysts at ING Groep (INGA) NV said in a note.

-By Dalia Fahmy

China’s Manhattan Project Marred by Ghost Buildings

Source: Bloomberg / News

China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation’s unprecedented investment boom.

The skyscraper-filled skyline of the Conch Bay district in the northern port city of Tianjin has none of a metropolis’s bustle up close, with dirt-covered glass doors and construction on some edifices halted. The area’s failure to attract tenants since the first building was finished in 2010 bodes ill across the Hai River for the separate Yujiapu development, which is modeled on New York’s Manhattan and remains in progress.

“Investing here won’t be better than throwing money into the water,” Zhang Zhihe, 60, said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. “There will be no way out -- it will be very difficult to find the next buyer.”

The deserted area underscores the challenge facing China’s leaders in dealing with the fallout from a record credit-fueled investment spree while sustaining growth and jobs in the world’s second-biggest economy. A Tianjin local-government financing vehicle connected to the developments said revenue fell 68 percent in 2013 to an amount that’s less than one-third of debt due this year.

“There will have to be a reckoning,” said Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong. Sales of bonds by local-government vehicles to repay bank loans are just “buying time,” he said. “The people will pay” for it through bank bailouts, recapitalization with public money or inflation.

Soured Assets

While a debt crisis is unlikely and major cities like Tianjin can fill vacancies, some credit and assets will go sour, leading to a drag on growth, Green said.

Tianjin, a city of 14.7 million people whose center is about 125 kilometers (78 miles) southeast of Beijing’s, saw its economic growth cool to 10.6 percent in the first quarter of 2014 from a year earlier, from 17.4 percent in full-year 2010, compared with a moderation in national expansion over the same period to 7.4 percent from 10.4 percent. An annual pace of 10.6 percent would be the weakest for Tianjin since 1999.

The government financing vehicle, Tianjin Binhai New Area Construction & Investment Group Co., reported revenue fell to 5.9 billion yuan ($950 million) in 2013, and profit dropped about 37 percent to 246.6 million yuan, according to its annual report.

Repay Loans

The company has 20.7 billion yuan of debt due in 2014, including loans, corporate bonds and commercial paper, almost triple 2013’s amount. Another 13.9 billion yuan is due next year. It sold 2.5 billion yuan of seven-year notes in May at a 6.5 percent coupon to repay bank loans and interest, according to a prospectus.

The Tianjin government didn’t respond to faxed questions yesterday.

“Both the central and local governments clearly know that a big slump in the property market will significantly magnify financial system risks, and they know it’s a delicate balance,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. The government will try to do everything to ensure an “orderly de-leveraging,” Liu said.

China’s leaders have pledged to control risks in local-government debt, with the central bank saying in May that it would strengthen monitoring of credit extended to the financing vehicles. The nation’s chief auditor said this week that growth in regional authorities’ debt has slowed.

Hotel Shell

Conch Bay showed few signs of life during a June 19 visit by Bloomberg reporters. Work on Glorious Oriental, a two-tower residential and office complex, had stopped, and at the north end of Conch Bay, the main building of the Country Garden Phoenix Hotel, billed as Asia’s largest hotel, was a deserted shell with no signs of any work under way.

Developer Country Garden Holdings Co. (2007) is “steadily building the walls and roofing” and working on mechanical and electronic systems after completing the main construction of the hotel, Lin Weiying, a deputy general manager of Country Garden’s strategic development department, said in an e-mail.

Calls to Glorious Oriental’s Beijing and Tianjin offices went unanswered.

Tianjin isn’t the only place in China where property strains are showing. New-building construction dropped 18.6 percent in the first five months of 2014 from a year earlier, according to government data. A closely held Shanghai developer suspended construction at a property project this month due to a lack of funds, Bloomberg News reported today, citing two government officials familiar with the matter.

Pudong Thriving

Conch Bay’s ghost-town appearance isn’t necessarily an indication the area will fail. Shanghai’s Pudong district overcame struggles in the mid-1990s to thrive as the nation’s financial center. Zhengzhou, capital of central Henan province, now suffers from traffic jams in its new-city district instead of the vacancies from a few years ago, said Nicole Wong, Hong Kong-based head of property research at CLSA Ltd.

Michael Hart, managing director at real-estate brokerage Jones Lang LaSalle Inc. in Tianjin, said the hope is that the local government will help fill buildings, possibly with anchor tenants such as state-owned enterprises. “Yujiapu is too iconic and too well-known in association for Tianjin for the government not to do their best to make it successful,” he said.

Government Offices

In fact, the government is already occupying some office space in Conch Bay, where shipping-company employee Chen Wenjie, 31, came to renew a license at the Hai River transportation administration bureau. “The construction now is nothing compared to the days in 2008 and 2009,” Chen said.

Wang Wei, a 34-year-old Tianjin resident, was driving through the area to check out property prices, finding them six times higher than what he’d be willing to pay. “I’ve seen a lot of reports about the area, but apparently it’s not a place fit for home -- at least for now,” said Wang. “No shops, no schools, no hospitals and no neighbors.”

-By Bloomberg News

Carney at Tolerance Limit as BOE Acts to Curb Housing Risks

Source: Bloomberg / Luxury

Mark Carney said the biggest risks to Britain’s recovery stem from the housing market as he introduced measures to limit riskier mortgages and prevent an unsustainable buildup of consumer debt.

The unprecedented action was prompted by booming demand for real estate and an increase in high loan-to-income mortgages, with the Bank of England governor saying debt levels put the economy in a vulnerable position. Today’s announcement is the biggest recent effort by a major central bank to tackle the threat of an asset bubble and avoid a repeat of the 2008 financial crisis.

“This is the limit of our tolerance,” Carney told a press conference in London. “Prospects for household indebtedness concern us. Although U.K. households have made progress in repairing their balance sheets, they start from a vulnerable position.”

In the first of two recommendations announced today, the Financial Policy Committee said lenders must limit the proportion of mortgages at 4.5 times income to no more than 15 percent of their new home loans. It also said banks must decline loans to borrowers who fail a new stress test that assumes an immediate 3 percentage-point increase in the benchmark rate.

In a separate announcement, Chancellor of the Exchequer George Osborne said that all mortgages taken out under Help to Buy, a government program guaranteeing loans to people with small down payments, will be capped at 4.5 times income.

Fresh Test

The measures are a test of the BOE’s new macroprudential tools, which it was granted as part of an overhaul of banking regulation by the U.K. government in 2010. Britons owed a record 1.28 trillion pounds ($2.2 trillion) on their homes in April, equal to about 76 percent of gross domestic product, BOE figures show.

Shares of homebuilders and the pound increased after the announcement, which economists including Philip Rush from Nomura International Plc and ING Bank NV’s James Knightleysaid were more lenient than the market was anticipating.

“These tentative measures will not significantly impact the outlook for the housing market in the near term,” London-based Knightley said. “Higher interest rates, more aggressive restrictions on lending and a slowdown in foreign appetite for London property will be needed for that to happen.”

Barratt Developments Plc (BDEV) climbed 4.1 percent at 12:18 p.m. London time,Persimmon Plc (PSN) surged 4.3 percent and Travis Perkins Plc (TPK) appreciated 3 percent. The pound rose 0.3 percent to $1.7027 after climbing to $1.7063 on June 19, the highest since October 2008.

Targeted Package

“We have seen time and again how quickly responsible can turn to reckless,” Carney said. He said policy makers will evaluate the impact of today’s measures and “recalibrate” them if needed.

While the BOE said household debt levels aren’t an “imminent threat to stability,” Carney told reporters that “highly indebted households could pose major direct and indirect risks in future.”

Today’s move represents an unprecedented bid to prevent the U.K. housing market from overheating, eclipsing the BOE’s decision to end incentives for mortgage lending under its Funding for Lending Scheme at the end of last year. Home prices rose 9.9 percent in April from a year earlier, the most in four years, and by almost 20 percent in London, according to official data.

Prices Soar

The BOE’s central forecast assumes house-price inflation continues at its current rate for another year before cooling to a rate in line with income growth. The “upside scenario” sees mortgage approvals rise to about 350,000 a quarter and house-price growth accelerating to an annual 15 percent, similar to the pace seen in the early 2000s.

In the past year, about 10 percent of loans had a loan-to-income ratio of 4.5 times or above, compared with 6.5 percent in the two years before the financial crisis. The 15 percent ceiling will begin Oct. 1, though mortgages approved before that date will be counted if not completed by the end of September.

According to the Council of Mortgage Lenders, first-time buyers in London are borrowing almost four times their gross income and the average loan is 200,000 pounds -- almost double the U.K. as a whole.

While Britain’s property market has boomed over the past year, other rules already introduced appear to be having an impact. In a BOE survey last week, some lenders said the changes in the Mortgage Market Review “might reduce approval rates somewhat.”

Official Intervention

The FPC is on the front line of the response to the surge in housing demand. With the benchmark interest rate at a record-low 0.5 percent for the past five years, BOE officials have promoted macroprudential tools as the best way to head off potential stability threats.

Official intervention in the housing market in recent decades has been aimed at raising revenue for the government rather than cooling demand. Tax relief on mortgage-interest costs was eroded steadily from 1988 and eventually abolished in 2000 by then Labour Chancellor of the Exchequer Gordon Brown, who regarded the 1.4 billion-pound tax break as a middle-class perk. The introduction of a 7 percent stamp-duty rate by Osborne in 2012 was limited to properties bought for at least 2 million pounds.

How the BOE fares with its policies will be tracked by other key central banks such as the Federal Reserve and the European Central Bank. Fed officials have raised financial-stability concerns at meetings in recent months.

Central banks already experimenting with such policies include Carney’s native Canada. It has been tightening macro-prudential policy since 2008, with steps including minimum down-payment demands and maximum debt limits for insured mortgages. Sweden and Norway capped loans as a share of a property’s value and asked banks to protect themselves against losses. Hong Kong limited the size of loans too and took steps to curb some purchases by foreigners.

-By Ben Moshinsky

Bilfinger Turns to Industrial Deals After U.K. Takeovers

Source: Bloomberg / Luxury

Bilfinger SE (GBF), the German builder transforming itself into a provider of factory and property services, still has 700 million euros ($955 million) for industrial acquisitions after buying two U.K. building-management companies.

“Future acquisitions will largely be in Bilfinger’s other business segments” of industrial services and power plant maintenance, Chief Executive Officer Roland Koch said in an interview at Bloomberg’s Frankfurt office. “We have plenty of ideas.”

Bilfinger will first integrate real estate consultant GVA and Europa Support Services to boost its building-management business in the U.K. more than 11-fold to 400 million euros a year, Koch said. It bought Europa in December and said June 23 it has GVA shareholder support to complete that deal.

Bilfinger, once Germany’s second-biggest builder, has been withdrawing from construction as it tries to stabilize earnings by avoiding the cyclical peaks and troughs of the building industry. As the 134-year-old company focuses on industrial and power services, as well as facility management, it added almost 6,000 employees through purchases in 2013.

Koch has bought 25 companies with an enterprise value of about 1 billion euros since taking the helm in 2011. One goal is to increase Bilfinger’s reach outside Europe, where it gets less than 20 percent of sales. The Mannheim-based company said last month it will sell civil engineering businesses with sales of about 800 million euros as it steers away from construction.

Hochtief Differs

The strategy is different from that pursued by Hochtief, Germany’s biggest builder, which has reversed a push into services to concentrate on engineering projects.

“We are talking about growth opportunities that aren’t exactly in line with broader macroeconomic data,” said Koch, who previously served as premier of the German state of Hesse. “The outsourcing of industrial facilities, retrofit programs for power plants and changing energy sources are not exactly markets that are tied to macro trends.”

The approach is rewarding investors, as Bilfinger shares have returned about 47 percent in three years, including reinvested dividends. That compares with a 15 percent return for Hochtief and a 37 percent return for the Euro Stoxx Industrial Goods & Services Index of 46 companies.

The shares fell 0.6 percent to 83.16 euros at 11:40 a.m. today in Frankfurt, giving Bilfinger a market value of 3.8 billion euros.

Stable Contracts

“In services you naturally have a lot more visibility than you do as a construction company because you have a higher proportion of long-term contracts,” said Ingbert Faust, a Frankfurt-based analyst at Equinet who has a hold recommendation on the shares. “Margins are higher than they were in the earlier segment, but the capital employed is also higher.”

Bilfinger’s construction output, the industry’s measure of completed work, declined 26 percent last year to 1 billion euros. The figure increased 7 percent to 4 billion euros at the industrial division, the largest unit. Output rose 4 percent in building and facility services and fell 5 percent in energy operations. Total revenue rose 0.9 percent to 8.4 billion euros.

Bilfinger is forecasting output of at least 11 billion euros by 2016 with earnings of about 400 million euros. That compares with 8.5 billion euros and 249 million euros respectively last year.

IBM Property

The building and facility division -- now larger with Europa and GVA -- provides services such as electrical maintenance, cleaning and the provision of furniture. Bilfinger runs more than 200 International Business Machines Corp. (IBM) properties and manages real estate for Deutsche Bank AG.

Bilfinger hasn’t disclosed prices paid for most deals as the majority involve closely held companies. Recent purchases have been 300 million euros or less, according to the company.

Equinet estimates that GVA is worth about 160 million euros. The company manages student housing and helps clients such as fashion retailer Mint Velvet find store locations. Europa had 142 million pounds ($241 million) in sales in 2012.

In the U.K., Bilfinger’s plans include doing more property management in the City of London financial district, Koch said.

The company is also expanding in the U.S. amid an industrial recovery, and acquisitions there have been a success, Koch said. One of the biggest recent deals was last year’s purchase of Johnson Screens Inc., a U.S. provider of industrial filters and water-well screens.

BASF SE, the world’s largest chemical company, is investing more than 1 billion euros in U.S. facilities to take advantage of lower energy costs. Bilfinger, which counts BASF among its biggest customers, stands to benefit.

“It is naturally an opportunity for us,” Koch said. “We will follow a Wacker Chemie, a BASF, a Bayer or a Lanxess. We follow American companies worldwide and are set up in a way that lets us do so.”

-By Alex Webb and Dalia Fahmy

Hulic Plans to Boost Japan Hotel Investment as Tourists Grow

Source: Bloomberg / Luxury

Hulic Co. (3003) is seeking to invest as much as 100 billion yen ($981 million) over the next five years in hotels in Japan amid rising inbound tourism in the country.

Hulic, the second-best performer among Japanese real estate firms in the past two years, is looking to acquire properties for hotel development, said Noritaka Takahashi, general manager of the real estate planning department at the Tokyo-based company. The developer, which spun off from Mizuho Bank Ltd., owns buildings that house the bank’s branches and may redevelop them in key locations into hotels, he said.

The hospitality business is becoming one of Japan’s fastest-growing industries as the government targets inbound tourists to reach 20 million by 2020, when Tokyo hosts the Olympic Games. Foreign visitors to the country in April rose to a record high, gaining 33 percent to 1.2 million from a year earlier, according to an estimate by the Japan National Tourism Organization.

“We have identified some opportunities in the tourism market and we recognized our strength lies in the lodging business,” said Takahashi, who leads a team that was formed in April at Hulic.

Consumption by inbound tourists rose 31 percent to 1.4 trillion yen in 2013, while spending by domestic travelers gained 4 percent to 20.6 trillion yen, according to the Japan Tourism Agency.

Rising Occupancies

Hulic was created after Mizuho Bank, formerly known as Fuji Bank, spun off its real estate business in 1957, the company said on its website. About 40 percent of leasing revenue the developer generates is from Mizuho, while the bank and its subsidiaries own a 6.5 percent stake in the developer.

Hulic has invested about 15 billion yen to 20 billion yen in three hotels in Tokyo and the neighboring Yokohama area since 2010, according to the company. The developer plans to add about 10 to 13 hotels to its portfolio, Takahashi said.

Occupancy rates for city hotels across Japan rose for a second year to 75 percent in 2013, according to the Japan Tourism Agency. Tokyo hotels had an occupancy rate of 83 percent during the July to September period last year, according to the agency.

Shares of Hulic have more than tripled in the past two years, making the company the best performer among the 45 members that make up the Topix Real Estate Index after Sun Frontier Fudosan Co. The stock closed 2 percent higher at 1,384 yen in Tokyo, trimming its year-to-date decline to 11 percent, compared with the 14 percent drop by the industry measure.

-By Kathleen Chu and Katsuyo Kuwako