Real News‎ > ‎2014‎ > ‎June 2014‎ > ‎

5th June 2014

Singapore Real Estate

New online tool provides clarity on rental deals

Rental X-Value can estimate a home's rental value

Source: Business Times / Property

[SINGAPORE] Tenants and landlords seeking clarity in rental transactions, especially during the peak rental season from May to August, may be able to find support in a new online pricing tool that aims to provide transparency.

The Singapore Real Estate Exchange (SRX), an information exchange formed by real estate agencies, yesterday launched Rental X-Value, a computer-generated estimate of a home's rental value, on its website.

Described as the first-of-its-kind in Singapore, the pricing feature draws on data from more than 30 public and private sources and is based on algorithms developed in partnership with academics, government agencies and valuers.

In comparing recent transactions, the calculation uses the SRX Price Index for rentals to adjust disparities in rental contract dates. It also takes into account differences and exceptions, including distances to the MRT and real-time rentals of other units in the same project.

Real Estate Companies' Brief

S-Reits' refinancing flexibility offsets high leverage risks

Source: Business Times / Companies

SINGAPORE-LISTED real estate investment trusts (S-Reits) have good refinancing flexibility which offsets the risks associated with the sector's high leverage, Fitch Ratings said in its report released yesterday.

S-Reits have been able to sustain their high leverages - or borrowings as a ratio of assets - chiefly due to low market interest rates and rising asset values in a largely bank-funded market.

Most of the S-Reits' loans make up less than 40 per cent of the value of their properties, well below the regulatory limit of 60 per cent for rated Reits.

In addition, their unencumbered assets (such as fully paid properties free from creditor claims) also comfortably cover their unsecured creditors by a multiple of 3.8 times. Four in five of the Reits' property assets are unencumbered.

-By Lee Meixian

FCL makes A$2.6b bid for Australand

Its proposed offer price of A$4.48 per security trumps bid from Stockland

Source: Business Times / Top Stories

[SINGAPORE] Singapore developer Frasers Centrepoint Limited (FCL) is taking on Australia's largest property player with a competing proposal to acquire Australand Property Group for A$2.6 billion (S$3 billion) cash.

Its proposed offer price of A$4.48 per stapled security trumps the all-share bid from Stockland, which had revised its offer price to A$4.35 per security.

FCL said its proposal was conditional and non-binding. It has entered into a process agreement with Australand for an exclusive period of four weeks to conduct due diligence before finalising an implementation agreement that is binding.

"The proposal will catapult FCL to become one of Australia's leading real estate companies with a portfolio of scale and quality," said FCL group chief executive Lim Ee Seng, who was in Australia when the announcement was released yesterday.

The proposed deal is touted as "transformational" as it will result in a substantial increase in group assets and earnings. It would grant FCL access to Australand's A$2.4 billion of office and industrial properties and A$9.3 billion of developments pipeline in Australia, one of FCL's core markets since its entry over a decade ago.

Underpinned by strong momentum in its residential division, Australand is expecting its earnings per security this year to grow by 20-25 per cent from 2013 based on a further review of its operating earnings outlook.

Should the proposal become a binding offer, Australand's board intends to recommend the proposal "in the absence of a superior proposal and subject to an independent expert opinion", Australand said yesterday.

Under FCL's proposal, Australand security holders would be entitled to an expected first-half 2014 distribution of 12.75 cents per stapled security and an additional distribution of up to 12.75 cents apiece for second-half 2014 until the offer becomes unconditional.

Australand has been seen as a takeover target since CapitaLand said it wanted to sell its 59.1 per cent stake early last year after a strategic review. The stake was fully divested in two tranches of private placements - at A$3.685 apiece in November and at an average A$3.75 apiece in March this year.

A CapitaLand spokeswoman said the company was not at liberty to disclose the identities of interested parties whom the group held discussions with.

BT understands that apart from a takeover offer or an acquisition approved by resolution of a target company, the stake that can be acquired in the target company cannot exceed 19.9 per cent under Australian takeover rules. FCL would also not have access to Australand's books for due diligence if it was acquiring shares from then-shareholder CapitaLand.

Stockland, which snapped up a 19.9 per cent stake in AustraLand in March, tabled an offer at A$4.20 for each stapled security the following month. But it was prompted to raise its final offer price to A$4.35 apiece when the original bid was rejected by Australand.

Stockland said separately yesterday that its board will consider its options and provide an update in due course.

In the event that FCL's offer becomes binding, Australand could be delisted from the Australian stock exchange if the latter manages to obtain 100 per cent interest in Australand.

FCL, which was spun off as a listing by conglomerate Fraser and Neave in January, now hopes to raise the contribution from overseas properties and increase the proportion of recurring income to about half of group income over the medium term. Its latest proposal, if implemented, is expected to help the group to achieve these objectives in a shorter time.

"We already have an established platform and good brand recognition in Australia, but real estate is a business where scale and depth matter," said Mr Lim. "This proposal will be the catalyst that will help FCL to deepen our roots and accelerate our growth in a market that we believe will continue to offer long-term growth prospects."

The proposed offer price represents a premium of 4 per cent over the last closing price of Australand's stapled securities of A$4.31 each as at June 3 and a 22 per cent premium to Australand's estimated net tangible assets per security of A$3.68 as at June 30.

Deutsche Bank AG and Standard Chartered Bank are the financial advisers to FCL.

-By Lynette Khoo

Frasers Centrepoint makes S$3b bid for Australian developer

Singapore’s Frasers Centrepoint makes takeover bid of A$4.48 a share for Australand Property Group, pipping an offer by rival developer Stockland Corp.

Source: Channel News Asia / Business

SINGAPORE: Property developer Frasers Centrepoint said on Wednesday (June 4) that it has submitted a A$2.6 billion (S$3.03 billion) takeover bid for Australia's Australand Property Group.

Frasers Centrepoint has proposed a cash offer of A$4.48 per share, topping a A$4.43 offer made by Australand stakeholder Stockland Corp, Australia’s second-largest property group.

Australand’s board intends to recommend Frasers Centrepoint's offer “in the absence of a superior proposal and subject to receipt of an independent expert opinion”, the Singapore-listed developer said in a statement.

“The proposal will catapult Frasers Centrepoint to being one of Australia’s leading real estate companies with a portfolio of scale and quality. We already have an established platform and good brand recognition in Australia, but real estate is a business where scale and depth matters,” said Group CEO Lim Ee Seng.

“This proposal will be the catalyst that will help Frasers Centrepoint to deepen our roots and accelerate our growth in a market that we believe will continue to offer long-term growth prospects."

- CNA/cy

Frasers Enters Australand Battle With A$26 Billion Offer

Source: Bloomberg / Luxury

Frasers Centrepoint Ltd. (FCL) offered to buy Australian developer Australand Property Group (ALZ) for A$2.6 billion ($2.4 billion) in the Singapore real-estate company’s biggest proposed acquisition, trumping a bid by Stockland.

Frasers offered A$4.48 per share, Sydney-based Australand said today in a regulatory filing, compared with Stockland’s A$4.43 all-share bid. Shares of Australand, whose board said it intends to recommend the offer in the absence of a superior proposal, posted their biggest gain since December 2012 in Sydney. Frasers shares had the biggest drop in four months in Singapore.

The acquisition would give Frasers control of Australand’s A$2.4 billion of office and industrial properties and A$9.3 billion of developments in Australia, where the Singapore company is already building the 2,000-apartment Central Park project in downtown Sydney. Frasers is seeking to boost its operations in faster-growing overseas markets, which contributed 38 percent of earnings as of March 31 from 10 percent a year earlier, and has flagged Australia and China as preferred destinations.

“Australia is a market that Frasers understands well,” said Goh Han Peng, a Singapore-based analyst at DMG & Partners Securities Pte.“This bid helps them diversify further out of the challenging Singapore market.”

Australand rose 5.6 percent to A$4.55 at the close of trading in Sydney. Frasers shares declined 3.9 percent to S$1.85, the biggest drop since Feb. 4.

Home Prices

Private home prices in Singapore dropped by the most in almost five years in the first quarter following a campaign that started in 2009 to curb property speculation. Dwelling prices in Australia’s biggest cities rose 10.7 percent in May from a year earlier, according to the RP Data-Rismark Home Value index.

CapitaLand Ltd. (CAPL), formerly Australand’s biggest shareholder, sold its 39 percent stake in the company in March.

Australand was a financial investment for CapitaLand, which shifted its focus to Singapore and China after Chief Executive Officer Lim Ming Yan took over in January 2013, DMG’s Goh said. Australia is one of Frasers’s core markets, so an expansion is logical, he said.

Stockland Offer

Stockland bought 19.9 percent of the Sydney-based company on CapitaLand’s exit, and followed that with an all-share bid equivalent to A$4.20 a share, which Australand rejected on April 23. It returned with a sweetened bid that equated to A$4.35 a share on May 28 and A$4.43 based on yesterday’s closing price, gaining access to Australand’s books.

Australand revoked that access today, saying it has granted Frasers a four-week period of exclusivity. Under Frasers’s offer, Australand shareholders would retain their expected first-half dividend of 12.75 Australian cents per share, the Sydney-based company said. They would also receive an additional payout equal to the same amount pro-rated from July 1 until the offer becomes unconditional, it said.

“The board concluded that the conditional proposal would deliver a compelling value outcome for Australand securityholders and is superior to the final and conditional proposal received fromStockland (SGP),” Australand Chairman Paul Isherwood said in the statement.

Biggest Bid

Frasers’s offer is subject to approval by Australia’s Foreign Investment Review Board, and the backing of Frasers shareholders.

Stockland will consider its options and provide an update in due course, it said separately today.

Frasers’s offer “is a very full price so it’s a great outcome for Australand shareholders, but I would be surprised if Frasers gets much additional value out of it,” said Tony Sherlock, Sydney-based head of property research at Morningstar Australasia Pty. “In the context of Stockland, I would be very surprised if they kept raising, as they’d have to go a fair bit higher than their current offer to trump this.”

The bid is the biggest for Frasers Centrepoint, according to data compiled by Bloomberg, since it was spun off from Fraser & Neave Ltd. and began trading independently in January. The company, whose businesses include residential development, commercial property management and a hospitality unit, is seeking to expand in Australia and China as Singapore’s housing market slows, Lim Ee Seng, chief executive officer of Frasers Centrepoint, said in a May 9 statement.

“The proposal will catapult Frasers Centrepoint to being one of Australia’s leading real estate companies with a portfolio of scale and quality,” Lim said in a separate statement today. “We already have an established platform and good brand recognition in Australia, but real estate is a business where scale and depth matters.”

GPT Offer

Australand’s board in December 2012 rejected a bid by GPT Group, Australia’s second-biggest property trust, to acquire Australand’s industrial and commercial property divisions. GPT dropped its pursuit in May last year after failing to agree on a price that would compensate Australand shareholders for being left with a standalone residential property developer.

Australand shares are up 18 percent this year, and 7.6 percent since Stockland’s sweetened bid on May 28. Frasers’s shares have gained 25 percent since they began trading Jan. 9.

-By Nichola Saminather and Pooja Thakur

CapitaLand close to gaining 90% control of CMA

68 Holdings says it controls 50.89% of HPL

Source: Business Times / Companies

CAPITALAND, which aims to take CapitaMalls Asia (CMA) private, is on the verge of gaining 90 per cent control just days before its extended offer closes on June 9.

Sound Investments Holdings, the wholly owned subsidiary through which CapitaLand is making the offer, said that as at Tuesday, it and its concert parties owned, controlled or have agreed to acquire an aggregate of about 3.503 billion shares representing approximately 89.9 per cent of the issued share capital of CMA.

This comprised the starting stake of 65.4 per cent when the offer was first announced in April, another 9 per cent in valid acceptances and 15.5 per cent that the offeror has acquired or agreed to acquire.

Sound Investments declared its offer unconditional on May 16 after waiving its acceptance condition.

-By Jacquelyn Cheok

CapitaLand acquires stake needed to delist CapitaMalls Asia

Real estate developer has submitted an application to the Singapore Exchange to delist its shopping mall division, having crossed the 90 per cent threshold with a buy-out of minority owners.

Source: Channel News Asia / Business

SINGAPORE: CapitaLand on Thursday (June 5) announced that it holds more than 90 per cent of the issued shares of CapitaMalls Asia (CMA) - crossing the threshold it needs to delist its shopping mall arm.

CapitaLand said in a press release that it has submitted an application to the Singapore Exchange to delist CMA, and CMA shares will be suspended from trading after on June 9, the close of its offer to buy out minority owners, unless extended.

As at 5pm on June 4, CapitaLand and its concert parties owned, controlled or have agreed to acquire an aggregate of 3,614,324,178 CMA shares - about 92.7 per cent of CMA’s issued share capital.

The Singapore-listed developer had a 65.4 per cent stake when its offer was first announced in April. On May 16, it raised its offer to S$2.35 a share, up from the previous offer of S$2.22.

Said Mr Lim Ming Yan, President and Group CEO of CapitaLand: “It is a key milestone for CapitaLand. With the delisting of CMA, the Group’s simplified structure and ‘One CapitaLand’ strategy will provide us with a strong platform to seize opportunities in integrated developments. We will be able to better leverage resources across the Group’s businesses to maximise overall project returns.”

Shopping mall developer and operator CapitaMalls Asia has interests in more than 100 shopping malls across Singapore, China, Malaysia, Japan and India.

- CNA/es

CapitaLand’s stake in CapitaMalls Asia crosses 80% mark

Source: Today Online / Business

SINGAPORE — CapitaLand’s stake in CapitaMalls Asia (CMA) has crossed the 80 per cent mark, bringing it closer to attaining full control of its shopping mall arm.

CapitaLand, South-east Asia’s largest developer, now controls about 81 per cent of CMA, after taking into account open-market purchases and acceptances of the offer as at 5pm on Tuesday, it said in a statement yesterday. On May 16, it increased its offer for CMA to S$2.35 per share and said the offer was unconditional. CMA shareholders who accepted the offer before May 16 will get the higher offer price. CapitaLand had previously offered S$2.22 per share before adjusting it downwards to S$2.2025 to take into account a dividend payment.

“CapitaLand is committed to delisting CMA and we are confident we will achieve this objective. The proposed delisting and full integration of CMA is in line with our ‘One CapitaLand’ strategy to enhance our long- term competitiveness,” said group chief executive officer, Mr Lim Ming Yan, in a statement.

“The group will be well-positioned to deepen and strengthen our ability to undertake and optimise integrated developments with the simplified structure,” he added.

CMA is one of Asia’s largest shopping mall developers and operators, with interests in more than 100 shopping malls across Singapore, China, Malaysia, Japan and India.

-By Channel News Asia

CapitaLand's loss could be FCL's gain in Australand deal

Source: Business Times / Companies

WHAT does Frasers Centrepoint Limited (FCL) see in Australand Property Group that escaped CapitaLand?

This must be a question on some market watchers' minds after FCL said yesterday that it had submitted a conditional cash proposal to acquire up to a 100 per cent stake in Australand at A$4.48 per stapled security, totalling A$2.6 billion (S$3 billion). FCL has entered into a four-week, exclusive due-diligence period, after which the plan is to launch a binding offer. A key condition is that FCL receives minimum 50.1 per cent acceptance.

CapitaLand had a 59.1 per cent stake in Australand, which it divested itself of in two stages: 20 per cent last November at A$3.685 a stapled security or a total of A$426 million, followed by a sale of the balance 39.12 per cent stake at A$3.75 each raising A$848.8 million. "This divestment would allow us to reallocate capital to our core businesses in Singapore and China," CapitaLand's group CEO Lim Ming Yan said in March.

The total sales proceeds of around S$1.5 billion would no doubt come in handy for the already cash-rich group in its effort to privatise CapitaMalls Asia.

-By Kalpana Rashiwala

Views, Reviews & Forum

Rising rents driving up inflation?

Source: Straits Times

According to the Economist Intelligence Unit, Singapore is the world's most expensive city ("Take heed of heat over rising costs"; May 25). Although its survey was targeted at expatriates, we should not discount it if we want to attract the right talent from all over the world, as this finding could dissuade them from coming here.

S'poreans voice housing preferences in online survey

Source: Channel News Asia / Singapore

SINGAPORE: An online survey has found that Singaporeans are supportive of giving greater priority to those who apply for a HDB flat in the same town as their parents.

They are also in favour of building more three-generation flats and providing higher housing grants to those who live close to or with their parents.

The survey is being conducted by the National Development Ministry to find out what the preferred housing arrangements of Singaporeans are.

The survey, which began on May 25, has seen 1,927 people participate so far. It is part of the government’s new housing conversation with Singaporeans to find out what more can be done to help extended families live together or close by.

The ongoing survey has already shed some light on housing preferences.

Out of 949 courting Singaporeans who responded, the majority said they plan to set up their own home when they get married. Out of this majority, 72 per cent said they want to live close to their parents either in the same town or nearer.

It is likewise the case for seniors with children above the age of 21. Among the 41 seniors who currently live apart or plan to live apart from their children, 68 per cent said they also plan to live in the same town or closer. Ninety-eight seniors have taken part in the survey so far.

But among the 880 married Singaporeans who responded, only 31 per cent live in the same town as their parents or nearer, while 40 per cent stay in a different region.

"There may not be sufficient new BTO (flats) in the same estates where their parents are living,” said Dr Lee Bee Wah, chair of the Government Parliamentary Committee for National Development.

“For example, at one time I had a lot of residents who come and tell me that they want to apply for new BTO flats in Yishun. However at that time, a lot of flats were being offered in Punggol, so some of them went to apply in Punggol and later on when they find that there were flats available in Yishun, it was too late."

Some suggestions to help extended families live together or close by have also been mooted. One such suggestion is to give absolute priority to those hoping to apply for a BTO flat in the same estate as their parents.

"Imagine if the children were brought up in Nee Soon South and then later on when they want to buy a flat, they also buy it in Nee Soon South -- a few generations living in the same place,” said Dr Lee, who is also MP for Nee Soon GRC.

“It will be a very strong kampong spirit being forged. I would see it as more of a positive. Of course, there will be concerns. Some people might say giving absolute allocation may (result in) some abuse.

“Perhaps in this case, to ensure it is genuine demand, perhaps what the Ministry can look at is the Minimum Occupation Period (MOP). You can increase the MOP. Currently, it is five years. For those given absolute allocation, perhaps we can look at increasing the MOP."

The online survey will conclude in July and those who want to take part can do so at

To take the housing conversation further, Singaporeans are invited to take part in three upcoming focus group discussions, the first of which will be held on Saturday.

To get a variety of views, each session will target participants from different life stages, namely courting couples, married couples and seniors with children above the age of 21." 

- CNA/ec

Global Economy & Global Real Estate

Tianjin Eco-City 'shaping up nicely'

Source: Straits Times 

Amenities at Tianjin Eco-City, a joint China-Singapore project, are falling into place as a basic community forms. That was the report card from Mr Ho Tong Yen, chief executive of Sino-Singapore Tianjin Eco- City Investment and Development (SSTEC), its developer.

Fears of China housing glut 'overblown'

Urbanisation set to continue to drive fundamental demand for homes

Source: Business Times / Property

FEARS of an oversupply of homes in China appear to be overblown, going by the views of developers and industry practitioners who spoke at the World City Summit yesterday.

CapitaLand group CEO Lim Ming Yan told the audience at Marina Bay Sands that he expects urbanisation to continue to drive fundamental demand for homes in China.

Citing China's urbanisation plan for 60 per cent of its people to live in cities by 2020 and more than 100 million people will move from farms to cities by the same year, Mr Lim said: "There is still significant real demand in major Chinese cities."

There is also a growing trend of higher densities and compact cities in China, he noted.

-By Lynette Khoo

Productivity key to region's growth, says OECD chief

Source: Straits Times

How cities build resilience

Wellington mayor highlights need for disaster management and building of social capital by appreciating ethnic diversity

Source: Today Online / Singapore

SINGAPORE — It is a city with residents of 85 ethnicities, but New Zealand’s capital, Wellington, has managed to build social capital by avoiding ethnic enclaves and huge income gaps among suburbs, and by investing in facilities and community gardens.

In a quality of life survey conducted across 12 of the country’s cities, more than 80 per cent of Wellington residents said people from different cultures add to their quality of life, said Ms Celia Wade-Brown, the city’s mayor, on Tuesday at a World Cities Summit dialogue on social resilience.

“Being tolerant means there’s something to be put up with. You might be tolerant of your teenagers, you might be tolerant of loud music, but we shouldn’t be saying we should be tolerant of ethnic diversity. We should appreciate it,” said Ms Wade-Brown, who noted that celebrations in her city such as Chinese New Year, Christmas and Africa Day attract people from different cultures.

While there are some income disparities among suburbs in Wellington, which is home to more than 200,000 people and sits on the southern tip of New Zealand’s North Island, she noted that no one would know if one is on unemployment benefits, a Web developer or a successful property developer from the suburb one lives in.

But resilience is also about proper disaster management; social capital cannot be seen as a cheap way out of planning and building for disasters, she said. Wellington is prone to earthquakes and tsunamis, and public buildings have been strengthened, together with widespread education on what to do when a tsunami hits.

Meanwhile, the mayor of Tacloban city in the Philippines, which was devastated by Typhoon Haiyan last November, said at the dialogue that rebuilding has been a little slow due to the flow of funds, but planning is largely done.

Mr Alfred Romualdez said the city of about 240,000 people has modified its building code. Instead of defining no-build zones as those less than 40m from the coast, they are now defined as land less than 5m above sea level. Structures built must be above that height, said Mr Romualdez, who noted that typhoons of a higher magnitude could be “the new normal”.

Other steps included the setting of a reasonable timeframe for action by multiple stakeholders, added Mr Romualdez, who was reported last month as saying the majority of displaced residents were still living in evacuation centres and tent communities. He was invited to the Lee Kuan Yew School of Public Policy recently and said he learnt about good mechanisms for governance. “I’ve lost a lot of people and had to pick out new leaders.”

The Rockefeller Foundation of the United States is doing its part through the 100 Resilient Cities Centennial Challenge launched last year and will provide 100 cities with resources and technical support. The first 32 cities selected last December — including Ramallah in Palestine, Medellin in Colombia and New York City — vary in size and challenges faced.

Mr Michael Berkowitz, 100 Resilient Cities’ managing director, said the foundation helps the cities hire a chief resilience officer, a senior adviser who reports directly to the mayor, works across departments and oversees the resilience strategy.

-By Neo Chai Chin

Heathrow's £2.5b Terminal 2 off to smooth start

Airport aims to avoid the chaos of T5's opening that hit over 600 flights

Source: Business Times / Property

[LONDON] London's Heathrow airport welcomed its first passengers to a £2.5 billion (S$5.3 billion) terminal yesterday, aiming to avoid the chaos of the last major opening and bolster its case for remaining a major hub.

More than 1,000 passengers have arrived and 300 checked in at Terminal 2 yesterday morning. The first flight to use the building, which replaces facilities from the 1950s, was a United Airlines Boeing Co 767 from Chicago.

Flights will be capped at 10 per cent of capacity while systems bed in after the debut of Heathrow's Terminal 5 in 2008 led to a baggage-handling glitch that cost £16 million in expenses and lost revenue.

With undulating ceilings and a plaza-like departure zone, Terminal 2 will add no new capacity and instead help Heathrow counter the glitz of newer hubs in the Gulf, according to chief executive-designate John Holland-Kaye.

-From London, UK

London Reit Workspace's NAV soars

Source: Business Times / Property

[LONDON] Britain's Workspace Group plc reported a 43 per cent jump in full-year net asset value as the landlord saw an increase in occupancy and charged higher rates in a recovering commercial property market.

The real estate investment trust, which provides office spaces to small businesses, said EPRA net asset value - a key measure of industry performance - rose to 496 pence per share in the year to March 31 from 348 pence a year earlier.

EPRA (European Public Real Estate Association) net asset value excludes market adjustments of effective cash flow hedges, deferred tax relating to revaluation movements and capital allowances and derivatives.

Last year, growth in the UK commercial property business climbed to its highest level since 2010, with income returns from commercial assets rising to 6.8 per cent, data from real estate benchmark provider Investment Property Databank Ltd showed.

-From London, UK

RBS tightens home loans, following Lloyds example

Income-based limits on mortgages, term capped at 30 years

Source: Business Times / Property

[LONDON] Royal Bank of Scotland (RBS) has followed rival Lloyds Banking Group in placing restrictions on mortgage lending to tackle rising British house prices.

RBS, which is 81 per cent owned by the British government, will introduce a four times loan-to- income cap and maximum term of 30 years for all mortgages worth £500,000 (S$1.05 million) or more, according to sources familiar with the matter.

The move is designed to be an extra safeguard on top of the affordability checks RBS already has in place.

"We are focused on looking after the interests of our customers and ensuring that they only take on mortgage lending that they can afford," the bank said on Tuesday.

-From London, UK

Prologis' Mexican Reit raises 7b pesos in IPO

It is the first successful share sale there this year

Source: Business Times / Property

[SAO PAULO] Prologis Inc's Mexico real estate investment trust raised about seven billion pesos (S$680 million) in its initial public offering on Tuesday, marking the nation's first successful share sale of the year.

Prologis Property Mexico, as the Mexico City-based Reit is formally known, sold 258 million shares for 27 pesos apiece, according to a statement. The shares were to start trading yesterday, listed on the Mexico Stock Exchange. With manufacturing and logistics space for rent across the country, Prologis Property is positioning itself to benefit from rising demand after President Enrique Pena Nieto overhauled the constitution last year to lure investment.

To complete the offering, the Reit braved a market that hasn't had an IPO since the US Federal Reserve began reducing a record stimulus programme. The company also proceeded with a share sale amid waning interest in real estate trusts.

Among the four Reits to raise a record US$1.82 billion in Mexico last year, only office building and mall owner Concentradora Fibra Danhos is trading above its IPO price. Administradora Sendero, the shopping centre company that was the last Reit to try an IPO, pulled its 5.3 billion peso sale on pricing day in November.

-From Sao Paulo, Brazil

Mori plans 1t yen of central Tokyo projects

Japanese developers are boosting investments in the lead up to the Tokyo Olympics in 2020

Source: Business Times / Property

[TOKYO] Mori Building Co, Japan's biggest closely held developer, has plans for projects in central Tokyo worth an estimated one trillion yen (S$12.25 billion) with partners as the city prepares for the Olympic Games in 2020.

Mori, which is opening Tokyo's second-tallest building next week, plans to develop about 10 projects over the next decade in Minato ward, Shingo Tsuji, president and chief executive officer of the developer, said at a press conference in Tokyo yesterday. Japanese developers are boosting investments in the lead up to the Tokyo Olympics in six years' time, as vacancy rates decline and rents climb, and as they bet on a strategic zoning plan announced in March as part of the government's plan to stimulate economic growth.

Mori's announcement follows the biggest share sale plan in 32 years by Mitsui Fudosan, the nation's biggest publicly traded developer, last week. "Toranomon area has great potential," said Mr Tsuji. "We would like to speed up the revitalisation of the area."

The government has designated strategic zones, including the region around Tokyo, that will offer lower corporate taxes and looser building restrictions to lure investment, according to a proposal announced on March 28.

-From Tokyo, Japan

London Mayor Says Councils Should ‘Whack Up’ Tax on Empty Homes

Source: Bloomberg / Luxury

London Mayor Boris Johnson said councils should increase taxes by as much as ten times on homes in the capital that lie empty because they were bought as investments.

“What is certainly not acceptable is people buying homes as assets in places like Kensington and Chelsea and keeping them” empty, he told LBC Radio today. Local authorities are being encouraged “to whack up council tax on them” if a house lies empty for more than a year, he said.

Increased demand for property by foreign investors has resulted in many homes in central London lying empty. Data from housing charity Empty Homes shows that 3 percent of houses in the capital’s exclusive Kensington and Chelsea district were empty in 2013, with 2 percent being classified as long-term unoccupied.

London house prices have surged as foreign demand, cheaper credit and a lack of supply push up prices, and the Bank of England is coming under increasing pressure to curb what some economists say may be the start of a property bubble. A report by Nationwide Building Society yesterday showed U.K. home values rose to a record last month, while the European Commission this week raised concern about the lack of housing supply in the U.K., particularly in the capital.

“London has a massive shortage and we need to accelerate our house building program,” Johnson said. “We need to build hundreds of thousands more homes, affordable or not.”

The EU Commission report, published on June 2, also said “reforms to the taxation of land and property should be considered to alleviate distortions in the housing market.”

-By Svenja O’Donnell

Prologis Property REIT Unchanged in First Mexico IPO of 2014

Source: Bloomberg / News

Prologis Inc. (PLD)’s Mexico real estate investment trust closed the day almost unchanged in its trading debut after raising about 7 billion pesos ($541 million) in the nation’s first initial public offering this year.

Prologis Property Mexico SA (FIBRAPL), as the Mexico City-based REIT is formally known, rose 0.1 percent to 27.02 pesos in Mexico City trading today, after earlier climbing as much as 4.1 percent. The BMV Fibras index of Mexico REITs fell 0.2 percent, while the nation’s benchmark equity index, the IPC, retreated 0.4 percent. Prologis Property sold 258 million shares for 27 pesos apiece yesterday, according to a statement.

With manufacturing and logistics space for rent across the country, Prologis Property is positioning itself to benefit from rising demand after President Enrique Pena Nieto overhauled the constitution last year to lure investment.

To complete the offering, the REIT braved a market that hasn’t had an IPO since the U.S. Federal Reserve began reducing a record stimulus program. The company also proceeded with a share sale amid waning interest in real estate trusts.

Among the four REITs to raise a record $1.82 billion in Mexico last year, only office building and mall-owner Concentradora Fibra Danhos SA is trading above its IPO price. Administradora Sendero SA, the shopping-center company that was the last REIT to attempt an IPO, pulled its 5.3 billion peso sale on pricing day in November.

Parent company Prologis, based in San Francisco, rose 0.8 percent today to $41.48, giving it a market value of about $21 billion. The company manages more than $27 billion of assets in the Americas, Europe and Asia, according to its website.

-By Jonathan Levin

Workspace Climbs as Demand for Offices Increases in London Area

Source: Bloomberg / News

Workspace Group Plc (WKP) rose the most in 11 months in London trading after the provider of office space reported full-year profit that beat analyst estimates.

The shares climbed as much as 6 percent to 619 pence, on track for the highest closing price since 2008. Net income rose to 241 million pounds ($403 million) in the 12 months through March from 76 million pounds a year earlier, Workspace said in a statement today. The average of four analyst estimates was for earnings of 158 million pounds, according to data compiled by Bloomberg.

Workspace has gained from refurbishing offices to suit growing companies on the fringes of London’s main financial district and the West End. The company’s portfolio generated a total property return, which combines rental income and changes in property valuations, of 34.7 percent during fiscal 2014. That compares with 13.4 percent for the Investment Property Databank’s U.K. Property Index.

“We see further valuation growth driven by a core portfolio supported by the strong fundamentals of the London property market,” Oriel Securities analysts John Cahill and Miranda Cockburn said in a note today.

The London-based company was up 5.3 percent at 615 pence at 9:20 a.m. in London. Workspace has a market value of 896 million pounds.

-By Patrick Gower

Russians Pay Up to Turn Rubles Into Homes: Mortgages

Source: Bloomberg / Luxury

Denis Ichetkin’s decision to get a mortgage for a one-bedroom apartment on the outskirts of Moscow in late January couldn’t have been better timed, he said.

The 30-year-old journalist and his wife Veronika secured a 15-year loan from VTB Group with a 12 percent interest rate before Russia’s March incursion into Ukraine’s Crimean peninsula. Since then, the central bank has raised its key interest rate by 2 percentage points to arrest the ruble’s slide, spurring economists to predict that home-loan costs, already triple the European average, will rise further.

“I couldn’t be happier that we got our loan before Crimea,” Ichetkin said. “We got a better rate than if we had applied now or a month ago.”

The ruble’s 16-month slide has driven a jump in mortgage lending as Russians buy homes with mortgages in an effort to protect their dwindling savings. Mortgage lending this year may reach a record of between 1.5 trillion rubles ($43 billion) and 1.8 trillion rubles, according to the forecast by the Agency for Housing Mortgage Lending.

Russia’s $2 trillion economy, which is suffering a slump in investment and slowing wage growth, has probably already sunk into a recession, the International Monetary Fund said April 30. President Vladimir Putin’s standoff with the U.S. and Europe over Ukraine, including sanctions against Russian officials and executives following the takeover of the Crimea, has been an additional drag on growth.

Currency Plunges

As investors have fled Russia, the national currency plunged to a record low of 36.6 rubles per dollar on March 13, losing 6.6 percent since the beginning of the year. Russians have had their savings wiped out during past crises, such as the 1998 default when the ruble fell as much as 27 percent in a day. They are now seeking a haven in property bought with mortgages, said Sofia Lebedeva, head of new-home sales at Miel, a Moscow-based chain of real estate brokers.

“People who had cash and got their incomes in rubles applied for mortgages to invest in an asset which is most reliable at times of volatility,” Lebedeva said. “The weakening of the ruble spurred demand.”

The number of housing sales that Miel negotiated jumped 30 percent in the first three months of the year compared with the first quarter of 2013, Lebedeva said. Housing prices increased 7.2 percent last year, just 0.7 percentage point over inflation, according to the mortgage agency, while the ruble sank 7 percent against the dollar.

Russia, the world’s biggest energy exporter, has been building a mortgage industry since the fall of the Soviet Union in 1991 to meet the demands of its more than 143 million citizens.

Soviet Apartments

The Agency for Housing Mortgage Lending was set up under the government of former President Boris Yeltsin in 1997 to make housing more accessible. The government gave most of the state-owned apartments to their residents. A mortgage law that came into force the following year allowed Russians to raise funds to buy new homes for themselves or to finance purchases for children.

Most Russians have since become owners of their apartments. About 85 percent of the country’s 62 million registered flats were in private hands by the end of 2012, the most recent data available at the Mortgage Agency.

Today, the government is trying to increase mortgage lending to 7.2 percent of economic output by 2015 from 3.2 percent in 2012, according to a strategy program adopted by the mortgage agency in 2010. Outstanding home loans accounted for about 21 percent of GDP in Poland last year, according to the banking regulator KNF’s data.

Capping Rates

Putin took steps to widen the availability of Russian home loans by signing a decree in 2012 to cap mortgage rates at 2.2 percentage points above inflation by 2018. The average weighted interest rate on Russia home loans was 12.2 percent in the first quarter, down almost 2 percentage points from the same period in 2010, according to central bank data.

Following the central bank’s interest rate increase to 7.5 percent, the mortgage rate can go up another 150 basis points this year, said Natalia Orlova, chief economist at Alfa Bank in Moscow. Banks will be hesitant to slow the momentum in mortgage lending by passing on the full cost of interest-rate increases to consumers, she said.

Maturing Industry

Lenders “want to switch from riskier consumer loans to mortgages,” Orlova said. “The market is becoming more mature and mortgages are beginning to play a normal role, that of a mechanism to improve one’s quality of life.”

One in four apartments purchased in Russia last year was financed using a mortgage, up from 12 percent in 2009, data from the mortgage agency show. The number of home loans more than doubled to 824,792 in the six years through 2013, the agency said. This number is expected to grow to 921,000 in 2017 and exceed 1 million in 2020.

The growth in mortgages has helped boost housing-construction volumes to a post-Soviet record of 69.4 million square meters, spread over 912,100 homes, last year, according to the mortgage agency.

Miel works with about 60 banks in Russia to find financing for homebuyers, who can put down deposits of as little as 10 percent of the purchase price. Most of the buyers are 45 or younger and seeking to buy one- or two-bedroom apartments outside the city center, Lebedeva said. The majority of prospective homeowners take mortgages of 1.5 million rubles to 4.5 million rubles in Moscow and its region, she said.

Biggest Lender

In March, as Putin moved to annex Crimea, mortgage lending in Russia jumped 37 percent from the same period a year earlier, the fastest pace in seven months, according to the central bank. At OAO Sberbank, which controls more than 50 percent of the mortgage market in Russia, loans issued in February and March soared 87 percent from the prior year to 131 billion rubles.

The most-popular mortgage issued by Sberbank this year was for 1.5 million rubles for 14 years, with the borrower providing a 30 percent down payment, according to the lender’s press service.

Ichetkin, the journalist, said he expects his 60-square-meter (650 square foot) apartment on the fourth floor of a 17-story building in South Butovo, 30 kilometers (20 miles) from the center of Moscow, to be ready by December. He and Veronika scraped together enough cash for a 20 percent down payment on the 6.2 million-ruble ($180,000) property.

“We have rented and lived with my wife’s parents before,” Ichetkin said. “This flat will give me the quality of life a man should have. Getting a mortgage was the only way to get our own home.”

-By Lyubov Pronina