Real News‎ > ‎2014‎ > ‎March 2014‎ > ‎

18th March 2014

Singapore Real Estate

S'pore private home sales up in Feb

More units launched, mostly outside central region

Source: Business Times / Top Stories

[SINGAPORE] Private home sales are expected to slow in March after picking up last month, given the cautious mood and a lack of new launches.

Developers sold more new private homes in February than a month ago, with top selling projects located outside the central region (OCR), data from the Urban Redevelopment Authority (URA) shows.

There were 724 private homes sold in February, up from 565 units in January and more than the 712 units moved in February last year. Another 45 executive condominiums (ECs) were sold last month, unchanged from January.

Developers also launched more units in February, mostly in the OCR area, following a slow festive season in January. Some 671 units were launched islandwide last month, up from 549 units in January.

-By Lynette Khoo

S'pore new private home sales up 28% in February

Source: Channel News Asia / Singapore

SINGAPORE: Demand for new private homes in Singapore rebounded in February, boosted by good take-up rates at two condominium projects in the Sengkang area.

Figures from the Urban Redevelopment Authority (URA) showed that developers sold 724 units last month, up by 28 per cent from January.

Rivertrees Residences was the star performer in February, selling 218 of the 300 units launched, while nearby Riverbank@Fernvale sold 211 of the 250 units launched.

Together, the two projects in Sengkang accounted for 59 per cent of total sales last month as mass market homes continued to drive sales.

According to URA, 588 new units were sold in the suburban areas, followed by 87 units in the city fringe and 49 units in the Core Central Region.

Chia Siew Chuin, director for research and advisory at Colliers International, said: "The exuberance has indeed been shaven off largely because of the effects of the TDSR (total debt servicing ratio); we are still looking at demand from the genuine buyers that are driving the market.

"So a group of buyers is still looking out for value buys -- they are very selective. By and large, the market is steering towards a stable state as of now."

Apart from the stronger showing at the two new projects in Sengkang, analysts said sales at existing launches remained fairly muted and some developers may decide to step up marketing efforts.

However, they do not expect home prices to correct significantly anytime soon.

Looking at February's numbers, some market watchers said any hope of the government easing on property cooling measures is slim.

Ku Swee Yong, CEO of Century 21 Singapore, said: "In fact, with the mass market prices still going at above S$1,000 psf, and this month we also saw a transaction in Pasir Ris that is S$1,500 psf.

"In Bedok, again we are seeing S$1,600 psf transaction... this type of record setting type of prices probably would mean that the government would continue to keep the cooling measures in place."

Some analysts said a trend is emerging -- one that sees the more affordable units being taken up rapidly during the initial launch period. Thereafter, sales of the rest of the project will taper or stagnate.

Looking ahead, market watchers expect new home sales this year to come in at between 800 and 1,000 units a month if the new projects are priced reasonably.

Overall, developers launched a total of 671 private housing units for sale in February.

Including executive condominiums, developers sold 769 new units in February. 

- CNA/nd/ms

New home sales pick up, but market still muted

Source: Today Online / Business

SINGAPORE — New private-home sales stirred in February after two months of near slumber, but analysts said activity remained muted as developers and prospective buyers continued to hold back in the current cautious environment.

Developers sold 724 non-landed private homes last month, a 28 per cent rise from 565 in January, after they launched 671 units or 22 per cent more than January’s 549 units, figures released by the Urban Redevelopment Authority yesterday showed.

Despite the rebound, analysts noted that the launched volume and sales pale in comparison to the roughly 1,800 units just before the imposition of the Total Debt Servicing Ratio (TDSR) framework last June.

Mr Desmond Sim, Head of Research at property consultancy CBRE, said: “This is an encouraging sign that deals are still being inked and the market is still moving.” But he added that the market had yet to find an equilibrium, saying that this was largely a result of a function of supply: Developers have been treading with caution and trying to read signs from buyers, who have been waiting on the sidelines.

On the lack of new launches, Ms Christine Li, Head of Research and Consultancy at real estate firm OrangeTee, said: “Buyers are becoming increasingly selective. Thus, existing projects are under pressure from newer ones in terms of pricing and location attributes. It seems developers also noticed the trend and decided to increase marketing efforts of existing launches instead of pushing out new projects.”

The Outside Central Region (OCR), or the suburbs, continued to dominate activity with 588 homes sold, as buyers were attracted by lower prices.

The two best-selling projects last month — Rivertrees Residences and Riverbank @ Fernvale in Sengkang — are located in the OCR. At Rivertrees Residences, 218 of the 300 units launched were sold at an average price of S$1,111 psf, while 211 of 250 units launched at Riverbank @ Fernvale were sold at an average of S$1,033 psf.

In the Rest of Central Region (RCR), or the fringes of the city, developers sold 87 units, while in the Core Central Region (CCR), they sold 49 units, 26 of which are at Hallmark Residences in Ewe Boon Road.

“(The sales volume of Hallmark Residences) is excellent, given that it is in the CCR and the quantum is high. This could give developers some comfort that the underlying demand for real estate investment is not totally wiped out by the Government’s cooling measures and the TDSR. The key is to find the right price point with which buyers are comfortable,” said Ms Li. Units at the condominium sold at an average S$1,860 psf.

With the Government indicating that cooling measures and loan curbs would stay, new private-home sales volume for the whole of this year is likely to fall about 30 per cent to about 10,000 to 12,000 units, said PropNex Chief Executive Mohamed Ismail.

Two adjacent warehouses in Tampines up for sale

Source: Business Times / Singapore

TWO adjacent multi-storey warehouses located at 21 and 23 Tampines along Street 92 have been put up for sale by expression of interest (EOI) by architecture and interior design firm HC Design.

The total indicative price for the properties, which sit on a Government Land Sales (GLS) site, is about $70 million, said Colliers International, the exclusive marketing agent for the sale, yesterday.

Given that the site area is about 214,880 square feet with an allowable gross plot ratio of 1.4, this works out to a price of about $235 per sq ft per plot ratio.

The industrial site has a 30-year leasehold tenure with the Urban Redevelopment Authority with effect from July 9, 2007. Under the 2008 Master Plan, it is zoned for "Business 2" or heavier industrial use.

-By Lee Meixian

CEA launches online guide to buying foreign property

Move follows issuance of practice guidelines for estate agents, salespeople

Source: Business Times / Singapore

THE Council for Estate Agencies (CEA) has published a new guide to help consumers in Singapore who are interested in buying overseas properties.

The aim of this latest guide, titled Consumer Tips for Buying Foreign Properties, is to help consumers and the industry make "informed and appropriate" decisions when buying and marketing foreign properties.

The guide was first announced by National Development Minister Khaw Boon Wan during the Committee of Supply debate in Parliament last week.

All property transactions handled by estate agents in Singapore, including those involving foreign properties, are regulated by CEA under the Estate Agents Act.

-By Lee U-Wen

CEA launches online consumer guide on foreign properties

Source: Channel News Asia / Singapore

SINGAPORE: The Council for Estate Agencies (CEA) has published an online consumer guide on foreign properties at its website.

It said the guide will help consumers make informed decisions when buying foreign properties.

In a statement on Monday, CEA noted that an increasing number of foreign properties is being marketed in Singapore.

It said as buying a foreign property can be complex and risky, consumers should understand their needs and not rush into such purchases.

Before making any purchase decision, they should also understand the total costs and financial commitments, and ensure that the sales agent and representative conducting the transaction are registered with CEA.

CEA also issued a set of guidelines for estate agents in the marketing of foreign properties, which is also available at its website.

Under the Estate Agents Act, CEA regulates all property transactions handled by estate agents in Singapore, including those involving foreign properties.

Foreign estate agents must be licensed with CEA before they can market foreign properties in Singapore.

Foreign property developers may also appoint a local licensed estate agent to market their foreign properties in Singapore. 

- CNA/nd

RB Capital repositioning Robertson Quay assets

Gallery Hotel, The Quayside retail revamp to create 100,000 sq ft of prime retail space

Source: Business Times / Property

[SINGAPORE] RB Capital is pumping about $50 million to $70 million in a major refurbishment of Gallery Hotel along Robertson Quay and the retail podium of The Quayside next door.

These plans are seen as bringing "energy and excitement" to an important location along the Singapore River.

The repositioning of the two assets will create a combined 100,000 sq ft of prime lettable retail space with as many as 80 food and beverage outlets under a scheme that seeks to maximise the two assets' combined river frontage of more than 200 metres.

The asset enhancement works at Gallery Hotel and The Quayside are expected to be completed in early 2016. Across Alkaff Bridge, RB Capital's recently completed 442-room Holiday Inn Express Clarke Quay, at the corner of Havelock Road and Clemenceau Avenue, is due to start trading soon. The total value of the group's three assets in the locale exceeds $1 billion.

-By Kalpana Rashiwala

Real Estate Companies' Brief

Centurion Corporation

Source: Business Times 

We visited two of Centurion's Singapore dormitories on March 14: the 8,600-bed Westlite Toh Guan permanent dormitory and the 8,600-bed Westlite Tuas temporary dormitory. We visited several units, and viewed some of the amenities each dormitory provides for its residents.

St James shares up on reverse takeover news

Source: Straits Times

Investors lapped up news that entertainment operator St James Holdings will exit its current business and transform itself into a real estate player in a reverse takeover. Shares of the Catalist-listed firm shot up one cent or 18.5 per cent to 6.4 cents yesterday, its first session of trading since it called for a trading halt last Friday at around 2pm, pending the announcement of the reverse takeover.

Views, Reviews & Forum

Valuations are meant to be a guide for bank loans

Source: Today Online / Voices

There appears to be a misconception regarding the use of a valuation report for resale flats (“HDB resale rule might shore up prices”; March 15).

To quote the Housing and Development Board: “Resale transactions are conducted on a ‘willing-buyer, willing-seller’ basis. The resale price is open to negotiation and mutually agreed upon by buyers and sellers.

“If the resale price you pay for the flat is above the market valuation, the difference has to be paid for in cash.”

This means a buyer and seller can set a transacted price that varies according to market conditions.

A valuation to determine market value is used to guide financial institutions that lend money to buyers, not to fix a base price for negotiation.

-By Patrick Sio

Global Economy & Global Real Estate

Int'l Healthway buys 2 more Aussie properties

Source: Business Times / Companies

JUST a week after acquiring its first property in Australia, International Healthway Corporation (IHC) has signed another two deals to buy two freehold properties in Melbourne and Geelong for A$63.8 million ($73.4 million) in total.

The property in Melbourne, costing A$35.8 million, is an eight-storey commercial building at 541 St Kilda Road, with anchor tenant, the listed online employment classifieds platform operator Seek Limited, taking up close to full occupancy.

The property, opposite the 688-bed Alfred Hospital, has a net leasable area of 8,229 sq m. The development has two floors of retail space and six upper floors of office space.

The second property, bought for A$28 million, is a four-storey medical-use building at 73-79 Little Ryrie Street in Geelong, a port city 75 km south-west of Melbourne.

-By Lee Meixian

Australia to probe foreign home buying

Source: Straits Times

Blackstone slows home buying as prices surge

Its acquisition of houses to rent has fallen 70% from its peak last year

Source: Business Times / Property

[LOS ANGELES] Blackstone Group is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest US single-family home landlord.

Blackstone's acquisition pace has declined 70 per cent from its peak last year, when the private equity firm was spending more than US$100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm.

After investing US$8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.

"The institutional wave has passed," said Mr Gray, who oversees almost US$80 billion in property investments. "It's at a much lower level than it was 12 or 24 months ago."

-From Los Angeles, US

China to spend S$205b to redevelop rural towns, boost urban population

Govt aims to boost number of urban residents to 60 per cent of population by 2020

Source: Today Online / China

BEIJING — China yesterday said it will invest more than one trillion yuan (S$205 billion) in redeveloping rural towns this year as the government detailed how it will boost its urban population to 60 per cent of the population.

More than 4.75 million households will be involved under the plans contained in a 2014-2020 urbanisation document unveiled last Sunday by the State Council, the official Xinhua news agency reported.

The plans said rural residents employed in cities will see their incomes rise and increasing consumption, while investment in urban infrastructure, public service facilities and housing will drive economic development.

The plans also provide details on how China will seek to achieve a 7.5 per cent target this year for expansion while sustaining growth through the rest of the decade.

Chinese leaders have pledged to speed up urbanisation as they try to rely more on domestic consumption for growth and give markets a bigger role in the world’s second-largest economy. Premier Li Keqiang had said last Thursday that tens of millions of people still live in rural towns, which Xinhua says are areas of dilapidated housing where factory workers often live.

At present, permanent urban residents make up 53.7 per cent of the population of almost 1.4 billion. China plans to raise this to 60 per cent of the total population by 2020. That target puts it on par with that of developing countries with similar per capita income levels but would be lower than the average of 80 per cent for developed countries.

Beijing will speed up the construction of railways, expressways and airports to support the rapid urbanisation, Xinhua said in a separate report.

The government will remove restrictions on obtaining household registration permits in small cities and towns and strictly control the populations of cities with more than five million urban residents. It will help 100 million people, including migrant workers, get status as urban residents by 2020.

The country’s environmental problems, such as pollution and water scarcity, are expected to intensify as rapid migration pushes urban infrastructure to the limit.

Poor air quality is estimated to end hundreds of thousands of lives prematurely each year and has led to riots and public protests.

“We will improve and promote green, sustainable and low-carbon development in the urbanisation process, enforcing the strictest measures on ecological and environmental systems,” the plan said.

The State Council said 60 per cent of the cities will meet national air quality standards in 2020, up from 40 per cent in 2012.

However, at China’s annual parliamentary session earlier this month, officials said only three of 74 major cities met the pollution standards last year.

The council’s plan outlined an extensive list of policies it will implement to meet the target, including boosting renewable energy use, curbing emission-intensive industries and taking high-polluting vehicles off the roads.

China will also set up a tiered pricing system for electricity, natural gas and water, to control rapid growth in consumption of scarce natural resources. The government plans to roll out trading systems for carbon and air pollutant emissions, energy-saving certificates and water to provide economic incentives to reduce waste.

Beijing has already picked seven key regions to launch pilot carbon trading schemes, with the intention of setting up a national market to cut emissions per unit of gross domestic product by 40 to 45 per cent from 2005 levels by 2020.

China is seeking to ensure it has enough labour in its vast farming sector to guarantee food security, with rural worker shortages being one of the country’s biggest challenges.

It has promised more state investment in major food-producing regions, improved insurance coverage in rural areas and reforms to the pricing systems of major agricultural commodities. It also promised to raise farming mechanisation rates to around 70 per cent from 60 per cent. Agencies

China Developer With $567 Million Debt Said to Collapse

Source: Bloomberg / News

A closely held Chinese real estate developer with 3.5 billion yuan ($566.6 million) of debt has collapsed and its largest shareholder was detained, government officials familiar with the matter said yesterday.

Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay creditors that include more than 15 banks, with China Construction Bank Corp. (939) holding more than 1 billion yuan of its debt, according to the officials, who asked not to be named because they weren’t authorized to discuss the matter. The company’s majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said.

The collapse of the company, based in the eastern town of Fenghua, adds to concern of strains in the nation’s real estate sector and comes less than two weeks after the first bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology Co.’s inability to repay its debt may become China’s own “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, Bank of America Corp. said March 5.

“Chinese developers are extremely exposed to the easy credit that is used to finance purchases and investment,” said Patrick Chovanec, the New York-based chief strategist at Silvercrest Asset Management Group LLC, which oversees $14.1 billion in asset, by phone. “When credit is reined in even slightly, it undercuts demand. This is potentially an inflection point.”

Securities Slump

Stocks and bonds issued by Chinese real estate companies slumped after reports of Zhejiang Xingrun’s collapse added to concern that defaults are starting to mount as the nation’s economy slows and the government reins in lending.

Prices on the dollar bonds sold by Evergrande Real Estate Group Ltd., the nation’s fourth-largest developer by market value, fell 0.5 cent on the dollar yesterday, sending yields to the highest since August. Prices on Kaisa Group Holdings Ltd.’s bonds maturing in 2018 dropped to a seven-month low. American depositary receipts of E-House China Holdings Ltd., the online real estate services provider, slid 2.6 percent while SouFun Holdings Ltd. retreated for a seventh day.

Zhejiang Xingrun’s collapse was reported earlier yesterday by the Chinese-language National Business Daily, which cited an unidentified government official for the news. The report blamed the failure on mismanagement and high costs of private lending, according to the newspaper.

Bank Talks

The city of Ningbo has jurisdiction over the town of Fenghua, which is the birthplace of former Chinese nationalist leader Chiang Kai-Shek. Fenghua is in discussions with the banks and Ningbo on how to repay the debt, the people said. They said Zhejiang Xingrun has assets worth 3 billion yuan.

Two calls to the chairman’s office and financial department at Zhejiang Xingrun weren’t answered yesterday. A woman who answered the phone at the Fenghua government’s news office who declined to give her name confirmed the company can’t pay its debt. A Beijing-based press officer at CCB said the bank asked for more information from its local branch about the report and hasn’t heard back.

“We think the default of the developer will alert the banks on escalating risk from developers amid the liquidity tightening,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. “We maintain our view that banks may revisit loan policy on property and may take a stricter stance on property development loans, particularly for small developers.”

Property Curbs

The property market in smaller Chinese cities faces “true risks of a sharp correction” due to oversupply and investors may have underestimated the risk, Nomura Holdings Inc. economists said in a March 14 report.

Property shares slid to a 16-month low in February after Industrial Bank Co. suspended mezzanine financing for developers, adding to concerns that smaller developers may default on their borrowings amid the government’s property curbs and an economic slowdown.

New home prices in Ningbo rose 7.1 percent in January from a year earlier, according to the National Bureau of Statistics. The city in February recorded the 10th-lowest yield on residential investments in the past year among 116 Chinese cities, with negative 1.1 percent, according to a March 13 report by Zhongjin Standard Data Research Ltd., a Hong Kong-based data provider.

-By Bloomberg News

Digital Realty’s Chief Executive Departs, Replaced by CFO

Source: Bloomberg / News

Digital Realty Trust Inc. (DLR), a data-center real estate investment trust, said Chief Executive Officer Michael Foust has left the company, effective immediately.

A. William Stein, 60, the company’s chief financial officer and chief investment officer, was named interim CEO, the San Francisco-based company said today in a statement. Digital Realty said it’s hiring a search firm to find a permanent replacement for Foust, 58.

Digital Realty shares fell 28 percent last year after the company announced an accounting change in July, and in October it lowered its outlook for 2013 funds from operations. The company’s stock-market value fell to $6.3 billion at the end of 2013 from $8.5 billion a year earlier.

“We had a disappointing year from a stock-price performance standpoint,” John Stewart, senior vice president of investor relations, said in a telephone interview. There was no wrongdoing on Foust’s behalf, Stewart said. “The departure isn’t as abrupt as it appears from the outside.”

Foust won’t stand for re-election to the board at the company’s annual meeting next month, Digital Realty said. It expects to record a one-time expense of 10 cents a share in the first quarter for Foust’s departure. Foust will be eligible to receive a severance payment of about $6.5 million, as well as other payments and benefits, as part of non-cause termination provisions in his employment agreement, the company said in a regulatory filing today.

Digital Realty disclosed the management change after the close of regular trading. It rose 2.5 percent to $52.77 today. The company has 131 properties in North America, Europe, Asia and Australia.

-By Brian Louis

China Greenland to List in Shanghai Through Jinfeng Swap

Source: Bloomberg / News

Greenland Holding Group Co., the Shanghai city government-owned builder of one of China’s tallest towers, plans to list on the Shanghai Stock Exchange through an asset swap with an affiliate.

Greenland will inject assets worth 65.5 billion yuan ($10.6 billion) into Shanghai Jinfeng Investment Co. (600606) in exchange for 11.3 billion new Jinfeng shares at 5.64 yuan each, Jinfeng said in a statement to the city’s stock exchange yesterday.

“After the entire listing, Greenland may use the capital market as a platform to improve overall competitiveness and boost profitability,” Jinfeng said in the statement.

Greenland’s back-door listing comes as it seeks investment opportunities abroad and as Shanghai steps up efforts to make its state-owned enterprises more profitable and efficient. Chinese developers are virtually denied access to financing through initial public offerings amid a government crackdown on rising home prices, according to Wu Kan, a fund manager at Dragon Life Insurance Co. in Shanghai.

Greenland, which entered the U.S. and Australia last year, is joining Chinese developers including China Vanke Co. that are venturing into real estate abroad as they seek opportunities to diversify outside their home market. Dalian Wanda Group said in June it will build a luxury hotel and apartment building on the South Bank of the River Thames in London.

Greenland said in January it plans to invest 1.2 billion pounds ($2 billion) on two property projects in London as Chinese developers branch out overseas. Greenland, set up in 1992 and owned by the Assets Supervision and Administration Commission of Shanghai Municipal Government, is also looking to enter Canada, France and Singapore this year, it said then.

Approvals Needed

The asset swap is pending the approval of shareholders and the China Securities Regulatory Commission, Jinfeng said yesterday. Both Greenland and Jinfeng are controlled by state-owned Shanghai Real Estate Group Co.

Shares of Shanghai Jinfeng will resume trading today after being suspended since Aug. 26, according to the statement.

Greenland’s announcement comes as Zhejiang Xingrun Real Estate Co., a closely held developer based in Fenghua in eastern China, collapses with 3.5 billion yuan of debt, with the majority shareholder and his son being detained by police, according to reports yesterday.

-By Bloomberg News

Evergrande Bonds Decline Amid China Housing Bankruptcy

Source: Bloomberg / News

Stocks and bonds issued by some Chinese real estate companies extended a slump after the collapse of a developer stoked concern defaults are starting to mount as the economy slows and the government reins in lending.

The 8.75 percent notes due 2018 sold by Evergrande Real Estate Group Ltd., the nation’s fourth-largest developer by market value, fell 0.25 cents on the dollar today, sending the yield to 10.345 percent, the highest since the securities were sold in October last year, DBS Bank Ltd. prices show. The yield on Agile Propery Holdings Ltd.’s February 2017 notes jumped 20 basis points to 7.459 percent, the highest since they were sold last month, according to Australia & New Zealand Banking Group Ltd. prices.

Government officials familiar with the matter said yesterday that closely-held Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay 3.5 billion yuan ($567 million) of debt. The housing market in the world’s second-biggest economy is cooling with the value of home sales falling 5 percent in the first two months of the year after local governments stepped up measures to curb rising prices. The 7.5 percent economic expansion targeted by China this year would be the slowest since 1990.

“Chinese developers are extremely exposed to the easy credit that’s used to finance purchases and investment,” said Patrick Chovanec, the New York-based chief strategist at Silvercrest Asset Management Group LLC, which oversees $14.1 billion in assets. “When credit is reined in even slightly, it undercuts demand. This is potentially an inflection point.”

Onshore Default

The collapse comes less than two weeks after Shanghai Chaori Solar Energy Science & Technology Co. became the first company in China to default on its onshore corporate bonds. Calls to the chairman’s office and financial department at Zhejiang Xingrun weren’t answered yesterday.

Speculative-grade Chinese debt has lost 1.1 percent in the four days through yesterday, the worst slide since Jan. 28, according to an index compiled by Bank of America Merrill Lynch. Sixty-nine of 106 securities in the measure are from real estate developers.

The Shanghai Property Index fell 0.6 percent, as half of its 24 members declined. The gauge has dropped 9.9 percent this year and touched a 17-month low on March 10.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed for the first time in seven days yesterday, rising 0.8 percent to 97.16. The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added 0.1 percent to $33.07.

Soaring Yields

The yield on Evergrade’s $1.35 billion of 13 percent bonds due January 2015 rose 88 basis points, or 0.88 percentage point, to 8.620 percent yesterday, the highest since Aug. 23, BNP Paribas SA prices show. The notes are rated at BB- by Standard & Poor’s, or three levels below investment grade. Shenzhen-based Kaisa Group Holdings Ltd. (1638)’s 8.875 percent notes due 2018 dropped to a seven-month low yesterday, sending the yield past 10 percent for the first time since August.

Zhejiang Xingrun, based in the eastern town of Fenghua in Zhejiang Province, doesn’t have cash to repay creditors that include more than 15 banks, according to the officials, who asked not to be named because they weren’t authorized to discuss the matter. The company’s majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said.

The company is the largest property developer at risk of bankruptcy in recent years and more companies may run into trouble as sales decline and funding becomes limited, according to Nomura Holdings Inc.

‘More Serious’

“This is a far more serious situation than Chaori Solar’s default, as it hits right at the heart of China’s property boom,” Mark Bayley, a credit strategist at Aquasia Pty in Sydney, said in a report today. “The real danger now is that banks will considerably tighten liquidity afforded to the real estate and property development sectors.”

At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.

New-home price growth slowed last month led by Beijing, Shenzhen, Shanghai and Guangzhou, the four cities the government defines as first tier, the National Bureau of Statistics said today. Prices in Beijing and Shenzhen each rose 0.2 percent in February from a month earlier while they added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices advanced in 57 of the 70 cities the government tracks, versus 62 in January.

Chinese property shares slid to a 16-month low in February after Industrial Bank Co. suspended mezzanine financing for developers, adding to concern that smaller developers may default on their borrowings amid the government’s property curbs and an economic slowdown.

American depositary receipts of SouFun Holdings Ltd. (SFUN), China’s biggest real-estate information website, slipped 0.4 percent to $82.80 yesteday, extending a seven-day decline to 15 percent. E-House China Holdings Ltd. (EJ), based in Shanghai, sank 2.6 percent to $14.08.

-By Ye Xie

NorthStar to Buy $1.05 Billion of Health-Care Buildings

Source: Bloomberg / Luxury

NorthStar Realty Finance Corp. (NRF), a New York-based property investment company, agreed to buy 60 U.S. senior housing and nursing-home buildings as it seeks to expand in health-care real estate.

The sellers are Formation Capital and Safanad Ltd., NorthStar said in a statement today. NorthStar will contribute about 92 percent of the $430 million in equity for the purchase, with NorthStar and Formation jointly taking over financing for the rest of the transaction price, according to the statement. The real estate is valued at $1.05 billion.

The deal would bring NorthStar’s health-care real estate holdings to 160 buildings worth $1.6 billion, according to the company. The expansion of the business is being led by Jay Flaherty, who joined NorthStar two months ago after he was fired as chief executive officer of HCP Inc. (HCP), the third-biggest U.S. health-care real estate investment trust by market value.

“This transaction represents an initial step towards our goal of expanding NorthStar’s health-care portfolio into a pre-eminent health-care real estate business,” Flaherty said in the statement. “We are enthusiastic that this will be the first of many compelling transactions that we can complete with our partners at Formation Capital.”

The purchase includes 43 private-pay senior housing buildings and 37 nursing homes, according to the statement. More than a third of the buildings are in Florida.

Sydney Offices Turn Into Housing Avoiding Shakeout: Real Estate

Source: Bloomberg / Luxury

Greenland Holding Group Co. likens its downtown Sydney luxury development to a “diamond in the sky” with floor-to-ceiling windows offering 360-degree views of the city. That’s a far cry from the 50-year-old concrete government office building from which the new tower will morph.

The Chinese state-owned company is among developers finding more lucrative uses for older commercial sites in a booming housing market as the supply of new office space in Australian cities surges and tenant demand falters.

“You’ve got a lot of new buildings being developed and a lot of tenants moving out of older buildings into newer ones,” said David Milton, managing director for residential at CBRE Group Inc., who’s marketing the Greenland apartments. “With the values we’re seeing in residential,” the best use for outdated office buildings is conversion to apartments, he said.

Greenland, Singapore-based Far East Organization Centre Pte and local pension funds are among those buying lower-quality properties as office tenants leave for newer buildings, pushing the amount of commercial space slated for conversion to record highs. Almost 47,000 square meters (505,904 square feet) of office space was withdrawn from the market last year to turn into apartments, according to Jones Lang LaSalle Inc., the most since the broker began keeping track in 2007 and almost double the 25,794 square meters in 2012.

Developers in 2013 bought A$364 million ($329 million) of office buildings in Sydney to turn into apartments, according to Colliers International, which doesn’t track historical data on the value of properties sold for conversion.

Livable Cities

The trend reflects record-low interest rates that have drawn foreign buyers and domestic investors to Australia’s housing market, boosting dwelling prices almost 10 percent in the past year. At the same time, an unemployment rate at a decade high 6 percent has weighed on office demand.

The country’s major city centers were once ghost towns on weekends as Australians favored free-standing suburban homes on quarter-acre blocks. Now they are “more livable and more enticing, with increasingly better restaurants, great little bars, great entertainment,” said Sydney-based Milton.

The average apartment price in Sydney, where about half the conversions were located in 2013 based on the Jones Lang LaSalle figures, rose more than 10 percent in the year to Feb. 28 to a record A$573,323, according to the RP Data-Rismark Home Value Index. (RPAUMED) Melbourne’s average price rose 7 percent to A$488,827, also a historical high.

“The Sydney housing market is quite healthy and promising, and I believe this trend will continue in the future,” said Sherwood Luo, managing director of Greenland Australia, the company’s Sydney-based subsidiary. “We’ll speed up our development and will invest more money in the Sydney market. We’re looking for other sites.”

Office Additions

In contrast, Sydney’s office vacancy rate climbed to 9 percent at the start of the year from 7.2 percent 12 months earlier, according to broker Colliers. Melbourne’s increased to 8.7 percent from 6.9 percent a year ago and is expected to rise to 9.7 percent by the end of 2014.

Apartment conversions are also increasing in New York, Dubai and London, where slowing demand for offices has prompted developers to seek more profitable uses for space in traditional commercial areas. In New York last year, telephone company Verizon Communications Inc. sold part of its former headquarters to a developer who will turn it into luxury housing. Dubai developer Damac Real Estate Development Ltd. (DMC) changed six buildings planned as office towers to apartments in 2010, according to the company.

Even before the U.K. government last year proposed developers wouldn’t need permission to convert offices to residential buildings for three years, companies including Axa Real Estate Investment Managers Ltd. andBerkeley Group Holdings Plc (BKG) began turning obsolete offices into apartments to counter slumping demand due to job cuts at banks.

Vacancy Rate

In Sydney, almost 800,000 square meters of office space will be built over the next five years, according to broker Savills Plc. Lend Lease Group’s A$6 billion Barangaroo harbor-front redevelopment alone will add 280,000 square meters in three towers.

The potential removal of about 130,000 square meters for conversion to residential or hotels over the next three years will prevent a blowout in the office vacancy rate, Savills said.

The increase in conversions in Australia has been driven by the entry of Asian developers including Shanghai-based Greenland and Far East, according to Rupa Ganguli, director of Australian residential research at Jones Lang LaSalle.

Greenland’s purchase of the former Sydney water board office for A$107.5 million, and the acquisition of two buildings overlooking the city’s Hyde Park by Far East and pension fund CBUS Super for A$143 million and A$59 million respectively were among last year’s biggest transactions for conversion, according to Colliers.

Conversion Risks

Demand for dwellings around city centers is set to grow faster than homes elsewhere over the next 12 months, according to a survey by National Australia Bank Ltd.

Conversions aren’t without risks. Replacing an office building with apartments can take as many as four years, from application for government approvals to the end of construction, according to CBRE’s Milton. In that amount of time, following its July 2006 peak, the U.S. housing market plunged 28 percent, the S&P/Case-Shiller (SPCS20) price index shows.

While most developers mitigate these risks by selling a proportion of apartments before construction, a big enough drop in prices could push buyers to forfeit their deposits and walk away, which happened in Australia’s oversupplied Gold Coast in Queensland state following the global financial crisis.

Blackstone Group LP (BX) in 2012 gained approval to convert Gold Fields House, a 1960s office tower overlooking Sydney Harbour, into 197 luxury apartments and is yet to commence work at the site. Paul Heller, Australian managing director at Blackstone, declined to comment on the plans for the building.

Brutalist Architecture

Greenland plans to erect Sydney’s tallest apartment tower where now stands a weather-beaten Brutalist building. The architectural style -- coined from the French “béton brut,” used by Franco-Swiss modernist pioneer Le Corbusier to describe many of his post-World War II buildings -- favors exposed concrete for large public structures.

Inside the stained, grayish-brown building with crumbling paint on the ceilings, Greenland has set up a sales office for the luxury development. In the center is a model of the gleaming skyscraper that will occupy the spot in a few years.

About a quarter of the apartments in the first stage of pre-sales went to overseas buyers following marketing campaigns in Shanghai, Hong Kong and Singapore in addition to Sydney, CBRE’s Milton said in December.

Far East

Far East, Singapore’s biggest closely held developer, bought 227 Elizabeth Street in Sydney late last year. Jones Lang LaSalle, which marketed the property, highlighted the opportunity for conversion and a tentative design by PTW Architects to create 114 apartments and some retail space.

Conversion is a “possible long-term plan,” though Far East doesn’t currently have any concrete proposals, according to a spokeswoman for the company, who asked not to be identified citing company policy.

Far East has since bought a 23-story office building in Sydney’s center for A$151.8 million from the New South Wales state government. The late 1960s building -- opposite Sydney’s 125-year-old Town Hall and its adjoining train station, and a stone’s throw from one of the city’s busiest shopping districts -- could be converted to a hotel, retail and residential complex, according to a statement from Andrew Constance, New South Wales’s minister for finance and services.

Far East also bought two towers near Hyde Park from closely held developer Kyko Group for A$127 million.

Chinese Buyers

Asian builders are steering billions of dollars overseas amid regulatory restrictions at home and concerns their own property markets are overheating. Australia, one of the most popular destinations for Chinese buyers, is also favored by developers who are trying to follow the demand.

Chinese were the biggest investors in Australian commercial and residential property in the year ended June 30, plowing A$5.9 billion into real estate, a 42 percent increase from a year earlier, according to Australia’s Foreign Investment Review Board. The board approved more than 6,500 applications worth A$10.8 billion by overseas investors to develop residential property, data released this month showed.

For groups including CBUS, the largest building industry pension fund, the competition from foreign developers for a limited number of sites that work as apartments means the need for increased caution to avoid overpaying.

“It’s becoming a tad expensive but you need to stick to your fundamentals in respect to what you’re willing to pay,” said Adrian Pozzo, chief executive officer of CBUS Property, the real estate investment arm of the pension fund. “You can’t win every one.”

City Living

CBUS’s planned conversion of a 14-story building at 130 Elizabeth Street follows a similar luxury apartment redevelopment across the park completed in 2012 in partnership with AMP Capital Ltd., a unit of Australia’s biggest asset manager and Galileo Group. CBUS is also starting work on another development in Melbourne, demolishing an office building it bought about 3 1/2 years ago to create a high-end apartment tower overlooking the city’s Treasury Gardens, Pozzo said.

“Inner city living is the market to be in at the moment,” Pozzo said. “My word, we’re looking for more sites. So’s everyone else.”

-By Nichola Saminather

Homebuilder Confidence in U.S. Lower Than Forecast in March

Source: Bloomberg / Personal Finance

Confidence among U.S. homebuilders rose less than forecast in March, a sign the industry may take time to pick up after inclement weather damped activity earlier in the year.

The National Association of Home Builders/Wells Fargo index of builder confidence climbed to 47 from 46 in February, a report from the Washington-based group showed today. The median forecast in a Bloomberg survey of 47 economists was 50. Readings below 50 mean more survey respondents reported poor market conditions than good.

This month’s reading follows a drop in February that was the biggest on record amid snowstorms that restrained prospective buyers from going out to shop for homes and kept builders from starting work. Recent gains in borrowing costs and higher property values also are limiting affordability, while an improving job market will help to underpin demand.

“Builders continued to be affected by poor weather and difficulties in finding lots and labor,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Delaware, said in a statement.

Estimates in the Bloomberg survey ranged from 45 to 55. The index, which was first published in January 1985, reached a record low of 8 in January 2009.

Another report today showed factory production rose in February by the most in six months, indicating the industry started to recover from severe winter weather.

Production Rebound

The 0.8 percent increase at manufacturers followed a 0.9 percent slump in the prior month that was the biggest since May 2009, figures from the Federal Reserve in Washington showed. The median forecast called for a 0.3 percent gain. Total industrial production rose 0.6 percent, more than projected.

The builders group’s index of present sales of single-family homes increased to 52 this month from 51 in February.

A measure of sales expectations for the next six months declined to 53 from 54. The gauge of buyer trafficrose to 33 from 31.

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

“A number of factors are raising builder concerns over meeting demand for the spring buying season,” David Crowe, the NAHB’s chief economist, said in a statement. “These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”

Regional Split

Confidence among builders declined in two of the four U.S. regions, as the Northeast and West dropped 5 points. Sentiment for builders in the Midwest and South improved.

Snowfall and frigid temperatures in the eastern U.S. has hurt everything from housing to retail sales. Home starts slumped in January by the most in almost three years as unusually harsh winter weather added to the industry’s burdens. February figures will be released tomorrow.

Sales of previously owned homes dropped in January to the lowest level in more than a year as poor weather combined with a lack of supply and strict lending rules.

Beyond the weather, borrowing costs for homebuyers have been climbing. The average 30-year, fixed-rate mortgage rate was 4.37 percent in the week ended March 13, up from 3.63 percent a year earlier, according to Freddie Mac in McLean, Virginia.

Hovnanian Enterprises Inc. (HOV), New Jersey’s largest homebuilder, reported a wider loss for its fiscal first quarter as inclement weather extended construction times and sales demand slowed.

“We believe this is a temporary pause in the industry’s recovery,” Chief Executive Officer Ara Hovnanian said in a statement on March 5. “Based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery.”

-By Shobhana Chandra

Brookfield’s Brush Said to Leave Post to Head Spanish REIT

Source: Bloomberg / News

David Brush resigned as head of Europe for Brookfield Property Group to join a new Spanish property company being created by Magic Real Estate, according to two people with knowledge of the matter.

Brush, 54, will move to Madrid to become the chief investment officer for the unnamed Socimi, the Spanish equivalent of a real estate investment trust, said the people, who asked not to be identified because the information isn’t public.

The new company’s size will be very significant, said the people, who were attending the MIPIM property conference in Cannes, France, last week. They declined to be more specific. Nobody was immediately available for comment at Magic Real Estate. Andrew Willis, a spokesman for Brookfield, wasn’t immediately available for comment.

Brush, a New York native who has lived in the U.K. for the past 18 years, will join a stream of international investors including Pacific Investment Management Co. LLC’s Bill Gross, Quantum’s George Soros and billionaire John Paulson who are banking on a recovery of Spanish real estate after a six-year slump.

Amendments to Spain’s REIT legislation last year have reduced the tax burden for Spanish property investors. Lar Espana SA and Hispania Activos Inmobiliarios SA, two externally-managed Socimis, have listed shares shares within the past two weeks.

Positive Sign

“It’s a great sign that an international professional such as Brush believes in the Spanish Socimi model and the recovery of the Spanish real estate market,” said Ismael Fernandez Anton, a partner at Ashurst LLP in Madrid who heads the law firm’s Socimi team. “People coming from outside show that the Spanish Socimi model is as attractive as any international REIT regime.”

Brush joined Brookfield in 2012 after spending 18 years as a managing director of the opportunity fund at RREEF, the former name of Deutsche Bank AG’s global real estate investment unit. Prior to that, he worked for Bankers Trust’s real estate investment banking group.

Brookfield Property is a unit of Brookfield Asset Management Inc. Magic Real Estate was set up in 2012 by Ismael Clemente and Miguel Ollero, former managing directors at RREEF Spain.

-By Sharon Smyth

London Home Prices Rise to Record Amid Focus on Stimulus

Source: Bloomberg / Luxury

Asking prices for homes in London surged to a record this month, as the buoyant outlook spread to other parts of the country, according to Rightmove Plc.

Prices climbed 2.1 percent from February to 552,530 pounds ($919,000), taking the annual appreciation to more than 11 percent, the website operator said today. Nationally,values rose 1.6 percent to 255,962 pounds, also an all-time high.

Britain’s property-market revival has been encouraged by a strengthening recovery and a government stimulus plan known as Help to Buy, which allows people to buy a home with a down payment of as little as 5 percent. Chancellor of the Exchequer George Osborne said yesterday he will extend the program for new homes to 2020 to spur construction.

“Spring is in the air and the country is finally on the move,” said Miles Shipside, a director at Rightmove. “The mass property market is starting to unlock after years of being handcuffed by fragile consumer confidence and a lack of low-deposit mortgages.”

Price growth in London last month was led by the outer boroughs, including Haringey and Barnet in the north, Rightmove said. The most expensive district, Kensington & Chelsea, saw values drop 2.4 percent, while Westminster recorded a 2.3 percent decline.

The report also showed a 10 percent annual increase in the number of properties coming onto realtors’ books this month. While that will ease some price pressure, “structural shortages remain” in London’s housing supply, Shipside said.

Stimulus Expansion

The Treasury said the U.K. will invest a further 6 billion pounds ($10 billion) in Help to Buy and that the additional funding will help support the construction of 120,000 properties.

With house prices rising, more than 80 percent of economists in a Bloomberg survey published on March 14 said Osborne should curtail Help to Buy in the budget this week. The plan was first introduced in April 2013 and a second version began in October.

Morgan Stanley analysts including Huw Van Steenis have argued the opposite, saying in a March 10 note that the U.K. is building too few homes and HTB is a “key catalyst” for construction.

“We think the market still underestimates how critical HTB 1 and 2 are proving for construction, credit and broader recovery,” they said. “Side effects are less than critics feared.”

Nationally, asking prices for residential property rose 6.8 percent in March from a year earlier, Rightmove said. Values are now above the 250,000-pound threshold that increases the stamp-duty tax on property sales to 3 percent from 1 percent, and Rightmove said a more incremental scale may be “opportune and fair.” Osborne is due to make his budget speech in Parliament in London at 12:30 p.m. on March 19.

“Depending on the chancellor’s need to balance the books versus the desire to please target voters, he may be tempted to make some further tax changes,” Shipside said. “Stamp duty has unfair thresholds, and a buoyant market could withstand some tinkering.”

-By Fergal O’Brien

German Homebuilding Permits Climb to 10-Year High as Prices Rise

Source: Bloomberg / Luxury

Germany issued the most homebuilding permits in 10 years in 2013 as developers took advantage of rising prices and demand from a growing population.

German authorities issued 270,364 construction permits for apartments and houses, 12.9 percent more than a year earlier, the Federal Statistics Office said in a statement today. That’s the most since 2003, when about 297,000 permits were granted.

“This continues the positive trend which began in 2010,” the statistics office said in the statement.

Construction in Germany is rising as the population grows and developers race to close a housing gap that grew during a 15-year construction slump. The population gained 0.4 percent to 80.8 million in 2013 as immigrants from countries hurt by the European economic crisis searched for jobs.

Permits for units in apartment buildings rose the most, by 22.3 percent, according to the Statistics Office. Permits for units in two-family homes gained 13.3 percent, while single-family dwellings rose 1.1 percent.

German home prices increased 4 percent in 2013 from a year earlier, according to the VDP Association of German Pfandbrief Banks. That’s the most in at least 10 years.

-By Dalia Fahmy