Real News‎ > ‎2014‎ > ‎March 2014‎ > ‎

21st March 2014

Singapore Real Estate

SRX launches real-time property pricing feature

CEO says X-Value can 'mitigate the problems faced by HDB home buyers'

Source: Business Times / Property

[SINGAPORE] Negotiating property prices, especially for HDB resale flats, will no longer be like a shot in the dark with "X-Value", a new real-time pricing feature.

Launched by the Singapore Real Estate Exchange (SRX), it is derived algorithmically based on past transacted prices of comparable units. It is also adjusted for factors such as size, location, amenities, floor level and the direction where the unit is facing.

"It is not an appraisal, but aims to provide a standard for pricing homes and assisting pre-valuation financing decisions," SRX said yesterday.

SRX chief executive and co-founder Sam Baker told reporters that X-Value can "mitigate the problems faced by HDB home buyers", following recent changes in the HDB resale rules that require buyers to first obtain the option to purchase (OTP) from the sellers before they can seek HDB valuation for the units.

-By Lynette Khoo

URA plan to 'unblock' Boat Quay

Source: Straits Times

Diners at Boat Quay can look forward to unblocked views of the Singapore River and shophouses nearby, if a plan to revamp the waterfront promenade takes off. The Urban Redevelopment Authority (URA) launched a tender yesterday for consultant teams to study how outdoor dining areas along the quay can be made more appealing.

URA calls tender for ideas to revitalise Boat Quay

Source: Channel News Asia / Singapore

SINGAPORE: The Urban Redevelopment Authority (URA) called for a tender on Thursday for ideas on refurbishing Boat Quay's waterfront outdoor refreshment areas.

It is inviting consultant teams of architects, quantity surveyors and engineers to undertake the project.

The tender will close on April 3. The consultants will be appointed by mid-year and refurbishment plans will be finalised by September.

Boat Quay may be sited along the Singapore River and lined with quaint shophouses but over the years, it has garnered a reputation as a spot where sightseers can afford to give a miss.

Some of the problems affecting Boat Quay include big signboards that obscure the view of the Singapore River, cluttered and unsightly walkways, and tents that prevent people from admiring the Singapore skyline.

Non-profit group Singapore River One wants to refresh Boat Quay's image and it is getting landlords and tenants to support a ground-up initiative to revitalise alfresco areas with funding from authorities.

If majority stakeholder support is garnered, refurbishment works will begin around April or May 2015.

The URA will call a tender in January 2015 to undertake the construction work needed for the revamp.

The tender will be awarded within the first quarter of 2015.

Fun Siew Leng, group director of urban planning and design at URA, said: "The stakeholders are encouraged to therefore come forward to give us all their comments, air their concerns so that the consultant team can take those into consideration."

Wilson Tan, chairman of Singapore River One said: "If you look at Boat Quay itself right now, there is an opportunity for us to make use of the ambience. There is an opportunity for us to make use of the river so I believe that this is something that we have not really gone out to leverage."

And stakeholders' response has been encouraging, said Singapore River One.

Arthur Chua, chief executive of Goldbell Corporation, a landlord at Boat Quay, explained: "As a landlord, definitely the value of the shop houses should increase. Culturally, socially, business-wise, economically, everything should improve."

Others hope refurbishment works won't impact business too much.

Jason Pope, managing director of Dallas Restaurant & Bar, said: "The biggest constraint will be the downtime on alfresco areas. How long are we going to be out of action to utilise those areas for dining so it's very important for myself and our fellow stakeholders to utilise internal space for dining."

The revamp of Boat Quay will likely be phased to allow businesses to adjust.

- CNA/fa

Tender called for ideas to revamp Boat Quay area

Source: Today Online / Singapore

SINGAPORE — Efforts are under way to refresh Boat Quay’s image and refurbish the outdoor areas along its waterfront promenade.

The Urban Redevelopment Authority (URA) yesterday called a tender to study how Boat Quay’s outdoor dining areas could be improved and invited consultant teams of architects, quantity surveyors and engineers to undertake the project.

The tender invitation will close on April 3 and consultants appointed will be confirmed by mid-2014. Refurbishment plans will be finalised by September this year.

Although Boat Quay is lined with quaint shophouses and waterfront dining areas along the Singapore River, it has, over the years, garnered an unfortunate reputation of being a spot that sightseers can afford to miss.

The initiative to revitalise Boat Quay’s al fresco areas was led by Singapore River One (SRO), a non-profit entity that was formed to enhance the Singapore River precinct.

“If you look at Boat Quay itself right now, there is an opportunity for us to make use of the ambience,” Mr Wilson Tan, Chairman of Singapore River One, said. “There is an opportunity for us to make use of the river, so I believe that these are some things that we have not really gone out to leverage.”

SRO said it has been canvassing support from landlords and tenants in Boat Quay to support the ground-up initiative. If majority stakeholder support is won, refurbishment work, which will be funded by URA, will begin around April or May next year.

The response towards the project has been largely supportive, said SRO. Said Mr Arthur Chua, Chief Executive of Goldbell Corporation: “As a landlord, definitely the value of the shophouses would increase. Culturally, socially, business-wise, economically, everything should improve.”

Mr Jason Pope, Managing Director of Dallas Restaurant & Bar, said he sees the project as “a positive step forward in revitalising a tired area”, but hopes business will not be adversely impacted by the work needed.

“The biggest constraint will be the downtime on al fresco areas. How long are we going to be out of action to utilise those areas for dining? So it’s very important for myself and our fellow stakeholders to utilise internal space for dining,” he said.

URA Group Director of Planning and Design Fun Siew Leng said stakeholders are encouraged to come forward “to give us all their comments, air their concerns so that the consultant team can take those into consideration”.

SRO said the revamp of Boat Quay is likely to commence in phases to allow businesses to adjust. 

-By Dylan Loh

Vision Exchange: first phase sale tomorrow

Source: Business Times / Companies

SIM Lian Group will launch the first phase of its integrated development, Vision Exchange, for sale tomorrow.

Located in Jurong East, the 99-year leasehold commercial property will house a 25-storey office tower with two levels of food & beverage (F&B) space and medical suites, the company said in a statement yesterday.

Said Kuik Sing Beng, executive director of the group: "Vision Exchange is one of the few strata offices in Jurong Regional Centre, and businesses will benefit from being at the heart of this thriving commercial and leisure destination in Singapore."

Expected to be completed in 2018, the development will feature 740 units, with a total gross floor area of almost 690,000 square feet.

-By Raphael Lim

MBS seeking more land from govt, says Adelson

IR wants to boost room stock by 60% as it's facing full occupancy

Source: Business Times / Singapore

[SINGAPORE] Las Vegas Sands has asked the Singapore authorities for more land to increase rooms at its Marina Bay Sands (MBS) by about 60 per cent after facing almost full occupancy, said LVS chairman Sheldon Adelson yesterday.

The world's biggest casino operator plans to add 1,500 rooms to the 2,563-room MBS, he said at a briefing in Singapore.

The company will also add meeting rooms, ballrooms and exhibition spaces to the US$6 billion integrated resort when the government releases more land, he announced.

"We need more rooms. We are running at a 100 per cent occupancy; on a bad day it's 98 per cent, no other hotel in the world runs like this except some in Vegas," noted Mr Adelson.

Billionaire Adelson seeks land to expand Marina Bay Sands

Casino operator plans to add 1,500 rooms to S’pore’s largest hotel

Source: Today Online / Business

SINGAPORE — Las Vegas Sands has asked the Singapore authorities for more land to increase rooms at its Marina Bay Sands resort by about 60 per cent after facing almost full occupancy, billionaire Chairman Sheldon Adelson said yesterday.

The world’s biggest casino operator plans to add 1,500 rooms to the 2,563-room resort, Mr Adelson said at a briefing here. It will also add meeting rooms, ballrooms and exhibition spaces to the US$6 billion (S$7.65 billion) project and largest hotel in Singapore when the Government releases more land, he said.

“We need more rooms,” Mr Adelson said. “We are running at a 100 per cent occupancy; on a bad day, it’s 98 per cent. No other hotel in the world runs like this, except some in Vegas.”

Mr Adelson said he had met government officials on Wednesday and repeated his request for more land. Marina Bay Sands has about 1.2 million sq ft of meeting and convention space and two theatres for Broadway shows, concerts and gala events, said a company filing.

The room revenue at the resort rose 11 per cent to US$360.3 million last year, the filing showed.

Last year’s occupancy rate was 98.6 per cent, with an average daily room rate of US$396.

Hotels in the city filled 86.3 per cent of their rooms last year, data from the Singapore Tourism Board showed.

Still, Sands posted fourth-quarter earnings on Jan 30 that trailed analysts’ estimates, as revenue in Singapore fell 8 per cent to US$659.8 million. Gains in mass gaming and non-gaming revenue were countered by “softer VIP play”, the firm said.

Sands plans to focus on Asia after the operator abandoned a plan in December to build a US$30 billion mega-resort in Spain.

“We want to develop a network of resorts around the Pacific Rim,” Mr Adelson said.

Sands is ready to invest as much as US$10 billion in Japan to build a gambling, hotels, entertainment and shopping complex that would lure tourists to Asia’s biggest economy after China, Mr Adelson said, repeating comments made last month.

Japan should allow Sands to build an integrated resort by 2020, before the Tokyo Olympic Games, said Mr George Tanasijevich, Chief Executive Officer of Marina Bay Sands. The Tokyo facility should have at least 200 rooms for meetings, conventions and exhibitions.

The company invested in Macau a decade ago and has since become the largest foreign casino operator in the city, which is about an hour by ferry from Hong Kong. BLOOMBERG

JTC official spearheading Tianjin Eco-City physical planning

Source: Business Times / Singapore

THE Singapore government will be seconding a senior official to spearhead the work of the Sino-Singapore Tianjin Eco-City Investment and Development Co (SSTEC) in the physical planning and development of the bilateral eco-city project in Tianjin.

Kok Poh June will take over as deputy CEO in charge of Physical Planning and Development from April 1. Before his secondment to SSTEC, Mr Kok was director (Biomedical Sciences, Cleantech, Media, Infocomms and Electronics clusters) at JTC Corporation.

SSTEC chief executive Ho Tong Yen said that this secondment reflects the strong support by Singapore government agencies for the Sino-Singapore Tianjin Eco-City project, which has around 10,000 residents and more than 1,000 registered companies.

"Mr Kok brings with him valuable experience from the public and private sectors," Mr Ho said. "In the next phase of the Eco-City's development, we would need to focus on attracting more companies and residents to the Eco-City. Mr Kok's experience in master planning and creation of vibrant, people-friendly, mixed-use communities in Singapore will be very useful to the Eco-City project."

-By Lynette Khoo

The old-world beauty of Beauty World

Source: Straits Times

A train station bearing the name Beauty World will rise up in two years in a part of Upper Bukit Timah where an open-air market of the same name once stood. The new segment of the Downtown Line promises to take visitors not just down memory lane but also right up to the doorsteps of a mall in a seeming time warp.

Real Estate Companies' Brief

Private placement by Suntec raises questions

But analysts not ruling out imminent acquisitions

Source: Business Times / Companies

SUNTEC Reit is issuing 218.1 million new units at $1.605 apiece in a private placement.

The move will increase the unit base by 9.7 per cent. Analysts say this will dilute distributions per unit by 3.9-8.4 per cent from FY14 to FY16.

Although the Reit said the $341.4 million in net proceeds raised will go towards repaying its existing debt, analysts flagged imminent acquisitions as a more likely scenario.

"Suntec could be amassing gunpowder for future acquisitions in either Singapore or Australia," Maybank-Kim Eng analyst Ong Kian Lin said.

-By Lee Meixian

Starhill Global Reit

Source: Business Times

Starhill Global Reit (SGReit) just announced that it has successfully divested the Holon L property in Tokyo for 1.026 billion yen (S$12.8 million). The selling price represents a 6 per cent premium over book value, translating into a yield of 4.03 per cent. SGReit's management revealed that the proceeds from the divestment will be used to repay its yen loans as well as for working capital purposes. As a result, its gearing will drop marginally by 0.3 per cent to 28.7 per cent.

Views, Reviews & Forum

Angst over HDB resale flat valuations

Source: Straits Times

The Housing Board's move to publish daily instead of fortnightly figures on resale transactions will help create a more informed market and a more level playing field. The overarching goal, of course, is for the HDB resale market to achieve long-term stability - with price movements reflecting any imbalance in supply and demand and price differences reflecting the attributes of units, like location and age.

Global Economy & Global Real Estate

Luxury home project in Johor in the works

Forest City, to be located near Second Link, will require massive reclamation

Source: Business Times / Property

[PETALING JAYA] China's Country Garden Holdings Co Ltd and Kumpulan Prasarana Rakyat Johor (KPRJ) have drawn up plans for a massive reclamation project to build luxury homes near Pendas in southern Johor near Singapore, according to sources.

Sources told Malaysian daily The Star that the project could entail a land area of "a few thousand acres", which would make it one of Iskandar Malaysia's single largest projects.

It isn't clear how much Country Garden is pumping into the project, but going by its size, it would dwarf the Hong Kong-listed firm's first project in Danga Bay, which covered an area of only 50 acres or 20 ha, for which it had paid RM900 million (S$348 million).

The new project is being dubbed Forest City.

-From Petaling Jaya, Malaysia

Good response to Oxley's London launch

Source: Straits Times

Large crowds have flocked to the launch of Singapore-listed Oxley Holdings' first British property, in London's Docklands area. The first phase of the huge Royal Wharf project, stretching 500m along the River Thames, will be launched here today.

Myanmar hotel sector to soar

Source: Today Online / Business

MYANMAR — The hotel sector in rapidly-emerging Myanmar will continue to be supported by strong growth in the number of visitors to Yangon as a result of accelerated foreign investment, the boom in leisure tourism, as well as a lack of quality apartments.

Myanmar is similar to Thailand 30 years ago in terms of tourism development, and even if it achieves only a fraction of the latter’s success, it is still set to experience explosive growth. Hotel room rates will remain very high because new projects being announced will take several years to hit the market.

The most anticipated new hotel opening this year is the Novotel along Pyay Road, a joint venture between Max Myanmar and Accor.

Although there are several large, mixed-use projects that have commenced construction, they will not be completed until 2016 to 2017 and the expected strong growth in the number of visitors to Yangon will easily soak up all of the new completions.

A successful completion of the much-anticipated elections next year could herald a sharp acceleration of foreign direct investment, and a surge of foreign professionals and business visitors is expected as more projects become established.

Meanwhile, leisure tourism is expected to maintain its strong upward momentum. Leisure tourism increased at a compounded annual growth rate of 34 per cent since Myanmar opened up in 2010. As tourism infrastructure improves amid co-ordinated efforts by the government and private sector, tourist arrivals are expected to grow at a CAGR of 25 per cent from 2013 to 2020 as a base case.

Thanks to this heavy demand, hotel room rates will remain high in the near-to-medium term. A lack of quality apartments for rent also supports high hotel room rates. Business visitors are likely to stay longer as their exploratory trips evolve into material business development and this will provide an added boost to hotel demand.

In addition, the setting of an official room rate ceiling of US$150 (S$190)has failed to dent rates, with a standard room in a four-to-five-star hotel averaging about US$200 a night. Little effort has been made to enforce these rules, which are in any case almost unenforceable. Should the government push towards heavily regulating the industry, the hotels will simply drive their costs underground and visitors may be charged indirectly via payments for ancillary services.

-From Myanmar

February home sales drop to 19-month low

Source: Business Times / World

[WASHINGTON] US home resales dropped slightly in February to a 19-month low as cold weather and a shortage of homes for sale continued to sideline potential buyers.

The National Association of Realtors said yesterday that home sales dropped 0.4 per cent to an annual rate of 4.60 million units, the lowest level since July 2012, and in line with economists' expectations. January's sales pace was unrevised at 4.62 million.

Even though temperatures remained chilly in February, pinching sales, a modest improvement in inventory on the market indicates buyers are expected to jump in soon.

The median existing home price rose 9.1 per cent in February to US$189,000 from the same month in 2013. Mortgage rates have risen almost a full percentage point in the past year and the increase in house prices has far outpaced income growth, making home-buying less affordable.

-From Washington, US

Mainland Chinese rush to sell HK luxury homes

Cash-strapped sellers knocking up to 20% off price, as liquidity crunch looms on the mainland
Source: Today Online / Business

HONG KONG — Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong and some are knocking up to a fifth off the price for a quick sale as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in Hong Kong, where they accounted for 43 per cent of new luxury home purchases in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell now coincides with a forecast 10 per cent drop in property prices this year, as the tax increase and rising borrowing costs cool housing demand. Concurrently, credit conditions in China have tightened and the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan (S$720 million) have heightened concerns that financial risk was spreading.

“Some of the mainland sellers have liquidity issues … Their companies in China have some difficulties, so they sold the houses to get cash,” said Mr Norton Ng, Account Manager at a Centaline Property office close to the China border, where luxury homes costing up to HK$30 million (S$4.89 million) have been popular with mainland buyers.

Property agents said mainland Chinese own about a third of the existing homes that are now for sale in Hong Kong — up 20 per cent from a year ago. Many are offering discounts of 5 to 10 per cent from the market average — and, in some cases, as much as 20 per cent, property agents and analysts said.

In a Hong Kong housing development called Valais, about 10 minutes’ drive from the Chinese border, real estate agents said between a quarter and half of the 330 houses are now on sale. At the development’s frenzied debut in 2010, a third of the HK$30 million to HK$66 million units were sold on the first day, with nearly half going to mainland Chinese.

Built by the city’s largest developer, Sun Hung Kai Properties, Valais is one of many estates in Hong Kong where agents are seeing an increasing number of Chinese eager to sell.

“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago, but now they want to cash in as liquidity is quite tight in the mainland,” said Mr Joseph Tsang, Managing Director at Jones Lang LaSalle.

A spokesman for Sun Hung Kai said the current occupancy rate at Valais was 75 per cent, and most of the sellers were looking for a good selling price and not eager to sell at deep discounts. In West Kowloon district, where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some are offering steep discounts on the higher-end apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 sq ft unit at the Imperial Cullinan — a high-end estate developed by Sun Hung Kai in 2012 — for HK$19.3 million, 17 per cent less than the original price. The landlord told agents to sell the flat as soon as possible, said Mr Richard Chan, Branch Manager at Centaline Property in West Kowloon. “In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market — that’s for sure,” he said. REUTERS

-From Hong Kong, China

2 China developers get nod for stock placements

Source: Business Times / China

[SHANGHAI] Two Chinese property developers said they have received regulatory approvals to make private placements of shares, paving the way for more real estate firms to raise funds after a near four-year ban by authorities on real estate companies from seeking new financing.

Developers Tianjin Tianbao Infrastructure Co and Join.In Holding Co have received regulatory approval to sell yuan-denominated A shares in private placements, according to separate statements to the Shanghai and Shenzhen stock exchanges.

The latest approvals, which come amid growing fears of defaults in the property sector after the collapse of Zhejiang Xingrun Real Estate, will pave the way for more developers to raise capital and alleviate crash crunches.

China stopped allowing developers to raise money by selling shares in April 2010 on concerns that surging home prices were inflating an asset bubble.

-From Shanghai, China

Sales of Existing Homes in U.S. Fall to Lowest Since 2012

Source: Bloomberg / Personal Finance

Purchases (ETSLTOTL) of previously owned homes in the U.S. declined in February to the lowest level since July 2012, a sign the industry may be slow to recover.

Contract closings on existing properties fell 0.4 percent to a 4.6 million annual rate, matching the median projection in a Bloomberg survey, figures from the National Association of Realtors showed today in Washington. Prices rose 9.1 percent from a year earlier, the group said.

The slowdown in sales since the middle of last year reflects a pickup in borrowing costs, declining affordability and, more recently, bad weather. Faster job growth that generates bigger income gains are needed to spur demand and allow housing to contribute more to the economy.

“There are some headwinds out there,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who correctly forecast the pace of sales. “Housing affordability has come down a bit as mortgage rates have come up from recent historic lows. The weather was a factor and we expect that to be turning around shortly.”

Estimates in the Bloomberg survey of economists ranged from 4.5 million to 4.76 million. The prior month’s pace was unrevised at 4.62 million.

Jobless Claims

Among other reports today, the number of Americans filing applications for unemployment benefits held last week near the lowest level in almost four months, a sign the labor market continues to strengthen. Jobless claims increased by 5,000 to 320,000 in the week ended March 15.

The index of leading indicators rose more than forecast in February, a sign the world’s largest economy will strengthen after a weather-induced slowdown in the first quarter. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.5 percent, the biggest gain since November.

Another report showed manufacturing around the Philadelphia area expanded more than forecast in March.

Stocks rose after the figures, with the Standard & Poor’s 500 Index climbing 0.4 percent to 1,867.35 at 10:33 a.m. in New York.

The median price of an existing home rose from February 2013, to $189,000, today’s report showed. Sales of home priced $250,000 and less declined, while those selling for more increased.

First-Time Buyers

First-time buyers accounted for 28 percent of all purchases in February, up from 26 percent in January that was the lowest in data going back to October 2008.

Compared with a year earlier, purchases decreased 6.9 percent on an unadjusted basis.

The number of previously owned homes on the market rose 6.4 percent to 2 million. At the current sales pace, it would take 5.2 months to sell those houses, the highest since April 2013, compared with 4.9 months at the end of the prior month. Less than a five months’ supply is considered a tight market, the Realtors group has said.

Sales of existing single-family homes decreased 0.2 percent to an annual rate of 4.04 million. Purchases of multifamily properties -- including condominiums and townhouses -- fell 1.8 percent to a 560,000 pace.

By Region

Purchases declined in two of four regions, led by an 11.3 percent drop in the Northeast. Sales rose in the South and West.

Of all purchases, cash transactions accounted for about 35 percent, the report showed.

Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 16 percent of the total.

“Prices are rising much faster than people’s incomes,” Lawrence Yun, NAR chief economist, said at a news conference today as the figures were released. “The biggest factor is affordability,” which has been declining. Faster job growth can help ease the sting of higher prices and borrowing costs, he said.

Existing-home sales, tabulated when a purchase contract closes, have recovered from a 13-year low of 4.11 million in 2008, three years after a record 7.08 million houses were sold in 2005. Still, higher prices and borrowing costs have put properties out of reach for some Americans, helping explain a slowdown in sales since July.

Winter Weather

Colder weather and snowstorms in parts of the U.S. have made it difficult to gauge the true health of housing and other indicators such as retail sales and manufacturing. February ended with its coldest final week since 2003, according to Berwyn, Pennsylvania-based weather data provider Planalytics Inc. The second week of the month was the snowiest such period since 2007.

Other data have shown new projects have been slow to get under way because of the bad conditions, also depressing builder sentiment. Housing starts were little changed in February at a 907,000 annualized rate, Commerce Department data showed this week. In November, new construction was running at a 1.1 million pace.

The National Association of Home Builders/Wells Fargo index of builder confidence rose less than forecast in March.

Warmer temperatures may revive construction in coming months, and some companies are more upbeat. Among those is Hovnanian Enterprises Inc. (HOV), New Jersey’s largest homebuilder.

“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.”

KB Home, a builder primarily focused on first-time buyers, yesterday reported a fiscal first-quarter profit that beat analysts’ estimates as revenue and prices soared.

Borrowing Costs

Rising borrowing costs have also restrained affordability. 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.

Fed policy makers yesterday gave themselves room to keep borrowing costs low at least until next year by dropping a linkage between the benchmark interest rate and a specific level of unemployment. The central bank also reduced the monthly pace of bond purchases by $10 billion, to $55 billion.

“Growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions,” the Federal Open Market Committee said in a statement after its two-day meeting. Even so, “there is sufficient underlying strength in the broader economy to support ongoing improvement in labor-market conditions.”

Policy makers also said that the recovery in housing is still slow. That may give way to a pickup as more people take advantage of historically low borrowing costs.

“There’s a lot of demographic potential there for new household formation that would ultimately generate new construction,” Yellen said during a news conference after the policy meeting. “And the level of rates I think does matter, and the fact that they’re low now is something that should serve as a stimulus to people coming back into the housing market.”

-By Shobhana Chandra

Colony Plans $513.6 Million of Debt Tied to Rental Payments

Source: Bloomberg / Luxury

Colony American Homes Inc. (CAH), the third-largest single-family landlord in the U.S., is selling $513.6 million of bonds tied to rental payments, according to deal documents.

The securities are linked to 3,399 properties in 20 metropolitan areas in seven states, the document shows, and the homes were fully leased as of Feb. 1. The deal would be the second connected to rental homes after Blackstone Group LP (BX), the largest single-family landlord, issued the first such bond last year. Santa Monica, California-based Colony owns more than 15,600 homes.

Private equity firms, hedge funds and real estate investment trusts have purchased as many as 200,000 houses during the past two years. They are seeking to profit from rebounding prices and rising demand for rentals among millions of Americans who went through foreclosure or can’t qualify for a mortgage. Wall Street ultimately may sell more than $20 billion a year of rental-home bonds, according to Ryan Stark, a director at Deutsche Bank AG, which structured and helped underwrite the first transaction.

Colony “has demonstrated its ability to effectively handle the day-to-day business of managing a national single-family rental platform,” Moody’s Investors Service said in an e-mailed statement today.

Moody’s concern related to equity foreclosure “was mitigated for this transaction because both mortgages and pledges of the borrower’s equity secure the loan that backs the transaction,” the statement said.

American Homes 4 Rent

American Homes 4 Rent (AMH), the second-largest single-family rental landlord with more than 25,000 homes, plans to “aggressively pursue a securitization transaction, which it expects to be completed in the next 60 days,” the Agoura Hills, California-based company said in a March 13 statement.

A $291 million portion of the Colony deal is rated AAA, the top credit rating, by Moody’s, Kroll Bond Rating Agency and Morningstar Inc.

Standard & Poor’s said last month that new securities backed by U.S. rental homes don’t meet the criteria for the highest credit grade. S&P has yet to see a transaction with portions warranting AAA grades based on the amount of risk protection including credit enhancement, New York-based analysts Rasool Alizadeh, Weili Chen and John Connorton III wrote in the Feb. 27 report.

Colony declined to comment on the offering, according to Caroline Luz, a spokeswoman for the company with Owen Blicksilver Public Relations.

JPMorgan Chase (JPM) & Co. and Credit Suisse Group AG are marketing the Colony deal, according to the documents. Justin Perras, a spokesman for New York-based JPMorgan Chase, and Drew Benson, a spokesman for Credit Suisse, declined to comment on the rental bond sale.

-By Heather Perlberg

Lennar Profit Tops Estimates as Home Prices Increase

Source: Bloomberg / Luxury

Lennar Corp. (LEN), the biggest U.S. homebuilder by market value, reported a fiscal first-quarter profit that beat analysts’ estimates as the company sold more homes at increased prices.

Net income climbed to $78.1 million, or 35 cents a share, in the three months through February, from $57.5 million, or 26 cents, a year earlier, the Miami-based company said in a statement today. Analysts expected earnings of 28 cents a share, the average of 17 estimates compiled by Bloomberg.

Publicly traded builders have been increasing prices to take advantage of a tight supply of new and existing homes while using their economies of scale to reduce costs and widen profit margins. Lennar’s profit, deliveries and orders grew even as inclement weather threatened home sales in much of the U.S. during the quarter, according to Drew Reading, a Bloomberg Industries analyst.

“Lennar followed KB Home (KBH) in reporting order trends indicating a strong start to the spring selling season,” Reading said in a note after the earnings were released.

KB Home, a Los Angeles-based builder, reported fiscal first-quarter earnings that beat estimates yesterday as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.

Orders, Prices

Lennar’s orders by volume climbed 10 percent to 4,465 homes and increased 26 percent by value to $1.5 billion. Revenue rose to $1.36 billion from $990 million, while the number of houses delivered increased to 3,609 from 3,186 last year. The average sale price increased to $316,000 from $269,000.

“We’ve led this recovery with price-increase recovery as opposed to volume recovery,” Chief Executive Officer Stuart Miller said on a conference call with analysts. “But as we go forward, we suspect that we’re going to see volumes increased.”

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

U.S. builders received permits to build new residences at an annual pace of 1.02 million in February, up 6.9 percent from a year earlier, the Commerce Department reported this week.

Lennar fell 2.5 percent to $40.32 after gaining as much as 2.8 percent earlier in the day. The shares have increased 1.9 percent this year, compared with a 1.3 percent decline for the Standard & Poor’s Supercomposite Homebuilding Index.

-By John Gittelsohn

KB Home Issues $400 Million of Bonds as Housing Sales Decline

Source: Bloomberg / Luxury

KB Home (KBH) sold $400 million of bonds that it may use to acquire and develop land, in its first offering in five months.

The builder issued 4.75 percent, senior notes maturing in 2019 that yielded 304 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. Proceeds from the sale, which was increased in size from $300 million initially marketed, may be used for general corporate purposes, including land acquisitions and land development, according to a statement yesterday from the Los Angeles-based company.

The new notes are graded B2 by Moody’s Investors Service, which today changed its outlook on KB Home to “positive” from “stable.” KB Home, which mostly focuses on first-time home buyers, issued the debt as data showed purchases of previously-owned homes in the U.S. declined in February to the lowest level since July 2012.

“They’re sort of looking at the market advantageously,” Jody Lurie, a corporate-credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. Issuing now gives KB Home “an ability to secure additional liquidity, while financing is cheap.”

Moody’s “expects the company’s credit metrics to continue to improve over the next year as it benefits from increasing demand for new homes,” according to a statement today. In October, KB Home sold $450 million of 7 percent securities due 2021 to yield 460 basis points more than similar-maturity Treasuries, Bloomberg data show.

KB Home reported fiscal first-quarter earnings yesterday that beat estimates as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.

Index Roll

The cost to protect against losses on U.S. corporate bonds increased as banks and investors began trading a new series of a credit-default swaps benchmark index that has a longer maturity.

Series 22 of the Markit CDX North American Investment Grade Index, used to hedge against losses or to speculate on creditworthiness, traded at 71.5 basis points at 5:20 p.m. in New York, compared with 64.5 basis points for the previous series’ close yesterday, according to prices compiled by Bloomberg.

New versions of Markit Group Ltd.’s indexes are created every six months. Companies in the measure are replaced if they no longer hold appropriate grades, aren’t among the most actively-traded borrowers or fail to meet other criteria. Series 22 was forecast to trade about 10 basis points wider because of the six-month extension in maturity, Morgan Stanley analysts led by Ashley Musfeldt wrote in a research note dated March 19.

The swaps gauge typically rises as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Commercial Paper

The market for corporate borrowing through short-term IOUs declined as issuance by financial institutions fell. The seasonally adjusted amount of U.S. commercial paper decreased $1.9 billion to $1.019 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the lowest level since the market touched $1.012 trillion in the period ended Feb. 26.

Commercial paper sold by overseas financial institutions declined $4.3 billion to $256.4 billion, the lowest level in three weeks. The amount issued by U.S.-based banks fell for a second week, decreasing $2.1 billion to $279.4 billion.

Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 8.7 basis points to 314.4 basis points, Bloomberg prices show. Speculative-grade bonds are rated below Baa3 by Moody’s and lower than BBB- at Standard & Poor’s.

The extra yield investors demand to hold investment-grade corporate bonds rather than government debt was little changed at 98.2 basis points, Bloomberg data show.

-By Jessica Summers

Henderson Land Underlying Profit Rises on China Property Sales

Source: Bloomberg / Luxury

Henderson Land Development Co., the Hong Kong builder controlled by billionaire Lee Shau-kee, said full-year earnings climbed 26 percent, helped by an increase in property sales in mainland China.

Underlying profit, which excludes revaluation gains and deferred taxes, rose to HK$8.94 billion ($1.15 billion), or HK$3.35 a share, last year, from HK$7.09 billion, or HK$2.70, in 2012, the company said in a stock exchange filing yesterday. That compares with the HK$7.9 billion average estimate of 18 analysts surveyed by Bloomberg News.

Henderson Land, which focuses on developments targeting middle-class homebuyers, said gross revenue from mainland China property sales more than doubled to HK$5.17 billion. Revenue from Hong Kong property sales increased 56 percent to HK$10.6 billion.

The shares climbed 2 percent to HK$41.50 as of 10:47 a.m. in Hong Kong after gaining as much as 2.3 percent. The stock has declined 6.1 percent this year, compared with a 9.1 percent decline in the city’s benchmark Hang Seng Index.

China’s home sales in 2013 exceeded $1 trillion for the first time as property prices surged in the absence of further nationwide housing curbs. In contrast, Hong Kong builders sold the fewest homes in almost two decades last year as the government stepped up measures to prevent a bubble in the housing market.

Including revaluation gains, Henderson Land’s 2013 net income fell to HK$15.9 billion from HK$20.2 billion a year earlier, the company said. The company said it will pay a final dividend of 74 Hong Kong cents a share.

Lee, 86, is Asia’s third-richest man with an estimated wealth of $21.7 billion, according to the Bloomberg Billionaires Index.

-By Jonathan Browning

Carlyle Partners Bail Out Brazil Real-Estate Developer

Source: Business Times / Luxury

Carlyle Group LP (CG)’s partners are reaching into their wallets to bail out one of the private-equity firm’s first investments in Brazil, seeking to protect its growing business in South America’s biggest economy.

Senior Carlyle professionals have injected $66.9 million and their firm has poured another $21.1 million into Urbplan Desenvolvimento Urbano SA, a real-estate developer that’s been hit with hundreds of lawsuits, in part for failing to complete home sites across Brazil, according to court and regulatory filings. Urbplan needs as much as $200 million to carry out Carlyle’s turnaround plan after an overly ambitious expansion left it with $305 million of high-cost debt.

Carlyle’s misadventure in Brazilian real-estate highlights a risk of doing business in the country almost seven years after the firm’s co-founder David Rubenstein said it would be a “huge” private-equity market. Buyout shops seldom use their own cash, let alone that of their partners to rescue investments. For Washington-based Carlyle that move may be necessary to protect its reputation and growing holdings in a country where courts increasingly hold directors and shareholders personally responsible for claims against their companies.

Little Protection

“Limited liability, which used to be the rule, has become the exception,” Bruno Salama, a law professor at Fundacao Getulio Vargas School of Law in Sao Paulo, said in a telephone interview.

Shareholders, including private-equity firms, are typically shielded from being personally responsible for claims against the companies they own. While the Brazilian legal code has limited liability provisions, they offer little protection when it comes to consumer, tax and labor claims.

“This is a serious threat to certain industries, and private equity is one of them,” said Salama, author of a forthcoming book ‘The End of Limited Liability in Brazil.’’

Carlyle funds spent a total of at least $100 million to buy a majority stake in Urbplan in 2007 and to continue funding it through 2011. That investment was worthless as of the end of 2012, and fund investors didn’t put any more money into the company, according to Carlyle’s regulatory filings. In an annual report filed last month with the U.S. Securities and Exchange Commission, Carlyle said if Urbplan fails to complete construction projects, customers or other creditors might seek to assert claims against the private-equity firm “under certain consumer protection” or other laws.

Rare Miss

Carlyle is taking steps to revive Urbplan, including hiring a new chief executive officer who specializes in turnarounds.

“Unfortunately, despite our strong investment track record, not every investment works out,” the firm said in an e-mailed statement. “We had an issue and we took action. Alongside the new management team and with a plan in place, we are working hard to turn this business around, including delivering on Urbplan’s projects.”

The investment is a rare black mark for Carlyle, founded by billionaires William Conway, Daniel D’Aniello and Rubenstein in 1987. As of Dec. 31, the buyout firm had invested in more than 470 corporate transactions, returned an average of 30 percent annually to investors, and oversaw almost $189 billion. Even in the rarefied world of buyouts the partners are enjoying heady times. The co-founders collected $279 million in pay and cash dividends last year, a 61 percent increase from 2012.

More Money

“The guys who are the principals have more money than God,” said James Hill, the chairman of the private-equity practice group at Benesch, Friedlander, Coplan & Aronoff LLP, a Cleveland-based law firm. Their wealth notwithstanding, private-equity executives rarely use their own capital to rescue an investment made on behalf of one of their funds.

“It could create a bad precedent,” said Hill, adding “investors in another investment that is failing may say ‘Where is our’” bailout?

Carlyle’s stock was little changed today at $33.33 in New York. The shares have risen 8.3 percent in the past year, trailing Apollo Global Management LLC (APO)’s 43 percent gain and Blackstone Group LP (BX)’s 67 percent increase.

It’s not the first time Carlyle’s partners have rescued an investment with their own money. The firm’s employees put cash into Kuhlman Electric Corp. after a 1999 takeover went awry, ultimately fixing the company and selling it to ABB Ltd. (ABB) in 2008. The private-equity firm also provided loans to Carlyle Capital Corp. during the credit crisis after the publicly traded fund was hit with losses on mortgage-backed securities. In March 2008, Carlyle executives weighed putting their own money into the fund, which ended up defaulting on $16.6 billion of debt that month.

Buyout Pioneer

Carlyle was a pioneer among buyout firms venturing outside the U.S., initially targeting Europe and later high-growth emerging markets, such as China. It created a Latin America real estate team in 2006 headed by Eduardo Machado, who structured one of the first real estate investment trusts distributed in Brazil and also worked for the Steinbruchs, one of the country’s wealthiest families.

One of the first investments was the acquisition of a 61 percent stake in Urbplan, then known as Scopel Desenvolvimento Urbano SA, a family-owned real estate company in Sao Paulo that focused on middle- and low-income housing as well as first-time homebuyers. Along with Carlyle funds, the Olayan family of Saudi Arabia agreed to invest directly in the developer.

Scopel Brothers

Eduardo and Ciro Scopel, the sons of the company’s founder, retained 39 percent as well as control over its day-to-day operations. Carlyle said its investment would foster the developer’s expansion, adding the company’s sales, then at 5,000 lots a year, were “expected to increase considerably” following the partnership.

At the time there was huge pent-up demand for housing as the hyperinflation and currency devaluations that had discouraged home-buying were being replaced with relative stability in prices and interest rates, said Roberto Ordorica, the former head of the Latin American division at Prudential Real Estate Investors.

“The result was a policy that created an incentive for developers to develop homes for the majority of the population,” said Ordorica, who now runs Mexrob Capital LLC, a Miami-based firm that provides investment capital to real estate ventures in Mexico.

Brazil’s Economy

Brazil’s economy grew more than 6 percent in 2007 and the government was also stepping in to make mortgages more available for first-time buyers. The housing market took off in 2009, when President Luiz Inacio Lula da Silva introduced his “My House, My Life” program, an initiative that Brazil’s current president, Dilma Rousseff, has also supported. While there are signs the market is cooling, home lending rose 33 percent in January from a year earlier, twice the pace of growth for consumer loans, according to Brazil’s central bank.

The Scopel family had operated in Sao Paulo state for four decades, specializing in acquiring the rights to develop residential lots from landowners in return for a share of the eventual lot sales, a bartering system known locally as “permuta.” The company would then install basic infrastructure to the land, such as roads and electrical and sewer hook-ups, and sell the individual lots to prospective homeowners, who would then hire their own builders.

Urblan Expansion

After Carlyle’s acquisition, Urbplan expanded across Brazil, South America’s largest country, making it difficult to track regulations, consumer preferences, and prices.

Every city and state has its own building permit legislation, and developers face a lack of credit and data, said Eduardo Scopel, who left Urbplan in May and couldn’t comment on the company’s specific issues.

“When you expand beyond Sao Paulo state, you can’t use the same methodology,” he said in a telephone interview.

Construction became paralyzed and some customers stopped making payments on their lots, said Mirian Abe, an analyst in the Sao Paulo office of Fitch Ratings. As of November, 26 percent of customer receivables that Urbplan had packaged into securities were more than 90 days overdue, while some 17 percent were more than 180 days late, Fitch said.

As financial and operational problems escalated, prospective homeowners sued Urbplan. In the state of Sao Paulo alone, Urbplan and its predecessor company have been hit with 154 lawsuits, most of which were filed in or after 2011, said Ivan Lobato Prado Teixeira, the head of litigation at Woiler & Contin, a Brazilian law firm that specializes in real estate and private equity. Of that, 84 appear to be consumer-related cases seeking the termination of purchase and sale agreements and “recovery of moral and material damages.”

Jeopardized Investments

Letting the company fail could have jeopardized Carlyle’s other investments in Brazil, which range from a lingerie maker to CVC Brasil Operadora e Agencia de Viagens SA, a travel agency that sold shares to the public in December. In 2011, the firm raised $1 billion for a pair of buyout funds that planned to focus on Brazil.

The personal assets of Urbplan’s past and present directors could also be at risk, according to three local private-equity experts.

When presented with consumer complaints, a Brazilian court can disregard a company’s legal status in the event there has been a violation of law, an abuse of power, a wrongful act by the company, or even a violation of its articles of association, according to a March legal memo prepared by Woiler & Contin.

Corporate Veil

The “corporate veil” can also be pierced when the company files for bankruptcy or becomes inoperative as a result of corporate mismanagement, according to the memo. A judge could freeze the assets of private-equity fund companies in Brazil until customer disputes are resolved, Woiler & Contin said.

Beginning in April of last year, Carlyle negotiated the removal of the Scopels, and the brothers are now directors at Scopel Empreendimentos e Obras SA, another developer of land allotments. The firm also looked to exit Urbplan, either through a sale, a joint venture or an infusion of third-party capital, according to the January letter to the SEC.

By mid-November, the buyout firm concluded none of that was possible, even though Carlyle and some of its senior professionals had lent money to one of its original Scopel co-investment funds, which in turn invested in the developer. While Carlyle and its partners had invested $88 million as of mid-February, the company estimates Urbplan will need a total of $200 million to continue, according to regulatory filings.

Turnaround Expert

According to Carlyle’s annual report, a potential buyer might also want the firm to guarantee Urbplan’s existing obligations. At the end of last year, these included debt with a face value of $305 million that bore interest at floating rates of 13.7 percent to 19.3 percent and commitments to develop land at an estimated cost of $125 million.

Carlyle has installed Andre Machado Mastrobuono as Urbplan’s new CEO, a turnaround expert with an MBA from the University of Chicago who has previously taken the helm at companies including Parmalat Brasil SA and San Antonio Internacional. Urbplan is working to get construction restarted at delayed projects and houses delivered on time.

After failing to capitalize on the Brazilian government’s effort to make housing widely available to low income homebuyers, the market has now begun to cool. Homebuilders, suffering from rising costs, delays in deliveries of new homes, and a sluggish economy, are reducing the number of new developments they take on, a sign that the market is going to slow down, Abe said.

Jive Investments Holding Ltd., the biggest buyer of distressed assets in Brazil, is starting the first fund that will invest solely in troubled real estate within the country. Jive decided to start the fund after receiving 35 properties that had been used as collateral on non-performing loans.

“If Carlyle intends to sell the company, I don’t think it is going to happen in the short term,” Fitch’s Abe said. “They have to fix everything up there and show some results.”

-By Miles Weiss and Francisco Marcelino

Intu to Acquire U.K. Malls From Westfield for $1.4 Billion

Source: Bloomberg / News

Intu Properties Plc (INTU), the U.K.’s largest shopping-mall owner, agreed to buy three retail centers from Westfield Group (WDC) for 867.8 million pounds ($1.4 billion) including working capital.

Intu will purchase a mall in the English city of Derby and the Sprucefield retail park in Northern Ireland, as well as a 50 percent stake in the Westfield Merry Hill center near Birmingham, the London-based company said in a statement today. To finance the acquisitions, Intu will raise about 500 million pounds in a share sale and will also raise new debt facilities of 423.8 million pounds.

The U.K.’s largest real estate companies are using their access to capital to invest in properties and developments as values rise. U.K. commercial real estate values rose for the 10th straight month in February, according to data compiled by Investment Property Databank Ltd.

The deal “is a rare and attractive opportunity to acquire a further two prime shopping centers in line with our strategy to focus on the U.K.’s largest and most successful destinations,” Intu Chief Executive Officer David Fischel said in the statement.

Intu dropped as much as 4.6 percent in London trading. The shares were down 4.3 percent to 309.2 pence at 9:20 a.m., the second-biggest decliner in the Bloomberg European 500 Index, which fell 1.5 percent.

Westfield, which owned the malls with partners, will receive 597 million pounds from the sale, in line with book value, it said in a separate statement. The Sydney-based company owns the White City mall in London and half of the city’s Stratford shopping center. Westfield plans to develop a third large-scale mall in Croydon, south of the U.K. capital, in a venture with Hammerson Plc.

Westfield in December proposed creating a separate company to manage its Australian and New Zealand properties, enabling the rest of the business to focus on expanding overseas, particularly in the U.S. and U.K.

-By Neil Callanan

China Developers Get Share-Sale Approval in Rules Shift

Source: Bloomberg / Luxury

Two Chinese developers received regulatory approval for new-stock sales, the first the government has allowed by real estate companies in about four years, after home sales fell and a developer collapsed.

The China Securities Regulatory Commission said yesterday Tianjin Tianbao Infrastructure Co. (000965) and Join.In Holding Co. (600745) are allowed to sell yuan-denominated A shares in private placements, according to separate statements to Shanghai and Shenzhen stock exchanges. The 142 mainland-listed developers may see an average 3 percent increase in profits this year if the resumption of stock offerings cuts borrowing costs by 1 percentage point, according to estimates by Ping An Securities Co. today.

The approvals came after regulators last year started to accept new share sales applications by developers, prompting optimism that the government will ease fundraising limits as slowing economic growth spurs adjustments to policies aimed at curbing property prices. China’s home sales fell in the first two months of the year as local government property measures weakened buyer sentiment, and the collapse of closely held Zhejiang Xingrun Real Estate Co. under its debt load has prompted declines in property companies’ shares and bonds.

The regulator’s unconditional approvals yesterday “suggest that refinancing formally, unconditionally and fully reopens,” Ping An Securities analysts led by Shenzhen-based Zhou Yating wrote in a report today. The move “is a direct boost to listed companies’ profitability and investment capabilities.”

42 Companies

China hasn’t allowed developers to raise money by selling shares since 2010, when it stepped up efforts to cool the real estate market amid rising home prices, according to Zheshang Securities Co. and Haitong Securities Co. A total of 42 real estate companies have in recent months announced plans for additional share sales to raise a combined 178.5 billion yuan ($28.7 billion), according to Ping An Securities.

A gauge tracking Shanghai-listed property companies rose as much as 1.1 percent. Beijing Capital Development Co. (600376) jumped as much as 7.6 percent, and traded 5.2 percent up at 4.84 yuan in Shanghai trading as of 11:46 a.m. local time. Tianjin Tianbao rose 2.8 percent while Join.In was down 0.4 percent.

China’s new-home price increases slowed in February, led by the four cities the government defines as first tier, amid tighter credit to rein in excessive borrowing and individual city measures to curb property prices, according to data released by the National Bureau of Statistics on March 18.

Private Placements

Tianjin Tianbao said in a September statement that it plans to raise as much as 1.55 billion yuan in a private placement to build a commercial project and two housing projects in Tianjin, the northern city where it’s based.

Join.In said in an August statement that it plans to raise as much as 1.72 billion yuan selling shares to a group of investors to develop serviced apartments, office buildings, commercial properties and supermarkets in Xuzhou in eastern China’s Jiangsu province.

Zhejiang Xingrun, a Chinese real estate developer with 3.5 billion yuan of debt based in the eastern city of Ningbo, has collapsed and its largest shareholder was detained, government officials familiar with the matter said on March 17.

That’s only “one example of many distressed smaller developers” in China, who turned to more expensive financing methods such as trust products after banks raised risk management standards in the past three to four years, Standard & Poor’s Ratings Services wrote in a report March 18.

Bond Default

The failure emerged less than two weeks after the first onshore bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology Co.’s missed coupon payment on March 7 may have been China’s “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, according to Bank of America Corp.

Short interest in Evergrande Real Estate Group Ltd. (3333), the nation’s fourth-largest developer by market value, was at 8.4 percent of shares outstanding on March 17, up from 3.2 percent a year ago, according to data compiled by Bloomberg and Markit Group Ltd. It touched a record 8.6 percent on March 4. Wagers against Guangzhou R&F Properties Co. (2777) and Agile Property Holdings Ltd. (3383) have both reached the highest since December 2012.

Evergrande’s dollar bonds fell on March 18, sending the yield to 10.86 percent, the highest level on record, DBS Bank Ltd. prices show.

The share-sale approvals came after Greenland Holding Group Co., the Shanghai city government-owned builder of one of China’s tallest towers, said on March 17 that it plans to list on the city’s stock exchange through an asset swap with an affiliate, injecting assets worth 65.5 billion yuan into the unit.

-By Bloomberg News