Real News‎ > ‎2014‎ > ‎March 2014‎ > ‎

27th March 2014

Singapore Real Estate

Analysts still see healthy demand for new BTO flats

Four BTO projects will add 3,497 flats in Sembawang, Sengkang, Yishun

Source: Business Times / Singapore

DESPITE signs of waning prices and slowing sales in the resale market, analysts are still expecting healthy interest for new Build-To-Order (BTO) projects rolled out by the Housing and Development Board (HDB) yesterday.

The HDB launched four new BTO projects that will add another 3,497 flats in the non-mature towns of Sembawang, Sengkang and Yishun - its second BTO launch this year.

This brings the total number of flats offered for sale this year to 6,636.

The 3,497 new flats comprise two-room and five-room flats, as well as three-generation (3Gen) flats, to meet the housing needs of first-timers, second-timers, multi-generation families and singles, HDB said yesterday.

-By Lynette Khoo

3,497 BTO flats in Sembawang, Sengkang, Yishun launched

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Development Board (HDB) launched four Build-To-Order (BTO) projects on Wednesday, offering 3,497 new flats in the non-mature towns of Sembawang, Sengkang and Yishun.

The new flats comprise 2-room to 5-room flats, and Three-Generation (3Gen) flats.

Prices start from S$10,000 with maximum housing grants.

Siti Shahilah, aged 26, and her husband have been looking for a place of their own for about a year.

While they had hoped initially to buy a Build-To-Order flat in the mature town of Bedok, they have decided on a four-room unit in non-mature Sengkang instead.

Siti said: "It's a bit far but I think we can still afford it. For Bedok, the price right now is 300 (thousand) plus (Singapore dollars) for a three-room flat, but for Sengkang we can get a four-room flat. So why not take a bigger place?"

The new units are spread across three non-mature towns of Sengkang, Sembawang and Yishun.

Stefanie Ang, a potential homebuyer, said: "It's not really a main concern because I think at the end of the day, Yishun and Sembawang will be the areas that will become more developed."

Muhammad Hairuddin, a BTO applicant said: "It's not the most ideal but we have to make do, so we're hoping that in four to five years’ time when we move into the place, there'll be more amenities and transportation will be more developed over there."

Chris Koh, director at Chris International, said: "We call it a non-mature estate because we are still building in that estate. But perhaps I don't have to look at whether it's called non-mature or mature, but rather look at the age of the estate and the infrastructure that has come up.

“Although they are non-mature estates, some of the estates are older. We're talking about estates like Yishun -- some of the flats there are easily 20 years old. When the estate is older, you tend to have more infrastructure already in place, such as the public transportation network, the schools, the shopping." 

Property analysts foresee the overall demand for BTO flats to be healthy, but also expect two-room flats for singles and 3Gen flats to continue to be popular.

Christine Li, head of research and consultancy at OrangeTee, said: "The demand from singles is still very strong. I expect it (the take-up rate) to still be in the double digits. Previously, some people still haven't got their two-room flat, so they'll try again and again until they get it.

“3Gen flats will attract a fair bit of healthy interest. Looking at the number of units on offer, it's only 70 units. It's a small number and given it's next to a reservoir, waterfront living appeals to a lot of people."

Some analysts noted in the previous BTO launch in January, there were about 41 singles applying for each two-room flat in Punggol.

"With the small increase of the number of 2-room units offered from 604 to 740 flats, the supply of 2-room flats in this BTO launch is still unlikely to meet all the demand from singles for this category," said Nicholas Mak, executive director of research and consultancy at SLP International.

As for whether recent changes to the HDB resale process will affect demand for BTO flats, some property analysts say it is unlikely.

In a move to shift the attention of negotiations away from Cash-Over-Valuation, the government earlier announced that buyers and sellers have to agree on a price first, before being allowed to get a valuation from HDB for a resale flat.

"People who buy resale flats and BTO flats do differ,” noted Chris Koh.

“Many who can't wait for BTO flats prefer to be in the resale market. Whereas those who prefer to buy a flat that is brand new, one that's cheaper, especially if they can wait… for the construction process, don’t mind the BTO flats." 

In a statement on Wednesday, HDB said the new flats are meant to meet the diverse housing needs of first-time buyers, second-timers, multi-generation families, and singles.

First-timers will continue to have priority flat allocation, with at least 85 per cent of 4-room and 5-room flats and 70 per cent of 2-room and 3-room flats in the BTO supply set aside for them.

Eligible first-timer singles have the option of applying for a 2-room flat in EastCrown @ Canberra, EastLace @ Canberra, and Fern Grove @ Yishun.

Married or courting couples who wish to apply for a 3Gen flat together with their parent or parents can apply for one at Anchorvale Parkview, which will offer 70 3Gen flats in the exercise.

Other multi-generation families who wish to live in the same BTO project can apply under the Multi-Generation Priority Scheme (MGPS).

There will be flats set aside in EastCrown @ Canberra, EastLace @ Canberra and Fern Grove @ Yishun for that purpose.

HDB will set aside up to 15 per cent of the Studio Apartments, 2-room and 3-room flats in a BTO project, subject to a minimum of 20 units each, for parents applying under MGPS.

The same number of 2-room and bigger flats will be set aside in the same BTO project for their married children.

This is the second BTO launch for 2014, bringing the total number of flats offered for sale this year to 6,636.

HDB said as with all new public housing developments launched since January this year, it will introduce a standard suite of eco-features in all four projects.

The features are meant to manage water, energy and waste more efficiently.

Regular updates on the number of applications submitted for the various flat types or towns will be published at HDB InfoWEB.

HDB advised applicants to check for updates before submitting their applications.

In May 2014, HDB will offer about 3,060 BTO flats in Bukit Batok and Woodlands.

An additional 3,000 flats will be offered in a concurrent Sales of Balance Flats (SBF) exercise.

Information on the flats for offer under the May 2014 BTO exercise can be found at the HDB InfoWEB. 

More information on the flats for offer under the March 2014 BTO exercise in Sembawang, Sengkang and Yishun can be found here.

- CNA/nd/ec

HDB launches 3,497 new flats in four BTO projects

Two- to five-room flats will be on offer in non-mature towns of Sembawang, Sengkang, Yishun

Source: Today Online / Singapore

SINGAPORE — Four Build-To-Order (BTO) projects offering 3,497 new flats were launched by the Housing and Development Board yesterday, the second sales exercise since the Government announced a taper in the public housing supply.

The flats are in the non-mature towns of Sembawang, Sengkang and Yishun and comprise two- to five-room flats as well as large three-generation units. Prices range from S$70,000 for a two-room flat in Sembawang to S$351,000 or more for a three-generation flat in Sengkang, before grants.

However, eligible first-time households can enjoy up to S$60,000 in housing grants, comprising the Additional CPF Housing Grant of S$40,000 and Special CPF Housing Grant of S$20,000.

“With these grants, two-room, three-room, four-room and five-room flats are priced from S$10,000, S$91,000, S$201,000 and S$303,000 respectively,” the HDB said.

There are 70 three-generation flats on offer in the Anchorvale Parkview project in Sengkang. These are four-bedroom flats for couples applying with their parents.

Other multi-generation families who wish to live in the same BTO project can apply under the Multi-Generation Priority Scheme. There will be flats set aside in Sembawang and Yishun for that purpose.

The HDB will also introduce eco-features in all four projects, which will help manage water, energy and waste more efficiently. The authority had announced last month that all new public housing developments will have such eco-friendly features.

Demand from singles remained high in the latest exercise, with applications from this group exceeding the supply of two-room flats set aside for them. More than five singles are vying for one two-room unit in Yishun, while close to two singles had applied for a two-room unit in Sembawang by 5pm yesterday.

“The demand from singles has not been satisfied and we expect to see an oversubscription for two-room flats in this BTO exercise,” said ERA Key Executive Officer Eugene Lim.

He added that while the ramp-up in BTO supply has cleared most of the demand from first-time applicants, he expects second-timers to apply in the BTO exercise.

“As buyers try to find their footing in the resale market, they may turn their attention to BTO for a higher chance to pick their flats from a variety of choices,” Mr Lim said.

Mr Nicholas Mak, SLP International’s Executive Director for Research and Consultancy, felt that affordable public housing appears to be the main objective in this exercise.

He pointed out that the range of BTO flat prices is about 16 per cent to 39 per cent cheaper than the prices of comparable resale flats in their areas. “All the flats in this BTO exercise are standard flats in non-mature estates. There are no premium flats that cost more,” Mr Mak said.

Applications can be submitted up till Tuesday. The HDB said it will offer about 3,060 BTO flats in Bukit Batok and Woodlands in May. An additional 3,000 remaining units will be offered in a concurrent sales exercise.

Kampong Glam shophouse block up for sale

Also for sale are 3 adjoining plots of vacant GCB land along Holland Rise

Source: Business Times / Property

A DETACHED shophouse block at Kampong Glam and three adjoining plots of prime good class bungalow land were put up for sale yesterday by expression of interest.

The freehold shophouse block - comprising three shophouse units of part one-storey and two-storey shophouses at 32, 34 and 34A Sultan Gate - is currently leased to a tenant in the food and beverage industry. The tenant's lease ends in September 2015.

The indicative price for the property, which is zoned for commercial use, is in the region of $28 million, said Cushman & Wakefield and Historical Land, the joint marketing agents for the property.

Located along Sultan Gate off Beach Road, the property sits on a land area of about 7,401 sq ft and is flanked by a public car park and a side lane. It is designated for conservation under the Kampong Glam conservation area.

-By Mindy Tan

Tampines condominium to launch on Saturday

MCC Land's The Santorini is expected to cost $1,100 to $1,200 psf

Source: Business Times / Property

MCC Land, a unit of Hong Kong and Shanghai-listed Metallurgy Corporation of China, will be launching its Mediterranean-inspired condominium project, The Santorini, at Tampines Avenue 10 this Saturday.

The 597-unit condominium in Tampines New Town is surrounded by two large water bodies, Bedok Reservoir and Tampines Quarry. "The Santorini will be ringed by a continuous and scenic waterline, evoking a coastal Mediterranean feel," the developer said.

Market sources put the average price at $1,100 to $1,200 per square foot (psf).

This was in line with consultants' price forecasts of "above $1,100 psf", given that the break-even price for the project is $940 to $1,050 psf.

-By Lee Meixian

Property buyers sued over 'lost opportunity' costs

Source: Straits Times

A condominium developer is suing an "obstinate" man and his wife for more than $760,000, claiming they built two unauthorised timber lofts in their penthouse apartment. Developer Macly Assets alleges that Mr and Mrs Andrew Loke are to blame for the delay in it obtaining the certificate of statutory completion from the Building and Construction Authority (BCA).

Mandarin Oriental to expand Munich hotel

Construction of a mixed-use complex set to start in 2018

Source: Business Times / Companies

MANDARIN Oriental International's wholly owned hotel in Munich will be undergoing expansion and refurbishment for an estimated cost of 124 million euros (S$217 million).

The expansion will come from the construction of a mixed-use complex on an adjacent site. The existing hotel will get an enhancement through the refurbishment of its 73 rooms.

The group has entered into an agreement with the Wohr + Bauer group (W + B), the project developer.

The new complex, with an area of 23,000 square metres, is slated to open in 2021. It will comprise two buildings housing the new hotel rooms and facilities, 19 luxury-branded Residences at Mandarin Oriental units, retail units, commercial offices and an underground car park.

-By Viven Shiao

KSH-Lian Beng unit in Cambodia property deal

ISEA in joint venture to buy US$64m land and redevelop hotel on it

Source: Business Times / Companies

IMPERIAL South East Asia Investment (ISEA), 34.7 per cent owned by KSH Holdings and 32.65 per cent owned by Lian Beng Group, is forming a joint venture (JV) to acquire a piece of land in Cambodia for US$64 million, with plans to redevelop the existing hotel on it.

ISEA has signed a JV agreement with Lok Oknha Sear Rithy, a Cambodian national unrelated to both the listed property development groups, to set up a real estate development firm in Cambodia called New Global Imperial Investment.

The principal activity of New Global will be real estate development and investment holding in Cambodia.

New Global is expected, on incorporation, to have a registered capital of 20,000,000 KHR (approximately US$5,000), 49 per cent to be held by ISEA and 51 per cent by Sear Rithy.

-By Lee Meixian

Fire breaks out at Little India DTL construction site

Source: Channel News Asia / Singapore

SINGAPORE: A fire broke out at the Downtown Line Little India work site at Race Course Road on Wednesday night. No one was injured.

Photos from Channel NewsAsia viewers showed black smoke billowing out of the construction site.

The fire broke out at around 9.30pm and involved three large metal containers measuring about six metres long.

The Land Transport Authority (LTA) said the fire was at a localised area within the work site and that it was put out in half an hour.

The LTA said the incident will not impact the construction of Stage 2 of the Downtown Line. 

- CNA/xq

Real Estate Companies' Brief

Ascendas Hospitality Trust buys hotel in Osaka for 8.9b yen

Source: Business Times / Companies

ASCENDAS Hospitality Trust (A-HTrust) - a stapled group comprising Ascendas Hospitality Real Estate Investment Trust (A-HReit) and Ascendas Hospitality Business Trust (A-HBT) - has added a second Japanese asset into its portfolio.

Yesterday, A-HTrust's managers - Ascendas Hospitality Fund Management and Ascendas Hospitality Trust Management - said that A-HBT had agreed to buy Osaka Namba Washington Hotel Plaza in Japan's Osaka city for 8.9 billion yen (S$110.8 million).

The purchase price, which will be paid to Ainodake Godo Kaisha, is 3.3 per cent below the independent property valuation of 9.2 billion yen by Savills Japan.

The hotel, which sits on freehold land and boasts 698 guest rooms and two restaurants, will continue to be leased to Washington Hotel KK until Dec 31, 2015, under a fixed-term building lease agreement for a fixed rent of 652.6 million yen per year.

-By Angela Tan

OUE Commercial Reit

Source: Business Times 

Mar 26 close: $0.79

OCBC Investment Research, Mar 26

WE initiate coverage with a "buy" rating and fair value estimate of $0.88.

EPC projects in UK, Qatar challenging: Keppel CEO

Source: Business Times / Companies

KEPPEL Corporation's new chief executive, Loh Chin Hua, says the group is "working hard under challenging conditions" to deliver its engineering, procurement and construction (EPC) infrastructure projects with minimal losses.

He said in Keppel's annual report released yesterday: "Conditions on the ground have been very difficult. We continued to face challenges on the EPC contracts in Qatar and the UK, where cost overruns were due mainly to the projects taking longer than expected to complete."

Adding that he was "deeply disappointed" at having to make additional provisions, Mr Loh, who has been at Keppel's helm only since the start of this year, said: "The performance of the Doha North and Greater Manchester EPC projects was not in keeping with the group's enviable record for on-time, on-bud-get project execution. Lessons have been learnt. We will continue to build, own and operate infrastructure projects in areas where we have stronger technical knowledge and deeper understanding of the markets and key value chains."

Keppel's infrastructure division continued to disappoint with Q4 2013 net losses ballooning to $111 million, from a loss of $72 million in Q4 2012, as the group's EPC contracts in Doha North and Runcorn continued to face challenges, and additional provisions were made at the year end. Infrastructure losses in FY13 stood at $14 million.

-By Kelly Tay

Global Economy & Global Real Estate

NY offices deck up to lure creative clients

Offices offer lifestyle as city's economy grows dependent on creative sectors

Source: Business Times / Property

[NEW YORK] A field of wheat doesn't usually stand inside the lobby of a Manhattan office building.

Yet a 10-foot simulacrum, consisting of a few hundred stalks of wheat puncturing an enormous block of styrofoam and covered with pebbles, is the first thing visitors see when entering the marketing centre at 285 Madison Ave.

"Wheat denotes fertility, it is the building block for bread, and it also brings scale and interest to the space," said its creator, Sheldon Werdiger, an architect and the director of marketing and design development for the building's landlord, RFR Holding.

The wheat field is part of an effort by RFR, which also owns the Seagram Building and the Lever House, to woo creative companies to its office tower at East 40th Street.

-From New York, US

China expands property survey as oversupply concern grows

Govts in over 300 cities asked to look at home and land sales and price data

Source: Business Times / Property

[BEIJING] China expanded an annual property survey that helps shape policies to more than 300 cities amid growing concern of oversupply in smaller cities, according to people with knowledge of the matter.

China's National Development and Reform Commission (NDRC), the country's economic planner, issued notices ordering the survey be expanded to cities at the prefecture level and above, more than quadruple the 70 cities where it was carried out in previous years, said two government officials who asked not to be identified.

Governments were ordered to look at home and land sales and price data, they said.

Premier Li Keqiang this month said the government would regulate the housing market "differently in different cities" to take into account local conditions. The annual property survey is usually conducted at the beginning of the year as a reference for government policies and isn't made public.

-From Beijing, China

Marriott adds 3 and 5-star Nigeria hotels to its stable

Source: Business Times / Property

[LAGOS] Marriott International, the owner of brands including the Ritz-Carlton and Renaissance, is strengthening its position in West Africa as economic growth in Nigeria and Ghana boost travel and tourism.

Protea Hospitality Holdings, which Bethesda, Maryland-based Marriott agreed to buy for US$186 million in January, is building five-star and three-star hotels in Lagos, Nigeria's commercial capital, adding 400 rooms to the 700 it has in the country, said Danny Bryer, director of sales, marketing and revenue for Protea.

"With the surging Nigerian economy resulting in companies around the world seeking to do business, demand for quality hotel rooms is expected to increase substantially over the next few years," said Mr Bryer.

Marriott, the largest publicly-traded hotel chain after Hilton Worldwide Holdings, will almost double its rooms in Africa to about 23,000 with the acquisition of Protea, helping it expand in a continent where a growing middle class and rising travel are fuelling the fastest pace of hotel development in the world. The number of hotels in Nigeria rose 88 per cent to 6,200 in the two years through December, according to the country's tourism development agency.

-From Lagos, Africa

Dubai developer Nakheel aims for 15% profit growth

Source: Business Times / Property

[DUBAI] Dubai property developer Nakheel is targeting a 15 per cent increase in profit for 2014 as it launches new projects and expands its leasing income, the firm's chairman said yesterday.

Government-run Nakheel agreed to a US$16 billion debt restructuring in 2011 in the wake of a property crash that sent Dubai's house prices tumbling by more than half from a 2008 peak, oversupply and the global financial crisis that ended years of fervent speculation.

Yet the emirate's real estate sector is resurgent, with rental and sale prices rebounding, and this helped Nakheel make a profit of 2.57 billion UAE dirhams (S$886.8 million) for 2013, up 27 per cent from a year earlier. "Our profit will be better (higher) than last year - we are targeting 15 per cent growth (in profit)," Nakheel chairman Ali Rashid Lootah told reporters in Dubai.

Mr Lootah was speaking at a press conference to announce the launch of plot sales on Nakheel's Deira Islands project, which consists of four islands, on Sunday.

-From Dubai

In North Korea: Illegal property market sizzles

Source: Straits Times

North Dakota Ranks as the Most Stable U.S. Housing Market

Source: Bloomberg / Luxury

North Dakota, Washington, D.C. and Wyoming rank as the most stable U.S. housing markets, according to a new Freddie Mac gauge that weighs criteria including mortgage applications, income ratios and employment.

Freddie Mac’s Multi-Indicator Market Index released today measures the stability of states and the U.S. capital, as well as the top 50 metropolitan areas. Nationally, the measure shows an improving housing market that’s still outside its healthy range, the McLean, Virginia-based company said in a statement.

“We’re making progress, we’re recovering but we’re not all the way there yet,” Len Kiefer, deputy chief economist at Freddie Mac, said in a phone interview. “Some places are much closer and others have farther to go.”

The U.S. housing market has been healing for two years as the job market improves and competition for tight inventories fuels home-price gains. The S&P/Case-Shiller index of property values in 20 cities increased 13.2 percent in the year through January, according to a report yesterday. Rising employment and income growth is bolstering many areas, Freddie Mac said.

The Freddie Mac measure assesses the stability of each market relative to its historical range, based on home purchase applications, payment-to-income ratios, local employment and the proportion of on-time mortgage payments.

North Dakota is benefiting from an oil boom that has driven up employment, personal income and residential real estate values. Home prices climbed 39 percent from the end of 2006 through last year, according to the Federal Housing Finance Agency, avoiding the housing crash in the rest of the country.

The most stable metro areas as of January were San Antonio, Houston, and Austin in Texas, followed by New Orleans, according to Freddie Mac. The least stable were Las Vegas; Atlanta; Orlando, Florida; and Chicago.

-By Prashant Gopal

U.S. Single-Family Home Investors Form Trade Group

Source: Bloomberg / Luxury

The largest landlords of single-family homes, including Blackstone Group LP (BX), have formed an industry trade group at a time their impact on housing and finance faces scrutiny.

The National Rental Home Council will advocate for professional managers of single-family leased residences, after private-equity firms, hedge funds and real estate investment trusts spent more than $20 billion to buy 200,000 houses, according to a statement by the Washington-based group.

While small investors still own the majority of the 14 million U.S. rental homes, corporate landlords saw an opportunity to start a new real estate asset class after housing prices fell as much as 35 percent from their 2006 peak and demand for rentals rose after almost 5 million owners lost properties to foreclosure.

“Our members are professionalizing the market,” Gary DeLapp, president of Invitation Homes LP, a Dallas-based unit of Blackstone that owns more than 43,000 rental houses, said in the statement. “The NRHC is an important step for the industry as it begins to engage with interested stakeholders and members of the public to educate them on this growing industry.”

One of the council’s founding members is Colony American Homes Inc., a landlord with 15,600 homes started by Tom Barrack, which last week began marketing $513.6 million in bonds backed by mortgages on rental houses. It was the second issue of such securities after Invitation Homes sold $479 million in debt last year. Slices of both offerings received the highest rating from Moody’s Investors Service Inc., a sign of Wall Street’s confidence in the industry.

Changing Neighborhoods

The single-family rental business’s growth and use of financial instruments has drawn criticism from U.S. Representative Mark Takano, a Democrat from California’s Riverside County, who said large investors have bought thousands of foreclosed properties in his district, outbidding local buyers and helping turn owner-occupied neighborhoods into rental communities.

Takano this month called for the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Treasury Department to report on the possible risks of “the recent increase of investor-owned rental properties and the development of single-family rental-backed securities.”

Limited Markets

Blackstone has sought to counter impressions that investors are dominating the housing market.

“The reality is that institutional buyers are in a relatively limited number of markets,” Jonathan Gray, Blackstone’s global head of real estate, said in an interview earlier this month. “Their buying is tapering and yet home prices continue to go up at a pretty strong clip nationally -- even in markets where institutional buyers haven’t purchased a single home.”

American Homes 4 Rent, the largest publicly traded single-family landlord with about 25,000 houses, and Starwood Waypoint Residential Trust, a REIT headed by Barry Sternlicht, are the other two founding members of the association, which has retained the Glover Park Group, a Washington-based communications and government-relations firm.

-By John Gittelsohn

Lamda Development Raises Offer for Europe’s Largest Urban Plot

Source: Bloomberg / News

A venture led by Lamda Development increased its initial offer by 25 percent for 100 percent of Hellenikon SA, topping an independent valuation, the Greek state-asset sales fund said.

Lamda, backed by China’s Fosun Group and Abu Dhabi-based property firm Al Maabar, submitted an offer of 915 million euros ($1.26 billion) for Hellenikon, with plans to develop the former Athens Airport site, the Hellenic Republic Asset Development Fund said in an e-mailed statement yesterday. The 6.2 million square-meter site is more than three times the size of Monaco.

“A huge piece of urban land, which was abandoned for more than 10 years, will now become a source for growth for Athens,” Ioannis Emiris, the fund’s chief executive officer, said in a phone interview after the official announcement. “The benefit for Greece is not just the money from the sale of the old airport site, but the huge park of at least 200 hectares and the thousands of jobs that will be created,” he said.

In 2013, Greece saw its sixth year of a recession that has destroyed about a quarter of its economic output and sent the unemployment rate soaring to more than 27 percent. Revenue from a state asset sales program is also earmarked to cover part of the country’s funding needs in the coming years under the 240 billion-euro bailout from the euro area and the International Monetary Fund.

Amount Deferred

Lamda will pay 33 percent of the offered amount upon completion of the agreement, and the rest will be deferred over 10 years, according to the sales fund.

“The total investment, including construction, comes to 8 billion euros, which rises to 11 billion euros if we also add retail outlets and hotels that will be built on the site,” Odysseus Athanassiou, chief executive of Lamda Development (LAMDA) said by phone. “About 2.5 billion euros will be invested in the first five years of the project, and we are going to create 50,000 jobs, while the deadline for the state to deliver all the relevant permits is two years,” he said.

“Only 250 hectares out of the 600 hectares of the site will be developed for commercial use, the rest will be covered by a metropolitan park, schools, roads and utilities, and, in this sense, we are actually paying 850 euros per square meter, which is twice the price of land in the wider area,” Athanassiou said.

Green Spaces

Part of the proceeds from Hellenikon should be directed toward creating green spaces in other parts of the Athens, the city’s mayor, George Kaminis, said in an interview yesterday.

“We have perhaps the biggest free space in the whole of Europe right now to be taken care of and to create jobs,” he said. “What’s going to be built there must correspond to a balance of green spaces in Athens.”

The HRADF will deliver a fairness opinion on the improved financial bid and will decide within the coming days if a preferred bidder can be declared, according to yesterday’s statement.

-By Paul Tugwell and Nikos Chrysoloras

Billionaires Buying Islands Off Australia Find Perilous Paradise

Source: Bloomberg / Luxury

Billionaire William Han perches at the stern of Silver Fox II, his 20-meter powerboat, as it weaves through the kaleidoscopic coral wonderland that is Australia’s Great Barrier Reef.

In these pristine tropical waters in 1954, then-27-year-old Queen Elizabeth II and her consort, Prince Philip, escaped official duties to swim and spearfish during a six-month post-coronation world tour. Sixty years on, the secluded headland off which Their Highnesses frolicked is part of Han’s kingdom, Bloomberg Pursuits will report in its Spring 2014 issue. “Welcome to my island!” he says, leaping onto a wooden jetty leading to a sandy, palm-fringed shore.

After paying A$12 million ($10.9 million) for lovely Lindeman in 2012, the Chinese-Australian entrepreneur plans to spend more than A$200 million building a luxury resort on the 8-square-kilometer (3-square-mile) island, while keeping a prime secluded site for his own vacation retreat. “When you first see the Great Barrier Reef, it blows your breath,” he says in cheerfully fractured English. “Buying Lindeman was a bargain. It took me 10 minutes to make up my mind.”

How much of a bargain is a source of debate within the cloistered world of private-island sales. Although the Great Barrier Reef is renowned as one of the planet’s most beautiful and precious places, it has a perilous history. Over the past 80 years, investors have poured billions into resorts here, only to discover that the reef can be as treacherous for them as it was in 1770 for British explorer James Cook, whose HMS Endeavour ran aground near a spot he aptly named Cape Tribulation.

Iconic Islands

In the past three years alone, four of the most iconic Great Barrier Reef islands, including Lindeman, have been sold for a total of A$25 million -- a fraction of their former valuations. Today, the most prominent property agents specializing in private islands are divided over whether the Great Barrier Reef market has finally bottomed out.

“These properties sold for pennies on the dollar, and we will see an upswing,” says Chris Krolow, chief executive officer of Toronto-based Private Islands Inc. That’s not a view shared by Farhad Vladi, the Hamburg-based founder of Vladi Private Islands GmbH, who says Great Barrier Reef sales reflect a global trend downward, as evidenced by Microsoft Corp. co-founder Paul Allen’s December sale of his Washington state island for $8 million -- a third of its original asking price. “In the past, the market was artificially inflated by greedy real estate agents and overly romantic buyers,” Vladi says. “Only now, when we’re seeing forced sales, is the true value revealed. I think prices will continue to go down.”

Natural Wonder

If ever a smart entrepreneur could make money while pursuing the idyllic island dream, it should be here, on Australia’s foremost natural wonder. Stretching 2,300 kilometers (1,430 miles) down the country’s northeast coast, this labyrinth of 3,500 shoals, atolls, cays and coral-fringed continental islands is often described as the largest living structure on Earth.

Apart from the dazzling coral formations built from the skeletons of tiny sea creatures called coral polyps, the reef supports some 5,000 other species, from majestic, 40-ton humpback whales to the colorful, comical clown fish that inspired the 2003 Walt Disney blockbuster Finding Nemo.

Each year, 2 million visitors, from billionaires to backpackers, flock here. (In 2011, Oprah Winfrey even showed up with 100 members of her studio audience in tow.) They dive its depths and snorkel its shallows. They ogle it from the air in light planes and skim its surface aboard sailboats and megayachts. The game fishers among them engage in titanic, Hemingway-esque struggles with black marlin that can weigh 450 kilograms (990 pounds). And some decide that the reef is just so special they must own a piece of it.

Hamilton Island

For one devotee, a A$500 million investment in a 7.4-square-kilometer dot called Hamilton Island, in the Whitsunday archipelago near Lindeman, has fulfilled his wildest island fantasies. Not only has billionaire Australian winemaker Robert Oatley, 85, built what is quite possibly Australia’s toniest resort -- an ultradiscreet, A$1,500-a-night, 60-pavilion retreat called Qualia -- he’s also developed the lavishly appointed Hamilton Island Yacht Club, which in October successfully bid to become the official challenger to Larry Ellison’s Oracle Team USA at the next America’s Cup.

For numerous other investors, however, the music of waves lapping against coral turned out to be a siren song -- their dreams run aground by a disastrous combination of cyclones, unsympathetic bankers, astronomical overheads, overcapitalization, a soaring Australian dollar and competition from cheaper Asia-Pacific resort locales such as Bali, Fiji and Phuket.

Mother Nature

Mother Nature has been particularly unforgiving. Since 1858, the region has been struck by more than 200 typhoons, according to the Australian Bureau of Meteorology -- most recently in 2011, when Cyclone Yasi, one of the worst storms ever to hit Australia, devastated resorts and private homes in its path.

Great Barrier Reef investors must also battle what Australians sometimes call the tyranny of distance. Australia is the size of the continental U.S., and the reef itself, if transplanted to North America’s Pacific coast, would stretch from Vancouver to the Mexican border. Yet the domestic tourism market, still the main source of visitors to these parts, draws on a population of just 23 million. What’s more, Australia’s distance from major foreign markets means it received only 6.4 million international visitors during the year ended in September, compared with France’s 80 million.

Rich Foreigners

Even rich foreigners eager to buy private islands find the distance formidable, according to broker Krolow. “Eighty percent of buyers come from the U.S., Canada and Europe,” he says. “Simply getting them here to show them what’s available is a challenge. The distance is insane.”

Indeed, losses and bankruptcies have become so common that banks are increasingly reluctant to lend for island investments, says Wayne Bunz, a Brisbane, Australia–based senior director at CBRE Group Inc., the brokerage that sold Lindeman to Han. One of the tiniest of the resort islands has alone devoured at least A$150 million of investments by successive owners over the past 20 years. Its name: Daydream.

Vaughan Bullivant, Daydream’s present owner, is a native New Zealander who sold his vitamin supplements business in 1999 for A$135 million. He’s spent A$75 million creating a 300-room resort with amenities ranging from an elaborate spa to a wedding chapel. At one stage, in 2002, Bullivant was losing A$600,000 a month, says Phil Casey, the troubleshooter Bullivant brought in as CEO to stem the losses.


“Daydream became Vaughan’s nightmare,” Casey says, as we chat in Bullivant’s two-story island penthouse, with its reverie-inducing views of the Whitsunday Passage. Casey says he has since succeeded in turning around Daydream’s business. The resort, where rates average A$300 a night, delivered a net profit of A$2 million on revenue of A$28 million for the fiscal year ended on June 30, 2013, he says, and has no debt. However, Bullivant, 66, who wasn’t available for comment, wants out, Casey says, and has been trying to sell for a fraction of the A$150 million replacement value. Although Casey won’t disclose the asking price, he says Bullivant recently turned down offers of more than A$30 million.

When he does finally walk away with inevitably lighter pockets, Bullivant will be in illustrious company. Even Rupert Murdoch, Australia’s most famous entrepreneur, managed to lose money on a Great Barrier Reef investment in 1998, when a company he half owned -- the now-defunct Ansett Airlines -- sold luxuriously appointed Hayman Island for A$61 million, a fifth of the A$300 million it had splurged on the resort barely a decade earlier.


In total, A$500 million has been invested in Hayman since the 1980s, according to its current owner, Malaysian tycoon Lee Seng Huang’s Mulpha International Bhd. Hayman will be closed until June 30 while it undergoes yet another, A$50 million makeover, following last year’s management switch to Sol Kerzner’s Kerzner International Resorts Inc., the company that built Atlantis resorts in the Bahamas and Dubai. Hayman, where accommodation costs A$730 to A$12,000 a night, is now marketed under Kerzner’s One&Only brand.

While Mulpha’s Lee persists with Hayman, some owners have simply walked away, leaving behind fully equipped resorts, as eerily abandoned as the Flying Dutchman. On Lindeman, Han, 56, knows all about these somber testimonies to the perils of investing in paradise. After we disembark, he leads me straight to one. In 1990, Club Mediterranee SA (CU) paid A$15 million to buy an existing resort on Lindeman and then spent an additional A$85 million transforming it into a 218-room faux-Polynesian village. In 2012, the Paris-based operator shut it down -- selling out to Han two months later for less than an eighth of its A$100 million investment.

Abandoned Property

Today, the abandoned Club Med property molders away on Lindeman’s south shore. Guest rooms and restaurant tables gather dust. The swim-up pool bar is green with algae. Each day, the eucalyptus forest envelops more outbuildings. Soon, Han will bulldoze the lot and start again with his own, more upmarket vision. “The risk of buying islands here is that the purchase price is just the small part,” he says. “If you’re not careful, you can pour millions more into these places and then actually watch them go down in value.”

Han -- a stocky, self-made tycoon who, during China’s Cultural Revolution, labored on a farm commune for 8 yuan ($1.32) a month -- says he’s confident that won’t happen to him. He and his two brothers own Guangzhou-based White Horse Group, China’s biggest outdoor-advertising agency and an operator of golf and shopping television channels broadcast throughout the world’s most populous nation.

National Park

Armed with those marketing resources, Han believes he can lure China’s rich from their pressured, polluted cities to pristine Lindeman, where three-fourths of the land is a government-designated national park. He’s already produced a master plan for a 400-unit resort he describes as six star. “In Beijing and Shanghai, people work 15, 17 hours a day,” he says. “Now, they will be able to escape the noise and pollution and fly down here for five days or a week to recharge. There will be no loud karaoke here. Just blue sky, blue ocean and a feeling of luxury.”

Han isn’t the only investor sensing opportunity amid crisis. Just months before the tycoon scooped up Lindeman, three Australian businessmen picked up other islands on the cheap.

Fire Sales

The fire sales began relatively modestly in January 2011, when Chris Morris, founder of Melbourne-based Computershare Ltd., the world’s biggest stock registrar, paid A$6.25 million for Orpheus Island resort -- an exclusive A$1,400-a-night retreat that three years earlier had sold for A$15 million. Lushly forested and just 11 kilometers in circumference, Orpheus Island in the 1950s hosted the likes of Vivien Leigh and Mickey Rooney.

Morris, who owns a chain of pubs and breweries on the Australian mainland, has made the resort even more exclusive by reducing the number of rooms to only 17 from 24. He says he expects to break even this year -- especially given the additional bookings he hopes to generate after buying a casino-resort in nearby Townsville in January for A$70 million.

One of Orpheus’s selling points is its spectacular fringe of coral reef. Another is that it’s one of the few small, superluxury resorts that accepts kids. “Rich people have children, too,” Morris says.

Cyclone Yasi

Days after Morris struck the deal to buy Orpheus, Cyclone Yasi swept across the reef, packing winds of 285 kilometers an hour. Although Orpheus suffered relatively minor damage, the storm devastated two islands farther north, Bedarra and Dunk.

Once the property of Australian national airline Qantas, the resorts on Bedarra and Dunk were by 2011 owned by a Geneva-based investment fund, the McCall MacBain Foundation, which put them up for sale after the cyclone. Intrigued, Sam Charlton -- a former fund manager at Macquarie Group Ltd., Australia’s largest investment bank, who spent a year frequenting Bedarra’s seven spectacular beaches as a child -- paid a visit. “I don’t think I’ve ever seen such a fantastic piece of real estate presented so poorly,” Charlton, 38, says of Bedarra. “It looked like a bomb site. It turned a lot of potential purchasers off.”

As recently as 2007, the then-owners had valued the resort at A$24.8 million. Charlton paid less than A$5 million and promptly set about putting the place right. To cut costs, Charlton switched from diesel generators to solar power, replaced air conditioners with natural breezeways and started piping in water from an island spring instead of a desalination plant. He even designed his own barge to ferry in supplies.

Private Beaches

Like Morris on Orpheus, Charlton has reduced the number of villas, to just seven from 16, meaning each couple can, if they wish, have a beach to themselves.

In July, 19 months after he bought Bedarra, Charlton reopened for business. He charges A$1,000 a night for a standard villa and A$1,500 for one with a private plunge pool, inclusive of all food and drinks, excepting premium tipple, such as the 2003 Dom Perignon, that guests can help themselves to on an honor-bar system.

Although the occupancy rate rose from 50 percent when he first opened the resort to 93 percent at the end of 2013, Charlton declines to declare his investment a winner just yet. “I am not going to say it’s been a roaring success, because I won’t know that for another five years,” he says. “But it is trading better than I’d hoped.”

One month after Charlton bought Bedarra, Peter Bond, a self-made tycoon who runs Brisbane-based coal, gas and oil company Linc Energy Ltd. (LNC), snapped up the much larger Dunk for A$7.5 million, 85 percent off its A$51.8 million 2007 valuation.

Waterfront Villas

Bond, 51, and his family fly there monthly in his personal Cessna Citation jet. (He also owns a 1943 Harvard trainer and a 1944 Spitfire.) They and their guests presently stay in 16 waterfront villas that weren’t damaged by the cyclone, though Bond will eventually build his own house. Last year, the tycoon hosted the wedding of his son Adam on his island, fireworks lighting up the sky from a landing barge moored 500 meters (1,640 feet) offshore while the Harvard trainer performed acrobatics overhead.

Bond jokes he’s lost count of how much he’s lavished on Dunk. “I would hate to look,” he says. “When you own a boat, you don’t want to know the cost, and when you own an island, you don’t want to know either.”

While the Great Barrier Reef is never likely to offer property returns on a par with, say, Manhattan, the current generation of island buyers might at least escape with their shirts, according to Ron de Wit, founding partner of Sydney-based hospitality consultant AHS Advisory.

‘Half a Chance’

“When you spend the sort of money people used to pay for Great Barrier Reef islands, it’s very hard to get your money back,” de Wit says. “But at these prices, you’ve got half a chance.”

If the new island owners want to increase those odds, they could do worse than to study the transformation of the Great Barrier Reef’s biggest resort island, Hamilton, under Robert Oatley.

In 2003, Oatley and his son Sandy, having sold their family wine business for A$1.5 billion, visited Hamilton to compete in a yacht race and learned the island was on the market. The Oatleys ended up paying A$188 million before investing a further A$300 million to redevelop it in a more-low-rise, environmentally sympathetic manner. As well as Robert Oatley’s private home, the island boasts three resorts, plus the top-of-the-range Qualia, along with apartments and private villas, which sell for as much as A$2.5 million.

Yacht Club

The family spent A$80 million building the yacht club, which has a saillike copper roof that bears some resemblance to the Sydney Opera House. “My father wanted to be able to sit in his own yacht club on his own island drinking his own wine looking at his own boat,” Sandy says, as we share a bottle of crisp, chilled 2012 Robert Oatley chardonnay and gaze out across the marina to nearby Dent Island, where the family has constructed a Peter Thomson–designed golf course.

Although the Oatleys decline to disclose Hamilton’s balance sheet, Sandy says the island operates profitably, with its resorts and 230-berth marina averaging 75 percent occupancy year-round. None of the family’s competitors I spoke with disputes that claim. “Bob Oatley is the one guy who’s made a lot of money out of the islands,” Orpheus’s Morris says.

Back on Lindeman, Han believes he can be the second. He and I trek, accompanied by bird song and butterflies, through the eucalyptus forest to the top of 240-meter Mount Oldfield, the island’s highest point. All around us, the Coral Sea glistens in its Unesco World Heritage Centre–listed glory. Down at sea level, the old Club Med resort is barely visible through the foliage. “Come back in two years, and you won’t recognize the place,” Han says. In surroundings like this, it’s hard not to be optimistic.

-By William Mellor

RBS Said to Mull Sale of $550 Million Irish Hotel Assets

Source: Bloomberg / Luxury

Royal Bank of Scotland Group Plc is weighing the sale of more than 400 million euros ($550 million) of Irish hotel assets, according to two people with knowledge of the matter.

The lender’s Irish unit, Ulster Bank, would sell loans and lodgings in portions to generate more income, said the people, who asked not to be identified because the matter is private. The bank is also considering selling development land, in tranches, the people said. RBS spokesman Erfan Hussain declined to comment on the matter.

Ulster Bank Chief Executive Officer Jim Brown said in January his division has to wind down 9 billion pounds ($15 million) of assets being put into a bad bank by the end of 2016. The bank hired investment bank Eastdil Secured LLC last month to advise on a separate potential sale of 1 billion euros of commercial-property assets.

Ulster Bank’s assets include a stake in three lodgings in Dublin’s Ballsbridge embassy district. Irish developer Sean Dunne bought the former Berkeley Court, the Towers and Jurys Hotel for about 380 million euros and Ulster Bank, Rabobank Groep NV and Kaupthing Bank took control of the hotels in 2009. Dunne was granted bankruptcy protection by Ireland’s High Court last year.

Revenue per available room, an industry measure of occupancies and rates, rose 11 percent to 71 euros at Irish hotels last year, according to data compiled by researcher STR Global. More than 200 million euros of hotels were sold in Ireland in 2013, London-based broker Savills Plc said March 3.

-By Neil Callanan and Joe Brennan

Hedge Funds Unlikely Saviors for New York-Area Homeowners

Source: Bloomberg / Personal Finance

Louis Ragusa, who hasn’t paid his mortgage in two years, says he now has a chance to save his Blackwood, New Jersey, home from foreclosure after a hedge fund bought the loan.

American Homeowner Preservation, a Chicago-based investment firm, purchased the mortgage for less than half of what Ragusa owed. Chief Executive Officer Jorge Newbery called the father of three in August with an offer: Pay $5,000 and the company will drop the foreclosure case and erase the more than $100,000 of unpaid principal and penalties amassed.

“They’re a lot more flexible than a bank,” said Ragusa, 48, who ran into financial trouble after losing his job in collections for a cable company in 2007. “They can work with you because they’re a private company and they can basically set their own rules.”

Investors from American Homeowner Preservation to Neuberger Berman Group LLC are accumulating delinquent home loans in New Jersey and New York as distressed-property deals dwindle in much of the U.S. Their strategy is often to persuade homeowners to settle or even pay them to leave, circumventing a court process for foreclosures that has led to the biggest backlogs of nonperforming mortgages in the country.

The firms are making deep cuts to loan balances so borrowers can afford to pay again and the mortgages can be sold as more valuable “performing” notes. Another strategy is to offer thousands of dollars to those who agree to hand over keys without a fight. While borrowers seeking foreclosure alternatives from large banks have complained of lengthy processes and lost paperwork, Newbery says his company requires little or no documentation to approve a sale or loan workout.

Finish Line

“It’s a shortcut to get to the finish line,” said Newbery, whose company owns about 1,000 loans and is in the process of buying another 2,700 mortgages. “You don’t have to litigate with us to get a good deal. We’ll give you the good deal up front.”

Lenders are selling pools of soured mortgages as they face new regulations that make bad debt more expensive to hold. Banks sold $34.7 billion in nonperforming loans last year, up from $13.1 billion in 2012, according to Mission Capital Advisors, a New York-based real estate loan broker. Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. (JPM), last month called mortgage servicing and production “the most painful business ever.”

“If I had a choice, I would never be in default servicing again,” he said at a presentation for investors. “I would tell anyone who’s got a mortgage with us, ‘You’re 60 days late, we’re selling the mortgage, and we don’t want to do any business with you anymore.’ It’s just far too painful.”

Loan Availability

The loan packages now available to buyers have a large share of mortgages in areas such as New York and New Jersey where courts oversee foreclosures, said Terry Glomski, managing director at Neuberger Berman, which oversees about 10,000 nonperforming home loans. That’s making deals more plentiful even as investors prefer to buy in nonjudicial states because the eviction process is faster and more predictable, he said.

A delinquent mortgage in New Jersey will cost about 60 percent of the property’s current value, compared with as much as 80 percent for a similar loan in California, a nonjudicial state, according to Derek Katz, managing director of Denver-based MountainView Capital Holdings, a residential whole-loan investor and sale adviser.

Geographic Split

Some large funds may buy geographically diverse portfolios and then sell loans in New York and New Jersey to local note buyers who specialize in working out mortgages in the slow-moving judicial states, said Kristopher Pilles, a Riverhead, New York-based real estate broker whose clients are now evenly split between large lenders and funds that own mortgages.

More than a third of the 58,000 loans that the Department of Housing and Urban Development auctioned last year were in Florida, New Jersey and New York, the states with the longest foreclosure timelines, according to an analysis of government data by RealtyTrac. About half of a $390 million offering by JPMorgan last month were loans in New York and New Jersey, where it takes three years on average to seize a house.

“All of us in the nonperforming-loan business have to deal with the fact that, as time passes, there’s going to be more and more judicial loans as compared to nonjudicial loans, so we have to value them as best we can and we need to resolve them,” said Glomski. About a third of the nonperforming loans New York-based Neuberger Berman owns are in judicial states.

Judicial states, including New York, New Jersey, Florida and Maryland, require that every foreclosure be approved by a court, slowing the process.

Bayview, Selene

Other funds buying the delinquent loans include Bayview Asset Management; mortgage-bond pioneer Lewis Ranieri’s Selene Finance; MCM Capital Partners/Oak Hill Advisors; Pacific Investment Management Co.; Angelo Gordon & Co.; and Pennymac Financial Services Inc., according to three people with knowledge of the industry, who asked not to be named because the transactions are private.

“We strive to keep borrowers in their homes whenever possible,” said Chris Oltmann, a spokesman for Moorpark, California-based Pennymac, which services distressed loans with unpaid principal balances totaling $5.9 billion. The company has worked foreclosure alternatives such as short sales and principal writedowns for about two-thirds of its delinquent loans, he said.

Spokesmen for Bayview, Selene, MCM Capital and Angelo Gordon declined to comment. A Pimco spokesman didn’t return phone calls seeking comment.

Surpassing Florida

New Jersey has surpassed Florida in having the highest share of residential mortgages that are seriously delinquent or in foreclosure, with New York third, a Mortgage Bankers Association report showed last month. By contrast, hard-hit areas such as Arizona and California have some of the lowest levels of delinquencies after allowing banks to quickly foreclose after home prices started to crash in 2006.

The backlog is weighing on housing values because of the prospect of a rising supply of distressed homes on the market. While U.S. prices jumped 12 percent in January from a year ago, they rose only 8 percent in New York and 6.6 percent in New Jersey and Maryland, according to CoreLogic Inc.

New Jersey ranked second-to-last in a gauge of U.S. housing-market stability, according to a Freddie Mac index measuring the 50 states and Washington, D.C. The index weighs criteria including mortgage applications, income ratios and proportion of on-time mortgage payments.

Hedge funds and investment firms buying the delinquent loans may help to limit the damage by sopping up extra inventory, according to Pilles.

“Without these buyers a lot of these properties would still be in the courts,” he said.

‘Profit Mode’

The loan buyers want to reduce delays to maximize profits, said Kinglsey Greenland, president and CEO of Debt Exchange Inc., a Boston-based loan-auction service known as Debtx. The firm has sold 47,000 loans for HUD since 2012.

“Once it gets out of the bank’s hands, where it’s in loss-mitigation mode, and into someone else’s hands, where it’s in a profit mode, speed is of the essence so things happen faster,” Greenland said.

Large banks have had success in working out deals with homeowners, according to Bob Davis, executive vice president for the American Bankers Association in Washington. Almost 7 million modifications have been completed since 2007, he said.

Mortgage Settlement

Citigroup Inc., Bank of America Corp., Wells Fargo & Co. and JPMorgan provided $50 billion in relief to more than 600,000 families, a court-appointed monitor of the 2012 settlement with the large servicers said last week. About $20 billion of that was credited toward meeting the legal settlement over botched foreclosures and was handed out mostly in the form of debt forgiveness such as approving sales for less than what is owed and help with refinancing.

“It’s unrealistic to expect, just because I’m private equity, my communications are going to work well, consumers are going to work with me and my systems are never going to make a mistake,” Davis said. “They’ll do a good job. Big banks have done a good job. The job will never be perfect because you’re dealing with human nature and human problems.”

For investors, foreclosing or paying a borrower to move out may often be more cost efficient than time-consuming loan workouts, said Diane Thompson, attorney with the National Consumer Law Center based in Boston.

Foreclosure Incentive

Seizing a property can be especially valuable to a fund in a market where home prices are rising, Thompson said. Another concern is that institutional investors aren’t subject to the same level of regulatory scrutiny as large banks, making it more difficult to police them, she said.

“It’s likely that at least some homeowners will find themselves losing their homes who should have been able to keep them,” she said. “Results will vary. Some will be getting good modifications they wouldn’t have gotten otherwise. For many people expectations will be raised and they’ll likely be disappointed.”

American Homeowner Preservation gives homeowners three options, and borrowers often choose as if ordering from a menu, CEO Newbery said. They can pay off the mortgage by coming up with 90 percent of the property’s current value; accept a modified loan with a principal cut; or take between $1,000 and $5,000, depending on the home’s value, to hand over the keys or cooperate with a sale.

Making Profit

Newbery said his company started in 2008 as a nonprofit organization, and has retained its mission of keeping borrowers in their homes whenever possible. In Ragusa’s case, the firm can make a solid profit even after lowering his payment and the amount he owes, Newbery said.

American Homeowner Preservation purchased Ragusa’s mortgage for $134,000 from a fund that had acquired it from Citigroup. (C) Ragusa is now trying to come up with the $10,000 the firm is seeking in exchange for restructuring the loan, a payment that has increased from the original offer.

Ragusa, who now works in sales at the cable company for less than half his previous salary, owes $308,000 on his mortgage for the three-bedroom house, plus two years of payments. The balance will be knocked down to $211,500 if he makes the deal with American Homeowner Preservation.

“I’m sure the hedge funds are going to do a better job than banks in pushing these through, because they’ve had five years and have not done anything,” Newbery said. “The loans going into private hands and away from banks is a big step forward to resolving families in limbo.’

-By Prashant Gopal