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6th March 2014

Top Stories

Tharman maps out path to transform S'pore economy

Source: Straits Times 

Deputy Prime Minister Tharman Shanmugaratnam gave a progress report yesterday on Singapore's economic restructuring journey, and spelt out how companies, jobs and social norms must transform if the national effort is to be a success.

Singapore Economy

Raising productivity only way to manage business costs

Weakening our economy would be wrong strategy, says Finance Minister

Source: Business Times / Top Stories

[SINGAPORE] The Republic is not going to be a cheap place to do business, and costs will inevitably rise as the economy turns more vibrant. While the government will continue to try to mitigate business cycles by stepping in when the market heats up, the only permanent solution to address climbing costs is to raise productivity, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

"Demand in the economy is strong (as seen in) demand for resources, especially (for) labour and space. And that's why costs are ticking up fundamentally. The wrong strategy will be to weaken our economy . . . That's not what our business community wants, and that's not what Singaporeans want.

"We've got to keep this a vibrant place - keep a check on costs to make sure they don't rise consistently, (and) foster business profits for wages. That's our strategy. But accept that we are not going to be a cheap location for business," said Mr Tharman.

He cited Hong Kong and Japan, which tackled the issue of rental pressures differently. The former has let market forces prevail, which pushed retail rents up to the extent that businesses have restructured themselves to shift away from traditional clientele and services to cater to the high-end Chinese market.

"And many Hong Kong residents are not very happy about that," said Mr Tharman, who noted that prime retail rents in Hong Kong are more than seven times the price of those in Singapore.

Japan, on the other hand, through its practice of rental protection, has allowed "charming little ramen shops" and mom-and- pop shops to survive. But that has come with trade- offs: rents may be cheap, but wages are stagnant, and opportunities for Japan's young are limited.

Said Mr Tharman: "Those are two quite different approaches, and I think we should avoid either extreme. Don't just leave it to the market, but neither can we fix rents and keep prices low."

He said the government has "(tried to) mitigate the cycles" by increasing the supply of factory and shop spaces, which should have a "moderating impact on rentals".

"That's our strategy. We don't have perfect foresight, but when we see the market heating up, we take action to boost supply and find other ways to help businesses to mitigate costs."

Still, he said, "the only permanent solution" to address rising business costs is to raise productivity.

"As long as we remain vibrant as an economy, our cost will basically approach that of an advanced country - a little higher in some areas, a little lower in some areas - but basically, we will have advanced country costs.

"And the only way for businesses to survive (in that environment) is to have advanced country capabilities in innovation, in the commercialisation of R&D (research and development), in managerial skills and in investing in employees so that they have deep skills. That's the only way."

While the government has thus far pushed for restructuring via tighter foreign worker policies and schemes to help businesses upgrade, Mr Tharman said the next phase of restructuring will focus on transforming SMEs, jobs and workplace norms. This will include placing greater emphasis on continuing education and developing "obsolescence-proof skills" for a new technology-driven world economy.

-By Kelly Tay

Singapore has narrowed productivity gap: Tharman

Source: Today Online / Singapore

SINGAPORE — While the Republic’s productivity levels have been dismal in the past few years, it has made good progress in closing the productivity gap with advanced economies over the decades, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

And in contrast to the approach taken by some countries, Singapore has been pursuing productivity improvements while maintaining full employment — which makes it challenging, he noted.

Wrapping up the three-day Budget debate, during which several Members of Parliament (MPs) had raised concerns about the lack of tangible results from the productivity drive in recent years, Mr Tharman said: “I think it’s useful to take a step back. It’s not as if we are a failing economy when it comes to productivity. It’s useful to see where we have come from.”

He shared a chart that compared productivity levels at 1980 and 2013 between Singapore and other advanced economies such as Hong Kong, Japan, Switzerland, the United Kingdom and the United States.

In 1980, Singapore was at 40 per cent of US productivity levels. Last year, this went up to 70 per cent — “quite a major shift” and not a bad achievement, Mr Tharman said.

Mr Tharman, who is also Finance Minister, reiterated that the Government has been able to achieve a rising employment rate over the years, giving everyone an opportunity to have a job. In contrast, some countries have gone about raising productivity differently — by removing a segment of the workforce entirely.

“The easy way to raise productivity is to go through some shock treatment, shed firms, (and) shed jobs ... we’ve taken a more inclusive approach which we will retain going forward,” he said.

To raise productivity, the Government has tightened its foreign worker policy and provided substantial assistance for businesses, with schemes skewed towards the Small and Medium Enterprises (SMEs) because they need the most help, he said.

However, he stressed that productivity “cannot just be summoned up”. The Government can do its part by spreading the innovation and productivity improvements throughout a particular sector but it also requires business owners to take the lead as well.

Amid the economic restructuring, companies have been hit by rising business costs, including higher salaries due to the tight labour market and increasing rental costs.

Mr Tharman said: “As long as we remain vibrant as an economy, our costs will basically approach those of an advanced country ... and the only way for our businesses to survive in that environment is to have advanced country capabilities in innovation, in commercialisation of R&D (research and development), in managerial skills, and in investing in employees so that they have deep skills.”

He assured that the Government will act to boost supply and find other ways to help business mitigate costs when it sees the market heating up.

In response to MPs’ questions about the effectiveness of the productivity schemes, Mr Tharman noted that MPs have expressed different views on the matter — some spoke about the need to make it easier for firms to qualify and take advantage of the schemes, while others felt the Government must require firms to demonstrate productivity improvements first, or mandate improvements that have to be made before assistance is given.

“Through the range of our schemes, we in fact have both approaches,” he said. The Productivity and Innovation Credit (PIC) scheme is not a “no-questions-asked” scheme, even though it is liberal in its approach to provide firms with broad based support, Mr Tharman said. But for the PIC Cash Payout scheme, there is an additional requirement for a company to have at least three Singaporean employees. “We’ve had to put a check into the system ... because it is more open to abuse,” he said.

Reiterating the importance of moving to a system where self-service becomes the default option in many services, he stressed that Singapore has to transform jobs, enterprises and culture. “We will not succeed (in restructuring) unless we move on all three.”

-By Fang Zhiwen Joy

'Middle path' for productivity drive

Source: Straits Times 

One sector that can do better is real estate, he added, citing Australia as an example. Its real estate agents post extensive information of properties online, allowing buyers to look at floor plans and take virtual tours before contacting the agents. "In every industry, we can think of how self-service can, in fact, provide good service. It also saves on manpower and takes us to a new and higher level."

Flawed EIU study made Singapore world's costliest

To compare costs by converting prices to US$ is misleading

Source: Business Times / Singapore

SINGAPORE is not the most expensive place on the globe. A much-cited survey has declared the city-state to be the world's costliest. But it suffers from a flawed methodology.

The Economist Intelligence Unit's twice-a-year study collects price information for 160 items in each city and then converts them into US dollars at prevailing exchange rates. That approach is useful for determining the true purchasing power of local currencies. But using this information to compare costs across cities is misleading, for two reasons.

The first problem is the US currency. Singapore, which has seen its nominal exchange rate appreciate by 40 per cent over the past decade, will obviously have higher US dollar prices. But that only matters to the shrinking group of expatriates who are paid in greenbacks. Most consumers care about costs in the currency in which they earn their living.

Besides, people care more about experiences than things. Take cars, which are expensive to own in Singapore because of high taxes. In a tiny city, personal vehicles have little utility beyond the dating scene. The average taxi ride is a lot cheaper than in, say, London.

-By Andy Mukherjee

Hard questions to answer for S'pore's development

Rational public policies must always prevail over irrational public pressures

Source: Business Times / Editorial & Opinion

AFTER the 2008/2009 global financial tsunami, several rounds of quantitative easing (QE) worked for the American economy, starting a broad-based recovery since the fourth quarter of 2012.

European and other high-income economies including Japan are also going through their respective QE and have since recovered from their lows. They started to show positive quarterly GDP growth from early 2013, although their growth has yet to stabilise and is not yet broad based.

In most developing economies, led by China, growth has been reasonably strong, notwithstanding recent stresses faced by the currencies of some big emerging economies such as Brazil, India and Indonesia.

Singapore should benefit from the external demand rebound from major export markets which should remain resilient at least up to 2016, according to the World Bank.

-By Tan Khee Giap

Cost-of-living surveys reflect expatriate, not local, costs

Source: Straits Times

Day after the Economist Intelligence Unit ranked Singapore the priciest city in the world, Finance Minister Tharman Shanmugaratnam came out to say that such surveys which focus on expatriates do not reflect the living costs of Singaporeans.

Cost of living reports do not reflect costs for locals: DPM Tharman

Source: Channel News Asia / Singapore

SINGAPORE: Cost of living reports, such as the one released by the Economist Intelligence Unit (EIU) which ranked Singapore as the costliest place to live in, are meant to measure cost of living for expatriates in various parts of the world, and thus do not reflect those of local residents, said Deputy Prime Minister Tharman Shanmugaratnam.

There are two things which make a big difference when comparing cost of living for expatriates and locals, Mr Tharman, who is also Finance Minister, said as he wrapped up the Budget debate in Parliament on Wednesday.

The first, he said, is currency -- in Singapore’s case, the Singapore dollar has strengthened over the years, and this means it is more expensive for expatriates who are paid in a foreign currency.

A stronger Singapore dollar also improves lives in Singapore, as purchasing power for items is improved, he added.

The second factor is the difference in items being measured -- the EIU study measured items such as imported cheese, which may not be purchased by Singapore residents, said Mr Tharman.

He said: "So for example, the EIU basket includes imported cheese, filet mignon, Burberry-type raincoats, four best seats in a theatre, three-course high-end dinners for four people... I don't think they're irrelevant to an expatriate cost of living basket but it's quite different from cost of living basket for Singaporeans.

"For some of these items, Singapore is quite expensive. Transport is also part of the cost of living basket for these cost of living indexes but no public transport -- it's just cars and taxis. And our public transport as you know, is in fact significantly cheaper than most other cities (like) New York, London and Tokyo.

"We're comparable to Hong Kong but significantly cheaper than most other cities, even our taxi fares are cheaper, but our cars are expensive because we are small."

He added that a survey by the Asia Competitiveness Institute similarly ranked Singapore fifth out of 109 cities on cost of living for expats. But on cost of living for Singapore residents, the city was ranked 61st.

What is important for the government, Mr Tharman said, is that Singaporeans, particularly those in the low and middle income groups, have incomes that grew faster.

He pointed out that in the last five years, incomes of median households have surpassed that of the increase in inflation.

Mr Tharman said: "In the last five years alone, if you take our middle-income households, our median households, their incomes have gone up faster than the CPI index, the cost of living. In fact, it's gone up by 10 per cent in real terms.

"(There's a) similar rate of growth for the low-income households, about 10 per cent in real terms. And indeed for the low-income households, if you exclude from the CPI index imputed rentals for those who are in fact owning their homes, and they don't have to pay rentals... then actually the increase in real incomes of the 20th percentile was 19 per cent over the last five years."

But another challenge the city faces is the rising cost of business -- as a result of higher rental and higher wages due to the tight labour market.

He said: "The wrong strategy would be to weaken our economy, be a less vibrant economy and you can think of many cities, not so far from where we are, which are less vibrant, and the cost of living is lower.

"Cost of living is significantly lower because you don't have wage pressures and rentals are cheap, cost of living is lower. But that's not what our business community wants and that's not what Singaporeans want.

"So we've got to keep this a vibrant place, keep a check on cost to make sure they don't rise persistently, faster than business profits or wages. That's our strategy. But accept that we are not going to be a cheap location for business."

Mr Tharman said Singapore is not going to be a cheap location for business. However, the key is to ensure that costs do not rise faster than profits or wages.

Analysts said businesses should also look at what Singapore can offer.

David Ang of Human Capital Singapore, said: "There are a lot of positives going for Singapore, in terms of security, politically stable, and also at the same time, there's a lot of infrastructure that enables businesses to do their business very well.

"Then of course, if you need to send an expatriate, you need to see to what extent and at what level these people will be sent to Singapore.

"I think it is also to look at the local Singaporeans, whether they have the skill or knowledge. If they have, why not mitigate your costs of doing business by employing Singaporeans?"

Mr Ang said this does not mean companies will stop sending expats to Singapore, adding that many hirers will consider the big picture before making the decision.

- CNA/nd/ac

Economist’s cost of living report ‘not representative’ of life of local residents

Source: Today Online / Singapore

SINGAPORE — While cost of living surveys are useful for human resource managers when deciding where to place their workers globally, they are not a good representation of how life is for local residents. This was a point made by Deputy Prime Minister Tharman Shanmugaratnam as he weighed in on a report released by the Economist Intelligence Unit (EIU) on Tuesday, which ranked Singapore as the costliest place to live in.

The EIU report attracted widespread coverage in international media and also went viral on social media. Apart from the effect of currency appreciation, the cost of living in Singapore has also been pushed up by high private transport costs and utility charges, the report said.

Mr Tharman pointed out that cost of living differs between expats and locals due to currency movements and the different goods and services consumed by the two groups.

With the Singapore dollar strengthening over the years, the country has become a more expensive place for someone who is paid in a foreign currency or for corporate headquarters located abroad. However, a stronger Singapore dollar means that Singaporeans have a greater purchasing power here — because imported goods become cheaper — as well as overseas, Mr Tharman noted. He pointed out that some goods and services measured in the EIU report are “a bit on the high end”, such as imported cheese, filet mignon, branded raincoats, the four best seats in a theatre and three-course dinners at restaurants for four people.

The report took into account the costs of taking taxis and buying cars but did not measure the costs of commuting on buses and the MRT. Compared with most cities such as New York, London and Tokyo, the costs of such mass commuting are “significantly cheaper” here, said Mr Tharman.

He cited a survey done by the Asia Competitiveness Institute in 2012, which had distinguished between the cost of living for expats and for a typical resident household. It found that while Singapore was ranked fifth out of 109 cities in the index for expatriates, it was ranked 61st when it comes to cost of living for Singapore residents.

What is important for the Government is that Singaporeans’ incomes grow faster than the rise in cost of living. In the past five years, lower- and middle-income households have experienced income growth in real terms, he noted. In terms of business costs, Mr Tharman reiterated that Singapore must continue to be a vibrant place. There has to be acceptance that “we are not going to be a cheap location for business”, he said.

Mr Jon Copestake, editor of the EIU report, was quoted by AFP acknowledging the points raised by Mr Tharman. However, he said the basket of goods includes many everyday items as well, and the highest-weighted category was that of groceries. He added that as expats form a growing community in Singapore, the impact of high costs will affect more and more people.

-By Fang Zhiwen Joy

Government keeping eye on growth of population

Source: Straits Times

Singapore's population growth is scrutinised regularly at a "very senior level" to ensure it keeps within planning parameters, said Minister in the Prime Minister's Office Grace Fu. Ms Fu gave the assurance yesterday while reiterating the Government's commitment to the "new strategic direction" laid out in the Population White Paper, which is to grow at a slower, more sustainable pace.

S'pore the costliest city? That's rich

Source: Straits Times 

A study out this week naming Singapore as the world's most expensive city has become a major talking point around town. Many people say the study confirms that the cost of living here has spiralled. But others argue that the Economist Intelligence Unit (EIU) report does not reflect the consumption patterns of ordinary Singaporeans. Rather, it focuses on high-living expats, they say.

Singapore expected to be No. 2 on ultra-rich list by 2023

Source: Straits Times 

Singapore is tipped to have the second-highest number of ultra-rich people among the world's cities by 2023, a new report says. London would be in the top spot, according to the Wealth Report released by property consultancy Knight Frank yesterday.

Singapore Real Estate

Feeling heat from cooling property

With valuations sliding, some developers making provisions for projects facing thin margins

Source: Business Times / Companies

DEVELOPERS are feeling the heat from a tougher operating environment as property valuations slide, and some have been pushed to make provisions for projects.

Wheelock Properties has made an accounting provision of $110 million for The Panorama, a 99-year leasehold condominium in Ang Mo Kio, while OUE has declared a net fair value loss of $76.8 million on its investment properties.

Wheelock posted a loss of $91.3 million for its fiscal fourth quarter, wider than the $30.8 million a year ago. For the full year ended December, the developer posted a net profit of $40 million, down 36.7 per cent from the $63.3 million a year ago.

Meanwhile, OUE posted a net attributable loss of $36.6 million for the full year ended December, compared with a net profit of $90.1 million a year earlier.

-By Mindy Tan

Jumabhoys' villa project in India off to a good start

Source: Straits Times 

Singapore's well-known Jumabhoy family may dramatically lift its land holdings in India's Silicon Valley after the early success of a villa project there. Mr Iqbal Jumabhoy, 56, and two of his siblings started an Indian real estate firm, Raffles Residency, and rolled out a 61-private villa project late last year.

Changi Business Park shaping up as infocomm tech hub

Source: Straits Times 

Changi Business Park (CBP) is turning out to be a major infocommunications technology hub after more than 20 tech companies, including IBM, Cisco and EMC, opened offices there. Affordable rents, plenty of space and proximity to the airport are its attractions. Tech employees tend to travel frequently, and these companies also receive visitors from abroad.

Property agents turn to rental market as sales slow

Source: Today Online / Business

SINGAPORE – Real estate agents are increasingly turning from the once-lucrative resale market to rentals, as they hunt for a living to preserve their careers and clients during what is expected to be another challenging year for the industry.

The shift comes as the rental market holds its own in the housing sector, which has been hit by slowing demand following several rounds of cooling measures and lending curbs, industry practitioners told TODAY.

“The market definitely has slowed down, transactions have been reduced and, of course, real estate agents are feeling the pinch. So, many of them are switching from sales to rentals,” said President of the Institute of Estate Agents (IEA) Jeff Foo. He added that the rental market has not been as badly hit, adding that the regulation requiring new permanent residents to wait three years before they can buy Housing and Development Board (HDB) flats is among the factors that have held up demand.

The HDB resale market continued to lose momentum in January, with transactions down 34.6 per cent on-year, according to the Singapore Real Estate Exchange (SRX). For the whole of last year, transactions had plunged by almost 30 per cent, the lowest since HDB started collecting the data in 1997.

In the private resale market, an estimated 310 non-landed homes were sold in January, a sharp decline of 70.2 per cent from a year ago, SRX said. Chief Executive of real estate agency GPS Alliance Jeffrey Hong said: “There are still transactions in both the HDB and private rental markets and (conditions should) remain like that for the next one quarter or two. So for now, things are still quite okay for the agents.”

One agent who has taken advantage of the relatively resilient rental market to maintain his income level is Mr Victor Chan from DWG agency.

“(Resale transactions) have definitely slowed down since I started about a year ago … I’m doing more rental cases now; that’s how we’re surviving,” he said.

However, industry insiders say they expect even the rental market to suffer, with an onslaught of new private homes expected in the coming months. With foreign hiring increasingly tightened, the tenant pool for these new homes will be limited, they said.

“It’s going to be tougher. The rental market has always seen steady volume. But if more agents enter the market, it means the new entrants are taking the volume from somebody else. And with the huge supply of newly completed (private) homes, more landlords will be fighting for tenants,” said the Chief Executive of Century 21, Mr Ku Swee Yong.

When that happens, real estate agents who fail to diversity their income stream will be forced to seek other employment opportunities.

“Agents have to be very resourceful and they have to work doubly hard to reach out to more consumers because when the market swings, it becomes very competitive,” said PropNex Chief Executive Mohamed Ismail. “Previously, an agent could focus on one area, such as HDB, but today you can’t.”

Mr Foo added: “You just have to bite the bullet and ride the storm and hope for the best. I think the market will go through some correction and the fitter ones will survive. But those who really can’t cope, many of them would think it’s better for them to switch careers.”

Real Estate Companies' Brief

Economists divided over Reit impact on business

Source: Business Times / Top Stories

[SINGAPORE] Calls in Parliament for the government to rein in industrial and commercial rents or reverse JTC's land divestment programme to "buy back some of the Reits" have sparked mixed responses from market watchers, with some in agreement and others cautioning against tinkering with free market principles.

A decade ago, JTC divested most of its industrial property, saying at the time that the move would create a more open and vibrant market by giving the private sector more freedom to operate flexibly to accommodate industry needs.

On Tuesday, however, Member of Parliament Inderjit Singh (Ang Mo Kio) called the divestment "a mistaken policy" during the Budget debate. "The government lost the ability to influence rental prices resulting in developers and investors (including Reits) making the money - this is passive income and not productive income benefiting the investors," he said.

It's a debate that has been cropping up in recent years as businesses reel from rising costs. Some economists agree that Singapore has over-embraced its free market approach and needs to recalibrate, especially with the proliferation of real estate investment trusts (Reits).

Irvin Seah of DBS, for instance, feels that Singapore has overdone what it set out to achieve and should backpedal. He believes that a sizeable amount of commercial and industrial property should come under government control to serve as a benchmark for the market.

"Right now, what we have is an oligolopolistic structure, with a small group of players in this market, which makes it prone to price rigging," he said.

"It is not so much about bringing prices down, but about ensuring that we have a lever on certain scarce resources (such as land). The Reit model may work in big countries with ample land but less so for land-scarce Singapore."

Yet, others found Mr Singh's suggestion too "drastic" and "excessive". They warned against being too quick to point fingers at Reits as the culprit for rising business rents. Rather, they suggested that it could be a case of supply lagging demand.

CIMB economist Song Seng Wun said: "Everyone forgot while squabbling on the ground level who's to blame, but if you take a few steps back, it is because there is plenty of demand for space out there. Economics 101: this allows landlords to yank up rentals."

In this case, solving the supply problem may prove more effective. Patience is also needed because physical completion of properties takes time, he said. It may even be a good problem to have if landlords have no difficulty finding tenants for commercial and industrial spaces as this may mean Singapore has been successful in attracting businesses that want to expand here, he added.

Several commercial and industrial Reits that BT contacted did not want to comment, but an industry player who declined to be named said that Reits themselves also face the same problems of rising costs that tenants face, including labour (for security guards and cleaners, for instance), land rents and property taxes, which help to justify rent adjustments.

That is not to say that profit is not on Reit managers' minds when they revise rents. It is the landlords' playground now, and they are motivated to maximise their return on investment, given that they are listed vehicles and answerable to unitholders, said the industry player.

This leads them to raise rents when they think the market can take it, while taking care not to tip the balance, lest their tenants pull down their shutters and leave, which is not in their interests either.

For Reits, the question is "how much can you push prices before businesses need a breather?", noted CIMB's Mr Song.

On Monday, Nominated MP R Dhinakaran also warned of the danger of the speculative element in commercial and industrial property. "An asset value being pushed higher by several times makes little sense with no significant underlying change to the value offered to (the) tenant . . . If the asset value is fuelled by trading on a speculative basis without any underlying benefit changing (such as higher traffic for the tenant), it is bound to disrupt economics for the operating business," he said.

But the industry player pointed out that JTC has tightened conditions on lease assignments to discourage "flipping" - such as implementing longer prohibition periods before sellers can sell the property, as well as a longer minimum occupation period for anchor tenants in sale and leaseback programmes.

-By Lee Meixian

Office Reits

Maybank Kim Eng Research, March 5

THE office Reits segment was recently abuzz with renewed interest from investors after the Urban Redevelopment Authority's Office Property Rental Index recorded about one per cent y-o-y increase in rent for both the Central Area and Central Region in both Q3 2013 and Q4 2013. The uptick came on the back of four consecutive quarters of y-o-y decline since Q3 2012.

While we anticipate a reprieve from new office space next year, the fact remains that there is still ample supply - an estimated 6.4 million sq ft of net leasable area in the Central Business District is expected to come on-stream between this year and 2017. With the labour market moderating and overall hiring expectations on the wane, we do not think headcount numbers will jump sharply this year, especially considering that the sub-trend GDP growth and financial services activities remain sluggish.

Views, Reviews & Forum

'Every Budget must be focused on our future'

Source: Straits Times 

In budget 2012, we had projected yearly total health-care spending to double from $4 billion to $8 billion by 2016. We are in fact likely to reach the $8 billion figure, which is close to 2 per cent of GDP, a year earlier, in 2015. Beyond that, health-care spending will continue to grow. We expect it to reach about $12 billion by 2020 from $4 billion in 2011. This is, therefore, a three-fold increase from 2011 to 2020. The bill will grow further as our baby-boomer generation moves into their senior years.

S'pore world's most expensive city? No

Source: Business Times / Editorial & Opinion

ACCORDING to a report released on Monday by the Economist Intelligence Unit (EIU), Singapore has the dubious distinction of being the most expensive city in the world - a headline that was e-mailed, tweeted and broadcast across the globe.

Certainly, even by the standards of First World cities, Singapore is hardly low-cost. However, results vary from survey to survey. In another recent one by the real estate firm Savills released just before the EIU's, Hong Kong was named the most expensive city in the world in which to locate employees; Singapore came in 5th. A survey by the research firm Mercer focused on expatriate living costs, released in July 2013, again ranked Singapore fifth; the most expensive turned out to be - few would have guessed it - Luanda in Angola.

But now, to be ranked No 1 for living costs by the EIU (compared with 18th a decade ago by the same organisation), ahead of cities such as Paris, Oslo and Zurich and 127 others, comes as something of a surprise. However, this startling result is subject to several caveats.

First, there is the EIU's methodology of simply taking prices of various items, converting them into US dollars at the prevailing exchange rate and making comparisons. Over the 10 years, the Singapore dollar has indeed appreciated substantially against other major currencies. So, much of Singapore's high cost reflects an exchange-rate effect. A year or two later, exchange rates could be quite different, which would yield a different result.

Allow state land to be used for community farming projects

Source: Straits Times

In A blog post, National Development Minister Khaw Boon Wan praised the skyrise greenery movement, which includes rooftop gardens. I hope the Government will give tax breaks to encourage more property owners to use their rooftops to grow vegetables.

Global Economy and Global Real Estate

Asia's ultra-wealthy to invest more in property: survey

Real estate remains a favoured asset class among ultra-high net worth individuals, and Singapore remains in their sights as a favoured location for a second home. Knight Frank's The Wealth Report 2014 has found that 45 per cent of Asia's ultra-wealthy plan to invest more in property this year, compared to a global average of 47 per cent.

Metro to replace Robinsons as Centrepoint's anchor tenant

Source: Business Times / Singapore

HOMEGROWN department store Metro will be the new anchor tenant of The Centrepoint from May, refurbish the space vacated by Robinsons and offer shoppers a fresh retail experience by Christmas.

The Business Times understands that refurbishment works will begin in May and likely be completed by the time the year-end shopping season rolls around.

This will be Metro's second store along Orchard Road; its flagship store, just up the road in Paragon Shopping Centre, opened in 1987.

A Metro spokesman said: "We are in good partnership with the landlords of Paragon and Centrepoint, which will see us operating at the two malls for the long term."

-By Jacquelyn Cheok

84, and on a second wind

LA developer who thought of suicide during the '90s recession has US$600m of projects in hand, says NADJA BRANDT

Source: Business Times / Property

[LOS ANGELES] AT 84, Los Angeles developer Jerry Snyder has US$600 million of projects under construction or planned, including two apartment towers in the city's Koreatown area and three office buildings.

"My doctor asked me, 'When are you going to quit?'" Mr Snyder said in an interview at his 30th-floor corner office overlooking the Los Angeles County Museum of Art and La Brea Tar Pits. "So I said, 'Are you a better doctor now than you were 10 years ago?' He said yes. 'Well, I am a better builder than I was 10 years ago'."

Mr Snyder, who formed his first company when he was 19, is persevering after surviving some tough economic cycles. During the recession in the early 1990s, "suicide became an option", he said, as values plunged on properties with millions of dollars of his personal guaranties. Six decades after entering the business, he's about to sell his latest apartment project and intends to use the proceeds on new office buildings.

"I have been hearing more and more, 'I need more space'," Mr Snyder said. "When you get the 'I need more space' in more than one of your buildings, you know things are getting better. It's time to build."

-From Los Angeles, US

China buyers to prop up Aussie home prices

Investment over next seven years can push home prices even higher: study

Source: Business Times / Property

[SYDNEY] Wealthy Chinese will pour A$44 billion (S$50 billion) into Australian real estate over the next seven years, potentially pushing prices in one of the world's most expensive housing markets even higher, a study said yesterday.

Investment bank Credit Suisse used data from the Foreign Investment Review Board and other government agencies to estimate the amount of Chinese investment in Australian residential property at more than A$5 billion a year.

"They purchased $24 billion of Australian housing over the past seven years; we forecast they will purchase $44 billion over the next seven, to 2020," it said.

As the Asian powerhouse becomes richer, the ranks of those who could easily afford Australian real estate will swell beyond the current 1.1 million people, with implications for Australian home-buyers, it said.

-From Sydney, Australia

Record UK supermarket- leased property bought

Investors bought £1.8b last year, 50% more than in 2012

Source: Business Times / Property

[LONDON] Investors bought a record £1.8 billion (S$3.82 billion) of property leased to UK supermarket operators such as Tesco and J Sainsbury last year, 50 per cent more than in 2012, as they sought real estate with longer leases.

The total return, comprised of changes in real estate values and rental income, was 11 per cent last year, researcher Investment Property Databank (IPD) and broker Colliers International said in a report yesterday. That beat a 6.7 per cent total return from shopping malls and a 9.6 per cent return from outlets such as high-street shops, department stores and restaurants. Supermarket leases are almost twice as long as those for standard stores, the report said.

Real estate held by some of the UK's biggest supermarket chains including Wm Morrison Supermarkets is attracting private-equity firms and hedge funds after a 35 per cent gain over five years made the stores worth more than the companies that run them.

The value of property leased to the grocers rose by 5.8 per cent last year, the most since 2010, according to yesterday's report.

-From London, UK

Sojitz plans to list Reit in April

Source: Business Times / Property

[TOKYO] Sojitz Corp, the Japanese trading house that operates malls near the nation's capital, is preparing an initial public offering of some of its property assets on the Tokyo Stock Exchange as early as April, three people with knowledge of the matter said.

Sojitz plans to list a real estate investment trust with about 70 billion yen (S$866.7 million) of assets, including office and residential buildings in Tokyo, said two of the people, who asked not to be identified as the details are private. Sojitz Reit Advisors will manage the trust, they said.

The offering from Sojitz would follow listings of property trusts by Aeon Co, the country's biggest retailer, and developer Hulic Co amid expectations the 2020 Olympic Games in Tokyo will boost real-estate prices.

The Tokyo Stock Exchange Reit Index has risen 34 per cent since Prime Minister Shinzo Abe took office in December 2012 and began implementing his economic stimulus measures, known as Abenomics.

-From Tokyo, Japan

Al Salam Bank launches syariah- compliant Reit

Source: Business Times / Property

[MANAMA] Bahrain's Al Salam Bank has launched a listed syariah-compliant real estate investment trust (Reit) that will invest in a portfolio of Asian properties, the lender said on Tuesday.

The Reit will invest in between 15 and 35 properties and be managed by Swiss-based B&I Capital AG, with Al Salam providing seed capital for the fund. The Islamic lender did not reveal the expected size of the fund.

Al Salam said the Reit would offer a more liquid tool to invest in real estate, an asset class favoured in Islamic finance, which follows religious guidelines such as bans on tobacco, alcohol and gambling.

"The fund aims to deliver benefits of diversified real estate ownership in Asia while avoiding many of the pitfalls of holding physical property and real estate developer equities," said deputy chief executive Anwar Khalifa Al Sada.

-From Manama, Bahrain

Super premiums for top floors of HK office towers

Investors willing to pay more for them than equivalent space in Manhattan

Source: Business Times / Property

[LONDON] Investors are willing to pay more than twice as much for offices on the upper floors of Hong Kong skyscrapers than for equivalent space in Manhattan, broker Knight Frank LLP said.

Workspace at "nose bleed" level in skyscrapers, which commands the highest rent, is selling for US$69,222 a square metre in Hong Kong compared with US$42,283 in second- ranked Tokyo and US$25,740 in Manhattan, the London-based broker said in a report yesterday. Five of the 10 most expensive cities are in the Asia-Pacific region, according to the report.

"Island-based cities tend to embrace the tower to maximise space," James Roberts, head of commercial research at Knight Frank, wrote in the report. "While Hong Kong and Tokyo are too far ahead to lose first and second place, I see some competition among Manhattan, London and Singapore in the coming year."

Rents in Central, Hong Kong's main business district, will rise 15 per cent this year as demand from banks increases, Credit Suisse Group AG analysts led by Joyce Kwock forecast in a January report.

-From London, UK

Big hotel chains carry on despite political tensions

Source: Business Times / Property

[BERLIN] Tensions between Ukraine and Russia could delay hotel projects, and some development deals have been shelved, but the world's biggest chains are less likely to be deterred as they seek to exploit rapid expansion in eastern Europe, specialists said.

The Feb 22 ousting of Russian-backed Ukrainian president Viktor Yanukovych after months of street protests in Kiev and Russia's subsequent actions in Crimea have led to the most serious confrontation between Moscow and the West since the end of the Cold War.

"We don't know what's going to happen, but it may turn a lot of investors off Russia," said one hotel specialist who declined to be named due to client relations.

Marriott, which is due to open its first hotel in Kiev next year, says that the opening will depend on how the situation develops. "It's hard to say right now how that will affect the hotel's development because it wasn't due to open this year, it's about whether the tension continues," Marriott Europe head Amy McPherson told Reuters at the IHIF hotel conference in Berlin.

-From Berlin, Germany

For-profit bodies revive closed hospitals as medical halls

Source: Business Times / Property

[NEW YORK] New Jersey has been losing hospitals for more than two decades; 26 have closed in that time, many in poor, urban neighbourhoods that are left with an empty shell where a hospital once stood.

But in recent years, a few developers have purchased some of these abandoned structures, reopening them as private medical complexes that offer many of the services the hospitals once provided.

For struggling cities such as Paterson, New Jersey, the new use removes blight from the streets, restores healthcare services, creates jobs and provides a tax boost when a for-profit company replaces a non-profit institution.

Since 2008, developers in New Jersey have bought hospitals in Paterson, Jersey City, Hammonton and Trenton, converting the buildings into so-called medical malls that house an array of services such as urgent care centres, doctors' offices and dialysis centres.

-From New York, US

Temporary home for British firm in Guangzhou

Source: Straits Times

Hovnanian Has Wider Loss as Sales Demand for Homes Slows

Source: Bloomberg / Luxury

Hovnanian Enterprises Inc. (HOV), the worst-performing U.S. homebuilder this year, reported a wider loss for its fiscal first quarter as inclement weather extended construction times and sales demand slowed.

The net loss for the three months ended Jan. 31 was $24.5 million, or 17 cents a share, compared with $11.3 million, or 8 cents, a year earlier, the Red Bank, New Jersey-based company said today in a statement. The average estimate of nine analysts was for a loss of 4 cents a share, according to data compiled by Bloomberg.

Hovnanian, New Jersey’s largest homebuilder, said last month that while revenue grew in the first quarter, a slower sales pace, poor weather and labor and material shortages in some markets hurt home deliveries, leading to a wider loss for a quarter. Net contracts dropped to 1,202 homes from 1,344.

“The strong recovery trajectory from the spring selling season of 2013 has softened on a year-over-year basis,” Chief Executive Officer Ara Hovnanian said in today’s statement. “Net contracts in the months of December, January and February have not met our expectations.”

Hovnanian today slumped 10 percent, the most since December 2011, to close at $5.44. The shares have lost 18 percent this year, the most in a Bloomberg index of 19 U.S. homebuilders.

Harsh Weather

Across the homebuilding industry, orders started to slow in the second half of last year, partly because of rising mortgage rates and prices. The industry has taken another hit in recent months with the cold weather in much of the U.S., Robert Rulla, an analyst at Fitch Ratings in Chicago, said in a phone interview before Hovnanian reported its results.

“The harsh weather we’ve experienced had a bit of an effect on net orders, particularly in the Northeast and Midwest,” Rulla said. “What we’re hearing from homebuilders is that order rates are fairly weak so far this year.”

U.S. housing starts dropped 16 percent in January from December, the biggest decline in almost three years, according to the Commerce Department. Contracts to purchase existing homes rose less than forecast in January, climbing 0.1 percent after a 5.8 percent decline the previous month, according to the National Association of Realtors.

Revenue Rises

Hovnanian’s first-quarter revenue increased to $364 million from $358.2 million a year earlier, as the average price of homes delivered jumped 10 percent to about $351,300. Home deliveries slipped to 1,138 homes from 1,188 a year earlier. Contract backlog, an indication of future sales, rose to 2,456 from 2,301 year earlier.

Hovnanian said it is seeking to boost sales during the spring selling season with promotions such as a “Big Deal Days” sales campaign during the month of March.

“We believe this is a temporary pause in the industry’s recovery, and 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,” Ara Hovnanian said in the statement.

Industrywide, contracts to buy U.S. new homes unexpectedly climbed in January to the highest level in more than five years, rising 9.6 percent to a 468,000 annualized pace, the Commerce Department reported on Feb. 26. It was the biggest jump since July 2008 and beat the highest estimate among the 82 economists surveyed by Bloomberg.

-By Craig Giammona

London’s ‘Iceberg Homes’ Should Be Limited, Assembly Tells Mayor

Source: Bloomberg / Luxury

The London Assembly passed a motion to limit large-scale basement development in the U.K. capital as homeowners dig underground to add space and amenities to aging properties.

Mayor Boris Johnson should limit the size and depth of new or extended-basement projects, according to an e-mailed statement today by the 25-member assembly, whose main function is to hold the capital’s mayor to account.

“These renovations are turning large homes into iceberg houses with some three stories deep below ground, bringing the risk of flooding and structural damage,” assembly member Murad Qureshi said in the statement. “The mayor needs to acknowledge this is an expanding problem in London.” The mayor’s office didn’t immediately reply to a request seeking comment.

Planning applications for basements in the Royal Borough of Kensington & Chelsea, the most expensive place to buy a home in the U.K., rose to 307 in 2012 from 13 in 2001, according to the assembly. Billionaire John Caudwell, the founder of mobile-phone retailer Phones4U, won approval in January for an extension that’s almost 10 times the size of the average U.K. home to a property in London’s affluent Mayfair district.

By expanding their home, buyers can avoid paying a 7 percent transaction tax known as stamp duty on a property purchase of 2 million pounds ($3.3 million) or more.

“We were recently marketing a property priced just above 2 million pounds that received three bids all below the stamp duty threshold, reflecting buyers’ aversion to the cost,” Richard Barber, a partner at real estate broker W.A. Ellis LLP, said in a March 3 statement.

Purchasers paid an average of 1.66 million pounds for a home in Kensington & Chelsea in December, 15 percent more than a year earlier, according to data compiled by researcher Acadametrics.

-By Neil Callanan

Singapore to Overtake Tokyo as Asia’s Wealthy Hub in 2023

Source: Bloomberg / News

Singapore is poised to surpass Tokyo as the Asian city with the most ultra-high-net-worth individuals within a decade as its stature as a financial center increases with the region’s growth.

Singapore will have 4,878 people with $30 million or more in assets excluding their principal residence by 2023, a 55 percent gain from last year, and trailing only London globally, according to a report from Knight Frank LLP yesterday. The number of these millionaires in Tokyo will climb 8 percent to 3,818, ranking the city fourth worldwide after New York.

“The main battleground is Asia, where a handful of locations are slugging it out in the hope of establishing a clear lead as the region’s alpha urban hub,” Nicholas Holt, Knight Frank’s Asia-Pacific head of research, said in a statement yesterday.

Singapore has overtaken Tokyo as the world’s most expensive city, the Economist Intelligence Unit’s Worldwide Cost of Living Survey showed on March 4. The city-state leapt five spots to top the ranking after its currency appreciated and the cost of car ownership and luxury apparel climbed, according to the EIU’s report.

The number of ultra-high-net-worth individuals in Vietnam’s Ho Chi Minh City will almost triple by 2023 to 246 from 90, the largest increase among the more than 80 cities tracked by Knight Frank. That was followed by a 148 percent advance in Jakarta to 857.

Second Home

Singapore’s business environment, tax regime, political stability and its growing status as a key regional financial hub have drawn wealthy people to the city, Alice Tan, head of consultancy and research at Knight Frank Singapore, said in yesterday’s statement.

Almost a quarter of Asia’s ultra-high-net-worth individuals are considering buying another home in the next 12 months, with Singapore following the U.K. as the top location for second-home ownership.

The Southeast Asian country’s economy expanded by an annualized 6.1 percent in the December quarter as manufacturing picked up, with the government predicting an improvement in overseas demand in 2014.

London is expected to have 4,940 ultra-high net-worth individuals by 2023, while New York will take the No. 3 spot with 3,825, according to Knight Frank. The total in Hong Kong will rise 37 percent to 3,502, helping the city retain its No. 5 spot.

-By Sanat Vallikappen

Americans Shut Out of Home Market Threaten Recovery: Mortgages

Source: Bloomberg / Personal Finance

Kirk Rohrig is concerned he may soon join the growing ranks of Americans shut out of the housing recovery and the financial benefits that spring from it.

Rohrig, who is unmarried, began hunting in November for his first home in PortlandOregon, where cash buyers are driving up property prices. The software support specialist earns about $55,000 a year, has a high credit score of 790 and can’t find anything worth buying for about $200,000.

“Even fixer uppers are out of my range,” Rohrig, 33, said. “I went to look at a house that was garbage. There were cracks around all the windows and full condensation on the inside. It was on the market for $225,000.”

    First-time homebuyers hurt by rising prices and tougher credit standards are disappearing from the market, slowing the pace of the three-year recovery. The decline of these buyers, many of whom are young and non-white, also threatens to widen the wealth gap between owners, who benefit from appreciation, and renters, said Thomas Lawler, a former Fannie Mae economist.

    “Potential first-time buyers weren’t able to take advantage of the high point in affordability and the low point in prices,” said Lawler, president of Lawler Economic & Housing Consulting LLC in Leesburg, Virginia. “So the wealth effect of the recovery hasn’t gone to what could have been new buyers.”

    First timers accounted for 26 percent of purchases in January, down from 30 percent a year earlier, according to the National Association of Realtors. This January’s figure is the lowest market share NAR has recorded since it began monthly measurements in October 2008.

    ’Huge Problem’

    The decline of these buyers has hurt U.S. sales, which fell 5.1 percent in January from a year earlier, according to NAR. While purchases rose 8.2 percent for residences costing more than $250,000, they fell 10.7 percent for homes worth less.

    “It’s a huge problem,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “We have a ladder of homeownership and need first-time homebuyers beginning the process of owning, building equity and trading up to have a healthy housing sector.”

    The biggest challenge to cracking the housing market for first time buyers is that in much of the country home prices are rising faster than incomes.

    The entry-level market was the first to rebound after the housing crash. It rose from a 2012 trough as Blackstone Group LP (BX) and other investors paid cash to absorb foreclosed homes to convert to rentals. In December, 47 percent of U.S. purchases were paid for with cash, up from 27 percent a year earlier and the highest level in data going back to at least 2005, according to a report yesterday by Black Knight Financial Services.

    More Landlords

    More owners of moderately priced homes are also becoming landlords, reducing the supply for first time buyers. Thirty-nine percent of owners looking for better homes plan to keep their current house as a rental, Redfin Corp., a Seattle-based brokerage firm, said in a report last month.

    “Being a landlord was not something that many people looked forward to in the past and now that’s much more of a norm,” Redfin Chief Executive Officer Glenn Kelman said.

    Younger buyers’ wealth has not bounced back as fast as the prices of homes. Americans under age 40 have only recovered a third of the wealth they lost after the recession began in 2007, while older households are back to pre-crisis levels, William Emmons and Bryan Noeth, researchers with the Federal Reserve Bank of St. Louis, said in a report last month.

    Mortgage Costs

    The decline in affordability is acute in California. Single-family home prices jumped 20 percent last year to a median $438,040, and only 32 percent of households could afford the median-priced home, according to California Association of Realtors. That’s down from 48 percent in 2012.

    “It certainly has made it very hard for first-time buyers,” Appleton-Young said. “How do you compete with all cash? You don’t.”

    Rohrig, the software specialist, doesn’t have much cash for a down payment. So he plans to purchase with a loan from Key Corp., which provides up to 100 percent financing for buyers who qualify.

    “I want to get in there as soon as I can because I have the feeling in another year or two it won’t be possible,” Rohrig said.

    Higher mortgage costs are also a burden for first timers. Rates for 30-year fixed loans climbed to 4.37 percent last week from a near-record low of 3.35 percent in early May. The rate reached a two-year peak of 4.58 percent in August.

    FHA Insurance

    The Federal Housing Administration, the biggest source of financing for first-time buyers, has raised the cost of borrowing and tightened underwriting to cope with losses on mortgages it insured as the property bubble burst.

    FHA borrowers pay an upfront fee of 1.75 percent of the loan balance and up to 1.35 percentage points in annual mortgage insurance premiums. The number of FHA borrowers purchasing their first homes declined by 38 percent to 550,000 last year from the 2010 peak.

    Under a Housing and Urban Development pilot program, first-time buyers who go through housing counseling will get a discount on the mortgage insurance premium, FHA commissioner Carol Galante told reporters yesterday.

    “We now have very strong evidence that housing counseling delivered by quality groups like HUD-approved counselors not only benefits the family but actually lowers the risk of default,” Housing and Urban Development Secretary Shaun Donovan said during the call. “We believe this initiative has a double benefit of expanding access to credit but also strengthening the FHA” insurance fund.

    Higher Scores

    Lenders are requiring higher FICO scores, which can disproportionally impact first-time borrowers with short or bad credit histories. More than 40 percent of borrowers in 2013 had FICO scores above 760, compared with about 25 percent in 2001, according to a Feb. 20 report by Goldman Sachs Group Inc. analysts Hui Shan and Eli Hackel.

    “Credit is not just tight relative to the peak years of the housing bubble, but also to most of recent U.S. housing history,” Shan and Hackel wrote. “Nearly five years after the end of the recession and with house prices 20 percent above the trough, we have seen few meaningful signs of easing in mortgage credit availability.”

    Many possible first-time borrowers have stopped applying for loans. Applications for mortgages to buy homes in February fell 9 percent from the previous month to the lowest level since August 1995, according to an analysis of Mortgage Bankers Association data by Capital Economics Ltd. in London.

    Applications Down

    Logan Mohtashami, a senior loan officer with AMC Lending Group in Irvine, California, hasn’t gotten one pre-qualification application from a person younger than 35 since Jan. 1.

    “They’re usually about 40 percent of buyers,” said Mohtashami, whose company has been lending since 1987. “This year, it’s so quiet. They’re not even getting started in the process.”

    After reaching 50.1 percent in 2005, the homeownership rate for people in their 20s and 30s fell to 42.2 percent in 2013, the lowest in 19 years of Census data analyzed by Emmons and Noeth, the Fed analysts.

    Those closed out of the market missed long-term gains in home equity that beat the stock market. Equity in a group of 46,000 homes purchased with median 3 percent down payments between 1999 and 2003 appreciated at a median annualized rate of 25 percent by the second quarter of 2013, according to a report by Roberto Quercia, professor of regional planning at the University of North Carolina at Chapel Hill. The equity on initial down payments of $1,950 increased a median $18,429 during the period of the study, according to Quercia.

    Nothing Left

    The Standard & Poor’s 500 Index (SPX) recorded an annualized rate of return of 3 percent between July 1999 and June 2013, according to data compiled by Bloomberg.

    Stephanie Horchreder, 32, moved in with her mother last year to save money for a down payment. She had been looking for a three-bedroom house with a yard for a maximum $250,000 within a short commute of her job as a law enforcement 911 dispatcher near Denver.

    Horschreder stopped house hunting in July, when bidding from competitors grew overheated. She started looking again in January, only to watch places she liked go into contract before she had time to submit a bid.

    “Two years ago would’ve been the right time to buy, but I didn’t have the money,” she said. “Now I’m at the right point in my life and there’s nothing for me.”

    -By Prashant Gopal and John Gittelsohn

    Google Invests $50 Million in Property Broker

    Source: Bloomberg / Tech

    Google Inc. (GOOG)’s new investment arm is buying a minority stake in LLC, the largest U.S. online real estate auction firm, for $50 million.

    The investment by Google Capital, which expects to spend about $300 million this year to back late-stage companies, is the first in a real estate venture for the unit of the Mountain View, California-based Internet search firm. The deal values at $1.2 billion, the Irvine, California-based company said today in a statement.

    “Like EBay kind of drove transparency and created a marketplace for hard-to-find items, is creating transparency in part of the real estate market,” David Lawee, head of Google Capital, founded last year, said in a telephone interview. “Here, you can go on to a site and see thousands of properties that are listed for sale that would be great investment opportunities.”, which sold $7 billion in real estate online last year, uses countdown clocks similar to those on EBay Inc.’s website to broker the sale of properties and non-performing loans. It has auctioned $26 billion of assets since 2007, diversifying from foreclosed homes sold on courthouse steps to selling luxury properties, office buildings and European real estate.

    The Google investment will help expand and diversify its technology, including offering more services for mobile customers, according to Jeff Frieden, the company’s co-founder and chief executive officer.

    “It’s a very strategic partnership,” Frieden said in a phone interview. “It’s about a lot more than just the money.”

    Board Seat

    Google Capital will have a seat on’s seven-member board, according to the statement. Other stakeholders include Stone Point Capital LLC, a Greenwich, Connecticut-based investment firm headed by former Goldman Sachs Group Inc. Chairman Stephen Friedman; Barry Sternlicht’s Starwood Capital Group LLC and Starwood Property Trust Inc., which acquired separate stakes last year; and funds managed by Fortress Investment Group LLC. (FIG)

    Google Capital last month put $40 million into Renaissance Learning Inc., an education-software company. Last year, it was part of a $125 million investment in LendingClub Corp., an online peer-to-peer loan service in San Francisco, and it joined private-equity investors backing SurveyMonkey Inc., a provider of online surveys., as of yesterday, had listings on its website for 19,772 residences, 138 commercial properties, 83 land parcels and 41 real estate loans.

    JPMorgan Chase & Co. served as the private-placement agent for for the investment.

    -By John Gittelsohn and Brian Womack

    Spanish Property Investor Lar Espana Rises on First Trading Day

    Source: Bloomberg / News

    Lar Espana Real Estate Socimi SA, a company that plans to buy distressed property in Spain (SPNPTHQ), rose on the first day of trading in Madrid on expectations it will benefit from a recovery in the country’s real estate market.

    Lar Espana, which raised 400 million euros ($549 million) in a share placement last week and counts Pacific Investment Management Co. among its investors, rose as much as 10 percent. The shares traded at 10.25 euros at 12:20 p.m. in Madrid, compared with the 10 euro price set for the share sale.

    Overseas investors are entering Spain’s property market after home prices fell by more than 40 percent. Paulson & Co., the hedge-fund firm founded by billionaire John Paulson, plans to invest in Hispania Activos Inmobiliarios, another Spanish real estate company that’s due to sell shares to the public for the first time this month. Other investors include Quantum Strategic Partners LP.

    Lar Espana is a Socimi, which is similar to a real estate investment trust. It will focus on buying undervalued offices in Madrid and Barcelona as well as retail parks and warehouses throughout Spain, the company said in the Feb. 13 offering documents. Lar Espana is targeting a total shareholder return rate of more than 12 percent a year when all net proceeds have been fully invested, according to the documents.

    Investment in Spain by funds, private-equity firms and financial-services companies totaled 13.9 billion euros in 2013, according to Madrid-based debt-restructuring firm Irea. About 37 percent of the money was spent on real estate assets and that figure is expected to increase this year as special emphasis is put on the property market, according to Irea Chief Executive Officer Mikel Echavarren.

    -By Sharon Smyth

    U.K. Supermarket Annual Property Sales Rise to Record $3 Billion

    Source: Bloomberg / News

    Investors bought a record 1.8 billion pounds ($3 billion) of property leased to U.K. supermarket operators such as Tesco Plc (TSCO) and J Sainsbury Plc last year, 50 percent more than in 2012, as they sought real estate with longer leases.

    The total return, comprised of changes in real estate values and rental income, was 11 percent last year, researcher Investment Property Databank Ltd. and broker Colliers International said in a report today. That beat a 6.7 percent total return from shopping malls and a 9.6 percent return from outlets such as high-street shops, department stores and restaurants. Supermarket leases are almost twice as long as those for standard stores, the report said.

    Real estate held by some of the U.K.’s biggest supermarket chains including Wm Morrison Supermarkets Plc (MRW) is attracting private-equity firms and hedge funds after a 35 percent gain over five years made the stores worth more than the companies that run them. The value of property leased to the grocers rose by 5.8 percent last year, the most since 2010, according to today’s report.

    Demand from investors was strongest for larger supermarkets in towns and cities as out-of-town stores underperformed, IPD and Colliers said.

    “The general retreat from larger ‘Death Star’ stores continued with a move away from non-food sales and an increased focus on the core business of groceries,” according to the report.

    Not all supermarket chains are cutting the size of their stores, according to the report. Waitrose Ltd., for example, increased its standard space requirement in “stronger towns” to 50,000 square feet (4,600 square meters) from 35,000 square feet, IPD and Colliers said.

    -By Neil Callanan