Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

15th May 2014

Singapore Real Estate

Over 80% of Kallang Wave's space taken

Anchor tenants include FairPrice Xtra, Uniqlo, H&M and Harvey Norman

Source: Business Times / Property

[SINGAPORE] Kallang Wave, the new retail mall in the Singapore Sports Hub, named its anchor dining, retail and lifestyle tenants yesterday. Besides hypermarket FairPrice Xtra, food court chain Foodfare and climbing-wall operator Climb Central, Kallang Wave's confirmed tenants include Uniqlo, H&M, Forever 21 and Harvey Norman.

More than 80 per cent of the 41,000-sq-m mall, whose official opening is planned for July, is occupied, said Kallang Wave's manager, SMRT Alpha.

"We are appealing to a broad spectrum of Singaporeans, from seniors, lifestylers, sports enthusiasts families (to) youths," said SMRT Alpha director Dawn Low. "The tenant mix has been engineered and curated to address basically a broad spectrum of needs."

That said, the mall is decidedly sports-themed. With their 1,000 sq m of climbing surface, the climbing towers in the mall's atrium will be the largest air-conditioned climbing wall - and the tallest indoor one - in Singapore, said operator Climb Central.

-By Jaira Koh

Kallang Wave mall to open next month

Source: Channel News Asia / Business

SINGAPORE: The Singapore Sports Hub's retail mall has been named the Kallang Wave.

According to its mall manager SMRT Alpha at a media preview on Wednesday, the mall will open from June.

Spread over 41,000 square metres, Kallang Wave will boast the tallest indoor climbing wall in Singapore and the first sports-themed hypermarket.

The mall is part of the S$1.33-billion Singapore Sports Hub, and SMRT Alpha said it already has an occupancy rate of over 80 per cent.

SMRT Alpha is a joint venture between subsidiaries of SMRT and NTUC Fairprice Co-operative.

Dawn Low, board of director at SMRT Alpha, said: "Because of its unique location, which is well served by Circle Line Stadium (station), as well as the East West Line (Kallang) which is accessible using a pedestrian overhead bridge, we are quite confident that we will have good visitorship to the mall and also the facilities around.

“With our wave of partners that have come on board in support of the mall, and also in support of the facilities around -- such as our bank partners, our community partners -- we're very confident that Singaporeans will be able to come here to shop, dine, and play, and truly spend an integrated experience throughout the day with their young and their old."

But analysts said until the Sports Hub is fully operational, and unless there is a strong pipeline of events, it may be hard for Kallang Wave's retailers to attract visitors.

Ku Swee Yong, Century 21 Singapore’s chief executive officer, said: "In comparison with the current retail shops at Leisure Park Kallang as well as the Singapore Indoor Stadium, we definitely can observe… many quiet periods in between concerts, in between sporting events... We cannot see that current catchment being able to sustain the current retailers."

But SportsHub, the consortium behind the entire project, is optimistic.

Oon Jin Teik, SportsHub’s chief operating officer, said: "The mall is going to open in tandem with all the events. So we have the rugby, the swimming events, (and) the community events -- all coming along at the same time.

“As the mall opens, each tenant has got its own plans as well, so again you see a staggered and phased approach here. We are not so concerned about it... as (it is in) the early phase, and it is a complex project, you will see all these multiple parties having to come together. Each will look a bit faster or slower, but it's not a concern."

The mall at the Singapore Sports Hub is touted as one that caters to a wide spectrum of users as it comprises a supermarket, fashion retail, and even food stores.

When asked about the retail mix, Mr Oon said he is not worried that the retail offerings at the mall will crowd out genuine sports users who come to this area.

Mr Oon added that besides sports, it is important to have other offerings, such as dining options. SMRT Alpha also added that there are over 3,000 parking lots in the facility, of which 500 are directly under the mall. 

- CNA/nd/gn

DHL breaks ground for $160m warehouse facility

Source: Straits Times 

Logistics giant DHL broke ground for a $160 million warehouse facility at Tampines LogisPark yesterday. The 90,000 sq m complex is due to be completed by the second half of next year. It is DHL's 21st facility in Singapore and will be its largest here, increasing its warehouse capacity by 40 per cent.

Factories in S'pore-run industrial parks in Vietnam hit by riots

Source: Channel News Asia / Business

SINGAPORE: Four factories in two Singapore-run industrial parks in Vietnam were set on fire on Tuesday night during Vietnamese anti-China protests.

The VSIP Binh Duong industrial parks 1 and 2 are managed by an associate company of Singapore's Sembcorp Industries. There are more than 400 operating companies in the two industrial parks, and many have stopped work since.

The four affected factories are from Taiwan and China.

In a statement, Sembcorp Development said about 200 tenant employees were evacuated, and that there were no reports of casualties.

A spokesperson added that local police have taken over security at the two parks.

Anti-China mobs torched up to 15 foreign-owned factories and trashed many more in southern Vietnam as anger over the recent deployment by China of an oil rig in disputed South China Sea waters spun dangerously out of control, according to news reports out of Vietnam.

The unrest at industrial parks established to attract foreign investors was the most serious outbreak of public disorder in years.

In response to media queries, a Ministry of Foreign Affairs spokesman said: "MFA has been informed of the protests that have broken out at the Vietnam-Singapore Industrial Parks (VSIP) I and II in Binh Duong and that a number of foreign companies have been broken into and set on fire.

"Singapore views this issue very seriously given our close economic cooperation with Vietnam. The Singapore Embassy in Hanoi and the Consulate-General in Ho Chi Minh City have separately requested the relevant Vietnamese authorities to restore order urgently."

"(On Wednesday) morning, MFA called in the Vietnam ambassador to Singapore to register its serious concerns about the security situation in VSIP I and II, and the attacks on foreign companies in the two industrial parks.

"MFA requests the Vietnamese government to act immediately to restore law and order in the two VSIPs before the security situation worsens and investor confidence is undermined."

The ministry added that the Singapore government is monitoring the situation closely and so far, there have not been any reports of Singaporeans affected by the demonstration.

- CNA/ac

Factories torched in anti-China riot in Vietnam

Some non-China operations also mistakenly attacked

Source: Business Times / Top Stories

[SINGAPORE] Anti-China protests in Vietnam took a violent turn on Tuesday night, as angry mobs - vexed by China's recent deployment of an oil rig in disputed waters - looted factories and set industrial property alight in the southern province of Binh Duong. Two Sembcorp-run Vietnam Singapore Industrial Parks (VSIPs) were among several industrial zones hit by the unrest.

The Singapore government yesterday urged the Vietnamese authorities to restore law and order "before the security situation worsens and investor confidence is undermined".

While businessmen The Business Times spoke to appeared largely unfazed by the protests - most said the turmoil was likely a one-off isolated incident - analysts warned that undertones of antagonism towards China could be a recurring theme in the socialist republic.

Reuters reported Tran Van Nam, vice-chairman of Binh Duong Province People's Committee, as saying to local reporters: "About 19,000 workers were demonstrating against China's violation of Vietnam's territorial waters . . . Some workers turned angry, destroying companies' gates and entering the compounds and asking other workers to join a strike."

Reports suggest that the rioters had wanted to target Chinese companies and employees, but ended up trashing Japanese, Korean, Taiwanese, and Hong Kong factories instead, after mistaking them for Chinese-owned facilities - perhaps because of Mandarin-looking characters on logos and signboards.

Several industrial parks were said to be affected too, with more than a dozen foreign-owned factories torched - although no official numbers have been given. There were no reports of casualties; police are said to be holding almost 500 people for questioning.

At the two VSIPs, four factories from China and Taiwan (which made garments and electronics) were set on fire. Of the 424 companies operating there, 99 tenants were affected by the protests, when crowds bashed windows and doors in, and looted factories.

The two VSIPs were set up in 1996 and 2006, as part of Vietnam's efforts to attract foreign investments into the country. The parks are the result of a collaboration between Vietnam's state-owned Becamex IDC Corp and a Singapore consortium lead by Sembcorp. The latter effectively holds a 47 per cent share in the joint-venture company that manages the parks.

Mainboard-listed Sembcorp said that protesters were still circling the two parks as at press time, though riotous activities were being controlled by VSIP security officers and local police who remained on-site. Though more than 200 people have been evacuated from the two VSIPs, BT understands that some parts of the industrial zone remain unaffected and some tenants are continuing with operations.

The tumult in Binh Duong comes days after protests were staged in Hanoi and Ho Chi Minh City over the past week. Earlier this month, China moved a drilling rig to a location 120 nautical miles off the coast of Vietnam, in a part of the South China Sea claimed by the latter.

Yesterday, a spokesman for Singapore's Ministry of Foreign Affairs (MFA) said that MFA had called in the Vietnam ambassador to Singapore to register its "serious concerns" about the security situation in VSIP I and II, and the attacks on foreign companies in the two industrial parks. The spokesman added: "Singapore views this issue very seriously given our close economic cooperation with Vietnam."

But businessmen who have a stake in the Binh Duong VSIPs do not seem too ruffled by the incident. T Chandroo, chairman and CEO of Modern Montessori International (MMI) - which has poured $2 million to build its first school in Vietnam - told BT: "So far we've never heard of any such incidents happening in Vietnam. I take it as a one-off thing, and I'm very confident things will settle down."

But analysts have another take. Said Barclays economist Leong Wai Ho: "I think it's a rude awakening for foreign investors and potential foreign investors, and these things are going to be factored into any company's strategic investments in Vietnam. If your production and supply chains straddle China and Vietnam (as many operations do), things may not be so smooth.

"No one saw this coming, and this anti-Chinese sentiment is not going to go away anytime soon. It looks more like it's going to be a protracted series of geopolitical risk flares, which will result in more of what we've just seen (in Binh Duong)."

Added CIMB economist Song Seng Wun: "We've already seen this happen between Japan and China - they squabbled over islands, and two-way trade (took a hit) for a good year or so. Depending on how officials respond, the same thing could happen here this time."

-By Kelly Tay

Real Estate Companies' Brief

Offer price for HPL raised to $4 a share

Move follows married trades in shares amounting to 3.3% of HPL

Source: Business Times / Top Stories

[SINGAPORE] The consortium led by tycoon Ong Beng Seng and Wheelock Properties has raised its offer price for shares in Hotel Properties Ltd (HPL) to $4 per share from $3.50.

This followed married trades yesterday with undisclosed parties in 17.1 million shares or 3.31 per cent of the issued share capital in HPL at $4 apiece, said Standard Chartered Bank, the financial adviser for the offeror 68 Holdings Pte Ltd.

These married trades stoked HPL shares up 7.3 per cent to $3.84 yesterday before a trading halt was imposed.

The mandatory takeover offer for HPL shares that 68 Holdings does not already own was earlier triggered last month after 68 Holdings agreed to acquire a 41.91 per cent stake in HPL at $3.50 apiece.

-By Lynette Khoo

Haw Par reports 59% jump in Q1 earnings

Source: Business Times / Companies

HAW PAR Corporation yesterday posted a 59 per cent increase in its first-quarter net profit to $12.2 million, due to higher operating income and gain from dilution of an associated company.

The group's revenue at $38.4 million was 16 per cent higher than the $33.1 million earned last year.

Earnings per share for the three months ended March 31 were 5.6 cents, compared to the 3.5 cents earned last year.

Haw Par's healthcare business led the way in the profitable quarter. The group's profit from operations increased 31 per cent to $12.4 million, with increased contribution from the healthcare division offsetting a decline in the leisure division.

-By Malminderjit Singh

Sim Lian, Lee Kim Tah report lower profits

Source: Business Times / Companies

SIM LIAN Group yesterday posted a 48 per cent slide in net profit to $17.1 million, on the back of a 50.7 per cent drop in revenue to $96.5 million for its third quarter ended March 31, 2014.

Earnings per share for the quarter fell to 1.7 cents, from 3.3 cents a year ago.

This was due to lower contributions from its property development division, whose contribution to the group's revenue fell 67 per cent year-on-year, "mainly due to reduced revenue contribution from Waterview project as it has obtained its TOP (temporary occupation permit) in January 2014."

The Tampines condominium adopts a "percentage of completion" method, meaning it raked in most of its revenue at the peak of its construction cycle in previous quarters.

-By Lee Meixian

CDL net profit down 13.1%

Group has acquired five prime freehold properties in UK for £152m

Source: Business Times / Companies

CITY Developments Ltd (CDL), which posted a 13.1 per cent drop in net profit to $119.7 million for the first quarter ended March 31, 2014, has acquired five prime freehold properties in the UK for £152 million (S$318.9 million) since September last year.

Besides the £80 million purchase of a multi-storey car park site at 28 Pavillion Road in Knightsbridge, which the group intends to redevelop into a luxury residential project (subject to planning approval), it has picked up investment properties in Croydon and Chelsea in addition to duplex apartments in Belgravia (near Sloane Square).

The group reiterated that it is actively seeking new opportunities in mature markets such as the US, Japan and Australia, whose economies are recovering and whose capital markets' sophistication, transparency and corporate governance are akin to those of Singapore.

For Q1 2014, CDL's group revenue eased 5.4 per cent year-on-year to $734.2 million.

-By Kalpana Rashiwala

City Developments Profit Falls 13% on Lower Property Sales

Source: Bloomberg / Luxury

City Developments Ltd. (CIT), Singapore’s second-largest developer, posted a 13 percent decline in first-quarter profit on lower divestment gains from property holdings.

Net income fell to S$119.7 million ($96 million) in the three months ended March 31, from S$137.7 million a year earlier, as sales slid 5.4 percent to S$734.2 million, the developer said in a statement to the stock exchange today. Profit from sales of investment properties dropped to S$1.2 million from S$31.5 million in the same period a year ago, according to the statement.

City Developments, which hired Grant Kelley from Leon Black’s Apollo Global Management LLC as chief executive officer earlier this year, is seeking to expand overseas amid declining demand in Singapore. Home sales in the city-state fell to a three-month low in March following the government’s tougher housing curbs that led to first-quarter private residential prices declining the most in five years, government data showed.

“The Singapore residential market is expected to be cautious with moderated volumes,” City Developments said in a statement today. “During this subdued state coupled with the uncertainty of the global economic landscape, the group has taken deliberate efforts to put in place some longer term strategies” such as overseas expansion.

‘Actively Seeking’

The developer is “actively seeking new opportunities in mature markets such as the U.S., Japan and Australia,” it said in the statement.

City Developments started marketing its Commonwealth Towers project this month, selling 66 percent of the 400 units released for sale from the total 845 units, the company said. The developer will start selling its 944-unit Coco Palms project later this month, it said.

The shares rose 0.2 percent to S$10.8, while the benchmark Straits Times Index added 1.1 percent. The company reported earnings after the close of trading.

Singapore’s first-quarter home prices declined for a second consecutive quarter as tighter mortgages cooled demand in Asia’s second-most expensive housing market. An index tracking private residential prices fell 1.3 percent in the three months ended March 31, a government statement showed on April 25.

-By Pooja Thakur

Banyan Tree Q1 profit down 72% on lower other income

Source: Business Times / Companies

SINGAPORE-BASED leisure and hospitality company Banyan Tree Holdings posted a 72 per cent decline in net profit for the first quarter to $4 million, compared to the $14.2 million it made during the same period last year.

Revenue for the three months ended March 31 slid 3 per cent to $93.9 million, compared to the $96.9 million it earned last year. "Other income decreased by $16.5 million from $18.1 million in 1Q13 to $1.6 million in 1Q14 as other income in 1Q13 included gain on sale of Angsana Velavaru hotel," said Banyan. Earnings per share for the quarter were 0.53 cent, against 1.87 cents per share last year.

The group lost revenue from its hotel investments, down 5 per cent from last year, and from its fee-based segments - 13 per cent less for spa/gallery operations and 12 per cent less for design & others. It said that its forward bookings for owned-hotels in Thailand for the second quarter are 25 per cent below the same period last year, causing it to be cautious about its operations there in the near term. However, it is opening five new resorts in the next 12 months - four in China and one in Morocco.

Banyan Tree shares fell by half a cent yesterday, closing at 62.5 cents.

-By Malminderjit Singh

Yanlord, Ying Li Q1 profits surge

Source: Business Times / Companies

CHINA property developers Yanlord Land Group and Ying Li International Real Estate both posted a surge in first-quarter earnings.

Ying Li's net profit attributable to shareholders was 33.7 million yuan (S$6.8 million), more than quadruple the 7.7 million yuan a year earlier.

Its revenue jumped 170.2 per cent to 279.7 million yuan due mainly to revenue recognition upon the handover of residential units in Block 3, 4, 5 and retail units of the Ying Li International Plaza project.

Earnings per share for the January-March quarter were 1.6 fen, up from 0.4 fen.

-By Malminderjit Singh

Singapore Hospitality

Source: Business Times / Singapore Market

We initiate coverage on the hospitality Reits, with a "buy" rating for CDL Hospitality Trust (target price or TP: S$1.90) and a "neutral" rating for Far East Hospitality Trust (TP: S$0.90). After three years of under-performance relative to the S-Reits, we believe the hospitality Reits are starting to turn the corner alongside a bottoming of the RevPar (revenue per available room) cycle, on expectations that room-night demand will exceed supply over the next three years.

Views, Reviews & Forum

'Get more S-E Asian investors looking beyond real estate'

Source: Straits Times

South-east Asia offers a wealth of growth opportunities but more must be done to get investors to diversify their investment portfolios, says a top Singapore Exchange (SGX) official. Securities head Jenny Chiam told a conference yesterday that Asia is clearly one of the fastest growing regions in the world and financing its burgeoning appetite will take on greater importance as urbanisation increases.

Implications of letting HDB flat owners buy private homes

Source: Straits Times

Mr Chiam Tat Ang ("Continue letting HDB flat owners buy private property"; last Friday) has overlooked some essential differences between public flats and private properties. HDB flat owners enjoy substantial subsidies as part of the Government's aim to give every citizen a chance to own a home. The minimum occupation period (MOP) ensures they make the houses their homes for a certain period to justify the subsidies.

Apprenticeship programmes develop skilled workforce in built environment sector

Source: Straits Times

We thank Mr Chia Wai Chon ("Apprenticeships: It's an image problem"; May 6) for his suggestions on how to make apprenticeships work. The Building and Construction Authority (BCA) agrees that apprenticeships are invaluable to developing a skilled workforce.

Global Economy & Global Real Estate

Eurozone industrial output unexpectedly falls in March

Slump in energy production behind 0.1% dip: Eurostat

Source: Business Times / World

[BRUSSELS] Eurozone industrial output unexpectedly fell in March on the year for the first time since August as energy production slumped, data showed yesterday, in what could point to slower economic growth going into the second quarter.

Output in the 18 countries sharing the euro dipped 0.1 per cent on the year due to the steepest drop in energy production in nearly five years, according to Eurostat, the European Union's statistics office. Weak energy output was partly due to a mild winter.

Analysts polled by Reuters had expected a one per cent rise in industrial production, with none of them predicting an annual drop. Production also fell 0.3 per cent from February.

The figures added to some recent softer eurozone data including a sharp drop in the ZEW German investor morale index in April, which could suggest growth in the currency bloc continues to struggle to gain stronger momentum.

-From Brussels, Belgium

Student loans keeping grads from buying homes

Source: Business Times / World

[WASHINGTON] Young people are drowning in student loans, and that debt is holding them back from reaching grown-up financial milestones, such as buying a house, according to a report released on Tuesday.

The housing market recovered a bit last year as home prices rose 11 per cent and overall mortgage debt increased, but 30-year-olds missed out on most of those gains, according to a report by the Federal Reserve Bank of New York. Researchers also found that those with student loans were less likely to own a home than those without college debt.

The Fed's data shows that while home ownership rates fell for all groups during the financial crisis, 2012 was the first year in which young people with student debt had lower home ownership rates than people without student debt.

In the nine years prior, dating back to 2003, student loan borrowers enjoyed higher home ownership rates, a trait researchers attributed to people with student loan debt being likely to have higher levels of education and presumably higher earning potential.

-From Washington, US

Judge blocks NY's inquiry into Airbnb

Gerald Connolly voids subpoena for seeking irrelevant materials

Source: Business Times / Property

[NEW YORK] New York's investigation into whether Airbnb Inc allows users to run illegal hotels hit a setback when a judge ruled that a request for information about the service's rental home providers was too broad.

Acting Supreme Court Justice Gerald Connolly in Albany on Tuesday voided a subpoena from New York Attorney-General Eric Schneiderman, saying that the demand for information identifying all hosts in New York, including their names and addresses, "seeks materials that are irrelevant to the inquiry".

The San Francisco-based firm lets users rent out a couch, bedroom or house, and makes money by charging a fee for each transaction. With listings in about 34,000 cities around the world, the company is said to be valued at US$10 billion under a financing deal with TPG Capital.

State regulations generally prohibit short-term rentals of entire private homes. Critics, including affordable housing advocates, said that Airbnb is driving up rents, while supporters such as the Washington-based Internet Association, which represents e-commerce companies Inc, EBay Inc and Twitter Inc, claimed that the service boosts local economies.

-From New York, US

China's property market finally seems to be stalling

In a severe blow for the country, housing starts plunged 25% in April from a year ago

Source: Business Times / Property

[HONG KONG] After almost two decades of nearly unceasing increases in real estate prices and construction across China, one of the world's longest-running bull markets finally seems to be stalling, with broad consequences for the country's economy and possibly its politics.

Prices are falling for both new and old apartments. The volume of deals is drying up. And developers are pulling back, furloughing workers and delaying new projects.

In the latest sign, housing starts plummeted 25 per cent in April from a year ago, the Chinese government announced on Tuesday.

It is a severe blow for a country where real estate sales offices have become ubiquitous and tower cranes are jokingly described as the national bird.

-From Hong Kong, China

Toronto condo market healthy: builders

They dismiss talk of bubble and say demand comes from domestic investors

Source: Business Times / Property

[TORONTO] Builders of Toronto condominiums get as little respect these days as the embattled mayor, according to one of the city's largest high-rise developers.

"I almost know what Rob Ford feels some days because people are always taking runs at the guy," Barry Fenton, chief executive officer of Lanterra Developments, said at the Bloomberg Canada Economic Summit yesterday. "The truth of it is we're good, the market is really healthy still and we have a long ways to go on the upside."

Toronto, whose mayor entered a rehabilitation centre after admitting smoking crack cocaine, is in the midst of a building boom.

The city of 2.8 million people has more condo towers under construction than any other North American city, according to industry researcher Emporis, fuelling speculation the market is in a bubble.

-From Toronto, Canada

Brazil's shopping centre glut sparks concerns in bond market

General Shopping's bond yields climb as firm's rating is cut

Source: Business Times / Property

[SAO PAULO] Brazil's shopping malls are proving to be the latest bond-market casualties of the nation's economic malaise.

General Shopping, the owner of 18 malls, had its rating cut by Moody's Investors Service on May 9 on concern a building boom in shopping centres will end up harming creditors as consumers stung by surging interest rates curtail spending. The downgrade pushed losses on the company's US$250 million of perpetual bonds to 3 per cent this year, compared with an average 3 per cent gain for junk-rated emerging-market debt.

Investors are growing concerned that General Shopping, which is building three more shopping centres, will struggle to fill its malls as the slowdown in Latin America's biggest economy deepens. One measure of vacancies in high-end commercial properties in Sao Paulo is soaring to the highest in a decade as retail sales slump and Brazil carries out the world's longest cycle of rate increases to tame inflation.

"There's a squeeze in consumer discretionary spending which has an impact on demand for retail space," Michael Roche, a fixed-income strategist at Seaport Global Holdings, said from New York. "The macro backdrop encouraged very aggressive growth models that were implemented amid a growth climbdown."

-From Sao Paulo, Brazil

InterContinental plans to return to Rio in time for Olympics

Source: Business Times / Property

[RIO DE JANEIRO] InterContinental Hotels Group, the world's largest provider of hotel accommodation, is returning to Rio de Janeiro after losing its only location to Louvre Hotels Group three years ago.

InterContinental plans to open a Holiday Inn and a Holiday Inn Express before the 2016 Olympics and is looking for other properties closer to Rio's beaches, said Salo Smaletz, vice-president of development for Latin America. Louvre bought the hotel InterContinental managed a few hundred metres from the seashore in the Sao Conrado neighbourhood in 2011.

"We want to return to Rio," Mr Smaletz said. "The market is very attractive and there is currently a deficit of quality hotels." The hotels will be in a downtown port area the city is turning into a business and residential hub with a new road network and a light-rail system.

Engineering and construction group Odebrecht will build and sell the properties and InterContinental will operate them, Mr Smaletz said. A group of investors is building Trump Towers Rio a few blocks from the InterContinental site.

-From Rio De Janeiro, Brazil

Grosvenor to spend 50b yen to buy, refurbish Tokyo apartments

Source: Business Times / Property

[TOKYO] Grosvenor Ltd, the real estate firm owned by the family trust of the Duke of Westminster, plans to spend as much as 50 billion yen (S$614 million) to buy and refurbish apartments in Tokyo as demand for existing luxury homes increases.

Grosvenor will buy residential buildings, renovate and sell the units because it sees more demand from Asian and domestic high-net-worth individuals for top-end, refurbished apartments, said Koshiro Hiroi, managing director at Grosvenor. The sales volume of new apartments in Tokyo that cost more than 100 million yen surged as much as 20 per cent last year, while sales of existing apartments rose 5 per cent, added Hiroi, citing the company's research.

Grosvenor is betting on changing tastes among Japanese homebuyers. The number of people who prefer to buy and live in newly built apartments has remained above 96 per cent over the last decade, according to a report by Recruit Sumai Co, a Tokyo-based housing information provider. About 44 per cent of homebuyers surveyed said they prefer existing units, an increase from 33 per cent in 2003, the report revealed.

"It used to be that new houses would cost more," said Mr Hiroi on May 12. "However, Japan's housing market has matured. Like Europe or the US, the value of good-quality housing should be sustainable after renovation."

-From Tokyo, Japan

Grosvenor to Refurbish Tokyo Apartment Into Luxury Homes

Source: Bloomberg / Luxury

Grosvenor Ltd., the real estate firm owned by the family trust of the Duke of Westminster, plans to spend as much as 50 billion yen ($490 million) to buy and refurbish in apartments in Tokyo as demand for existing luxury homes increases.

Grosvenor will buy residential buildings, renovate and sell the units because it sees more demand from Asian and domestic high-net-worth individuals for top-end, refurbished apartments, said Koshiro Hiroi, managing director at Grosvenor. The sales volume of new apartments in Tokyo that cost more than 100 million yen surged as much as 20 percent last year, while sales of existing apartments rose 5 percent, said Hiroi, citing the company’s research.

Grosvenor is betting on changing tastes among Japanese homebuyers. The number of people who prefer to buy and live in newly built apartments has remained above 96 percent over the last decade, according to a report by Recruit Sumai Co., a Tokyo-based housing information provider. About 44 percent of homebuyers surveyed said they prefer existing units, an increase from 33 percent in 2003, the report showed.

“It used to be that new houses would cost more,” said Hiroi in an interview on May 12. “However, Japan’s housing market has matured. Like Europe or the U.S., the value of good quality housing should be sustainable after renovation.”

Renovating Apartments

Transactions of previously owned homes account for 14 percent of the total in Japan, according to Japan’s land ministry. That compares with 90 percent in the U.S., 86 percent in the U.K. and 64 percent in France, it said.

The market for renovated residential apartments in Japan is estimated to be about 6.5 trillion yen and accounts for 28 percent of total residential investment, according to the land ministry. The ratio of investment in refurbished apartments in the country compares to 57 percent in the U.K. and 77 percent in Germany, the same report showed.

Grosvenor entered Japan’s market in 2001 and opened its Tokyo office the following year. One of Grosvenor’s first projects was an apartment building nearby Yoyogi Park in central Tokyo. The company in 2008 turned the property into a 45-unit luxury residential complex that it rents out.

The highest monthly rent at Grosvenor Place Kamizonocho is about 3 million yen, or as much as 28,000 yen per tsubo, which is among the most expensive residential rent in Japan, he said. A tsubo, a standard measure of property area in Japan, is 3.3 square meters or 35.5 square feet.

Grosvenor invests in luxury residential sector by buying existing apartment buildings and sell or rent them out after refurbishment depending on market condition, Hiroi said. The company also buys land and develop projects on its own.

Luxury Units

Since 2011, Grosvenor has acquired more than 40 billion yen of residential buildings in Tokyo, Hiroi said.

Grosvenor is turning a 14-story building, built in 2003, in Roppongi into luxury units that cost as much as 500 million yen. Grosvenor sold 20 of the 99 units last year and plans to release 20 more this year, including a penthouse which may cost even more, Hiroi said, without giving details.

Turning units into luxury apartments offers a return of about 10 percent to 15 percent, he said.

Grosvenor has invested more than $2 billion in residential, office and commercial buildings. About 70 percent is in residential.

The Duke of Westminster, whose name is Gerald Grosvenor, is the world’s 79th-richest man with a net worth of $13.7 billion, according to the Bloomberg Billionaires Index.

The Grosvenor family’s ancestral London land holdings are in Mayfair and Belgravia, districts that are consistently among the world’s most expensive for leasing an office or buying a home.

-By Kathleen Chu

Canary Wharf leads sharp rise in London home prices

Source: Business Times / Property

[LONDON] Home prices around the Canary Wharf financial district climbed at the fastest pace in London in the year to April as hiring by banks increased demand for housing in and around the city's financial districts.

Values jumped 16.2 per cent in the area from Limehouse to Beckton on the River Thames stretching north to Poplar, Knight Frank LLP said yesterday. Prices increased 2.3 per cent in the district a year earlier. Homes in the City of London financial district and its fringes climbed 15.7 per cent.

"Such strong price growth is built on the improving UK economy and the fact banks are hiring again," said Tom Bill, Knight Frank's head of London research. "When you add in rental income, you will struggle to find a prime residential market in London with a higher total return."

The housing markets in or close to London's financial districts were sluggish after the credit crisis as financial services companies cut staff and wealthy foreign investors opted to buy homes in the West End. Job vacancies in London's financial services industry climbed 67 per cent in April as companies sought employees to manage increasing demands from regulators, recruitment firm Morgan McKinley Ltd said yesterday.

-From London, UK

Khazanah, TPG buy into Manila developer

Source: Business Times / Property

[MANILA] Malaysia's state investor Khazanah Nasional and global private investment firm TPG have agreed to buy US$132 million worth of shares in 8990 Holdings Inc, the Philippine mass housing developer said yesterday.

Khazanah and TPG have committed to subscribe to about two-thirds of 8990 Holdings' follow-on equity offering that raised nine billion pesos (S$257.6 million), the Philippine firm said in a stock exchange filing.

The shares bought by the two institutional investors, amounting to over 5.8 billion pesos, are equivalent to around 20 per cent of the Philippine firm's equity, according to Reuters' computations.

The transaction, priced at 6.50 pesos per share, saw strong demand from global investors, 8990 Holdings said. The offer price represents a 6 per cent discount to the stock's closing price of 6.92 pesos on Tuesday.

-From Manila, The Philippines

Bond Yields Nip on Heels of Dividends to Pressure Rally in REITs

Source: Bloomberg / News

Some wise person, probably a Realtor, once said that real estate is always a good investment because they’re not making any more of it. Another wise person, probably not a Realtor, once said to ignore that original wise person when the property market crashed a few years ago.

That first wise person has an audience again, however. You can see the evidence not only in the reported $4.7 billion bid being prepared for Stuyvesant Town-Peter Cooper Village complex in Manhattan, but also by looking at the best-performing stocks in the U.S. market this year: real estate firms.

The S&P 500 Real Estate Index is up 13 percent, the biggest gain among 24 industries and five times the 2014 advance in the benchmark index. This comes after the group was the only one to miss out completely on last year’s rally in U.S. stocks, ending down 1.5 percent as the S&P 500 jumped 30 percent.

Cheap money, like what’s been engineered by the Federal Reserve, helps real estate firms in two ways. First, low rates obviously make it more attractive to borrow money to buy property. Secondly, low rates make stocks that pay higher dividends more attractive.


And even while Treasury yields are near lows of the year, the competition between their returns and real estate dividends is heating up. The 21-member S&P 500 Real Estate Index pays out 2.88 percent in dividends, compared with a 10-year Treasury rate of 2.61 percent as of yesterday’s close. That’s near the narrowest spread between the two since August 2011.

For sure, there are signs that real estate companies will be able to boost dividends. The group, all but one of which is a real estate investment trust required to pay most of its income as dividends, is projected to boost earnings by 19 percent in 2014, second only to chipmakers among 24 groups.

HCP Inc. and Health Care REIT Inc. are forecast to lead the pack, with projected dividend yields of more than 5 percent over the next 12 months. As a group, the real estate dividend yield is projected to increase to 3.2 percent.

Don’t call your broker and load up on REITs just yet, however. No one is expecting that cheap money to last forever, so bond yields are projected to go up as the Fed unwinds its purchases. The average forecast of analysts surveyed by Bloomberg calls for 10-year Treasury rates to surpass the projected real estate dividend yield by the end of this year and beat the payout by about a quarter of a percentage point by the second quarter of next year.

Golf, Tennis

At the same time, the blockbuster growth in real-estate earnings is forecast to cool to 8.9 percent in 2015 and 6.4 percent in 2016. So these stocks are going to have to fall, or analysts are going to have to be proven wrong about the future path of earnings or Treasuries, for yields to stay competitive.

If you still can’t resist the real-estate bug, check out the 15th century Spanish castle up for sale in Bloomberg’s classified pages. It comes complete with an olive orchard, a vineyard, private golf course, guest houses, a beach villa and a helipad. Listing price: 20 million euros ($27.4 million.)

They’re definitely not making any more 15th century castles.

-By Michael P. Regan

Fortress Said to Be Preparing Bid to Buy Stuyvesant Town

Source: Bloomberg / Personal Finance

May 14 (Bloomberg) -- Fortress Investment Group LLC is preparing a bid to buy Stuyvesant Town-Peter Cooper Village, the Manhattan apartment complex whose future has been in limbo since its owners defaulted on a $3 billion mortgage four years ago, according to a person familiar with the plans.

The New York-based private-equity firm is seeking financing for an offer valued at about $4.7 billion, said the person, who asked not to be identified because the discussions are private. A deal would involve bringing in equity partners to contribute cash, the person said.

Stuyvesant Town, Manhattan’s biggest rental community, is currently under the control of CWCapital Asset Management LLC, which is owned by Fortress. CWCapital is a special servicer in charge of representing bondholders after owners Tishman Speyer Properties LP and BlackRock Inc. walked away from their investment in January 2010, one of the highest-profile casualties of the property-market crash. New York apartment values have since jumped as rental demand rebounds.

“Stuytown has certainly come a long way since the depths of the crisis,” said Ben Thypin, director for market analysis at real estate research firm Real Capital Analytics Inc. The $4.7 billion value considered by Fortress “reflects that resurgence in pricing.”

Gordon Runte, a Fortress spokesman, declined to comment, as did Brian Moriarty, a CWCapital spokesman.

CWCapital said yesterday that it has begun the process of foreclosing on the property’s mezzanine debt, which is junior to the senior mortgage. That paves the way for the company to proceed with a sale of the 80-acre (32-hectare) complex.

Highest Price

As a special servicer, CWCapital must represent mortgage holders and work in its clients’ best interests to get the highest price possible, said Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor.

“Negotiating on behalf of a client against someone who ultimately reports to the same boss you report to is fraught with conflict of interest,” Gordon said in an e-mail.

Tishman Speyer and BlackRock purchased the 11,000-unit complex for $5.4 billion in 2006, a record for a New York commercial property at the time. The $3 billion senior loan that financed the transaction was carved up and bundled into commercial-mortgage bonds that also contained debt tied to offices, hotels and shopping centers.

Failed Deal

Tishman Speyer, which based its acquisition on plans to raise the cost of rent-regulated units to market rates and evict illegal occupants, defaulted after tenant litigation blocked that effort and the apartment market crumbled following the global financial crisis. The deal came to epitomize the lax lending based on unrealistic projections of future income that fueled the real estate bubble.

Stuyvesant Town was appraised at $3.4 billion in September, according to Barclays Plc, up from about $2.8 billion when CWCapital took it over. Barclays estimated in a May 2 report that the property could fetch $4 billion to $4.3 billion in a sale, which would result in zero losses to bondholders.

The jump in values underscores a rebound in Manhattan’s rental market from the depths of the recession. The median apartment rent in the borough in March was $3,200 a month, approaching the 2006 high, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

Never Stronger

“The Manhattan apartment market has never been stronger,” said Dave Bragg, an analyst at Green Street Advisors Inc., a Newport Beach, California-based real estate research firm. The company estimates that Manhattan apartment asset values are about 9 percent above the 2007 peak.

Tenants at the complex have sought to put together their own bid to buy the property, working with Brookfield Asset Management Inc. on a plan that would include converting apartments into condominiums as a way of paying off bondholders.

“Brookfield is still working with the Stuyvesant Town tenants’ association on a bid,” said Andrew Willis, a spokesman for the Toronto-based company.

Daniel Garodnick, a New York city councilman and lifelong resident of the complex, said tenants “are not going to sit on their hands” if a Fortress bid were to occur.

“We have seen the effects of enthusiastic buyers as they relate to rent-stabilized tenants, and it’s not necessarily a good fit,” Garodnick said in a telephone interview.

City Discussions

New York City Mayor Bill de Blasio has made creating and preserving affordable housing a key issue of his administration. The city is in “active discussions” with lenders, Garodnick and tenants in hopes of reaching a “joint approach” for Stuyvesant Town, said Alicia Glen, de Blasio’s deputy mayor for housing and economic development.

“Stuy Town and Peter Cooper Village are critical bulwarks of affordability for middle-class families,” Glen said in an e-mail. “Our housing plan emphasizes preservation, and with so many affordable units at risk in these developments, the stakes are too high to be hands-off.”

While Stuyvesant Town likely will attract many bidders, some potential buyers may be dissuaded by the complex’s troubled history, said Joshua Stein, principal of New York-based commercial real estate law firm Joshua Stein PLLC, and author of “Stein on New York Commercial Mortgage Transactions.”

“There used to be a saying: If you’re a restaurant you don’t want to open up in a place where other restaurants went out of business,” Stein said in a telephone interview. “All these bidders who otherwise might be very interested may say, ‘you know what? Too many people have had too many unpleasant surprises at this location.’”

-By Sarah Mulholland