Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

16th May 2014

Singapore Economy

Economy, cost of living are key issues, say MPs

Source: Straits Times

When Parliament reopens today after a midterm break, the two top concerns on the minds of MPs will be the Singapore economy and bread-and-butter issues. Specifically, they want to know how the Government will continue with the restructuring of the economy while keeping costs competitive and creating job opportunities for all Singaporeans.

Uncertainty about S'pore's economy rises

20% of respondents now unsure about recovery, up from 3% earlier: survey

Source: Business Times / Singapore

UNCERTAINTY over Singapore's economic recovery appears to have crept into the minds of accounting and finance professionals here, according to the latest edition of the Global Economic Conditions Survey.

The quarterly survey, carried out by the Association of Chartered Financial Accountants (ACCA) and the Institute of Management Accountants (IMA), showed that an unprecedented 20 per cent of Singaporean respondents were unsure whether conditions were improving or not, up from 3 per cent the previous quarter.

There were over 1,700 respondents globally.

According to ACCA's senior economic analyst Emmanouil Schizas, the uncertainty is due in part to rising prices. Members who only see business opportunities in cost-cutting are hence uncertain with inflation. Beside this, those who focus a lot on inorganic growth will also cite increases in uncertainty, explained Mr Schizas.

-By Sheena Tan

Singapore Real Estate

Price cuts revive April private home sales; further discounts expected

Developers cut prices and succeeded in reviving private home sales last month, possibly setting the stage for further discounts in what's increasingly seen as a buyer's market. April's private home sales reached the highest level since last November, following price cuts at several projects.

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

New private home sales rebound in April

Sales of new private homes rebounded last month despite fewer launches in the market, helped by strong interests for Jurong Lake District's latest offering Lakeville and Bishan's Sky Habitat.

Source: Channel News Asia / Singapore 

SINGAPORE: Sales of new private homes rebounded last month, helped by realistically-priced units.

According to the Urban Redevelopment Authority, 745 new units -- excluding executive condominiums -- were sold in April, the highest number registered in a single month this year.

This is 55.2 per cent more compared to the previous month, and a slight increase from February's figures (739 units).

The top performer in April is the newly-launched Lakeville condominium in Jurong West.

The 696-unit Lakeville sold more than 90 per cent of its 230 homes launched in the first phase.

And the reason for better sales, property watchers say, is competitive prices.

Christine Li, head of research and consultancy at OrangeTee, explained: "Developers have been very realistic in terms of pricing. For example, the Sorrento, it is a freehold project but it was priced almost similar to a 99-year-leasehold project and that is why the take-up is more than 90 per cent in April. The project was almost sold out in one month."

The Sky Habitat in Bishan sold 130 units last month at a median price of S$1,377 per square foot (psf).

That is about 13 per cent lower than the median price of S$1,583 psf when it first launched in April 2012.

Desmond Sim, head of research at CBRE said: "If you have a palatable quantum, or if you have an expected price cut, units would move. There is an underlying demand out there waiting to buy but they (buyers) are just waiting for developers to make such moves or (give) some sweeteners in order to come into the market and start buying."

Analysts expect sales to improve in the next few months on the back of more new launches, with transaction volume possibly crossing 1,000 units in May.

The Commonwealth Towers was launched earlier this month, while two other projects - Coco Palms and Waterfront@Faber - will be launched this weekend.

Analysts say developers are likely to still "drip-feed" the market - that is launching their units in stages, so there will not be a supply over-hang.

"Some developers prefer to phase their projects, especially the bigger projects, so that next time in order to move sales, they have more flexibility when it comes to pricing," added Ms Li.

- CNA/xq/fa

New private home sales rebound in April

Source: Today Online / Business

SINGAPORE — New private home sales picked up last month, recovering from the doldrums they sank into in March after developers shaved prices, and analysts said the market will become more active with several attractive launches expected in the coming weeks.

Last month, 745 private homes were sold, 55 per cent more than the 480 units offloaded in March, data released by the Urban Redevelopment Authority (URA) yesterday showed. The increase in sales was achieved despite developers launching fewer units last month, with 586 private homes being offered for the first time, 23 per cent lower than the 724 units in the previous month.

Compared with the same month a year ago, launches and sales fell 50 and 46 per cent from 1,162 and 1,384 units respectively.

Analysts said that while the cautious mood among buyers persisted following repeated rounds of property market cooling measures, sweeteners and price cuts offered by developers have been successful in attracting some of them back to the market.

Ms Christine Li, head of research and consultancy at property agency OrangeTee, said: “April seems to fare quite well for both the new launches and relaunches. One reason is that developers have priced these projects more realistically, both in terms of the total quantum and the per-square-foot (psf) price, to counter the cumulative effect of cooling measures and loan curbs, drawing buyers back to the show flats.”

The 99-year leasehold Lakeville, the latest offering in Jurong Lake District, was the best-selling development last month, with buyers snapping up 210 of the 230 homes launched at a median price of S$1,318 psf.

The only other new launch during the month, The Sorrento, a freehold project in West Coast Road, also did well with 125 of 131 homes sold at a median of S$1,414 psf.

The two projects helped to prop up sales in the Outside Central Region, or suburbs, by 63 per cent to 487 homes, the URA data showed. Sales volume in the Rest of Central Region rose 87 per cent to 237 units, largely due to the relaunch of Sky Habitat in Bishan at lower prices.

CapitaLand, the developer of Sky Habitat, sold 130 units last month at a median of S$1,377 psf — significantly lower than the S$1,583 psf when the project was first launched two years ago, noted Mr Nicholas Mak, executive director of research and consultancy at SLP International. This brings the total number of homes sold in the development to 312.

“Sales for Sky Habitat have been tepid after April 2012, with the monthly sales volume never exceeding 10 units. The project’s sales even tanked in February and March this year with no sales recorded. The developer’s strategy to reduce prices has obviously succeeded in drawing back buyers’ attention. The Sky Habitat story is a clear example that it is now a buyer’s market,” he said.

Meanwhile, sales in the Core Central Region, or city centre, fell 61 per cent to 21 units last month.

Analysts said the monthly sales volume could trend upwards if developers continue to price their units competitively.

“With reduced demand in the market and buyers looking out for bargains, pricing is crucial in moving sales. Currently, the sweet spot seems to be a 10 to 15 per cent price adjustment below previous levels in order to attract buyers,” said JLL’s national director of research and consultancy Ong Teck Hui.

With developers ramping up launches this month before the seasonal slowdown in June, Ms Li said this month’s volume could breach 1,000 units. New projects due to hit the market this month include Commonwealth Towers, Coco Palms, Waterfront@Faber and Kallang Riverside.

District 9 frozen due to cooling measures

Source: Today Online / Business

To see how impactful the government’s cooling measures have been, look no further than District 9. Data from the Singapore Real Estate Exchange (SRX) for last month showed that the median Transactions-Over-X Value (TOX) for District 9, which consists of Orchard, Cairnhill and River Valley, was negative S$130,000.

Each month, SRX algorithms compare the actual transacted value for each unit in a district with its X-Value. The X-Value is a computer-generated estimate of the market value for a home, and the difference between the median transacted price and the district’s X-Value is the TOX.

In District 9, more than half of the buyers paid below market value. In fact, 50 per cent paid at least S$130,000 below market value.

In contrast, the TOX in District 10, which covers Bukit Timah, Holland Road and Tanglin, was positive S$37,500 last month. This means more than half of the buyers paid above market value, with 50 per cent paying S$37,500 or more.

The TOX tells us that the sentiment in District 9 is very bearish, while that in District 10 is bullish. Why is there such a huge disparity between the two high-end neighbours?

The data suggests that District 10 is where Singaporeans buy homes to live in, whereas District 9 is where buyers — both local and foreigners — purchase homes for investment.

The cooling measures primarily target investors — both local and foreigners. The hefty additional buyer’s stamp duty (ABSD) applies to most foreigners, while the Total Debt Servicing Ratio (TDSR) limits Singaporeans’ ability to stretch their borrowings to purchase homes purely for investment.

Therefore, the cooling measures should significantly dampen sentiment in districts where investment activity outweighs purchasing homes to dwell in. The tale of the two affluent districts bears this point out.

Back in the first quarter of 2005, at the start of the private home market’s huge growth spurt, District 10 was the luxury heavyweight. It was about 13 per cent more expensive, on a median resale per-square-foot basis, than District 9. In addition, District 10 registered 18 per cent more transactions.

During the huge run-up in prices after the global financial crisis in 2009, District 9 overtook District 10. Today, even with the cooling measures, it is 12.4 per cent more expensive than District 10. Before the SRX Price Index made the turn during the first quarter of last year from positive to negative, District 9 was 16.6 per cent more expensive.

From the first quarter of last year to the first quarter of this year, a period that saw the ABSD regime made more severe as well as the introduction of the TDSR, median resale prices in District 10 have appreciated 0.4 per cent, while those in District 9 have seen a depreciation of 3.2 per cent. Meanwhile, District 10 posted nearly double the number of transactions during this period.

What this data suggests, at least in Districts 9 and 10, is that the cooling measures have been effective at cutting the investment market off at the knees, while allowing the owner-occupiers’ market to continue to grow, albeit at a slower pace.

At the risk of mixing my metaphors, the cooling measures have frozen the hot money.

-By Sam Baker

UOL bulk leases: a good or bad strategy?

Source: Business Times /  Companies

A RECENT long-lease agreement between UOL Group and the Central Provident Fund (CPF) Board has raised an interesting question: Is it better, from a shareholder point of view, for an office landlord to lease out a large chunk of office space on a long lease to one single tenant or to have the space divided and leased to a number of smaller tenants on shorter leases and thus achieving higher per-square-foot (psf) rents?

The lease agreement between UOL Group and the CPF Board involves the renting of nearly 210,000 sq ft that will be vacated at Novena Square's two office towers by Procter & Gamble (P&G) when its leases expire in two tranches: in mid-2015 and 2016.

At first glance, having smaller tenants is the better option, as it appears to maximise revenues. But on closer examination, this is not necessarily the case.

The CPF Board will start renting the space at Novena Square from the fourth quarter of next year. The initial lease term is understood to be 10 years with options for renewal. Talk in the market is that rental rates are likely to be staggered, but the average monthly rent over the duration of the lease term is believed to be in the low $7 psf range.

-By Kalpana Rashiwala

Real Estate Companies' Brief

Keppel Reit sells 92.8% stake in Prudential Tower for $512m

Buyer is consortium comprising KOP, Lian Beng, KSH and Centurion Global

Source: Business Times / Top Stories

[SINGAPORE] Keppel Reit has struck an agreement to sell its 92.8 per cent stake in Prudential Tower for $512 million - or nearly $2,316 per square foot based on the 221,080 sq ft net lettable area - to a consortium comprising KOP Limited, Lian Beng Group, KSH Holdings and Centurion Global.

The price reflects a net yield of about 3.5 per cent based on the current income generated by the space.

Market watchers say the sale will renew speculation that Keppel Reit will acquire its sponsor Keppel Land's one-third stake in Marina Bay Financial Centre Tower 3.

The Reit has received an initial deposit of $25.6 million and completion of the sale is expected to be on Sept 26.

-By Kalpana Rashiwala

Croesus Retail Trust's Q3 DPU beats own forecast

Source: Business Times / Companies

CROESUS Retail Trust, which listed in May last year, posted a third-quarter distribution per unit (DPU) of 1.76 cents for the three months ended March 31, 2014, 8 per cent higher than its forecast 1.63 cents.

The retail Reit, which has a portfolio of six properties in Japan, generated a net property income of 933.7 million yen (S$11.5 million), 12.3 per cent higher than its forecast 831.3 million yen.

This came on the back of a 3.7 per cent higher-than-forecast gross revenue of 1.4 billion yen, chiefly due to better-than-expected tenant sales from Mallage Shobu in Saitama Prefecture, one of its largest properties. Revenue from its other five properties was largely in line with forecasts.

"Gross revenue, which was impacted in February by one of the heaviest snowstorms to hit Tokyo in the last 45 years, recovered with strong tenant sales and increased rental income in March 2014. This was enhanced by active marketing and promotional activities, and increased purchases ahead of the consumption tax increase that came into effect on April 1, 2014," the Reit said.

-By Lee Meixian

Ascendas Hospitality Trust DPU for Q4 dips to 1.21¢

Net property income rises on improved performance of hotels in Australia

Source: Business Times / Companies

ASCENDAS Hospitality Trust (A-HTrust) posted distribution per unit (DPU) of 1.21 cents for the fiscal fourth quarter ended March 31, 2014.

The distribution, payable on June 6, was lower than the 1.68 cents posted a year ago, as income available for distribution declined 7.5 per cent to $12.48 million.

The trust managers said the decline was largely due to the $2 million incurred for partially unwinding cross-currency swaps for the Australian portfolio.

Gross revenue rose 9.7 per cent to $52.95 million, mainly contributed by additional revenue of $5 million from the acquisition of Park Hotel Clarke Quay in June last year.

-By Carine Lee

Keppel Infrastructure Fund Management gets new CEO

Source: Business Times / Companies

KEPPEL Infrastructure Fund Management (KIFM) yesterday named Khor Un-Hun as its new chief executive officer to replace Thomas Pang Thieng Hwi, who will move to Keppel Telecommunications & Transportation (Keppel T&T) as its CEO-designate and assume the position of CEO from July 1.

Oxley earnings dive with higher interest charges

Source: Straits Times 

Higher administration and finance costs dragged down earnings at property developer Oxley Holdings in the third quarter. Net profit came in at $1 million, down 93 per cent from $13.2 million in the same period a year earlier.

Views, Reviews & Forum

China's ultra-rich continue to set sights on S'pore

They are drawn by favourable tax regime and geographical, cultural proximity to China

Source: Business Times / Editorial & Opinion

OVER the past decade, the Chinese regulatory environment and its administration have become more stringent. It has never been easy to transfer funds out of China because of massive foreign exchange controls and this is compounded by the fact that a resident will need to report details of foreign financial assets and liabilities, and economic transactions conducted with non-Chinese nationals, either directly or through financial institutions.

All of this makes it very complicated - or nearly impossible - for Chinese business owners to hold foreign investments directly or through shell companies. However, they can choose to establish a regional holding company in a reputable location to hold their overseas investments. They can also consider setting up a family office using that particular holding company and thus kill two flies with one strike: investing while generating revenue.

In this respect, Singapore has a number of advantages. Most importantly, the Republic's domestic system does not award tax residence certificates to holding companies without economic substance.

If a pure shareholding (investment holding) company is set up in the country and files its tax returns, which is equivalent to claiming that it regards itself as a local tax resident, the Singaporean tax authorities will regularly ask questions about the reasons for the set-up here, the existence of non-nominee directors, the background of certain decisions made at board level, etc.

-By Michael Pfaar

Global Economy & Global Real Estate

China firms endure longer wait for payments

This is leading to record amounts of receivables on corporate balance sheets

Source: Business Times / Property

[BEIJING] As China's economy continues to cool, companies are waiting longer and finding it harder to get paid for goods and services they've already sold, leading to record amounts of receivables - and potential write-offs - on corporate balance sheets.

At Longyuan Construction Group Co, an east China builder of high-rise offices, apartments and highways, receivables last year inched up 4.9 per cent to 4.1 billion yuan (S$824 million), while on average collection times extended to 95.2 days, compared with 76.3 days for 2011.

Slow collection of money owed is causing Longyuan to delay its own payments to steel and cement suppliers, Zhang Li, the company's board secretary, told Reuters, in a ripple effect that is being repeated across the economy. "If you don't pay me and I pay others, aren't I just a sucker?" said Mr Zhang. "I'm not that stupid."

Growth in China's economy dipped to an 18-month low in the first quarter and may be on track this year for its weakest showing in more than two decades.

-From Beijing, China

Chinese Developer Sunac in Talks to Buy Up to 30% of Greentown

Source: Bloomberg / News

Greentown China Holdings Ltd. (3900) jumped to the highest in more than two weeks in Hong Kong trading, after saying it was in talks to sell a stake of as much as 30 percent to Sunac China Holdings Ltd. (1918)

Greentown, the biggest developer in eastern Zhejiang province, was 2.8 percent higher at HK$8.03 at the close of trading in Hong Kong after rallying as much as 11 percent. The stock closed at the highest since April 29.

Sunac, the Tianjin, China-based luxury-home builder part owned by buyout firm Bain Capital LLC, is in discussion with three of Greentown’s shareholders, including Chairman Song Weiping and Chief Executive Officer Shou Bainian, according to two statements from the companies to the Hong Kong stock exchange yesterday. No agreement has been signed, they said.

“For the past year, Chairman Song and CEO Shou, who are both in their late 50s, have been searching for successors,” China International Capital Corp. analysts, led by Beijing based Eric Yu Zhang, wrote in a report today. “Sunac is a perfect choice” because of its “strong franchise” and because the two have already “forged a trusting relationship.”

Greentown in 2012 sold stakes in nine real estate projects to Sunac for 3.37 billion yuan ($541 million) to repay loans and boost working capital. The two companies jointly bought a property project in Shanghai for 5.68 billion yuan about a year ago from Arch Capital Success Ltd.

“The two companies have a positive track record of cooperation,” wrote Fitch Ratings analysts led by Andy Chang in a report today. The deal won’t hurt the credit profile of Sunac because of “sufficient liquidity,” they said.

Granting Mortgages

Both developers resumed trading today after their shares were halted yesterday. Sunac declined 6.5 percent to HK$3.86, the biggest decline since Feb. 24.

Sunac has declined 17 percent this year in Hong Kong and Greentown has slumped 32 percent. The benchmark Hang Seng Index has dropped 2.6 percent in 2014.

China’s central bank this week called on the nation’s biggest lenders to accelerate the granting of mortgages, after falling home sales and property construction helped drag the world’s second-largest economy to its slowest pace in six quarters in the first three months of this year.

Developers including China Vanke Co. and Greentown have cut property prices since March to lure homebuyers, according to China Real Estate Information Corp.

-By Bloomberg News

Blackstone to Buy Cosmopolitan Resort for $1.73 Billion

Source: Bloomberg / News

Deutsche Bank AG (DBK) agreed to sell the Cosmopolitan of Las Vegas hotel and casino to Blackstone Group LP (BX) for $1.73 billion in cash, ending a six-year money-losing venture into casino development.

“The bank is committed to reducing its non-core legacy positions in a capital-efficient manner which benefits shareholders,” Pius Sprenger, head of the Frankfurt-based lender’s non-core operations unit, said in a statement today. The division is selling and winding down assets that Deutsche Bank doesn’t consider to be central to its business.

Germany’s largest lender foreclosed on the Cosmopolitan after developer Ian Bruce Eichner defaulted on a construction loan in January 2008, and has labeled it a temporary investment. The company was seeking more than $2 billion for the property, a person familiar with the situation said last month. Two others said it was valued at closer to $1.5 billion.

The resort, a two-tower complex on the Las Vegas Strip, cost more than $3.9 billion to build and hasn’t turned a profit since opening in December 2010, as the U.S. tourism industry struggled to recover from the 2008 financial crisis. Business has been improving, with a 9.6 percent increase in revenue last year to a record $653 million.

The Cosmopolitan’s parent company, Nevada Property 1 LLC, today reported that its net loss shrank to $12.7 million in the first quarter from $24.7 million a year earlier. Revenue after promotional allowances rose 15 percent to $182.9 million because of higher room rates, casino betting and other spending by customers.

Blindfolded Maid

The hotel has focused heavily on non-gambling revenue. The property, on 8.5 acres (3.4 hectares), features 2,995 rooms, a spa, salon and 14 restaurants. Its website shows video featuring a blindfolded French maid with the slogan “Just the Right Amount of Wrong.”

The Cosmopolitan’s Marquee Nightclub & Dayclub tied with Wynn Resorts Ltd.’s XS as the top-grossing nightclub in the U.S. with more than $80 million in 2012 revenue, according to Nightclub & Bar magazine.

“We are excited to join with the Cosmopolitan and work with its employees and management in the next phase of its evolution,” Tyler Henritze, a Blackstone senior managing director, said in an e-mailed statement. “As a significant investor in the hospitality sector, Blackstone recognizes the value and potential in the Cosmopolitan and Las Vegas and looks forward to working to build on the success to date.”

Nevada Investments

The purchase marks Blackstone’s first major casino investment. The firm has been investing actively in Nevada real estate on expectations of further recovery in the state’s economy. The firm last September bought the Hughes Center office complex in Las Vegas for $347 million. It also owns single-family houses to rent in the Las Vegas area and is a major owner and operator of warehouses in Reno.

The price for the Cosmopolitan, at almost 17 times the property’s $103.3 million in earnings before interest, taxes, depreciation and amortization last year, underscores the value in other large Las Vegas operators such as Wynn Resorts and MGM Resorts International, which trade at lower multiples, Joseph Greff, an analyst at JPMorgan Chase & Co. in New York, said in a research note today.

“This announcement speaks to a historically smart real estate buyer making a statement on the length of the Las Vegas Strip recovery, also a positive,” he said.

Vegas Premium

The price also illustrates the premium buyers are willing to pay for Las Vegas properties, which generate a large share of revenue from non-gaming amenities compared with other markets, according to Bloomberg Industries research. Gaming and Leisure Properties Inc. agreed yesterday to pay $465 million, or nine times Ebitda, for the Meadows Racetrack and Casino near Pittsburgh.

The Cosmopolitan sale will increase Deutsche Bank’s common equity Tier 1 ratio, a key measure of its financial strength, by about 5 basis points, or 0.05 percentage points, according to today’s statement. The company’s capital adequacy ratio was 9.5 percent at the end of March, its filings show.

Deutsche Bank isn’t the only Wall Street firm involved in the gambling business. Goldman Sachs Group Inc. owns the Stratosphere Casino, Hotel and Tower on the Strip, as well as three other Nevada gaming properties. Morgan Stanley invested about $1.2 billion into the Revel casino in Atlantic City, New Jersey, before writing down 97.7 percent of its value as the casino industry there collapsed. Revel opened in 2012 and filed for bankruptcy less than a year later.

-By Hui-yong Yu

Mortgage Rates Dropping With Bond Yields at 7-Month Low

Source: Bloomberg / Luxury

A rally in the mortgage-bond market is poised to send U.S. home-loan rates to a more than six-month low, bolstering a slowing real-estate recovery.

Yields on Fannie Mae securities that guide borrowing costs because they’re used to package new 30-year mortgages for sale fell 0.02 percentage point to 3.18 percent at 5 p.m. in New York, according to a Bloomberg index. That’s the lowest closing level since yields reached a four-month low of 3.15 percent on Oct. 29, after they surged as high as 3.81 percent in September. The yields ended 2013 at 3.61 percent.

Bond yields are tumbling this year as investors find fewer signs of strength in the economy than expected and less-than-anticipated damage to debt prices from the Federal Reserve’s reduction in its buying, said Vitaliy Liberman, a money manager who focuses on mortgage securities at DoubleLine Capital LP.

“Here we are in May 2014, and things are not as clear as they were five months ago,” Liberman said today in an interview in New York. His firm’s $32.7 billion DoubleLine Total Return Bond Fund (DBLTX) has gained 3.95 percent this year to beat 94 percent of peers, according to data compiled by Bloomberg.

Benchmark U.S. Treasuries gained today even after U.S. consumer-price inflation in April rose, claims for jobless benefits in the U.S. unexpectedly fell and a gauge of regional manufacturing increased more than forecast. Data showed the euro-area recovery failed to gather momentum last quarter, as France unexpectedly stalled and economies from Italy to the Netherlands shrank

Home Sales

The average rate offered on typical 30-year mortgages fell to a six-month low of 4.2 percent this week from a 2013 high of 4.58 percent in August, according to Freddie Mac surveys. Borrowing costs, which are driven by changes in lenders’ profit margins as well as bond yields, are up from a record low 3.31 percent in November 2012

Sales of previously owned homes dropped in March to the slowest pace since July 2012, as higher property prices and loan costs held back buyers, according to National Association of Realtors data. The further fall in mortgage rates “will help in terms of affordability but not to the extent one might expect,” Liberman said.

A measure of relative yields on the Fannie Mae current coupon securities, or those trading closest to face value, rose today to the widest since April 22. The bonds yield 1.17 percentage point more than an average of five- and 10-year Treasury rates, up 0.03 percentage point from yesterday, according to data compiled by Bloomberg.

-By Jody Shenn

Land Securities Profit Climbs as Rental Income Increases

Source: Bloomberg / Personal Finance

Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust, reported a 10 percent jump in annual earnings as rental income increased.

Profit excluding changes in asset values and one-time items rose to 319.6 million pounds ($535.3 million), or 40.5 pence a share, in the 12 months through March from 290.7 million pounds, or 36.8 pence, a year earlier, the London-based REIT said in a statement today.

Land Securities has profited from rising values as the U.K. economy rebounds. Adjusted net asset value climbed to 1,013 pence a share from 903 pence. U.K. commercial real estate values rose for the 11th straight month in March, according to Investment Property Databank Ltd.

“We’re now reaping the rewards from our development program,” Chief Executive Officer Robert Noel said on a conference call. “The schemes we’ve completed are now sold or virtually let and the remainder of our London program completes in 2016, right into the sweet spot.”

Land Securities was down 2.4 percent to 1,078 pence at the close of trading in London. The shares have risen about 9 percent in the past 12 months.

The company secured tenants for 87 percent of its 20 Fenchurch Street skyscraper, nicknamed the Walkie Talkie, and leased its 2 New Ludgate office development on the edge of the City of London financial district to Mizuho Financial Group Inc., according to the statement.

Increased Risk

Land Securities won’t begin further developments without first securing tenants as rising building costs and competition from other developers has increased the risk of construction, Noel said on the call.

The REIT began many of its large London developments, including the Walkie Talkie and 2 New Ludgate, without tenants, betting on an increase in demand for office space. It owns the Walkie Talkie in a venture with Canary Wharf Group Plc.

Economic growth and higher wages aren’t expected to translate into rental growth across the entire retail market, Noel said in the statement. Rental growth in the retail industry “will be limited to the best locations,” he said.

“We will move more into development on our retail side during the next couple years from our London side,” Noel said by phone.

-By Patrick Gower

U.K. Housing Minister Says Property Market Still Has Room to Run

Source: Bloomberg / Luxury

Housing Minister Kris Hopkins said Britain’s housing boom may run for another four years as the market picks up from the impact of the 2008 financial crisis, downplaying concern about an imminent bubble.

“On house prices, we’re nowhere near peak at the moment and we’re not expected to go past that peak price from back in 2008 until around 2018,” Hopkins said on BBC television today. “So across the country it’s still below peak.”

The Confederation of British Industry has said it’s on “high alert” about the property market in London and the southeast of England as house prices surge. The Organisation for Economic Cooperation and Development has also warned about the sustainability of housing and the Bank of England has said it’s monitoring developments.

BOE policy maker Ben Broadbent said today there’s no need for alarm over the housing market.

“In some sense we’ve already taken our foot off the accelerator as regards to mortgage lending,” he said today, explaining the bank has curtailed incentives for home loans in its credit-boosting Funding for Lending Scheme.

Hopkins said that building more houses is key to staving off a bubble and defended the government’s record on increasing the supply of homes.

He also said price inflation in London “is an issue” and “it is specific to London; it is about 9.1 percent, the rest of the country it’s 5.8 percent.

‘‘We need to build more houses and from a very low base,’’ the minister said. ‘‘We’ve just had the figures this morning and we’re seeing a 31 percent increase on houses built.”

-By Kitty Donaldson

China’s Richest City Set to Pass Hong Kong GDP: Chart of the Day

Source: Bloomberg / News

Tianjin, the city with the highest per-capita income in China, is poised to pass Hong Kong in economic output as soon as next year, following Shanghai and Beijing.

The CHART OF THE DAY tracks the gross domestic product of the four municipalities in billions of U.S. dollars starting in 2005. Shanghai overtook Hong Kong in 2009. Beijing did likewise in 2011. Tianjin’s move is based on last year’s growth rate of 11.5 percent and average estimates for Hong Kong’s GDP and the Chinese yuan in Bloomberg surveys. Ten years ago, Tianjin’s economy was about one quarter the former British colony’s size.

“It’s got ports, it’s got oil, it’s got a bit of everything, while Hong Kong is basically a trading post with finance and the services,” said James McGregor, greater China chairman for advisory firm APCO Worldwide Inc. “It’s just another look at the scale of China and the incredible urbanization and the growth of the cities.”

Tianjin, with about 14 million people, or twice Hong Kong’s population, is a shipping hub for commodities and a growing manufacturing site. Airbus Group NV put its first final-assembly line outside Europe in the city. Toyota Motor Corp. is adding 50,000 units to its local capacity this year. The city’s government has for several years been leading development of district modeled on Manhattan, complete with lookalikes of Rockefeller and Lincoln centers.

Per-capita income in Tianjin was 93,173 yuan ($14,944) in 2012, about 7 percent more Beijing, the No. 2, according to the most-recent National Bureau of Statistics data. By comparison, average income in Hong Kong was $36,736 that year.

Tianjin’s proximity to Beijing -- the two are connected by a high-speed train ride of less than 40 minutes -- has China’s top economic planners looking at ways to mitigate overcrowding and traffic. Some urban planners have also called for integrating nearby Hebei province into the “Jing-Jin-Ji” mix.

-By Bloomberg News

Senior Housing Surplus Seen as Boomers Spur Building Boom

Source: Bloomberg / Personal Finance

Real estate developers are betting big on U.S. housing for the elderly, preparing for a surge in demand as the population of senior citizens almost doubles in the next 35 years. They may be building too fast.

A jump in supply is forecast to cut growth in senior-housing net operating income to 1.8 percent in 2015 and 1.4 percent in 2016 from 3.3 percent this year, according to Green Street Advisors Inc. The increase may hurt health-care real estate investment trusts and companies including Brookdale Senior Living Inc. (BKD), which is buying competitor Emeritus Corp. (ESC) for about $1.4 billion to become the biggest owner of senior properties, the research firm said.

“Increased supply is always worrisome in any type of commercial real estate,” said Jim Sullivan, a managing director at Newport Beach, California-based Green Street. “In senior housing, new construction has ramped up considerably over the last two years.”

Health-care REITs, which soared to records early last year, have been the worst-performing part of the property-trust market in the past 12 months. The U.S. had 526,144 senior-housing units in the 31 largest markets in the first quarter, up 1.4 percent from a year earlier, and an additional 16,181 units are under construction, according to the National Investment Center for the Seniors Housing & Care Industry, a trade group based in Annapolis, Maryland.

Stock Decline

The Bloomberg health-care REIT index has fallen 18 percent in the past 12 months, compared with a 4.7 percent decline for the broader Bloomberg REIT index. The companies, which were trading at large premiums to their net asset values, have been hurt over concern about a narrowing of the spread between their capital costs and property prices, said Ian Goltra, a money manager at Forward Management LLC in San Francisco.

Building and owning housing for the elderly have become more popular as baby boomers age. The population of people 65 and older is projected to surge to 83.7 million in 2050 from 43.1 million in 2012, the U.S. Census Bureau said this month. Baby boomers -- those born between mid-1946 and mid-1964 -- began turning 65 in 2011, according to the bureau.

Housing for the elderly varies greatly. Independent-living communities serve those who need little assistance with daily living, and sometimes include meals and activities, Brookdale’s website shows. At assisted-living properties, residents usually receive help with bathing, dressing, transportation and medication management, according to the Assisted Living Federation of America, a senior-housing trade group based in Alexandria, Virginia.

Walking Path

Some properties have a mix of services. One example is the Hallmark, a high-rise on Chicago’s lakefront north of downtown that offers independent- and assisted-living options. The property, operated by Brentwood, Tennessee-based Brookdale, has transportation services, meals, a walking path, housekeeping and an exercise room.

Among the largest senior-housing companies are Chicago-based Ventas Inc. (VTR), which owns 713 communities; Toledo, Ohio-based Health Care REIT Inc. (HCN), with 711 properties; Long Beach, California-based HCP Inc. (HCP), with 444; and Brookdale, with 555. In February, Brookdale agreed to buy Seattle-based Emeritus.

Messages left yesterday for Ross Roadman, senior vice president of investor relations at Brookdale, weren’t returned.

Local Markets

“There’s been a little bit of an uptick -- we’re mindful of that,” said Brookdale Chief Executive Officer T. Andrew Smith when asked about supply at a Barclays Plc conference in March. “You have to go down and look at what’s happening in each local market. We just don’t see that much. It’s not to say that there is none, but we don’t see that much truly, directly, adversely new competition.”

Houston is one area where the senior-housing surge is particularly striking. The 1,591 units under construction in the city is the highest since at least late 2005, according to the National Investment Center. Houston has a fast-growing population and is a relatively easy market for development, said Hessam Nadji, chief strategy officer at Calabasas, California-based Marcus & Millichap Real Estate Investment Services Inc.

Across the U.S., peak demand for senior housing is 15 to 20 years away, according to Jacob Gehl, managing director and founding partner of Blueprint Healthcare Real Estate Advisors, a brokerage and advisory firm in Chicago.

The average person entering senior housing is over 80, Green Street said in an April report. The estimated number of people age 80 to 84 was 5.8 million in 2012, and is projected to climb to 13.5 million by 2040, the Census Bureau said.

‘Inexorably Increasing’

Health-care real estate executives say concerns about an oversupply of senior housing supply are overblown. Large REITs such as Ventas are better able to withstand issues in certain markets and lines of business because of their size and geographic diversity.

“Demand is inexorably increasing,” said Debra Cafaro, Ventas’s chairman and chief executive officer. “From a long-term standpoint, it’s a great asset class because the demand is there.”

Ventas has five senior-housing communities in the Houston area, which generate annualized net operating income of $7.7 million.

“There is new construction, but we feel OK about it,” Cafaro said of Houston.

Higher Inventory

Nationally, the inventory of senior-housing units is at the highest since at least the fourth quarter of 2005, according to the National Investment Center. Demand has so far kept pace, with occupancies climbing to 89.8 percent, the highest since 2008. The average rent rose to $3,415 per unit in the first quarter, up 2 percent from a year earlier, and is at the highest since at least 2005.

“The supply issue is a concern,” said Goltra of Forward Management, which oversees more than $5 billion of assets. The firm had shares of Ventas, HCP and Health Care REIT as of the end of March, according to data compiled by Bloomberg. “Supply is a concern, but this demographic wave is real.”

While construction slipped in the first quarter, the decrease may have been related to weather, the National Investment Center said last month. Construction as a percentage of inventory has hovered at more than 3 percent in the past year, a rate unmatched since the first quarter of 2009.

“There’s a lot of people that have begun to develop now,” Gehl said. “You’re seeing lots of shovels going into the ground now.”

-By Brian Louis

Canada Home Sales Rise Most Since August

Source: Bloomberg / Luxury

Canadian home sales rose last month at the fastest pace since August as a surge in transactions in Vancouver and Toronto offset a cooling elsewhere.

The number of homes changing hands in April rose 2.7 percent from a month earlier, the Canadian Real Estate Association said today in a statement, as sales jumped 14 percent in Vancouver and 4.6 percent in Toronto. The national average price of a home sold was up 0.8 percent from March and 7.6 percent from a year earlier, it said.

Gains in Canada’s two largest real estate markets are masking softness in other parts of Canada, where government efforts to slow housing demand may be having more effect. From a year ago, national sales are down 0.3 percent.

“Outside a few lingering hotspots, Canada’s housing market is stable, if not boring, which is good in the face of dire warnings about a crash,” Sal Guatieri, senior economist at Bank of Montreal, said in a note to investors.

Excluding Toronto and Vancouver, home sales in Canada were up 1.3 percent in April and down 1.2 percent down from a year ago, based on Bloomberg calculations using CREA data. April transactions were below the 10-year average in more than 60 percent of markets, the association said.

Policy makers have been tightening mortgage-lending rules amid concern home prices rose too quickly and the balance sheet of the federal agency that backstops the loans has grown too large. At the same time, commercial banks are reducing mortgage rates in an effort to drum up business.

The data show “that tightened mortgage rules and guidelines are working as intended to keep activity in check despite mortgage interest rates remaining extraordinarily low,” Gregory Klump, the real estate association’s chief economist, said in today’s statement.

April’s sales gain was the third consecutive monthly increase after a four-month winter skid the agency suggested was partly due to severe weather.

-By Theophilos Argitis

Confidence Among U.S. Homebuilders Falls to Lowest in a Year

Source: Bloomberg / Luxury

Confidence among U.S. homebuilders dropped in May to the lowest level in a year, showing the residential real estate market may be slow to recover after an unusually harsh winter.

The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions. The median forecast in a Bloomberg survey called for 49.

Still-tight credit conditions, limited availability of lots and falling affordability as home prices rise are probably preventing the residential real-estate market from gaining momentum as temperatures warm. Hiring gains may contribute to a pickup in housing demand and help offset some of the headwinds.

“Builder sentiment is becoming more in line with the market reality of a continuing but modest recovery,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Delaware, said in a statement. “However, builders expressed some optimism that sales will pick up in the coming months.”

Estimates in a Bloomberg survey of 46 economists ranged from 46 to 50. The April reading was revised from a prior estimate of 47.

The measure of current single-family home sales declined to 48 in May, the first pessimistic reading in a year, from 50.

Buyer Traffic

The group’s gauge of prospective buyer traffic climbed to 33 in May, a four-month high, while the index of the six-month sales outlook increased to 57 from 56 in the prior month.

Builder confidence dropped in the South and in the West, where it fell to its lowest level in a year. Sentiment was unchanged in the Northeast and the Midwest.

Borrowing costs, which climbed in the second half of 2013, are stabilizing. The average 30-year, fixed-rate mortgage was at a six-month low of 4.21 percent in the week ended May 8, according to data from Freddie Mac in McLean, Virginia. The average from July through December was 4.37 percent.

While increasing prices are hurting affordability for those getting into the market, they also help homeowners feel wealthier. Real estate data provider Zillow Inc. sees those prices keeping up their climb.

“For almost all of the country, home values are increasing,” Chief Executive Officer Spencer Rascoff said on a May 7 earnings call. “The rate of growth is slowing, but it’s still a very healthy housing market.”

A report tomorrow is projected to show housing starts climbed last month. Builders broke ground at a 980,000 annualized pace in April, a four-month high, from a 946,000 rate the prior month, according to the median forecast of economists surveyed before figures from the Commerce Department. Starts averaged a 929,000 pace last year.

-By Michelle Jamrisko

Dubai Slays Home Price Gain of 35% With Loan Restrictions

Source: Bloomberg / Luxury

Naseema Ahmed, a broker at Indus Real Estate LLC in Dubai, has been digging through her e-mails for leads after failing to sell a single home in the past month. She had been closing deals at a clip of about six a week since the market began recovering in 2012.

Dubai’s housing market is slowing after the world’s biggest price increases in 2013 prompted the United Arab Emirates Central Bank to restrict mortgage lending and the government doubled transaction fees.

Ahmed’s sales drought is good news for Dubai financial authorities who have been trying to tame a market that has lurched between boom and bust since it was opened to foreign buyers in 2002. Home values will rise by 12 percent in 2014 after surging by about 51 percent last year, said Steven J. Morgan, head of the Middle East at broker Cluttons LLC.

“Since January, we have seen a plateauing as new regulations aimed at curbing growth have gone into effect,” said Morgan. “There would have been cause for concern if we had continued to see the kind of price increases we saw over the last 18 months.”

Price growth is also slowing because recent increases have put homes out of reach for many buyers, Liam Bailey, head of residential research at Knight Frank LLP, said in a phone interview from London. Dubai home prices rose 35 percent last year, the most in the world ahead of China and Taiwan, Knight Frank said in a research report. Bailey predicted a 10 percent gain in 2014.

Booms, Busts

Dubai’s property market has been defined by steep rises and falls as builders of novelties such as palm-shaped artificial islands and the world’s tallest tower turned the desert sheikhdom into a business and tourism hub. Home-price gains were among the world’s fastest in the years up to 2008 before the bubble burst and values fell as much as 65 percent.

When an improving economy sparked a rally beginning in 2012, the central bank and the government started looking at ways to limit the easy money and speculation that caused the previous bubble. Developers including Emaar Properties PJSC (EMAAR) also imposed rules to prevent the so-called flipping of properties before they are built.

The central bank in October capped the size of mortgages banks can offer foreigners at 75 percent of the value of a first home priced at 5 million dirhams ($1.4 million) or less. U.A.E. nationals were allowed a loan-to-value ratio of as much as 80 percent. Other limits were applied to more expensive homes, investment properties and second residences. Borrowing for unbuilt real estate, a key driver of the last bubble, was capped at 50 percent.

Government Goals

The restrictions have triggered a sharp decline in single-family-home transactions, which dropped 46 percent in the first quarter, Cluttons said in a May 12 report. Emaar today said its single-family home sales fell 17 percent in the period. The developer’s shares dropped as much as 4.6 percent.

“It’s good news that the market is slowing down rather than going ahead at the same pace and then having another big correction,” said Craig Plumb, head of Middle East research at Jones Lang LaSalle Inc. “It’s exactly what the government wanted when it put these regulations in place.”

Residential prices rose 3 percent in the first quarter, compared with around 6 percent in the last quarter of 2013, according to a Cluttons report published May 12. Prices are still 19 percent below their peak in 2008.

It remains to be seen if the cooling measures taken so far will do enough to control price increases in a market bolstered by an improving economy and plans to invest $8 billion preparing to host the World Expo fair in 2020.

Mortgage Rates

The emirate’s gross domestic product may have grown by 4.9 percent in 2013, Mohamed Lahouel, chief economist for the Dubai Department of Economic Development, said earlier this year. That would be the fastest pace since 2007, when the economy expanded 18 percent.

Banks are offering mortgage rates as low as 3.99 percent compared with more than 9 percent before the property crash, said Warren Philliskirk, associate director at Mortgage International, a Dubai-based mortgage broker.

Authorities should consider further measures to discourage property speculation, Masood Ahmed, head of the International Monetary Fund’s Middle East and Central Asia Department, said this month.

“Most such interventions tend to be relatively minor to start with because policy makers tend to be concerned about the level of impact they would have,” Knight Frank’s Bailey said. “If the aim is to slow price growth and not help prices decline, it’s quite a balancing process.”

Supply Rising

The supply of homes under construction as well as new projects being started by developers will help temper prices. About 24,000 homes, or 6.5 percent of current housing stock, are set to be completed this year, Jones Lang said in a report last month. Keys for another 39,000 residences, mostly on the city’s periphery, are expected to be handed over to owners in the next two years.

Fallout from the 2008 crash still prompts caution among builders and lenders. Developments tend to be smaller, with a few hundred homes built in phases, compared with blocks of thousands planned before the crisis. To limit flipping, most home builders now bar resale of homes before construction and before 40 percent of the value is paid, Jones Lang’s Plumb said.

Mortgage regulations may need to be revised further to encourage residents looking to move from rentals into home ownership, said Philliskirk of Mortgage International.

First Timers

New rules “should incentivize first-time home buyers with a higher LTV to allow them to get into the market,” he said. “It’s for people who spent time in Dubai and want a family home to put down roots. The alternative is staying in rental accommodation, and rents will keep spiraling out of control.”

Ahmed, the broker at Indus, said buyers are pushing for lower prices and dropping out of talks when their bids are rejected by sellers.

“Before, buyers would have negotiated and raised their prices,” she said. “Now most are just dropping the whole thing and moving on.”

The slowdown in prices may pave the way to a market where values are set by local supply and demand rather than speculation, said Richard Paul, director of U.A.E. residential valuations at Cluttons in Dubai.

“That would build the basis for solid and sustainable growth going forward based on economic growth and real demographic demand,” he said. “As soon as the world sees Dubai has got its act together and taken the bubble off the market, that’s going to encourage growth.”

-By Zainab Fattah