Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

23rd May 2014

Singapore Real Estate

Rule changes, new system 'moderating bidding for EC sites'

CDL-TID and JBE top bidders for two EC plots in Yishun

Source: Business Times / Singapore

THE result of the latest state tender for two adjoining Yishun plots near a golf course and reservoir reflects a moderation in executive condominium (EC) land bids.

Analysts attribute this to a mix of last December's rule tweaks for EC buyers which have clipped new EC demand, and the batched tender system aimed at making developers more conscious of the dangers of overbidding.

For the first time since the system of simultaneous tender closings for adjacent residential sites was reintroduced last year, a pair of 99-year sites in Yishun Street 51 tendered yesterday will end up in different hands.

A City Developments Ltd-TID joint venture placed the highest bid of $330.13 per square foot per plot ratio (psf ppr) for Yishun Street 51 (Parcel A).

-By Kalpana Rashiwala

Yishun EC sites draw top bids totalling S$362.6m

Source: Channel News Asia / Business

SINGAPORE — Two adjacent Executive Condominium (EC) sites in Yishun that can be developed into about 1,000 of such hybrid public-private homes attracted top bids totalling S$362.6 million at the close of tender yesterday. This was in line with market expectations, as cooling measures and loan curbs curtailed exuberance in developers’ bids.

The plot on Yishun Street 51, Parcel A, garnered six bids, with the top bid of S$178.5 million from City Developments unit Verwood Holdings and TID Residential translating to about S$330 per sq foot per plot ratio (psfppr).

The site has an area of 193,400 sq ft and a plot ratio of 2.8, and can yield an estimated 490 homes, the HDB said.

The slightly bigger plot on the same street, Parcel B, attracted eight bids, including those from all six developers that took part in the Parcel A tender. The highest bid of S$184.1 million, by JBE Holdings, which targeted only this site, worked out to about S$335 psfppr.

The site has an area of 196,600 sq ftand a plot ratio of 2.8, and can be developed into about 520 homes.

Under new rules announced last December, EC buyers are now subject to a Mortgage Servicing Ratio of 30 percent and second-time applicants who buy such units directly from developers will have to pay a resale levy.

While developers were cautious about overbidding in the current environment, competition for the Yishun EC sites was keen. For Parcel A, the margin between the top and third bid was about 3.1 per cent, while the difference was about 4.6 per cent in the case of Parcel B.

Mr Desmond Sim, head of property firm CBRE Research, said: “Developers are still hungry for land. The relatively small total quantum for the two sites has enticed a spectrum of developers, big and small, to place competitive bids. This area is fast becoming a nice enclave of private developments in an established housing estate.”

A CDL spokesperson said it had planned a development of 12 to 13 storeys with about 480 homes that will offer good views of the greenery and golf course, as well as of Lower Seletar Reservoir for units on higher floors.

HDB selling 6,454 BTO and SBF flats

BTO flats in 2 non-mature towns while SBF units are in various locations

Source: Business Times / SIngapore

THE Housing Development Board (HDB) is rolling out 6,454 flats for sale this month in both mature and non-mature estates under its Build-To-Order (BTO) and Sale of Balance Flats (SBF) exercises.

The third BTO launch this year will offer 3,071 BTO flats in four projects in the non-mature towns of Bukit Batok and Woodlands, bringing the total number of BTO flats released this year to 9,707 units.

Admiralty Flora and Marsiling Greenview are in the Woodlands planning area bounded by Woodlands Drive 62 and Woodlands Drive 73, while West Crest @ Bukit Batok and West Valley 

@ Bukit Batok are bounded by Bukit Batok Avenue 8 and Bukit Batok Avenue 9.

Property consultants expect the new flats in Woodlands to be more appealing given their proximity to the MRT stations.

-By Lynette Khoo

HDB releases 6,454 flats in latest BTO exercise

The flats include both Build-To-Order and Sale of Balance Flats in both mature and non-mature estates.

Source: Channel News Asia / Singapore

SINGAPORE: The Housing & Development Board (HDB) launched 6,454 flats for sale on Thursday (May 22) under the May 2014 joint Build-To-Order (BTO) and Sale of Balance Flats exercise.

This latest exercise comprises 3,071 BTO flats over four projects in the non-mature towns of Bukit Batok and Woodlands, and will bring the total number of BTO flats offered for sale this year to 9,707 units, it said.

These BTO units range from 2-room units for first-timer singles to 3Gen flats for married and courting couples who wish to apply for such a flat with their parents, HDB stated.

For Sale of Balance Flats units, there will be 3,383 flats on offer in 11 non-mature and 13 mature estates under the May 2014 exercise. These are reserved for families, and at least 95 per cent will be set aside for first-timer applicants.

About 50 per cent of the Studio Apartments will be eligible for elderly flat applicants under the Studio Apartment Priority Scheme (SAPS), which allows them to stay close to their existing home or near married children, the agency said.

Application for this latest exercise can be submitted online on HDB's website from today to next Wednesday (May 28).

The next BTO launch is slated for July, and 3,810 flats in Punggol, Sembawang, Toa Payoh, Woodlands and Yishun will be up for grabs, HDB said.

- CNA/kk

HUDC estate in Hougang privatised

336-flat Hougang Ave 2 project is the 15th of 18 such estates to go private

Source: Business Times / Property

[SINGAPORE] The Housing and Urban Development Co (HUDC) estate at Hougang Avenue 2 has been privatised successfully, making it the 15th of 18 such once-public housing estates to do so.

The estate will be converted into a strata-titled property under the Land Titles (Strata) Act, said the Housing & Development Board in a statement yesterday.

The estate, which comprises 336 units of flats at Blocks 713 to 720 on Hougang Avenue 2, has obtained the required 75 per cent majority support for privatisation.

With the privatisation, the Aljunied-Hougang-Punggol East Town Council will no longer manage and maintain the estate's common properties. A Management Corporation Strata Title council will be elected to manage and maintain it.

-By Lee Meixian

HUDC estate at Hougang Ave 2 privatised

Source: Channel News Asia / Singapore

SINGAPORE: The Hougang Avenue 2 HUDC Estate will be privatised after obtaining the required 75 per cent majority support, the Housing and Development Board (HDB) announced on Thursday (May 22).

The estate, which comprises 336 units of flats at Blocks 713 to 720, will be converted into a strata-titled property under the Land Titles (Strata) Act effective May 22, HDB said in a press release.

"Aljunied-Hougang-Punggol East Town Council has also ceased its responsibility in the management and maintenance of the common properties of the estate, taken over by the Management Corporation Strata Title Plan No 3974," HDB said.

"Individual owners in the estate now own their respective strata units, as well as common property such as car parks and open landscaped areas, as tenants-in-common."

Of the 18 HUDC Estates in Singapore, 15 of them have been privatised since 1995. Two - at Hougang Ave 7 and Potong Pasir - are undergoing privatisation, while the Braddell View estate is in the midst of garnering support for the move.

- CNA/ek

Hougang Avenue 2 HUDC privatised, but en bloc sale unlikely

Source: Today Online / Business

SINGAPORE — The Hougang Avenue 2 HUDC Estate has been privatised under the Land Titles (Strata) Act, paving the way for a collective sale of the 336 homes, although analysts said the chances of an en bloc deal would be slim in the near future.

The HUDC Estate, comprising Blocks 713 to 720 in Hougang Avenue 2,had obtained the required 75 per cent majority support for privatisation, said the Housing and Development Board (HDB) yesterday. Mr Nicholas Mak, Executive Director of Research and Consultancy at property firm SLP International, noted that, among the 18 HUDC estates, only five had successfully been sold collectively.

“Currently, the owners of the privatised HUDC estate Eunosville are trying to sell the property collectively, but there are no takers yet. One of the reasons is that some HUDC estates are too large for most developers to digest,” he said.

“The land area of the HUDC estate in Hougang Avenue 2 is about the same size as that of Eunosville. In the current property market, it will be challenging for the Hougang Avenue 2 HUDC estate to be sold collectively at a price that is high enough to satisfy all the owners.”

Mr Ku Swee Yong, Chief Executive of property agency Century 21,also warned that the size of the development might be a hindrance, saying that “today’s market is a bit more restricted to en bloc deals of around S$100 million because developers are more cautious about the outlook”.

The Hougang Avenue 2 HUDC Estate is the 15th of 18 HUDC estates to be privatised, said the HDB. Of the remaining three HUDC estates, Hougang Avenue 7 and Potong Pasir had obtained the mandate and are currently undergoing privatisation, while Braddell View is currently garnering support for privatisation, added the HDB.

Marina Bay Financial Centre developers eye expansion in area

Source: Today Online / Business

SINGAPORE – With the three office towers of Marina Bay Financial Centre (MBFC) approaching full occupancy and its residential component almost fully sold, the consortium behind the new business district is looking to play a larger role by expanding its portfolio within the vicinity.

The three developers that make up Raffles Quay Asset Management (RQAM) — Cheung Kong (Holdings), Hongkong Land and Keppel Land — would be keen to affirm their presence in the Marina Bay area should any suitable land parcels be put up for sale, RQAM chief executive Warren Bishop told TODAY in an interview.

“The consortium has been very happy with how its developments are doing. Looking forward, it would certainly be keen to explore more opportunities in the Marina Bay area. I think it would be very interested in any sites adjacent to what we have here,” said Mr Bishop.

“Most of the sites here are very large, so it’s likely the consortium would continue its joint-venture approach because of the scale of the investment and resources required. I think they (developers) would prefer to work together. It’s a matter of when the Government releases the sites and whether or not they’re interested in that particular site.”

RQAM was set up in 2001 to market and manage projects co-developed by three of Asia’s most respected developers.

Its portfolio includes One Raffles Quay and the MBFC, both located in the Marina Bay area, which has been earmarked as an extension of the Central Business District to accommodate a growing financial industry and allow the Republic to develop as a business and financial hub.

Inspired by London’s Canary Wharf and Shanghai’s Pudong, Marina Bay is envisioned by the Government as not only a location that offers prime office space, but also a place for people to live and play.

MBFC, officially opened by Prime Minister Lee Hsien Loong in May last year, ticks those boxes.

A year on, the offices at Towers 1 and 2 have been fully taken up, while Tower 3, the largest of the lot, is 95 per cent occupied, said Mr Bishop.

He added that, while RQAM had been largely focused on attracting tenants from the financial sector, it is also open to interested parties from other industries.

“Our focus is pretty much financial services, commodities (and) legal services. But we have a lot of new interest from e-commerce firms too, so we don’t put any restrictions on ourselves,” he said.

The company is also comfortable with the sales progress of Marina Bay Suites, one of the residential components at MBFC and which is about 91 per cent sold.

The other development, Marina Bay Residences, has been sold out.

“The market has changed — the Government has taken steps to stabilise the (property) market … (and) the reality is the premium and luxury end of the market has become quieter. But we continue to transact, though at a slower rate.

“Given the quality of the location, we’re quite comfortable (about) being able to sell out. There are very few competing developments in the Marina Bay area, especially those with a direct view of the bay,” said Mr Bishop.

Overseas buyers, mainly from Indonesia, China and Malaysia, account for about half of the sales of the two residential developments, he added.

“We continue to market locally as well … But with 18 to 19 units left, we don’t have to be too aggressive.”

Global banks shrink S’pore office space

Source: Today Online / Business

SINGAPORE — More and more international banks are giving up office space in Singapore, as revenue and profitability come under pressure amid stricter global banking rules and foreign labour restrictions that increase competition for local workers and make it more expensive to hire them.

Global banks have vacated about 500,000sqf of leased space since 2011, enough to seat 3,800 employees, estimates by Jones Lang LaSalle Property Consultants showed. About 80 per cent of that is in the central business district, data tracked by the real estate broker revealed.

Said Mr Chris Archibold, Jones Lang LaSalle’s Singapore head of markets: “The banking industry is undergoing a huge amount of change, especially around its capital-intensive businesses, which means there are fewer jobs.

“Globally and locally, there have been various bits and pieces put in place by various governments that have drastically affected the banks.”

Singapore is Asia’s biggest wealth management hub and overtook Japan last year as the region’s largest foreign-exchange centre.

But a four-year campaign by the Government to restrict the hiring of foreigners has increased competition for local workers and made it more expensive to recruit them — dissuading banks from adding back-office staff, said Mr Archibold.

Revenue and profitability have also come under pressure amid tighter banking rules that have been implemented since the global financial crisis, forcing firms to cut costs and reduce payrolls. Banks worldwide have announced more than 500,000 job cuts in the past four years, Bloomberg data showed.

Barclays, the United Kingdom’s second-largest lender, has given up two storeys of prime office space at the Marina Bay Financial Centre (MBFC) that has since been leased by LinkedIn, people familiar with the matter said this month.

The bank has been shuffling its real estate space in Singapore, moving employees from suburban offices to the Marina Bay area to cut costs.

It will terminate its lease on about 15,500sqf of office space in a building in Tampines and relocate the employees to the 290,000sqf of space it occupies at MBFC by July, people familiar with the matter said last month. This comes after it exited 29,000sqf of office space in Changi Business Park earlier this year. The bank has another 96,000sqf at One Raffles Quay, revealed data provided by the bank in September 2012.

Credit Suisse is also planning a phased exit from its One Raffles Quay office space this year, a person with knowledge of the matter said. It is also seeking replacement tenants at some of its leased office space in Changi, the person added.

“Credit Suisse continually reviews its real estate strategy in line with the needs of its businesses,” said spokeswoman Juliette Leong. “Singapore is the largest regional hub for its business and back-office support, and (the firm) remains very committed to its presence in this market.”

Barclays declined to comment. The bank had 3,500 full-time employees in Singapore in October last year, down from 4,700 about a year earlier.

“While some financial institutions have relocated some lower-end roles in their middle and back offices out of Singapore due to cost reasons, they are also retaining and growing higher value-added activities here,” the Ministry of Manpower and Monetary Authority of Singapore (MAS) said in a joint statement in response to queries.

The MAS has been working with the financial community to raise the competencies of the local workforce because having a critical pool of qualified professionals is a key attraction for global banks to keep their operations in the city-state, the statement said.

Not all banks are trimming space, with United States lenders among those expanding their footprint on the island. The vacated space is also not expected to have a material effect on rents because it is a fraction of the 64 million sqf of office area available for leasing in Singapore, Mr Archibold said.

Citigroup, whose 10,000 employees across Singapore make it the largest employer among foreign banks, occupies more than 1 million sqf, up from 981,000sqf at the end of 2006, said spokesman Adam Abdur Rahman.

For Goldman Sachs Group, the largest prime broker in Asia, its Singapore real estate occupancy is the highest ever, said Mr Edward Naylor, a Hong Kong-based spokesman. The bank is considering plans to occupy more space, he said, without elaborating.

“The regulatory environment for banks in Europe appears to be harsher than it is in the US,” said Mr Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia, citing pressure ranging from capital requirements to political debate on profits. “The US banks are frankly just lucky.”

BCA plans makeover for building industry

Five-year plan to attract locals to built environment sector

Source: Today Online / Singapore

SINGAPORE — The Building and Construction Authority (BCA) has unveiled a five-year rebranding road map to attract and retain local talent, especially female talent, in the built environment sector. Its roll-out comes at a time of strong domestic construction demand, which has driven the sector’s need for more local talent, said the BCA in a statement yesterday.

Formulated by the Ministry of National Development (MND) and the building authority, the road map was announced at the BCA’s annual awards ceremony last night and will be used to help transform the sector. Areas it will look at include improving the work environment, enhancing human resource practices and generating a greater awareness of career opportunities, the BCA said.

“The locals tend to shun the sector as they might (perceive) the sector as dangerous. The demanding nature, pressure to meet deadlines and long working hours might also be contributing factors,” said Ms Rosana Wong, executive director at Yau Lee Holdings Limited.

Currently, females make up about 25 per cent of the local workforce in the sector. The BCA hopes the road map will help change that and remove stereotypes that the sector is unsuitable for women, which Mr Neo Choon Keong, group director of manpower and strategic policy at BCA, called a relatively untapped source of local manpower.

Under the road map, built environment firms can sign a voluntary pledge to commit to adopting good human resource practices, such as enhanced staff benefits. Firms must also create a conducive work environment, especially in the area of pro-family arrangements.

A pilot phase of the new Teachers’ Attachment Programme will also be conducted for Institute of Technical Education lecturers teaching built environment courses this year. The three- to five-day programme to help teachers provide better career guidance to students will also be gradually extended to those teaching at polytechnics and junior colleges.

Campaigns targeting job seekers, students, teachers and parents will be rolled out in the third quarter of this year to raise awareness of the sector and its meaningful careers. “We realise we cannot attract locals at the worker level. To go for higher productivity and support projects such as green buildings and underground construction, we need a bigger proportion of employees at the PMET (professionals, managers, executives and technicians) level,” said Mr Neo.

-By Tan Shi Wei

Construction of Stamford Diversion Canal to start in Q3

Source: Today Online / Singapore

SINGAPORE — As part of plans to reduce flooding along the busy Orchard Road shopping belt, national water agency PUB will begin construction work on the Stamford Diversion Canal in the third quarter of this year.

The first phase of construction, which costs S$50.6 million, runs through the Tanglin and Kim Seng areas, while a tender has been called for the second phase along Grange Road to River Valley Road.

Construction of the entire 2km-long diversion canal will be completed in 2017. It will divert stormwater away from the upstream section of the Stamford Canal catchment — about one-third of the entire catchment — towards Singapore River, and eventually, into the Marina Reservoir.

“We will also continue to work with the developers and building owners on implementing ‘source measures’ to slow down the flow of stormwater into the public drainage system and ‘receptor measures’ to protect the buildings against floods,” said PUB director of catchment and waterways, Mr Tan Nguan Sen.

Orchard Road was hit by several flash floods between 2010 and 2012. In June 2010, heavy rains flooded shopping malls such as Liat Towers and Lucky Plaza and car park basements, affecting many businesses in the area.

PUB said later that Stamford Canal, the drainage system under Orchard Road, had become choked with debris, causing water to overflow to the surface onto the junction of Orchard Road and Scotts Road.

As work on the diversion canal in the coming months will be carried out close to the Land Transport Authority’s construction sites for the Orchard Boulevard and Great World MRT stations, traffic will be diverted at a stretch of Grange Road at the junction of Orchard Boulevard and at River Valley Road off Kim Seng Road. The roads, however, will remain accessible.

Work on several new drainage improvement projects will also begin in the second half of this year.

The first phase of upgrading of the Siglap Canal, to be completed by 2017, will cover East Coast Parkway to the sea, where the canal will be deepened and widened. The Alexandra Canal Subsidiary Drain “F”, between Tiong Bahru Road and Outram Road, will be upgraded alongside a PUB Active, Beautiful, Clean Waters project, which is expected to be completed in 2016.

-By Louisa Tang

Real Estate Companies' Brief

S'pore-listed Reits on a winning streak

Source: Straits Times

Real estate investment trusts (Reits) listed in Singapore have performed surprisingly well this year and could continue to surge ahead, analysts from DBS Vickers Securities said. Reit unit prices are up 5 per cent so far this year, outperforming the benchmark Straits Times Index (STI), which has risen 3 per cent in the same period.

Global Economy & Global Real Estate

Malaysia most popular place for property buys

Source: Straits Times 

The hottest overseas real estate market for Singapore investors during last year's splurge on foreign property was Malaysia, going by central bank estimates. The country accounted for slightly more than half of real estate investments abroad last year, followed by Britain and Australia. These three countries made up the lion's share of purchases.

What China Property Crash? Economists See Growth Bump

Source: Bloomberg / News

China’s biggest homebuilding slump in at least four years isn’t enough to dissuade a majority of economists from predicting real estate will still contribute to 2014 growth. Property controls will be eased, they said in a Bloomberg News survey.

While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble state countrywide, according to the survey conducted from May 15 to May 20. Half see bubbles in some cities, and a majority says the loosening of restrictions on home purchases and loans will be limited to a regional level.

New construction has fallen 22 percent and sales have slumped 7.8 percent this year, testing the government’s four-year commitment to curbs targeted at making homes more affordable and its reluctance to enact broader economic stimulus. The slowdown’s depth will have implications for everything from demand for Australian iron ore to land sales that help local governments repay their $3 trillion of debt.

“China won’t fully lose the engine, but the engine will roar less than in the past and will be a more moderate supporter for growth,” said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, who formerly worked at the World Bank.

Central bank Governor Zhou Xiaochuan said China may have housing bubbles in some cities, an issue that’s difficult to resolve with a single nationwide policy. The economy “can still manage something around a 7.5 percent growth rate,” Zhou said in an interview in Rwanda yesterday, referring to the nation’s expansion target for 2014.

Property Stocks

Chinese real-estate companies gained today on speculation the government will ease property curbs. An index of developers listed in Shanghai rose 2.1 percent at the close, the biggest advance since April 22. Poly Real Estate Group Co. surged 4.3 percent.

A manufacturing gauge released yesterday signaled the economy is stabilizing after the government announced tax breaks and faster railway spending to support growth. The preliminary purchasing managers’ index for May from HSBC Holdings Plc and Markit Economics unexpectedly rose to a five-month high of 49.7, approaching the expansion-contraction dividing line of 50.

UBS AG has estimated the real-estate industry accounts for more than a quarter of final demand in the economy when including property-generated needs for goods including electric machinery and instruments, chemicals and metals.

‘Doom Mongers’

Five of 17 respondents said the property market will make a net contribution to growth this year of 1 to 2 percentage points, while four said it would add less than 1 point and one analyst projected more than 2 points. Four people said there would be a drag of 1 to 2 points and two projected a subtraction of less than 1 point.

Next year, 10 economists see a net contribution to growth, while five expect a drag.

The nation’s housing market won’t crash like that of the U.S., Japan and Hong Kong, the official Xinhua News Agency said in an article published May 21 that called people forecasting such an outcome “doom mongers.” China will have strong housing demand because of continuing urbanization, speculative buying is less prevalent than it was in Hong Kong and mortgage debt as a proportion of GDP is lower than it was in the U.S., Xinhua said.

“China’s urbanization process is far from being over,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing, who formerly worked for the World Bank. “The housing market is not seeing any structural turning point but rather suffering from a cyclical downturn, and the market can be brought back to life when policies become appropriate.”

New Buildings

That the property market is undergoing a slowdown is of little dispute. Floor space of new residential buildings under construction fell 23.8 percent last month from a year earlier, the steepest drop in figures going back to April 2010, according to data compiled by Bloomberg. April home prices rose in the fewest cities in 1 1/2 years, government statistics showed on May 18.

While a majority of respondents said China has an oversupply of housing, three said the current national supply is in balance with demand, even if some cities are facing issues, while two said the current supply is too small to meet demand.

Not everyone is optimistic. Moody’s Investors Service this week revised its credit outlook for Chinese developers to negative from stable. Ren Zeping, a researcher at the State Council’s Development Research Center, said economic growth may slow to about 5 percent in two to three years, the state-run Shanghai Securities News reported yesterday.

‘Biggest’ Risk

“Real-estate investment is the biggest macro risk,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, who sees an investment slump, including the effects on related industries, dragging growth down about 0.5 percentage point in 2014. “The government should do something to contain the downside risk. It’s probably time to remove the home purchase restrictions policy in most cities.”

At the same time, the probability is low that the government will ease curbs at the national level, Zhu said.

The world’s second-largest economy grew 7.4 percent in the first quarter from a year earlier, slowing from a 7.7 percent pace in the previous period, according to government figures. The median projection of economists for full-year growth of 7.3 percent would mark the weakest pace since 1990.

There are signs that the government is taking action to limit the real estate slump. The central bank this month called on the biggest lenders to accelerate the granting of home mortgages, while Southern Weekly reported yesterday that the housing ministry has allowed most cities to adjust home-buying curbs as they see fit.

“The government will be quite keen to avoid a very large downturn,” RBS’s Kuijs said. While real estate amplifies downward pressures on the economy, “it doesn’t have to be the end of the world,” he said.

-By Bloomberg News

China's property market is in serious trouble

Source: Business Times / Editorial & Opinion

CHINA'S property market is built on a vicious triangle. There are three ways that the pressures building in the real estate industry could show: shrinking investment, disappearing funding for developers and lower prices. Though they're all related, the effects and remedies are different.

Glum economic data makes a plunge in investment look like the most pressing threat. In the first four months of the year, housing starts fell 25 per cent year-on-year, the worst slump in over a decade. When investment in real estate slows, growth does too. In April, almost all of China's big economic numbers, from fixed asset investment to retail sales, decelerated.

Another source of concern is funding for property developers. Borrowing from banks has given way to other sources of finance, such as trust companies. Perhaps the biggest source of over exuberant funding is credulous homebuyers who, deprived of other savings options, have continued to pay for properties yet to be built.

Balance sheets are showing strain. The 111 mainland China-listed developers for whom data is available on Eikon saw their combined debt grow 20 per cent in 2013. Their aggregate net debt is now 4.3 times earnings before interest, tax, depreciation and amortisation (Ebitda), compared with 3.4 just a year earlier. Consolidation is inevitable, and useful. Greentown, a Hong-Kong listed developer that has already sold land in Shanghai to raise cash, may sell a 30 per cent stake to rival Sunac. The third side of the triangle is house prices. Outside Beijing or Shanghai, these are still in the realm of fantasy. The average urban worker has annual disposable income of 27,000 yuan (S$5,425). That's enough to buy just one square metre of housing in Shenzhen, according to national data.

-By John Foley

Fed officials see risk from slowdown in US housing

Source: Today Online / Business

WASHINGTON — United States Federal Reserve officials, while forecasting a rebound in growth, also warned last month about the industry at the heart of the financial crisis in the world’s biggest economy: Housing.

“A number of participants pointed to possible sources of downside risk to growth, including a persistent slowdown in the housing sector”, said the minutes of the April 29 to 30 meeting of the central bank’s policymaking Federal Open Market Committee (FOMC) released on Wednesday.

Fed policymakers noted several reasons for the “continuing weakness” in housing activity, including higher home prices, construction “bottlenecks” due to labour shortages and harsh winter conditions, as well as tight credit, the minutes showed.

Fed Chair Janet Yellen cited the housing slowdown as a risk to growth in her testimony on May 7 to the Joint Economic Committee of Congress, saying it was part of the reason “a high degree of monetary accommodation” would remain necessary.

Mr Steve Blitz, chief economist at ITG Investment Research in New York, said yesterday: “The housing situation is a marked reminder to the Fed that all is not yet right with the economy or the availability of mortgage credit.”

Fed staff briefing the FOMC also characterised activity in housing as “soft”.

While single-family home starts rose in March, the central bank’s staff warned that permits for single-family homes “remained below their fourth-quarter level and had not shown a sustained improvement since last spring, when mortgage rates began to rise”. BLOOMBERG

Existing-home sales rise in April

Source: Business Times / World

[WASHINGTON] Sales of previously owned US homes rose in April for the first time this year as the weather warmed, price increases slowed and more properties were put on the market.

Closings, which usually take place a month or two after a contract is signed, increased 1.3 per cent to a 4.65 million annual rate, the National Association of Realtors reported yesterday in Washington. Economists surveyed by Bloomberg projected a 4.69 million pace. The number of homes for sale jumped 16.8 per cent in April.

Easier lending standards for some Americans, faster job growth and historically low mortgage rates helped stabilise the industry at the start of the spring selling season. A pick-up in construction that boosts housing inventory and tempers gains in property values would provide a further boost to the market.

"The improvement in availability suggests stronger sales activity in the months ahead," said Russell Price, senior economist at Ameriprise Financial Inc in Detroit.

-From Washington, US

Gain in Existing U.S. Home Sales Lifts Spring Prospects:

Source: Bloomberg / Luxury

Previously owned U.S. home purchases increased in April as a bigger supply of properties lured buyers and raised prospects for a stronger spring buying season.

The 1.3 percent gain, the first this year, pushed sales to a 4.65 million annualized rate, National Association of Realtors data showed today. The number of available properties climbed to an almost two-year high, helping slow the pace of price appreciation.

A pickup in real-estate listings that improves affordability will help bring homeownership within reach of more Americans, increasing the odds the industry will recover from a yearlong slowdown. A gain in home construction last month showed builders are responding to limited inventory at the same time mortgage rates retreat and lure prospective buyers.

“The improvement in availability suggests stronger sales activity in the months ahead,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of existing home sales in the last two years, according to data compiled by Bloomberg. Still, “we need to see more building activity.”

More building permits last month helped boost the index of leading indicators by 0.4 percent after a 1 percent March gain that was the strongest since September, the New York-based Conference Board’s report showed today. The measure indicates the world’s largest economy will strengthen in the next three to six months after a first-quarter slowdown.

“If consumers continue to spend, and businesses pick up the pace of investment, the industrial core of the economy will benefit and GDP growth could move closer towards the 3 percent range,”Ken Goldstein, an economist at the Conference Board, said in a statement.

Stock Prices

Stocks rose, sending the Standard & Poor’s 500 Index near a record amid a rebound in small-cap shares. The S&P 500 climbed 0.2 percent to 1,892.49 at the close in New York.

Economists surveyed by Bloomberg projected a 4.69 million pace of previously owned home sales. Estimates of 75 economists ranged from 4.6 million to 4.82 million after a 4.59 million pace in March that was the weakest since July 2012.

The report still contained figures that show housing is far from hitting its stride. Compared with a year earlier, purchases were down 7.3 percent. The gain from a month earlier was limited to stronger results in the West and the South.

Investors continued to play a big role in the market, the April increase was driven mainly by purchases of condominiums and the share of first-time buyers was little changed. Lower limits on loans guaranteed by the Federal Housing Administration have also taken a toll.

First-Time Buyers

“There’s not that many first-time buyers who are getting into the market,” said Stephanie Karol, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We see a turnaround happening slowly.”

Sustained employment gains would give housing a further boost and lift consumers’ spirits at the same time. Another report today showed uneven labor-market improvement. The number of Americans filing for unemployment insurance increased by 28,000 to 326,000 in the week ended May 17 from a seven-year low in the prior period, according to the Labor Department.

Consumers’ expectations for the economy deteriorated to a seven-month low in May, data today from the Bloomberg Consumer Comfort Index showed. An expectations gauge that tracks where the economy is heading declined to 42.5 from 48 a month earlier. The share of respondents who said the economy was getting worse climbed to the highest level of the year.

Housing Inventory

The report from the Realtors group showed the number of previously owned homes on the market rose 16.8 percent to 2.29 million, the highest since August 2012. At the current sales pace, it would take 5.9 months to sell those houses. Less than a five months’ supply is considered a tight market, the NAR has said.

The sales increase in April “is welcoming,” Lawrence Yun, NAR’s chief economist, told reporters as the figures were released. “I feel optimistic you would trend higher generally. Now with more inventory, I think there will be more buyers entering the market.”

The median selling price of an existing home rose 5.2 percent from April 2013 to $201,700. The year-over-year increase was the smallest since March 2012. Some 44 percent of transactions last month were for properties valued between $100,000 and $250,000. Homes costing less than $100,000 accounted for 17.5 percent.

Investor Purchases

Investors accounted for 18 percent of the home purchases last month, up from 17 percent a month earlier. Seven of 10 investors paid cash. All-cash transactions accounted for about 32 percent, about the same share as the last year, the report showed. First-time buyers represented 29 percent of all transactions.

Sales of single-family homes increased 0.5 percent to an annual rate of 4.06 million. Purchases of multifamily properties -- including condominiums and townhouses -- jumped 7.3 percent to a 590,000 pace.

Potential buyers are starting to find relief in cheaper borrowing costs. The average rate on a 30-year, fixed mortgage fell to 4.14 percent in the week ended today, the lowest since October, according to Freddie Mac in McLean, Virginia.

Home-improvement retailers Home Depot Inc. (HD) and Lowe’s Cos. (LOW) are sticking to forecasts for improved sales this year after demand cooled at the start of the year because of harsh weather.

More Confidence

While the long winter held receipts at Lowe’s established stores to a 0.9 percent gain in the quarter ended May 2, trailing the 5 percent increase analysts estimated, the Mooresville, North Carolina-based company maintained its forecast that revenue by that measure would advance 4 percent this year.

“Performance has improved in May which, together with our strengthening execution, gives us confidence to reaffirm our sales and operating profit outlook for the year,” Robert Niblock, chief executive officer of the second-largest U.S. home-improvement retailer, said in a statement.

Home Depot, the largest home-improvement retailer, reported somewhat similar results yesterday. While first-quarter sales and profit trailed analysts’ estimates, ending six straight years of exceeding or meeting projections, the chain reiterated its forecast that revenue would gain 4.8 percent this year and boosted its projection for profit.

-By Michelle Jamrisko

Firm sues Johor govt, Petronas over land acquisition

Source: Business Times / Malaysia

A UNIT of gaming, property and plantation conglomerate MPHB - the former Multi-Purpose Group - has filed a suit against the Johor government and Malaysia's national oil company Petronas claiming that the defendants had "illegally acquired" 2,841 acres of its oil palm land in Pengerang, Johor as part of the development of the oil firm's Refinery and Petrochemical Integrated Development (Rapid) project.

In a May 9 writ lodged with Johor's High Court, MPHB unit Kelana Megah Development alleged that the defendants had "illegally, and unconstitutionally and dishonestly" acquired seven plots of Kelana's land in October 2013.

Kelana asked the court for an order revoking the acquisition, getting back the land and relief through unspecified, specific and general damages.

The suit, even if successful, is unlikely to derail the development of Rapid which is an integral part of Prime Minister Najib Razak's Economic Transformation Programme. Indeed, the palm trees that used to form part of a profitable oil palm plantation have been cut down as preliminary clearing has begun. But, that a listed firm saw fit to take up cudgels against a state government and Malaysia's largest and richest corporation underscores its significance.

-By S Jayasankaran in Kuala Lumpur

Cheung Kong Offers Discount on Hong Kong Project as Supply Rises

Source: Bloomberg / Luxury

Cheung Kong Holdings Ltd. (1), the Hong Kong builder controlled by Asia’s richest man, is offering as much as 16 percent discount at its latest residential project in the city as developers accelerate sales this year.

City Point, the company’s biggest Hong Kong housing project in two years, will sell 350 of a total 1,717 units in the first batch, the company said yesterday. After discounts, the flats in the estate developed jointly with Nan Fung Development Ltd. in the Tsuen Wan district, range from HK$7,634 ($984) per square foot to HK$12,071 per square foot.

Developers including Cheung Kong and Sun Hung Kai Properties Ltd. are competing for buyers in the world’s most-expensive housing market as the government’s curbing measures cooled prices and transaction volume. Prices, which Barclays Plc forecasts will drop at least 30 percent by 2016, are also under pressure from increasing supply in coming years.

“Cheung Kong is sitting on the most available-for-sale units so its strategy is very important for the market,” said Alfred Lau, an analyst at Bocom International Holdings Co. in Hong Kong. The discount at City Point “is not a severe price cut, so it seems they’re not going for volume, which puts less pressure on the pricing.”

The shares gained 0.1 percent to HK$134.70 as of 10:24 a.m. local time. The benchmark Hang Seng Index advanced 0.2 percent.

Sales Target

Cheung Kong will sell 800 units at City Point this year, Executive Director Justin Chiu told reporters yesterday in Hong Kong, adding that the company is confident it can reach its 2014 sales target.

“Our flats are at a significant discount to the market and priced quite competitively,” Chiu said, adding that the first batch at City Point is more than 10 percent cheaper than recent transactions at neighboring estates.

Sales at City Point may also benefit from an adjustment in the double stamp duty, which extends the time local buyers have to sell their existing homes to qualify for a refund of the additional tax. The tweak is a technical adjustment and doesn’t signify relaxation of property curbs, K.C. Chan, Hong Kong’s secretary for financial services and treasury, said last week.

The government may consider adjusting some of the property curbs after the supply and demand in the real estate market returns to normal, Hong Kong Chief Executive Leung Chun-ying told lawmakers yesterday.

Developers may release 15,000 units for sale this year, from 9,753 units last year, an 18-year low, according to realtor Centaline Property Agency Ltd.

Cheung Kong Chairman Li Ka-shing has a net worth of $32.5 billion and is ranked the richest in Asia and 17th globally, according to the Bloomberg Billionaires Index.

-By Michelle Yun

Airbnb to give New York host information

Source: Business Times / Property

[NEW YORK] Airbnb Inc, the short-term home rental service for travellers, agreed to comply with a New York state probe of it and hosts who may be violating state occupancy and tax regulations.

The San Francisco-based company, which charges a transaction fee to list a couch, bedroom or house available for short-term rental, will hand over information about its New York hosts on an anonymous basis, according to the accord. It agreed to furnish identifying details later for people deemed to be subjects of the probe.

The agreement will allow attorney general Eric Schneiderman's office to move forward with an investigation of what he describes as illegal hotels, accommodations that violate a state law generally prohibiting spot rentals of entire homes.

People who rent out rooms rather than entire dwellings aren't a target of the probe, Mr Schneiderman noted.

-From New York, US

Time Inc. to Move to Lower Manhattan’s Brookfield Place

Source: Bloomberg / News

Time Inc., the magazine unit to be spun off from Time Warner Inc. (TWX) next month, will move its headquarters to Brookfield Place in lower Manhattan next year.

The publisher of Time, Sports Illustrated and Entertainment Weekly said it signed a long-term lease for 700,000 square feet (65,000 square meters) on six floors at 225 Liberty St. The announcement means the company will leave the Time & Life Building on 50th Street and Avenue of the Americas, where it has been since the property was completed in 1959.

“We spent months evaluating competing sites in New York and New Jersey,” Chief Executive Officer Joseph Ripp said in a statement. The company was persuaded by the downtown Manhattan location, Brookfield Office Properties Inc.’s (BPO) plans for the property and an incentive package from New York state, he said.

Time Inc. is being spun off from the parent company it helped to create as an industrywide slump in print advertising contributed to revenue declines in five of the past seven years. For Brookfield, the publisher’s move means that about 3 million of the 4.2 million square feet in the complex left behind last year by Bank of America Corp. has been spoken for, the New York-based landlord said in its own statement.

Brookfield’s Makeover

Brookfield has been remaking the five-building complex, formerly known as the World Financial Center, stripping away brass and marble trims and installing bicycle racks, public Wi-Fi, and other amenities designed to make it more appealing to technology and media firms. It is also in the midst of a $250 million renovation of its retail and restaurant areas, with Hudson Eats, a food court overlooking the Hudson River, set to open in the next few weeks.

In November, the law firm Jones Day agreed to take 330,000 square feet at 250 Vesey St., the former 4 World Financial Center.

“A year ago at this time, they were facing a third of their complex being empty,” said Kenneth McCarthy, chief economist at commercial-property brokerage Cushman & Wakefield Inc. “The fact that they were able to sign two very large tenants in so short a time has made a huge dent.”

McCarthy said Time Inc.’s deal also bodes well for leasing at the World Trade Center across the street, where 2.4 million square feet of space are available in two new skyscrapers, including 1 World Trade Center, the Western Hemisphere’s tallest building. Cushman is the leasing broker for that tower.

‘Mad Men’

Teri Everett, a Time Inc. spokeswoman, declined to disclose financial terms of the lease. She said all of the company’s staff from the Time & Life Building and 150 W. 50th St. will be moving to Brookfield Place.

Time Inc. is receiving $10 million of state incentives, said Jason Conwall, a spokesman for New York’s Empire State Development Corp. Those consist of a $7 million grant from the Job Creation and Retention Program, a federally funded post-9/11 benefit designed to lure and keep jobs in lower Manhattan, and a $3 million Excelsior Tax Credit aimed to keep jobs in the state.

The magazine publisher’s departure from its namesake building in the Rockefeller Center area will end an association that goes back to the days of Time Magazine’s founder, Henry Luce. The 34th floor, where the most-senior executives kept their offices, was a model for the television show “Mad Men,” as a representation of 1960s corporate culture, Daniel Okrent, Time’s onetime corporate editor, said in a January interview.

Rockefeller Group Inc., which owns the 48-story tower, is planning a major capital-improvement program at the building, to be known as 1271 Avenue of the Americas, Dwayne Doherty, a spokesman, said in an e-mailed statement.

Lease Expiration

Time Inc.’s lease runs out at the end of 2017, giving the company time to market 1.9 million square feet in the building, he said.

The lease with Brookfield was brokered by a team from Studley Inc. led by Mitchell Steir, the firm’s CEO, and President Michael Colacino, the magazine company said in its statement.

Brookfield is negotiating with Bank of New York Mellon Corp. for about 400,000 square feet at 225 Liberty St., a person with knowledge of the discussions said earlier this month. The bank yesterday announced it had agreed to sell its headquarters tower at 1 Wall St.

-By David M. Levitt

Kylli Buys San Francisco Tower Stake in $350 Million Deal

Source: Bloomberg / News

Kylli Inc. acquired a majority stake in San Francisco’s 225 Bush St. building in a deal valued at $350 million, giving the Chinese development firm office space in a market where technology companies are driving up rents.

Kylli bought interests held by Chicago-based GEM Realty Capital Inc. and Frankfurt-based SEB ImmoInvest, brokerage Jones Lang LaSalle Inc. said in a statement today. The 22-story, 583,000-square-foot (54,000-square-meter) building will be managed by San Francisco-based Flynn Properties, which will keep an ownership interest in the building, Jones Lang said.

San Francisco office rents in the first quarter rose almost 12 percent from a year earlier to an average of $56.62 a square foot as technology firms led occupancy gains totaling 582,099 square feet, brokerage CBRE Group Inc. said. Tenants at the Bush Street building, the former headquarters of Standard Oil, include Groupon Inc., Zillow Inc. and RocketSpace, according to Jones Lang.

The tower, built in 1922, has floors measuring 26,000 square feet and is 99 percent occupied, Jones Lang said.

Chinese companies invested $1.4 billion in U.S. property last year, more than any other foreign group and ahead of second-place Norway, at $1.2 billion, Jones Lang said in March.

-By Dan Levy

Blackstone Pays Up to Sell Almost $1 Billion of Rental Bonds

Source: Bloomberg / Luxury

Investors demanded mostly higher relative yields to buy securities tied to rental houses managed by Blackstone Group LP (BX)’s Invitation Homes as the largest single-family landlord completed the new market’s biggest deal.

A $108.5 million portion of its $993 million transaction today with the least protection against losses will pay yields that float at 375 basis points more than a borrowing benchmark, a person with knowledge of the sale said. That was the highest end of a range suggested in marketing earlier this week, and compares with a spread of 325 basis points for a similar slice of a $481 million deal by American Homes 4 Rent on May 13.

The Blackstone business is getting back almost 85 percent of the money it spent buying and improving the more-than 6,500 properties packaged into its bonds, according to a report today by Keefe, Bruyette & Woods Inc. analysts. The yields accepted mean it still can earn about 17 percent annual returns on the remaining amount, they wrote, down from the return on equity garnered for American Homes through its offering that they estimated at as much as 26.5 percent.

“Given the transaction’s successful execution, we view the deal and its terms as positives for the sector,” KBW’s Jade J. Rahmani, Bose George and Ryan Tomasello said.

45,000 Houses

Blackstone, which has bought about 45,000 houses around the country over the past three years, in 2013 became the first of the hedge funds, private-equity firms and real-estate investment trusts that ramped up in the rental business amid the U.S. foreclosure crisis to tap the securitization market. Its latest sale of bonds was the fourth for such debt, bringing total issuance to about $2.5 billion.

Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on the latest sales.

Institutional investors, who went on a property-buying spree following a crash in prices, are bundling their rental homes into securities to recoup cash and earn higher returns on their residual investments with cheaper financing. The market could fuel an unsustainable expansion of institutional rental-home investment if demand for the bonds is too strong, according to a February report by the Center for American Progress.

The $477.5 million of top-rated securities in the Blackstone deal today yield 100 basis points, or 1 percentage point, more than the one-month London interbank offered rate, said the person, who asked not to be named because the details weren’t public. That matched the relative yields on AAA notes of the American Homes (AMH) deal as the tightest yet.

Wider Spreads

Libor, the rate at which banks say they can borrow money from each other, was set at 22.7 basis points today.

All other portions of the deal offered wider spreads than on similar classes of the American Homes transaction, and at the top end or in excess of potential spreads discussed with investors earlier this week. The second-lowest ranked slice pays a spread of 325 basis points, compared with guidance of 275 points to 300 basis points and relative yields of 250 basis points on a similar part of the American Homes sale.

In Blackstone’s first deal in November, the AAA class sold at 115 basis points more than Libor (US0003M), while the lowest-ranked class priced at 365 basis points and second-lowest at 265 basis points. Colony Capital LLC’s Colony American Homes Inc. issued $513.6 million of rental-home bonds in April in the second sale in the market.

-By Jody Shenn

Mortgage Rates for U.S. Loans Fall as 30-Year at 4.14%

Source: Bloomberg / Luxury

U.S. mortgage rates fell for a fourth week, reducing borrowing costs for homebuyers during the key spring selling season.

The average rate for a 30-year fixed mortgage was 4.14 percent this week, down from 4.2 percent and the lowest since late October, Freddie Mac (FMCC) said in a statement today. The average 15-year rate slipped to 3.25 percent from 3.29 percent, the McLean, Virginia-based mortgage-finance company said.

Sales of previously owned homes rose 1.3 percent in April, the first increase in four months, the National Association of Realtors said today. The drop in loan costs this month may help spur some would-be buyers, said Keith Gumbinger, vice president of, a Riverdale, New Jersey-based mortgage-data firm.

“With a combination of a flatter trajectory for home prices and lower rates, that should be preserving affordability as we go through the spring homebuying season,” Gumbinger said in a telephone interview yesterday.

Price gains have slowed, according to the S&P/Case-Shiller index of 20 U.S. cities. In the year ended February, the measure rose 12.9 percent, the smallest increase since August, after a 13.2 percent advance in the 12 months through January.

-By Prashant Gopal

PBOC’s Zhou Says China May Have Housing Bubble in ‘Some Cities’

Source: Bloomberg / Luxury

China may have a housing bubble only in “some cities,” a issue that’s difficult to resolve with a single nationwide policy, the nation’s central bank Governor Zhou Xiaochuan said.

China is a big country with multiple housing markets, many of which are still drawing new inhabitants from the countryside, Zhou said yesterday in an interview in Kigali, Rwanda, where he was attending the African Development Bank’s annual meeting.

“China is still in the process of urbanization, so there may be some kind of volatility in the supply-demand relationship,” Zhou said. “But if you look at the medium-term of urbanization, I think we still have a very good market for home sectors.”

While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble countrywide, according to a Bloomberg News survey conducted from May 15 to May 20. Half see bubbles in some cities, and a majority say they expect restrictions on home purchases and loans to be loosened at a regional level.

New construction in China has fallen 22 percent and sales have slumped 7.8 percent this year, testing the government’s four-year commitment to curbs that aim to make homes more affordable, and its reluctance to enact broader economic stimulus. The slowdown’s depth will have implications for everything from demand for Australian iron ore to land sales that help local governments repay their $3 trillion of debt.

Zhou said that he expects China’s economy “can still manage something around a 7.5 percent growth rate” and there are “no clear signs that show significant decline.”

“The economy has slowed down a bit, but not very much,” Zhou said. “We should keep vigilance on whether it continues to slow down.”

-By Rene Vollgraaff and Joshua Fellman

Real Estate Draws In $120 Billion ATP Fund Reviewing Price Hedge

Source: Bloomberg/ News

Denmark’s biggest pension fund, ATP, is looking for investments in real estate to generate higher returns as it redeploys funds previously invested in inflation-linked bonds.

Record-low central bank interest rates are still fueling property gains, Henrik Gade Jepsen, chief investment officer at ATP, which is based north of Copenhagen, said in an interview. Purchasing real estate is a better way to prevent inflation eroding the value of pension savings than buying inflation-linked government bonds, he said.

“Given our pension liabilities, we favor investments with stable cash flows and inflation protection,” Jepsen said. “That’s where property comes to mind.”

ATP, which sold its 90 billion-krone ($16.5 billion) linker portfolio in 2012 after U.S. and German inflation-linked government bonds delivered negative returns, isn’t planning to return to that market. It may reconsider its position should interest rates start rising again, Jepsen said.

Linkers are securities, whose payments are tied to changes in consumer prices. In the euro area, inflation is hovering at less than half the European Central Bank’s goal of close to, but below, 2 percent, undermining the investment value of paying for a hedge against consumer price gains.

Property Heat

Meanwhile, property values across parts of the Nordic region are continuing to rise from record highs. In Sweden and Norway, regulators are cautioning that their housing markets may be overheated. Denmark’s biggest lender, Danske Bank A/S (DANSKE), has warned that house prices in Copenhagen may be rising too fast.

ATP isn’t the only institutional investor eager to build up its real estate portfolio. Norway’s sovereign wealth fund, the world’s biggest, has $33 billion to spend on property as it struggles to fill a 5 percent allocation target. Real estate currently accounts for 1.2 percent of its total portfolio.

The Norwegian fund’s ability to choose the right properties will determine whether the investor is freed to expand into other assets classes such as infrastructure and private equity, the government in Oslo has said.

ATP has added 13 billion kroner of infrastructure investments since October, including a 3.1 billion-krone stake in a Brussels office building and the headquarters of utility Dong Energy A/S, which it owns together with Denmark’s government and Goldman Sachs Group Inc. (GS)

“We’ve got plenty of dry powder to take on risk,” Jepsen said. “We may well produce higher returns than 3 percent per year and if we do, that will help us to increase pension payments.”

-By Peter Levring

Blackstone Hunts for Apartments in Latest Rental Foray

Source: Bloomberg / News

Blackstone Group LP (BX), the biggest U.S. landlord of single-family houses, is carving out a new company to own apartment real estate, betting demand will outpace supply for at least three more years.

Blackstone is hunting for acquisitions to expand LivCor, a Chicago-based company formed last year from the purchase of stakes in 71 apartment properties valued at $2.4 billion. The firm is concentrating on suburban areas where there’s not as much new construction, including in the Southeast and in Texas, where more than half of the roughly 26,000 units it acquired are located, said Nadeem Meghji, who is overseeing the business.

“There is still a shortage of overall housing supply in the U.S.,” Meghji, a managing director at New York-based Blackstone, said in a telephone interview.

A stampede by investors into U.S. rental housing as the homebuying market collapsed in 2006 is still going strong in cities including San Francisco, Seattle and Houston, boosting rents and driving construction of apartments in and near downtowns. For Blackstone -- which has bought about 45,000 houses in the past three years to lead the burgeoning industry for single-family rentals -- LivCor represents its first major foray into the multifamily market.

U.S. apartment rents have climbed 13 percent on average since the recession ended in 2009, according to Reis Inc., a New York-based commercial-property research firm. Newer buildings charging higher rates helped push up the average, as developers look to cover their costs and modern amenities lure high-wage workers such as programmers and oil-industry engineers.

Growing Demand

The population of 20 to 34-year-olds, people in their prime renting years, exceeded 64 million as of the latest Census Bureau estimate for 2012. That represents about one-fifth of the U.S. population.

“When you look at the demand trends, there’s a good reason to be optimistic over the next certainly three to five years, and likely beyond,” said Jay Parsons, director of analytics at property specialist MPF Research, a unit of Carrollton, Texas-based RealPage Inc. “The cycle still has some legs.”

A surge in construction of multifamily dwellings in April propelled U.S. housing starts to the highest level in five months, the Commerce Department reported last week. Apartment and condominium projects jumped almost 40 percent from March, compared with a 0.8 percent increase for single-family homes.

Construction remains low by historical standards. Completions in buildings with five or more apartments averaged about 155,000 new units per year from 2010 to 2013, according to the U.S. Census Bureau. That’s below the annual average of about 245,000 units since 1999, according to the agency.

Vacancy Rate

Effective rents, or what tenants paid after any landlord breaks, averaged $1,090 a month in the first quarter, the highest since Reis began keeping the records in 1999. The U.S. apartment-vacancy rate has been hovering around 4 percent, its lowest since 2001, for more than a year.

As development accelerates in urban centers, some investors such as Blackstone are looking farther afield to areas with higher potential for rent gains.

“A lot of what’s getting built is urban mid- and high-rise product,” Meghji said. “There are fewer suburban, garden-style four-story walkups being built in most of our markets because suburban rental rates are not high enough to justify new construction.”

Blackstone is buying older apartments and fixing them up to compete with newer units -- improvements such as upgrading the kitchens and bathrooms, swapping carpets for wood floors and changing the lighting.

Household Formation

Housing demand also has yet to fully rebound. Annual household growth approached 1 million in 2012 for the first time since the Great Recession, according to Harvard University’s Joint Center for Housing Studies’ most recent annual report on U.S. housing. Household formation slowed since 2007 as many people got roommates or moved in with parents.

“Pent-up demand is going to result in more than 1 million households being formed annually the next several years,” Meghji said. “We should have more demand than total housing supply for the next three years.”

For landlords, that increased demand may not be enough to counter the rise in apartment construction and tempered rent growth. Reis estimates that the U.S. apartment-vacancy rate will hold steady or even increase this year, the first time since 2009 it hasn’t declined.

“It’s not the demand side I worry about,” said Ryan Severino, senior economist at Reis, which tracks almost 10 million apartments in 79 major metropolitan areas in the U.S. “It’s the fact that supply growth is just ramping up. We are four years into a recovery and that has to slow down.”

Suburban Markets

Suburban markets with high incomes may offer good returns for investors in the next stage of the apartment cycle, MPF’s Parsons said. The “vast majority” of the millennial generation, people born from the early 1980s to the early 2000s, don’t live in urban areas, he said.

“They don’t all want a luxury high-rise with bamboo floors, low-flow faucets and rooftop dog parks,” Parsons said. “The first wave that goes into the suburbs could do very well.”

Smaller cities led the roster of most-affordable apartment markets in the U.S. at the end of last year, led by Columbus, Ohio; Indianapolis; Oklahoma City; Las Vegas; and Raleigh, North Carolina. Each had a rent-to-income ratio averaging 17 percent, meaning 17 percent of annual income went to pay rent, according to Axiometrics Inc., a Dallas-based research company.

That’s about half the maximum of one-third of gross income that’s typically required to qualify for a home mortgage.

Most Expensive

New York, which has long been an outlier, is the least affordable market, followed by Los Angeles, Miami, San Francisco, Boston and San Diego, according to Axiometrics. Excluding New York, those cities averaged 33 percent in rent-to-income ratios, while the U.S. as a whole averaged 24 percent, according to the firm.

Blackstone likes Texas markets because of strong job growth, Meghji said. Toyota Motor Corp. said last month it plans to open a new U.S. headquarters in the Dallas suburb of Plano, sending 4,000 jobs from other states. Dallas, Austin and Houston are among the markets with large technology, energy and financial-services employers that have seen some of the fastest growth in apartment rents in the U.S.

Effective apartment rents in the submarket that includes Plano will rise an estimated 4.4 percent in 2016 when Toyota’s new U.S. headquarters is scheduled to open, up from a previous forecast for 3.5 percent growth, Axiometrics said. The Plano submarket, which has had 95 percent apartment occupancy since 2010, saw rent growth of 4.1 percent in 2013.

GE Deal

Blackstone acquired the assets that form the bulk of LivCor from a unit of General Electric Co., which is paring real estate holdings. The firm took over GE’s partnership agreements with eight operating partners.

LivCor also oversees about 3,000 apartments that Blackstone bought in 2012 from Nationwide Insurance with a partner. About half of those homes are in the Pittsburgh area, where drilling in the Marcellus shale has been a boon to the local economy.

Blackstone’s operating partners both manage the LivCor properties and help find new deals, Meghji said.

Property Growth

The formation of LivCor is another step in the exponential growth of Blackstone’s real estate business in the past decade. The firm is the biggest manager of private-equity property funds, with $81.3 billion under management as of March 31. That’s more than triple its holdings at the end of 2007.

The company’s most recent acquisitions include an agreement last week to purchase the Cosmopolitan resort in Las Vegas for $1.73 billion, its first major casino investment. It’s also buying a group of shopping centers from American Realty Capital Properties Inc. (ARCP) in a $1.98 billion deal announced yesterday.

Since the financial crisis, Blackstone has formed a warehouse-property landlord, IndCor Properties, and a company to own shopping centers, Brixmor Property Group Inc. (BRX), by taking advantage of opportunities to buy assets at discounts from distressed sellers.

In single-family housing, Blackstone has spent about $8.6 billion to acquire assets and created a company called Invitation Homes to oversee the house rentals.

“You’re probably a little behind the curve if you’re getting in the game right now,” Reis’s Severino said of apartment investing. “There are still opportunities out there if you pick your spots and be careful about the amount you’re willing to pay.”

-By Hui-yong Yu

Putin’s Singapore Dream Costs Crimea Banks and Burgers

Source: Bloomberg / News

President Vladimir Putin is trying to transform Crimea into the Singapore of the Black Sea. That effort so far has cost Russia’s newest republic its entire banking system and all three of its McDonald’s.

After Putin annexed Crimea in March, the government in Kiev banned all lenders operating under Ukrainian law from the region. Now almost every bank on the peninsula, from billionaire Igor Kolomoisky’s Privatbank, Ukraine’s largest, to Italy’s UniCredit SpA has been shuttered. Unlike UniCredit, which is refunding deposits, Privatbank simply pocketed the cash, leaving its clients to seek compensation from Russia.

“Thank God they decided to return my money,” said Alla Anisomova, a retiree in her 60s who gets by on less than $300 a month. Anisomova is among the thousands of people who have flocked to the former Privatbank branch on Lenin Street in Kerch, a city on the eastern edge of Crimea, to apply for redress from Russia’s Deposit Insurance Agency. The agency, which now controls the building, has pledged to return deposits of as much as 700,000 rubles ($20,000).

For Anisomova and Crimea’s other 600,000 or so pensioners, the headaches of navigating the new bureaucracy have an upside. Putin has increased their monthly stipends 50 percent and by July will raise them to double what Ukraine paid. Those payments are made through local post offices, in cash.

Albania, Barbados

The pension increases, deposit compensations and pay raises for 140,000 public workers are part of the $48 billion Russia may spend by the end of the decade to transform Crimea into a commercial hub similar to Singapore, according to Oleg Savelyev, head of the new Crimea Affairs Ministry. That’s about 10 times the annual output of the region of 2 million people.

“I blew the dust off the book, ‘Singapore: From Third World to First’ by Lee Kuan Yew to have another read when I became minister,” Savelyev said in an interview in his office in the Economy Ministry in Moscow, where he was deputy minister before his promotion. “We will pursue Singapore’s model in Crimea, we’ll ensure a comfortable business environment there.”

Lee, who ruled Singapore from 1959 to 1990, turned the former impoverished British colony into one of the wealthiest countries in the world. The World Bank ranks Singapore No. 1 on its annual ease of doing business survey. Russia is 92nd, just behind Albania and Barbados.

New Russia

“Regulatory principles in Crimea will be much better, simpler than in the rest of Russia,” said Savelyev, 48, who was added to the European Union’s sanctions list last month. “The region will not have the stifling bureaucratic system that Russia is notorious for. Our task is not to replicate the Russian model, but to create a much better one.”

It’s not just banks that Russia has in mind for Crimea, there’s also gambling, tourism and wine. The peninsula will be designated a special economic zone, unique among the 84 regions of the world’s largest country. The casinos will probably be located in Yalta, acting Prime Minister Sergey Aksyonov said.

“Casinos won’t be scattered around Crimea,” Aksyonov said in an interview in Simferopol, the regional capital. “The zone will be confined to an area of 50 to 100 hectares.”

Yalta, a resort city where Leo Tolstoy and Anton Chekhov did some of their writing and czars Alexander III and Nicholas II built palaces, became the main holiday destination for Soviet workers under communism. Now the real estate along Yalta’s picturesque embankment is the most expensive in Crimea.

Roosevelt, Churchill

The main attraction is the Livadia Palace, where wax statues of Soviet dictator Josef Stalin, U.S. President Franklin D. Roosevelt and U.K. Prime Minister Winston Churchill commemorate their meeting in 1945 to discuss the reorganization of Europe after the defeat of Nazi Germany in World War II.

“Crimea’s economic potential is incredible,” Aksyonov said. “We’ll only need Russian aid during the transitional period. We’ll return the funds with interest.”

Vladimir Gubanov, who runs a division of Massandra, the winemaker founded by Nicholas II before Russia’s last czar and his family were murdered by the Bolsheviks, said he couldn’t agree more. Orders for Massandra’s wines from Russian retailers have doubled and even tripled since annexation, Gubanov said.

“Taxes in Russia are lower than in Ukraine and the number of potential investors is many times higher,” Gubanov said.

Lawmakers in Moscow are working on a draft bill that will offer tax and other incentives to stimulate exports, according to Savelyev, the minister for Crimea. Businesses there will operate under English commercial law rather than Russian legislation to attract foreign investment, he said.

‘Boldest Dreams’

“We will try to put our boldest dreams into practice,” Savelyev said.

Those dreams sound promising, but they aren’t helping business owners now, said Natlia Kochurina, who owns a 10-room hotel in Kerch, where ancient Greeks established a colony about 2,600 years ago.

Tourism is one of the mainstays of the economy of Crimea, which National Geographic magazine named one of the world’s top travel destinations last year, calling it “a diamond suspended from the south coast of Ukraine.”

Colonized by ancient Romans as well as Greeks, Crimea was part of the Ottoman Empire until Catherine the Great’s lover Grigory Potemkin engineered Russia’s peaceful acquisition of the peninsula in 1783, writing “Russia needs its paradise.” Soviet leader Nikita Khrushchev gave Crimea to Ukraine in 1954, a move Putin called a mistake that needed to be rectified.

Presidential Election

The peninsula attracted 6 million visitors last year, about 70 percent of whom were Ukrainian and 25 percent Russian. Kochurina said those numbers have plummeted since annexation as the government in Kiev urges people to boycott the region and skirmishes continue between federal forces and seperatist rebels in eastern Ukraine. Elections to replace Kremlin-backed President Viktor Yanukovych, who fled to Russia amid bloody protests in February, are slated to be held May 25 in Ukraine.

Add to that the fact that all transactions are cash only because credit and debit cards no longer work and Kochurina said she’s starting to wonder how long she can stay in business.

“Our future looks very vague,” Kochurina said.

Another economic pillar, shipping, is also foundering, according to Leonid Orlov, deputy head of Krym, one of Crimea’s five main ports.

The wharves are empty and the loading cranes are idle, Orlov said in an interview in Kerch, which is separated from Russia’s southern Krasnodar region by the Kerch Strait.

‘Political Blockade’

“An economic and political blockade is in place,” said Valery Belyakov, the deputy head of the Temryuk port on the Russian side of the watery divide. “Crimea’s main ports are in a state of legal limbo.”

The local government plans to close two ports, in Fedosia and Yevpatoria, as part of a massive overhaul of the peninsula’s infrastructure, Crimea’s Deputy Prime Minister Rustam Temirgaliev said on his Facebook page.

Authorities plan to construct a new terminal at Crimea’s only international airport, in Simferopol, and build ring roads around Simferopol and Sevastopol, home to Russia’s Black Sea Fleet. They also plan to connect Sevastopol and Kerch, on opposite sides of the peninsula, by rail.

The most ambitious project is the 5-kilometer bridge that Russia plans to erect across the Kerch Strait, a project that may cost as much as $5.8 billion, according to the Regional Development Ministry in Moscow.

Build, Putin!

The government plans to start accepting bids for the bridge, which will have a four-lane highway and two railway tracks, later this year, according to Sergei Kelbakh, chairman of Russian Highways, the state-run company overseeing the project. Companies from China, Turkey and South Korea have already expressed interest, Kelbakh said in an interview, declining to be more specific.

Currently there are just two ways to reach Crimea directly from Russia, either on a two-hour flight from Moscow or a 30-minute ferry ride across the strait.

“Build the bridge, Putin!” a passenger on the Nikolai Aksenenko ferry wrote in the ship’s comment log, identifying himself as Ustinov from Moscow and Sochi. “The ferry’s slow!”

Aksyonov, the acting premier, acknowledged that any hope Putin has of replicating the commercial success of Singapore hinges on his ability to root out corruption. The practice is deeply entrenched in both Russia and Ukraine, which are ranked by Transparency International as the most corrupt major economy and the most corrupt country in Europe, respectively.

‘Like Family’

“I summoned the ministers and warned them against taking bribes,” Aksyonov said. “Those caught taking or giving bribes will be sent to work in Magadan,” Aksyonov said, referring to the region of northeast Russia that became a forced-labor hub during the Stalin era.

Aksyonov said Crimeans are prepared for the “temporary economic difficulties ” that come with reuniting with Russia after six decades apart.

That position was seconded by Yury Pivnenko, a retired fireman who supplements his pension by driving a taxi in Alushta, about 50 kilometers south of Simferopol.

“Putin brought us back home without firing a shot,” Pivnenko said. “He’s like family now.”

-By Evgenia Pismennaya

Sterling Adds Property Holdings Amid Fight Over Clippers

Source: Bloomberg / Luxury

Donald Sterling, the billionaire who may lose ownership of the Los Angeles Clippers basketball team after racist comments he made surfaced, stood outside a Nobu restaurant last month and enthused about a real estate deal.

“He told me a bank approached him with a bunch of houses,” Stephen Shapiro, chairman of Westside Estate Agency, a Beverly Hills, California-based brokerage specializing in multimillion-dollar homes, said in an interview. “He didn’t always buy the priciest properties. He bought what made sense. He never sold anything.”

He’s still buying -- and a sale of the Clippers would bring hundreds of millions of dollars to buy even more. Even as Sterling and his estranged wife, Shelly, fight to retain control of the team, they’ve completed deals for single-family houses and apartment properties in Beverly Hills and on Los Angeles’s Westside. They’ve purchased at least 12 houses and three multifamily buildings from the beginning of 2013 through last month for a total of $58.7 million, according to Los Angeles County Office of the Assessor records.

Whatever happens with the ownership of his basketball team, Sterling, 80, will probably remain a major player in Los Angeles real estate. He owns at least 160 apartment buildings, office properties and single-family homes in the area, many of which he purchased with cash, according to county records compiled by data provider LexisNexis.

Moral Compass

“The worst case for Sterling: he sells the team and pockets an additional billion dollars,” Curtis Palmer, the Beverly Hills-based head of CBRE Capital Markets’ multifamily group, said in an e-mail. “He won’t be capital-constrained, and people generally don’t use a moral compass when making a decision to sell real estate to the highest bidder.”

Two days after Shapiro’s encounter at the Nobu sushi restaurant in Malibu, California, a recording of Sterling telling a female friend not to bring black people to Clippers games was posted on, prompting criticism from President Barack Obamaand spurring National Basketball Association Commissioner Adam Silver to demand Sterling be stripped of the team. The NBA’s Board of Governors has scheduled a June 3 hearing on whether to force the sale.

Sterling has been offered a chance to present his side of the story at the hearing. Shelly Sterling, who has been married to Donald Sterling for 58 years, also has said she’s entitled to keep her 50 percent ownership interest in the Clippers, a claim opposed by the commissioner.

Family Trust

The buildings the Sterlings have purchased since the beginning of 2013 range in price from $1.3 million to $14.6 million. All of the properties were recorded with the county under Donald Sterling’s name, and most also have the Sterling Family Trust on the property records. The trust and Sterling himself have the same Wilshire Boulevard address in Beverly Hills. A portfolio like the one Shapiro said Donald Sterling described has yet to be recorded.

Max Blecher, an attorney for Donald Sterling, didn’t return phone calls seeking comment on the couple’s property purchases. Shelly Sterling declined to comment on the acquisitions.

“Shelly continues to be unfairly tarnished by the words and actions of her co-owner and estranged husband,” Pierce O’Donnell, her attorney, said in a statement e-mailed on May 20. “In fact, they have been living apart for more than a year, and both have announced their intentions to divorce. While they remain business partners, Shelly has denounced his racist statements in the strongest terms.”

Latest Deal

Donald Sterling’s latest recorded real estate deal was the $5.16 million cash purchase of a six-bedroom, six-bath, Spanish Mission-style house in Beverly Hills. He bought the home, built in 1931, for $423,000 below its list price.

“I’ve worked with him on a number of transactions over the last two years,” said Michael Libow, an agent with Coldwell Banker who represented the seller of the Beverly Hills house. “They’ve all become rentals.”

The sale was recorded on May 12, the same day cable network CNN aired an interview with Sterling, who apologized for his racist comments while also accusing retired NBA star Earvin “Magic” Johnson of failing to help the black community and criticizing him for contracting the virus that causes AIDS. Those comments were included in the NBA’s summary of termination charges seeking to end Sterling’s ownership of the Clippers.

Sterling International

The Sterlings’ real estate holdings include large apartment properties such as Sterling International Towers and the Sterling Wilshire in West Los Angeles, Sterling Ambassador Tower in Koreatown, and Long Beach Tower Apartments. They also have dozens of smaller multifamily buildings scattered across Los Angeles County, primarily on the Westside. The properties, acquired over several decades, often at a fraction of current prices, can be highly profitable and tend to be in demand because rents are lower than at higher-end buildings, according to Palmer of CBRE.

“The older, nondescript buildings Sterling owns can get a lot of demand because not everybody can afford brand-new, shiny things,” Palmer said. “A lot of people may not be able to pay $3,500 a month, but only $2,000 a month. And they are cheaper to maintain, especially if you don’t do any upgrades.”

Average rents for market-rate apartments in the Beverly Hills, West Hollywood and Park La Brea area rose to a record $2,024 last year, up from $1,963 in 2012 and 12 percent above the previous annual peak in 2007, according to New York-based research firm Reis Inc. (REIS) The vacancy rate dropped to 1.9 percent last year from 5.9 percent in 2007. For the entire Los Angeles metropolitan region, rents last year averaged $1,458 and the vacancy rate was 3.2 percent.

Rent Growth

“The Westside is very pricey, but it does make sense to buy there still because you’re seeing a lot of rent growth,” Palmer said. “It’s very hard to develop there and so you have a limited pipeline of new competing product. And you have tremendous job growth, particularly in the tech sector, so you have tremendous demand with little supply.”

In addition to rental income, Sterling has access to debt. He has a $250 million line of credit with Bank of America Corp., according to a document filed with the Los Angeles County Recorder’s Office on May 19, the same day the NBA initiated the termination charges.

While Sterling may be able to afford to buy more if he sells the Clippers, he probably won’t always get a warm reception, said Dean Zander, a senior partner at Hendricks-Berkadia, the apartment investment-banking unit of Berkadia Commercial Mortgage LLC.

‘Current Notoriety’

“I don’t think an offer by him today would be well-received by most owners, just because of the current notoriety,” Zander said in a telephone interview from Los Angeles. “He’s performed beautifully with me in the past, closing on time, on schedule and providing quick cash. He owns some high-profile communities throughout better parts of Los Angeles and is a natural buyer for these assets. But it’s a different world after those tapes were released and he made subsequent ill-informed comments.”

Sterling faced allegations of racism before the recording was released last month. In November 2011, he agreed to pay $2.73 million to settle a U.S. government lawsuit accusing him of discriminating against black and Hispanic prospective tenants for buildings he owns with the Sterling Family Trust in the Koreatown area. After contesting the claims in court, the trust denied any liability as part of the settlement.

Tenants’ Rights

Under the accord, the Sterlings agreed to display tenants’ rights posters at their property management offices, to send their employees to a fair-housing training program and to let an independent auditor monitor their compliance with the Fair Housing Act.

In 2005, Sterling settled a suit by the non-for-profit Housing Rights Center over claims his former employees and tenants were fired or mistreated because they weren’t Korean. Sterling told his staff at his buildings in Koreatown, west of downtown Los Angeles, that he didn’t want black or Latino tenants, according to the complaint.

Sterling denied most of the claims in the case and said the tenants who brought it had “hidden agendas,” according to a court filing. He and his wife appealed a judge’s order that they pay $4.9 million for the Housing Rights Center’s legal costs. The appeal was dismissed in February 2006.

Sterling, an active member of the California bar, has a history of litigation. Blecher, his attorney, told the NBA in a letter this month that his client intends to fight his punishment in court.

Stiviano Sued

Shelly Sterling also has used the courts to try to settle disputes. In March, she sued the woman her husband talked to on the tape released by TMZ, who goes by the name V. Stiviano.

The lawsuit alleges Donald Sterling had a sexual relationship with Stiviano and that he bought her a $1.8 million duplex, two Bentleys, a Ferrari and a Range Rover, as well as spending $240,000 on her upkeep, all of which came out of community property without Shelly Sterling’s consent.

Shelly Sterling has said she doesn’t think her estranged husband is a racist. Instead she believes his comments on the tape were the result of “the onset of dementia,” she told Barbara Walters of ABC News earlier this month.

“I said, ‘Well, this is the tape.’ And he says, ‘Hmm. I don’t remember it,’” Shelly Sterling said in the interview. “That’s when I thought he had dementia.”

Shapiro, the real estate broker who spoke with Donald Sterling outside Nobu last month, said past controversy never slowed Sterling down, so it may not have an effect now.

“I don’t think anybody particularly wanted to do business with him, because he probably always got the better of everybody,” Shapiro said. “No matter what you say, he’s a smart guy.”

-By Nadja Brandt and John Gittelsohn