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3rd May 2014

Singapore Real Estate

TDSR pushes some to offshore loans

Knight Frank report sees such spaces commanding 3-5% rise by the year-end

Source: Business Times / Property

RETAIL rents of prime spaces islandwide inched up 0.8 per cent in the first quarter from the previous period, led mainly by higher rents for such spaces in Marina, City Hall and Bugis.

While overall retail rents could see a gradual 3-5 per cent fall by the end of this year with new supply coming onstream, retail rents for prime spaces are likely to hold firm - and, in fact, grow by 3 to 5 per cent - by the end of this year, according to a Knight Frank report.

"Retailers would be more selective in their relocation and expansion plans with more ample options of available retail spaces," said Alice Tan, Knight Frank's head of consultancy and research.

The report defines prime spaces as units of between 350 and 1,500 sq ft with the best frontage, connectivity, footfall and accessibility in a mall. They are typically the ground or basement level of a retail mall that is linked to a bus interchange or an MRT station.

-By Lynette Khoo

Medical hubs sprouting up in suburbs

Source: Straits Times

New medical hubs are quickly taking shape away from traditional central areas thanks to the increasing numbers of suites being built in the suburbs for doctors. In the past, private health-care groups that own hospitals sold or leased these medical suites to only doctors or dentists. But in recent years, mainstream developers have started building mixed developments with units in this niche field and selling them to lay investors as well, but tenants must still be medical practitioners.

Sleepy waterfront estate set to transform

Source: Straits Times

A transformation is under way in sleepy Kampong Bugis, a piece of waterfront land next to Kallang River and once home to the Kallang Gas Works. The upcoming launch of a new condominium could provide the catalyst and kickstart the district's development into a high-density waterfront residential estate, analysts say.

Self-storage players see survival of the strongest in industry

They also expect more diversity, competitiveness, demand for new offering

Source: Business Times / Wealth

THE self-storage industry here is expected to become more diverse and competitive, and to spawn a wider range of product and service offerings, says a White Paper by Colliers International. Industry players interviewed by the commercial real-estate services provider said they believed this would raise the industry's profile and professional standards, and even lead to a shake-up that would leave only the strongest players standing.

For its third research paper on the industry, Colliers spoke to four major operators here - Extra Space, Lock+Store, StorHub and StoreFriendly - between last September and October. It asked them about the business models they were operating, the real estate requirements for their facilities, the challenges they faced and what would make for an "optimal" self-storage facility.

Colliers found the firms optimistic about the future of the industry; they are anticipating a rise in demand for their facilities, given that Singapore's population will grow not just in size, but also in affluence; affluence means more personal purchases but insufficient space in which to put them, given that home sizes are expected to remain small.

-By Jaira Koh

Wanted: Ultra-rich property buyers

Singapore ranks fourth among cities wooing the upper crust to invest in real estate, having attracted US$217b

Source: Business Times / Top Stories

SINGAPORE, long seen as a real-estate haven for the ultra-rich, has joined the league of top five cities in wooing the rich into putting their money into brick and mortar.

The biggest magnet is Hong Kong, which has attracted US$798 billion in real estate holdings from ultra high net worth individuals (UHNWI). London is second with US$676 billion, followed by Moscow (US$263 billion), Singapore (US$217 billion) and New York (US$164 billion).

Together, these cities account for 40 per cent or US$2.2 trillion of all global real-estate investments by UHNWIs, said a joint report by Savills, global interior design house Candy & Candy and Deutsche Asset & Wealth Management.

Real estate has begun to look more attractive amid increased under-performance of the fixed-income markets and a prevailing caution towards equities, said the report.

Of course, there could be short-term fluctuations in real-estate prices in these mature locations, but the ultra-rich are undeterred from staying invested in them, said Yolande Barnes, the London-based director for world research at Savills.

Residential properties remain the preferred choice of the world's 200,000 UHNWIs, said Savills in a separate report; if these individuals own commercial properties, they do so indirectly through companies or other investment entities.

Savills puts the value of the world's real estate at around US$180 trillion, of which some 72 per cent is owner-occupied residential property.  Of the US$70 trillion that is "investable" and therefore traded regularly - including US$20 trillion of commercial property - over half is bought by private individuals, companies and organisations.

Carlos Arrizurieta, managing director at Deutsche Asset & Wealth Management's Florida office, said that his clients dedicate as much as three-quarters of their investment portfolio to direct real estate. In Hong Kong, real-estate holdings have been bolstered by the influx of mainland Chinese investors and the city's extremely high property values, said the joint report. Moscow, on the other hand, has a disproportionately high number of domestic ultra-rich individuals propping up its real-estate market.

The report does not, however, offer an exact breakdown of investments by domestic and overseas UHNWIs. Corporate and institutions show markedly different investing behaviour from ultra-rich individuals; the most active investment markets for them in the 12 months to February were New York and London; Hong Kong came in only at 10th place.

A Savills analysis has found that a small number of countries tend to dominate global real-estate markets. The world's top-tier global urban centres - the so-called "alpha cities" - have been key magnets, drawing investments from ultra-rich individuals. Nearly half of all UHNWI wealth is tied up in real estate in these 45 alpha cities, which account for just 5 per cent of the world's population.

Similarly, a few countries dominate as sources of wealth streaming into real estate: Germany, Japan and the US account for 39 per cent. The report projects, however, that the number of Asia's ultra-rich and their aggregate wealth will grow faster than in any other region in the next five years. China, India and Hong Kong are poised to climb up the list of top 10 real-estate investing nations.

A dozen cities across the globe which do not have world city status were named in the report as having the potential to rake in strong residential price increases. These rising stars range from the well-established such as Melbourne in Australia and Chicago in the US to the upcoming such as Chennai in India.

Those looking for income-producing properties are more likely to find high and rising rental incomes in places where real-estate values have not been driven by the ultra-rich, the report said. Ms Barnes noted that while urban cities have been the growth story of the last five years, prime hot spots are also showing up among getaway-retreat locations. She anticipates that residential retreats will go up in price by up to 10 per cent this year, with some returning to their former peaks by 2019.

The "golden visa" scheme offered in some countries such as Portugal, which grants foreigners residency permits if they invest in real estate beyond a certain value, has attracted significant Chinese investment, she added.

-By Lynette Khoo

210 units sold at Commonwealth Towers

Source: Business Times / Wealth

JUST over half the 400 units of the 99-year leasehold Commonwealth Towers, launched on Thursday, have been sold.

The project on Commonwealth Avenue has its 845 units spread across two 43-storey towers, which offer views of the city and the Southern Ridges. The units have between one and four bedrooms and range in size from 441 sq ft to 1,302 sq ft. Betsy Chng, who heads sales and marketing at Hong Leong Holdings, said of the 210 units taken up: "We are very happy with the response, given the tough market today. Many applications are still being processed. Some buyers are still waiting to find out whether they comply with the Total Debt Servicing Ratio Framework."

(The framework requires financial institutions to consider borrowers' other outstanding debt obligations when granting property loans. Its aim is to strengthen credit underwriting practices and encourage financial prudence among borrowers.)

HDB extends grace period for business space tenants

New rule since October has been effective in arresting surging assignment fees, says Khaw

Source: Business Times / Singapore

TO grant more breathing space to long-time commercial and industrial tenants affected by the rule that restricts the transfer of business spaces, the Housing & Development Board (HDB) is extending for them the three-year grace period to six years.

This concession will be for those tenants who have already been renting HDB spaces for at least 15 years.

The grace-period extension was announced by Minister for National Development Khaw Boon Wan on his blog yesterday. He also said the new HDB rule that kicked in last October "has been effective".

HDB's commercial units generally cater to retail/service trades and eating houses.

-By Lynette Khoo

Rent transfer rules: HDB extends grace period for long-time tenants

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Development Board (HDB) has extended the grace period for businesses to adjust to a new rule banning the transfer of tenancies among HDB commercial and industrial tenants.

HDB will double the grace period from three to six years for existing commercial and industrial tenants who have already been tenants for at least 15 years as of 16 October 2013, Minister for National Development Khaw Boon Wan said in a blog post on Friday.

HDB reviewed the rule after meeting various groups of tenants, Mr Khaw said.

Some of them have been operating out of the same premises for many years and had asked HDB for a longer grace period to give them more time to make business adjustments.

A significant proportion of them will be retiring in a few years' time, or would be near retirement then.

Mr Khaw said: "I hope the extended grace period would better help them make the necessary business adjustments to dovetail with their retirement plans.

"This concession is a good way to recognise their many years of serving the local community."

About 7,100 long-time tenants, or 40 per cent of HDB commercial and industrial tenants, will benefit from the special concession.

Among them, 77 per cent are aged 55 years and above.

Since October last year, HDB has stopped the practice of transferring tenancies among HDB commercial and industrial tenants, but allowed existing tenants a three-year grace period until Oct 2016 to adjust to the new rule.

Mr Khaw said the old practice allowed the exit of tenants whose businesses were not doing well, but had led to high rental bids by businesses, in the hope of reaping high assignment fees down the road.

Such high rents and assignment fees translate directly to higher operating costs which must eventually be passed on to consumers.

The new HDB rule has been effective, Mr Khaw added.

The average assignment fees for HDB commercial and industrial properties have fallen by about 33 per cent and 42 per cent respectively since.  

- CNA/xq

Long-time HDB shop tenants get breather

Source: Straits Times

A recent rule to curb speculation in the Housing Board commercial and industrial rental market has been effective so far, and the authorities are extending a concession to long-time tenants. Last October, the HDB banned new tenants from transferring such rental premises to others for a cash premium, known as an assignment fee.

Retelling the story of Hotel New World tragedy

Source: Straits Times 

Veteran journalist Philip Lee can still recall what it was like at the scene of the 1986 Hotel New World disaster. "Whenever rescuers pulled out a body from the wreckage, they were greeted by a stony silence," the 72-year-old told 120 Straits Times readers last night.

Real Estate Companies' Brief

Korea's Lotte defers S'pore Reit IPO

Source: Business Times / Companies

LOTTE Shopping Co Ltd said it is postponing an up to US$1 billion real estate investment trust (Reit) listing in Singapore due to unfavourable market conditions, the second large initial public offering (IPO) to be pulled in Asia this week.

Volatile equity markets this year have helped undermine sentiment for some of the region's less attractive listings, but Asia-Pacific IPO markets as a whole are still expected to have an upbeat 2014. Issuance for the year so far has doubled to US$15.4 billion over the same period a year earlier.

"People are just being more tactical," said Keith Pogson, managing partner for financial services at consultancy EY in Hong Kong. "If we can see sensible valuations, where investors believe they can get some safety in terms of rewards for taking the IPO risk in getting involved, I think we will see plenty of deals flying out the door."

-From Seoul, Korea

Parkway Life distributable income up 6.9% in Q1

Source: Business Times / Companies

THE dawn of a new financial year brought some warmth from the land of the rising sun for Parkway Life Real Estate Investment Trust.

Distributable income at the healthcare Reit rose 6.9 per cent in the first quarter due to contributions from newly acquired properties in Japan and higher rents in Singapore.

Income to be paid out was $17.1 million, or 2.82 cents per unit, for the first three months of 2014, the healthcare real estate investment trust announced early yesterday.

-By Kenneth Lim

Roxy-Pacific Q1 profit up 29% at $15.1m

Source: Business Times / Companies

ROXY-PACIFIC Holdings' net profit for the first quarter ended March has risen 29 per cent to $15.1 million, from $11.7 million a year ago.

This was on the back of revenue surging 48 per cent to $79.5 million, compared to $53.7 million a year ago, thanks to stronger performance from the property development and hotel ownership segments.

The property development segment (comprising residential and commercial developments) accounted for 84 per cent of the group's Q1 turnover. Revenue from this segment rose by 58 per cent to $67.1 million.

-By Mindy Tan

Millennium & Copthorne suffers 46.7% slide in profit

Source: Straits Times

A stronger pound helped send earnings plunging at Millennium & Copthorne (M&C) Hotels in the first quarter. Net profit came in at £6.5 million (S$13.8 million), 46.7 per cent down on the same period a year earlier.

Starhill Global Reit

Source: Straits Times

Starhill Global Reit reported first-quarter revenues of $49 million, net property income (NPI) of $39 million and distributable income of $28 million. Income was lower owing to one-off rental arrears paid by Toshin in the first quarter last year. Excluding the one-off payment, gross revenue and NPI would be 2 per cent and 3 per cent higher respectively.

Views, Reviews & Forum

Rent too high? Move to Singapore

Source: Straits Times

Anyone in the market for a luxury apartment in Hong Kong, London or Washington towards the end of last year was in luck. The rents on prime flats were sagging a bit. Billionaires could lock in leases on pieds-a-terre at a slight discount. You might suppose that those savings would trickle down to regular working Joes, but no - middle-market rents in those cities continued their apparently inexorable upward march.

Global Economy & Global Real Estate

Record $296m for London penthouse

Source: Straits Times

Turkey Drops Probe Into Alleged Real Estate Corruption

Source: Bloomberg / News

A Turkish prosecutor dropped an investigation into corruption in real estate, one of three graft probes that had been rattling the government of Prime Minister Recep Tayyip Erdogan since December, Hurriyet newspaper said.

Prosecutor Ekrem Aydiner’s decision means the judiciary probably won’t pursue a case against 60 suspects in the probe, including construction magnate Ali Agaoglu and Oguz Bayraktar, the son of former government minister Erdogan Bayraktar, who lost his job in a cabinet shuffle a week after the allegations were made public.Turkey’s state housing agency TOKI and state-linked real estate developer Emlak Konut (EKGYO) had also been implicated in the case.

Erdogan’s government is fighting off graft allegations that broke when the sons of three former ministers were detained in simultaneous police raids starting Dec. 17. Erdogan’s ruling Justice and Development Party, or AKP, says the probes and arrests were orchestrated by political foes and aimed to undermine his government in the run-up to March 30 municipal elections.

“The government is succeeding in its efforts to neutralize the damaging corruption investigation,” Wolfango Piccoli, a political and economic risk analyst with Teneo Intelligence in London, said by e-mail today. “The AKP will now focus more and more on those it believes were behind the probes.”

New Prosecutors

Erdogan’s government is purging people it deems to be followers of U.S.-based Turkish cleric Fethullah Gulen in the police force and the judiciary. The premier blames the cleric for masterminding the allegations of corruption and has vowed to start legal action to request Gulen’s extradition from the U.S., while eliminating his followers from state institutions.

Aydiner, the prosecutor behind today’s decision, was appointed to lead the investigation after his predecessor, who opened the case, was dismissed. In February, Aydiner lifted travel restrictions on most suspects, citing a lack of evidence against them.

The country’s Supreme Board of Judges and Prosecutors today started a probe against prosecutors Zekeriya Oz, Celal Kara and Muammer Akkas, who were initially in charge of the graft case, as well as judge Suleyman Karacol, who had ordered a freeze on assets of the suspects, the state-run Anadolu news agency said.

Corruption Message

Ozcan Yeniceri, a lawmaker for the opposition Nationalist Movement Party, protested the decision, saying the corruption probes were “manipulated by this government” and “there will never be real prosecution,” according to Anadolu.

Kemal Kilicdaroglu, leader of the opposition Republican People’s Party, said in a press conference in Istanbul today that his party would continue to make corruption a campaign issue in the run-up to presidential elections in August.

“We have to talk about what kind of president we want, whether it’s right to have someone accused of corruption in that seat,” Kilicdaroglu said. “We’ll focus on that message.”

-By Onur Ant and Selcan Hacaoglu

Hyde Park penthouse may have changed hands at record price

Source: Business Times / Wealth

A PENTHOUSE in London's One Hyde Park luxury apartment complex valued at as much as £175 million (S$370 million) has been sold by Christian Candy's CPC Group Ltd. The 16,000 square foot duplex penthouse D was valued independently at £160 million to £175 million, CPC said yesterday. The buyer and selling price weren't disclosed.

A sale at that price would value the property at more than £10,000 per square foot, a UK record, said Oliver Hooper, director of broker Huntly Hooper Ltd. The previous record was £9,000 a square foot paid for a London mansion, he said.

London luxury-home values have soared since 2009 as the world's wealthy sought safe assets. CPC has sold properties worth more than £2 billion since One Hyde Park opened in 2011, according to the statement. The apartment complex is located in Knightsbridge, home to Harrods department store, Royal Albert Hall and the five-star Berkeley hotel.

-From London, UK

CPC Sells One Hyde Park Penthouse With $295 Million Valuation

Source: Bloomberg / News

A penthouse in London’s One Hyde Park luxury apartment complex valued at as much as 175 million pounds ($296 million) was sold by Christian Candy’s CPC Group Ltd.

The 16,000 square foot (1,486 square meter) duplex penthouse D was valued independently at 160 million pounds to 175 million pounds, CPC said today in an e-mailed statement. The buyer and selling price weren’t disclosed.

A sale at that price would value the property at more than 10,000 pounds per square foot, a U.K. record, Oliver Hooper, director of broker Huntly Hooper Ltd. said by phone. The previous record was 9,000 pounds a square foot paid for a London mansion, he said.

London luxury-home values have soared since 2009 as the world’s wealthy sought safe assets. CPC has sold properties worth more than 2 billion pounds since One Hyde Park opened in 2011, according to the statement. The apartment complex is located in Knightsbridge, home to Harrods department store, Royal Albert Hall and the five-star Berkeley hotel.

-By Patrick Gower