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9th May 2014

Singapore Real Estate

HDB resale flat prices dip 0.2% in April

Exec flat prices post 1.2% rise, SRX figures show, while resale deals are up 4.4% over March

Source: Business Times / Singapore

RESALE prices of HDB flats dipped 0.2 per cent in April over March. The drop was driven by three, four and five-room HDB flats, which saw price weakening of 0.2 per cent, 0.8 per cent and 0.4 per cent respectively. However, prices of executive flats rose 1.2 per cent.

Overall, HDB resale flat prices for April were down 5 per cent year-on-year, show latest figures from the Singapore Real Estate Exchange (SRX).

The total number of HDB flat resale transactions at 1,484 in April is a 4.4 per cent month-on-month improvement but down 14.4 per cent year on year.

HDB prices continue to face downward pressure, with the overall median transaction over X-value (TOX), which measures how much people pay over the recent transaction prices, remaining in negative territory last month. The overall median TOX for April was negative $4,000, a worsening of the negative $3,000 for March.

HDB resale prices remain flat in April

Source: Channel News Asia / Singapore

SINGAPORE: Resale prices of Housing and Development Board (HDB) flats remained relatively flat last month, a flash report from the Singapore Real Estate Exchange (SRX) showed.

Overall, HDB resale prices dropped slightly by 0.2 per cent in April compared to March.

This decrease is driven by 3-, 4- and 5-room flats which softened by 0.2 per cent, 0.8 per cent and 0.4 per cent respectively. However, prices of executive flats rose 1.2 per cent.

On a year-on-year basis, last month's prices are down 5 per cent from the same period last year.

Steven Tan, managing director of OrangeTee, said: "We thought that the prices could have dropped slightly more than that, if we compare it with the HDB index Q1 figure, which is about 1.6 per cent.

"It shows that in some of the areas, for some types of HDB resale flats, the prices are stabilising."

Resale volume rose in April with 1,484 units sold -- the highest since July last year when 1,494 units exchanged hands.

Buyers have also been more conservative after changes to the HDB resale process.

It has been about two months since HDB changed its resale procedure to shift the attention of buyers and sellers away from the Cash-Over-Valuation (COV) component when negotiating a deal for a HDB resale flat. This means that both parties have to agree on a price first, before being able to find out the valuation of the unit.

Mr Tan added: "With the change of the resale policy, we also noticed that more buyers are more conservative when it comes to negotiation.

"But having looked at the overall outcome, we feel that for some areas, the impact of this new policy is greater. But for some highly sought after areas, buyers are prepared to stick to the price or even offer a higher price.

"A good example is Jurong East and Queenstown, where the prices are higher than the last transaction, due to the location and the limited supply."

Thus, analysts said it has become more of a buyers' market, with sellers also more willing to negotiate.

Firdaus A.B., a resale flat seller, said: "We used to follow the valuation report. Now they will just bargain more. (It is now more difficult to) sell my house."

With prices stabilising, analysts said that more people are also returning to the HDB resale market.

Last month's sales volume (1,484 units) was a 4.4 per cent increase from March, when 1,422 units were sold.

On a year-on-year basis, April's resale volume is still 14.4 per cent down compared with 1,733 units resold in the same period last year.

Johnny Goh, head of training and agency at DWG Real Estate, said: "January, February is our festive period and many people have just started work after their year-end holidays. And followed by the policy announcement on March 10, they'll adopt a wait and see attitude. But after seeing prices not really coming down, they've started to come back."

Serangoon North HUDC goes private

Source: Straits Times 

Serangoon North HUDC estate has been privatised successfully, making it the 14th of 18 such once-public housing estates to complete the journey. The estate has become a strata-titled property under the Land Titles (Strata) Act, said the Housing Board in a statement yesterday.

Serangoon North HUDC goes private

Source: Channel News Asia / Singapore

SINGAPORE: The Serangoon North HUDC Estate has been privatised, clearing the path to a possible collective sale of the entire estate to private property developers.

It is the 14th of 18 HUDC estates to be privatised.

Privatisation is in progress for three other estates at Hougang North Neighbourhood 3, Hougang North Neighbourhood 7 and Potong Pasir, while the remaining development, Braddell View, is still gathering support.

The privatisation is initiated by residents and a requisite 75 per cent majority support was subsequently achieved by them.

One analyst said developers may still be attracted to en bloc sales, especially for sites in mature estates, such as the Serangoon North HUDC.

That is because developers are unlikely to get such land parcels under the government land sales programme.

"The current market conditions are of course, not that good for en bloc. In fact, in the last two to three years, the en bloc projects that have come to the market with values of S$500 million and above… have not found any investors or developers.

“But this HUDC project going into privatisation now -- the timing might be relatively good in preparation for future en bloc in the next upturn.

“Maybe in two years’ time, they would have prepped themselves ready to sell to a developer for an en bloc,” said Ku Swee Yong, CEO of Century 21.

Modification works on the Serangoon North HUDC estate have begun.

Located at Serangoon North Avenue 1, the estate comprises 244 units across seven blocks.

Its pro-tem committee said privatisation was already on the cards some 7 to 8 years ago, in a bid for residents to have greater control in managing the estate.

But an en bloc sale is not an immediate concern, although the committee does not rule it out.

"En bloc will be something that no one wants to rule out, if the opportunity is right. The main challenge would be to garner the level of support required.

“Unlike a privatisation, this one will have a so-called limitation of "within one year, you must complete the en bloc sale”, otherwise everything will go back to ground zero again,” said Richard Goh, chairman of the Pro-Tem Committee. 

- CNA/nd

Bus firm well-geared for move to property

Source: Straits Times

Kallang Riverside will technically be SJE's maiden residential project, but Mr Lee said the firm's sister company, Melodies, is developing the 41-unit Riverside Melodies at St Michael's Road. Melodies also developed the 72-unit Cassia View at Guillemard Road, completed in 1998. Both projects are freehold. Kallang Riverside opens for preview tomorrow. It is expected to launch later this month, but the date is yet to be fixed.

CDL expects strong take-up for Coco Palms

Source: Straits Times

The newest joint venture condominium development by City Developments (CDL), Hong Realty and Hong Leong Holdings has received a strong response ahead of its launch next Saturday. More than 3,000 visitors visited the Coco Palms showflat last weekend - the first weekend of its preview, CDL said yesterday. 

Coco Palms opens for booking on May 17

Unit sizes range from 463 sq ft one- bedder to penthouse of 3,111 sq ft

Source: Business Times / Companies

CITY Development's (CDL) latest resort-themed condo project at Pasir Ris, Coco Palms, is open for booking on May 17, with one-bedroom units starting from $498,000.

The showflat, which opened last Saturday, already drew more than 3,000 visitors in that weekend alone, said CDL, which is developing the project with Hong Leong Holdings and Hong Realty.

According to indicative prices from agents, a two-bedder may start from $718,000, a three bedder from $888,000 while a four bedroom unit may start from $1.23 million.

Comprising 12 blocks, Coco Palms offers one to five-bedroom apartments, dual key units and penthouses. Unit sizes range from 463 square feet for a one-bedder to 3,111 sq ft for a penthouse.

The 99-year lease of the site starts from January 2008, as the plot is part of CDL's historical Pasir Ris landbank acquired decades ago.

Property consultants noted that the developer seems to be making sure that the overall quantum of the units is affordable to upgraders.

"Most of the projects in Outside Central Region have been targeting at HDB upgraders, as investors are more cautious in view of the pipeline supply and softening demand," said OrangeTee research head Christine Li. "After all, HDB prices have almost doubled since 2006 and many HDB upgraders are sitting on tidy profits."

R'ST Research director Ong Kah Seng noted that the lowest quantum was at least $500,000 in CDL's earlier projects in Pasir Ris - NV Residences, D'Nest and The Palette. Most of the units in these three projects have selling prices of at least $1,000 per sq ft (psf), he said.

Since the mid-tier and suburban condos have started cutting prices, new projects have to be priced accordingly to entice buyers, Mr Ong said.

A key draw of the new 944-unit project is greater proximity to the Pasir Ris MRT station, bus interchange and White Sands shopping mall - a mere five-minute walk away - compared with earlier condo projects in the vicinity.

CDL's other joint venture projects in Pasir Ris - Livia, NV Residences and The Palette - have been fully sold. Its fourth project further south of the other three projects, D'Nest, is 94 per cent sold since it was launched in March 2013 at an average $920 psf.

According to CDL, Coco Palms' architecture incorporates organic and eco-friendly features.

Two to five-bedroom and dual key apartments offer the option of floor-level or bay-window level smart storage system, for extra bedding and luggage.

The project is a short drive to the upcoming mall Project Jewel at Changi Airport, Changi Business Park, Tampines Wafer Fab Park and Pasir Ris Wafer Fab Park.

-By Lynette Khoo

String of new malls to fire up shopping scene

Source: Straits Times

Shoppers can expect more places to splash their cash at with a string of new malls scheduled to open by the end of the year. An estimated 1.9 million sq ft of additional shop space will be ready by December, comprising about half the 4.1 million sq ft expected to come onstream in the next four years.

Real Estate Companies' Brief

Higher rents lift Fortune Reit DPU up 15.3% in Q1

Source: Business Times / Companies

FORTUNE Real Estate Investment Trust (Reit) posted a 15.3 per cent increase in first-quarter distribution per unit after reaping the benefits of a new property and rental reversions.

Fortune Reit said income available for distribution rose 26.5 per cent to HK$193.9 million (S$31.2 million), or 10.38 HK cents per unit, for the January-to-March period.

Net property income increased to HK$289.2 million as the retail property trust recognised income from Fortune Kingswood, which was acquired in October 2013.

Occupancy across Fortune Reit's portfolio was 99.3 per cent as at March 31, with rent averaging HK$33.90 per square foot. Rents were raised 26.5 per cent on renewed leases during the quarter.

-By Kenneth Lim

Chip Eng Seng Q1 profit soars on property project

Source: Business Times / Companies

CONSTRUCTION and property group Chip Eng Seng's first-quarter net profit more than quadrupled year-on-year, mainly from higher revenue in its property development division.

Net profit for the period ended March 31, 2014, was $21.6 million or 3.35 cents per share, up from $4.67 million or 0.72 cent per share a year ago.

The group's net profit margin was 10.9 per cent for the quarter, higher than the 3.6 per cent in Q1, 2013.

First-quarter revenue rose 51.7 per cent year-on-year to $197.8 million, due mainly to higher revenue from the property development segment.

-By Raphael Lim

Parkson's Q3 earnings fall 22.6% to $7.56m

Profit hit by poorer showing from the group's Malaysia, Vietnam operations

Source: Business Times / Companies

PARKSON Retail Asia posted a net profit of $7.56 million for the third quarter ended March 31, 2014, down 22.6 per cent year on year, partly due to a poorer performance by its Malaysia and Vietnam operations.

Revenue edged down 1.7 per cent to $106.71 million, on the back of negative same-store sales growth in Vietnam and the weaker Indonesian rupiah.

Earnings per share were 1.12 cents, down from 1.44 cents.

Gross sales proceeds slipped 3.4 per cent to $269.66 million, while total expenses climbed 1.6 per cent to $99.29 million. Share of profits of associate Odel rose to $214,000 from $26,000.

-By Nisha Ramchandani

Design Studio's Q1 earnings make a near triple jump to $2.1m

Higher profit comes in spite of a decline in revenue

Source: Business Times / Companies

DESIGN Studio's first-quarter net profit almost trebled despite a fall in revenue.

Net profit for the three months ended March 31, 2014, was $2.1 million, up from $716,000 a year ago, owing to higher margins and lower marketing and distribution expenses, the furniture manufacturer said yesterday.

Revenue fell 12 per cent to $25.1 million from $28.5 million, as a result of a decrease in contribution from all segments, particularly hospitality and commercial.

The hospitality and commercial segment completed fewer projects compared with the same period last year. Revenue from this segment fell 13.8 per cent to $12.5 million.

-By Isabelle Tan

Sin Heng Heavy Machinery

Source: Business Times / Singapore Markets

May 8 close: S$0.192

AmFraser Research, May 8

SIN Heng reported Q3 FY14 revenue of S$53.7 million, which was 33 per cent higher than the previous corresponding quarter and in line with our forecast. Reported Patmi (profit after tax and minority interests) at S$6.3 million witnessed a 106 per cent increased as compared with Q3 FY13.

Views, Reviews & Forum

Continue letting HDB flat owners buy private property

Source: Straits Times 

I disagree with Ms Chan Suan Yen ("Why condo units are shrinking"; Wednesday). First, she said private developers of smaller condominium units are meeting the demand from buyers who cannot afford the quantum for larger units, because they are holding on to their HDB flats.

Global Economy & Global Real Estate

Developer in cash crunch denies it's at the brink

Source: Business Times / China

[HONG KONG] A Chinese developer yesterday said it had failed to deliver some properties to homebuyers on time because of financial pressure but denied media reports that it was on the brink of collapse.

The news underlines the growing pressure on China's real estate industry as banks have made it harder for developers to get loans and authorities have tightened controls on speculative buying.

Shenzhen-based Guang Real Estate Group Co said the delivery of "a small number" of homes and apartments in the southern city of Huizhou had been delayed, but it had compensated the buyers and promised to complete these projects eventually.

"We are facing some capital pressure, but the banks in partnership still care about us and we are confident in pulling through this hard time," an official said.

-From Hong Kong, China

Sun Hung Kai's Kwok brothers on bribery trial

Source: Business Times / Top Stories

[HONG KONG] A blockbuster corruption trial involving Hong Kong property tycoons Thomas and Raymond Kwok got underway yesterday, with all five defendants pleading not guilty to bribery charges.

The billionaire Kwok brothers, who jointly chair development giant Sun Hung Kai Properties, were arrested along with Hong Kong's former chief secretary Rafael Hui in a major swoop by the city's anti-graft watchdog in March 2012.

The Kwoks, aged 62 and 60, were accused of bribing Hui, who once held the second-highest position in the southern Chinese territory's government.

The trio are among five people charged with offences related to payments and unsecured loans amounting to HK$34 million (S$5.47 million).

-From Hong Kong, China

Li Ka-shing group offers US$1.8b for Aussie gas firm

Its A$1.32 a share offer for Envestra trumps bid by APA

Source: Business Times / China

[HONG KONG] Companies controlled by Li Ka-shing have launched an unsolicited US$1.8 billion takeover offer to other shareholders in Australian gas distributor Envestra, trumping a rival bid as Asia's richest man continues to expand his business interests abroad in a quest for growth.

Cheung Kong Infrastructure (Holdings), which already has a 17.46 per cent stake in Envestra, is teaming up with Mr Li's other companies Cheung Kong (Holdings) and Power Assets 

Holdings to buy the remaining shares.

The A$1.32 a share offer is at a 16.8 per cent premium to Envestra's last traded price and trumps an earlier offer from Australian Pipeline Ltd (APA), which already owns a third of Envestra, and values the entire company at A$2.37 billion (S$3.16 billion).

Envestra is the latest in a series of overseas infrastructure businesses to be targeted by Mr Li's empire, as it cuts his exposure to Hong Kong, where he began building his conglomerate some 64 years ago.

-From Hong Kong, China

BNY Mellon Said to Zero In on Two Sites in Planned Move

Source: Bloomberg / Personal Finance

Bank of New York Mellon Corp. is poised to choose between a lower Manhattan skyscraper and a smaller office building in New Jersey for at least 850 employees who would relocate with a sale of the company’s Wall Street headquarters, a person with knowledge of the discussions said.

One of the bank’s top candidates is 225 Liberty St., a 2.7 million-square-foot (251,000-square-meter) tower at New York’s Brookfield Place complex that was once mostly leased to Merrill Lynch & Co., said the person, who asked not to be named because the talks are private. The other front-runner is a 410,000-square-foot waterfront building at 70 Hudson St. in Jersey City, the person said. Alternatives haven’t been ruled out.

The company’s predecessor, Bank of New York, has been in lower Manhattan since it was founded by Alexander Hamilton in 1784. The bank late last year hired brokers to help it sell its Wall Street headquarters and lease about 400,000 square feet of office space. The governments of New York and New Jersey are putting together packages of benefits designed to sway BNY Mellon’s decision for a move, the person said.

“They’re playing the New Jersey thing off of New York right now, trying to get some reasonable level of incentives,” said Peter Hennessy, president of the New York tri-state region for brokerage Cassidy Turley, which isn’t involved in the lease discussions. “It’s important for New York to retain the stature of downtown as one of the key financial markets in the world.”

Limestone Tower

BNY Mellon is also closing in on selecting a buyer for 1 Wall St., a 52-story limestone tower near Broadway that may fetch one of the highest per-square-foot prices for a large lower Manhattan office building, the person said. Bids for the 1 million-square-foot skyscraper may come in as high as $600 million, or about $600 a square foot, a price largely driven by the potential for the floors above its base to be converted to residential condominiums, according to the person.

The company is “exploring the sale of 1 Wall St. and examining potential properties to lease in New York and New Jersey,” said Kevin Heine, a BNY Mellon spokesman. “That process continues and no decisions have been made.”

He said the bank expects to settle on its plans by the end of the second quarter or the beginning of the third.

Melissa Coley, a spokeswoman for Brookfield Office Properties Inc. (BPO), owner of the 8 million-square-foot Brookfield Place, declined to comment on any talks with potential tenants. A little less than 2 million square feet of former Merrill Lynch space in the complex remains unleased, she said in an e-mail.

Advanced Discussions

Brookfield is in advanced discussions on leases totaling 1.1 million square feet at the complex, Chairman Ric Clark said on a May 1 conference call. He said the company is “cautiously optimistic” those agreements will be signed.

“We could end the year at Brookfield Place with considerably less of this space available,” Clark said. “But it is way too early to claim victory or count your chickens.”

The 44-story Liberty Street tower, located on the Hudson riverfront, emerged as a favorite after BNY Mellon also considered space in new skyscrapers at the World Trade Center site, according to the person with knowledge of the discussions.

The bank plans to split the 1,700 employees who work at 1 Wall St. between the new building and its offices at 101 Barclay St. nearby, with most going to the new site, the person said.

Office Costs

Moving to Jersey City, one stop from Manhattan on the PATH train, would be a less costly option. Class A office rents on New Jersey’s Hudson waterfront averaged $38.94 a square foot at the end of March, according to data from Cushman & Wakefield Inc. In the World Trade Center submarket, which includes Brookfield Place, the average was $62.15 a square foot.

The 12-story building at 70 Hudson St. was completed in 2000 by New Jersey-based developer Hartz Mountain Industries Inc. It’s just north of the Goldman Sachs Group Inc. tower at 30 Hudson St., which is New Jersey’s tallest skyscraper.

Lehman Brothers Holdings Inc. rented all of 70 Hudson St. after its offices at Brookfield Place, then known as the World Financial Center, were damaged in the Sept. 11, 2001, terrorist attack. Barclays Plc took over the lease after Lehman filed for bankruptcy in 2008, and its agreement expires in January 2016, according to information compiled by Bloomberg.

Barclays intends to vacate the building, the person with knowledge of the situation said. Brandon Ashcraft, a Barclays spokesman, declined to comment on the bank’s plans.

Highest Price

The building is owned by Princeton, New Jersey-based Chambers Street Properties. (CSG)Andrew Neilly, a spokesman for the landlord with Gallen Neilly & Associates, declined to comment. Erin Gold, a spokeswoman for the New Jersey Economic Development Agency, and Jason Conwall, spokesman for the Empire State Development Corp., declined to comment on any incentives.

The highest per-square-foot sale price for a lower Manhattan office building of 250,000 square feet or larger was $732, when Paramount Group Inc. bought Deutsche Bank AG’s headquarters at 60 Wall St. in 2007, according to data from research firm Real Capital Analytics Inc. The post-recession peak of $577 a square foot was reached in December when Verizon Communications Inc. sold part of its headquarters building at 140 West St. to Magnum Real Estate Group, which is converting the space to luxury condos.

-By David M. Levitt

Osborne Urged to Say What FPC Should Do on U.K. Housing Boom

Source: Bloomberg / Luxury

U.K. Chancellor of the Exchequer George Osborne should be clearer about what he expects the Bank of England’s Financial Policy Committee to do to address potential risks in the housing market, lawmakers said.

The government should “state what indicators it believes are most important in detecting any wider economic risks arising from the housing market,” the cross-party Treasury Committee said in a report published today. The Chancellor should also explain “whether he expects the FPC to interpret its remit in a way that might prompt it to take further action as a consequence.”

The report comes after the Organization for Economic Cooperation and Development warned this week of potential overheating in the property market and BOE Deputy Governor Jon Cunliffe said it was “dangerous” to ignore its momentum. Surging home values driven by London have sparked concern that government incentives and record-low interest rates are fueling an unsustainable boom.

“The FPC and the bank’s legitimacy can only be enhanced by a wider public understanding of their powers and decisions,” Treasury Committee Chairman Andrew Tyrie said in the statement. “Housing bubbles are easy to spot in retrospect. The FPC has been given the challenging role of identifying them in advance.”

U.K. house prices rose to a record last month, boosted by purchases by first-time buyers and buy-to-let landlords as a shortage of property for sale supported values, Acadata said.

Supply Shortage

Prices in England and Wales rose 7.3 percent in April from a year earlier, the most in 3 1/2 years, to 263,113 pounds ($446,200), the real-estate researcher and LSL Property Services Plc (LSL) said in a report in London today. From the previous month, prices jumped 0.5 percent.

“Constrained supply in the capital has already moderated total London sales over the past 12 months,” said Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services. “Demand shows no sign of slowing. More house building is imperative to keep the momentum going, and to ensure that price rises are sustainable.”

Osborne has rejected criticism that his Help to Buy program, which is designed to allow people with small down payments to get onto the property ladder, has fueled house-price growth, arguing that it has mainly assisted lower-income buyers outside London to buy their first home. Meanwhile, the Bank of England’s decision to keep the benchmark rate at 0.5 percent yesterday suggests policy makers will use other tools to curb house-price growth.

Wider Risks

The Treasury Committee said as the government is responsible for fiscal and policy tools that directly influence the housing market, it should “state what indicators it believes are most important in detecting any wider economic risks arising from the housing market” and “set out how it plans to address these risks should they arise.”

The 10-member FPC holds its next meeting on June 17 and will publish its recommendations the following week. After its March meeting, the committee said a tool to toughen affordability tests of borrowers will be available as soon as June. It’s already withdrawn mortgage incentives in the credit-boosting Funding for Lending Scheme and said it will take further “proportionate” action if needed.

-By Svenja O’Donnell

Key Democrats Join to Say No to Housing Finance Overhaul

Source: Bloomberg / U.S. Politics

The Senate Banking Committee is preparing to vote next week on a plan to replace government-owned mortgage firms Fannie Mae (FNMA) and Freddie Mac (FMCC) as fading Democratic backing for the measure dims its chances of becoming law.

Six Democrats whose support is crucial agreed in a private meeting yesterday that they wouldn’t vote for the bipartisan proposal to replace the finance companies with a government re-insurer, according to three people familiar with the meeting.

The six senators -- Elizabeth Warren of Massachusetts, Charles Schumer of New York, Sherrod Brown of Ohio, Jeff Merkley of Oregon, Robert Menendez of New Jersey and Jack Reed of Rhode Island -- agreed that the measure needed major revisions: The structure of the re-insurer seemed unworkable and the bill lacked sufficient support for affordable housing goals. Changing the bill to address those concerns could weaken Republican support for the bill.

The overhaul is “effectively dead until 2015,” said Isaac Boltansky, a policy analyst at Compass Point Research and Trading LLC in Washington.

Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, and Senator Mike Crapo of Idaho, the top Republican on the panel, have the backing of six Democrats and six Republicans on the 22-member committee. However Senate Majority Leader Harry Reid has said the bill needs to attract more support from Democrats, who hold a slim majority in the chamber, before he will bring it to the floor for a vote.

‘Highly Doubtful’

“The Johnson-Crapo package will still likely clear the committee, but without any of the six targeted Democrats signing on it is highly doubtful that the measure will get a floor vote,” Boltansky said.

Shares of Fannie Mae rose to $4.24 at 10:30 a.m. in New York, up 2 percent from $4.16 at Thursday’s close and 41 percent from $3.01 on Dec. 31. Freddie Mac was trading at $4.15, a gain of 1 percent from Monday’s close and 43 percent for the year.

A delay in winding down the companies could benefit stockholders including Bruce Berkowitz’s Fairholme Capital Management, hedge fund Perry Capital LLC, and Bill Ackman’s Pershing Square Capital Management LP. Ackman, whose firm holds about 11 percent of Fannie Mae and Freddie Mac’s outstanding common shares, said May 5 that the stock could be worth $23 to $47 a share over time.

Making Money

Fannie Mae and Freddie Mac, which buy loans and package them into securities, were taken into U.S. conservatorship in 2008 and received a $187.5 billion taxpayer bailout. They’ve since returned to profitability. Fannie Mae on Thursday reported net income of $5.3 billion for the three months ended March 31. Freddie Mac reported earnings of $4 billion for the period.

Sean Oblack, a spokesman for Johnson, said yesterday that the senator would continue to seek more support for the bill.

“We have made significant progress bridging the divide among those previously undecided, and the committee vote is just a first step,” Oblack said in a statement. “Those involved in the negotiations have indicated they are interested in continuing to work together to try and find common ground, so the Banking Committee will keep working after favorably reporting out the bill next week.”

Senator Bob Corker, a Tennessee Republican who helped draft an early version of the plan, said in a May 7 interview that adequate support for the bill was uncertain.

Support Uncertain

“We know we have the votes to pass it out of committee,” Corker said. “The question is, can we broaden support? I don’t think we can say yet how that’s going to work out.”

The bill would create a Federal Mortgage Insurance Corporation to provide insurance for mortgage-backed securities. It also would allow banks to be an aggregator, guarantor, securitizer and lender of mortgages.

The bill would rely on incentives to persuade financiers to lend to groups with higher risk profiles. Consumer and civil-rights advocates are pushing instead for a mandate that those groups be served.

In recent weeks, the bill’s backers had courted Warren for her support, said two of the people. Warren has previously said that any housing measure needed to include explicit affordable housing goals, not just incentives.

Affordable Housing

“The affordable housing standards issue and the duty to serve I think are important,” Brown said at a Bloomberg breakfast last month. “I don’t think they’re addressed in the way they should be. I think there is increasing sentiment I hear from people from all over the financial services sector, from Wall Street to community banks to credit unions, that say, ‘How is this going to work?’”

The Johnson-Crapo bill would phase out Fannie Mae and Freddie Mac over a five-year period and replace them with federal insurance for mortgage bonds that would kick in only after private investors were wiped out. Current shareholders of Fannie Mae and Freddie Mac would be in line behind the U.S. government in getting any compensation from the wind-down.

The bill is based on a framework introduced last year by Corker and Mark Warner, a Democrat from Virginia.

“If we don’t get this right, we’ll create major disturbances in the housing market which will have a profound impact on families, on homeownership and certainly on our national economy,” Merkley said in an interview on April 29.

-By Cheyenne Hopkins

U.S. 30-Year Mortgage Rate Declines to a Six-Month Low

Source: Bloomberg / Luxury

Mortgage rates for 30-year U.S. loans fell to a six-month low, reducing borrowing costs for homebuyers as the property market cools amid a slow economic recovery.

The average rate for a 30-year fixed mortgage was 4.21 percent this week, down from 4.29 percent, according to a statement today from Freddie Mac. The average 15-year rate dropped to 3.32 percent from 3.38 percent, the McLean, Virginia-based mortgage-finance company said.

Federal Reserve Chair Janet Yellen said yesterday that the economy still needs stimulus five years after the recession ended as housing demand slows. Rising property prices, along with mortgage rates that have climbed from near-record lows a year ago, are cutting into buyer affordability. U.S. home prices increased 11.1 percent in March from a year earlier, the 25th consecutive gain, CoreLogic Inc. said this week.

“Readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching,” Yellen said in testimony to the Joint Economic Committee of Congress yesterday. “The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.”

Completed purchases of previously owned U.S. homes fell for a third straight month in March to the slowest pace since July 2012, according to the National Association of Realtors. Sales of new houses dropped to an eight-month low, Commerce Department data show.

Yellen repeatedly declined in her testimony to specify when the benchmark interest rate might rise. The central bank’s policy of low rates and a bond-buying program pushed the average rate for a 30-year home loan to a near-record 3.35 percent last May. It has climbed since then as the Fed scales back its stimulus plan.

Employment remains well short of the Fed’s goals, according to Yellen. While the jobless rate dropped in April to 6.3 percent, the lowest since September 2008, the share of Americans who have been unemployed for more than six months as well as part-time workers who would prefer full-time positions “are at historically high levels,” she said.

-By Prashant Gopal

Luxury SLS Hotel in Beverly Hills on the Market

Source: Bloomberg / News

Sam Nazarian, the Los Angeles restaurant and nightclub owner, is putting his SLS Beverly Hillsluxury hotel on the market as part of a strategy to cash in on the company’s real estate investments and focus on its management operations.

The Southern California property may fetch more than $700,000 for each of its 297 rooms, according to Nazarian, founder and chief executive officer of SBE Entertainment Group LLC, SLS’s parent company. SBE and its partner, Los Angeles-based CIM Group, also are in talks with three potential buyers for the 140-room SLS Hotel South Beach in Miami Beach, Florida, Nazarian said.

“We are confident the SLS Beverly Hills will sell for more than $210 million if you look at how the property is performing, the possibility to add on development to the existing hotel and the revitalization of that neighborhood,” Nazarian said in a telephone interview.

SBE is seeking to profit on investments made when the company was starting to establish the luxury-hotel chain in the early 2000s. With five hotel properties open and demand for high-end lodging at the highest since the 2007 peak, Nazarian said the time is right to sell the real estate while expanding the company’s management contracts.

“Our strategy is to move to the asset-light model,” he said. “The market is very hot right now. L.A. is trailing some of the bigger cities like New York and Miami, but it is recovering nicely. And Miami is as hot as it can be.”

Highest Occupancies

Miami had an 84.6 percent hotel-occupancy rate this year through March, the highest among the top 25 U.S. markets after Oahu, Hawaii, according to Hendersonville, Tennessee-based research firm STR Inc. Los Angeles ranked fourth, at 77.2 percent.

The SLS Beverly Hills has a yearly average occupancy rate of about 80 percent, Nazarian said.

A deal for the SLS South Beach could be completed by the end of July, said Nazarian, who expects the property to sell for about $900,000 a room, or $126 million.

Last month, SBE and developer David Edelstein sold Miami Beach’s Raleigh Hotel to fashion designer Tommy Hilfiger for $68.5 million.

In New York, Nazarian is planning a December opening for a hotel project on Park Avenue South and 30th Street. SBE, which will manage the hotel, and partner Moin Development Corp. are gutting and adding on to an existing office building at the site. Nazarian also said he would like to have SLS properties in uptown Manhattan and the Soho neighborhood.

Brief Opportunity

SBE, which also owns Hyde nightclubs and the Katsuya and Cleo restaurant brands, has said it wants to build SLS into a chain of boutique hotels that would attract high-end leisure and business travelers. The company may need to act swiftly, said Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia.

“Right now, money is available for sales and for development because the hotel fundamentals have improved so much,” Bhalla said in a telephone interview. “In the luxury sector, you have to pull the trigger quickly, especially when you have a small boutique brand. You generally have only a small window of opportunity as sales, financing and new development opportunities can dry up very quickly.”

Current and planned projects include an SLS in Philadelphia and mixed-use properties in Florida that will include lodging and condominiums, including the SLS Brickell in Miami. SBE is scheduled to open the revamped former Sahara Hotel in Las Vegas as an SLS at the end of August and will add a property in Seattle as part of an office-and-hotel tower scheduled to open in the third quarter of 2016, according to Nazarian.

“Our strategy is to come in with equity as a proof of confidence,” he said. “Then it’s a good time to sell when the market is hot and cash in on some of those investments we made.”

The listing of the SLS Beverly Hills was reported on May 7 by Real Estate Alert, a trade newsletter.

-By Nadja Brandt

All Cash U.S. Home Purchases Surge With Rising Rates: Mortgages

Source: Bloomberg / Personal Finance

Greg Leffel, an investor in Columbus, Ohio, said he relishes cash deals as much as he dislikes home loans. He has spent $150,000 buying and renovating 10 foreclosed houses in the past two years and turned them into rentals.

“Lending is so tight, and even if you do get a loan you’d have to jump through a bunch of hoops first,” Leffel, 44, said. “I like buying with cash, because then I can control my investments.”

Investors like Leffel helped spur all-cash home purchases to a record 43 percent of U.S. deals in the first quarter, more than double the share a year ago, according to data firm RealtyTrac Inc.Cash is keeping residential salestrudging along while mortgage lending plummets, hurt by rising interest rates and stiff credit requirements. Americans seeking a loan to purchase their first dwelling are increasingly shut out.

“The cash buyers today mean that all is not well in the housing market,” said Clifford Rossi, finance professor at the University of Maryland’s Robert H. Smith School of Business. “First-time home buyers should make up 40 percent and we’re not seeing it because of mortgage rules.”

U.S. lenders are cutting jobs as business contracts. They made $226 billion in mortgages in the first quarter, a 17-year low, according to the Mortgage Bankers Association in Washington.

Small Investors

Smaller investors, who deploy cash for homes to rent, flip, or vacation in, are finding better deals now that institutions have pared buying foreclosures, said RealtyTrac Vice President Daren Blomquist. Cash sales are rising from coast to coast, comprising more than half of all purchases in many metropolitan areas in the first quarter.

In the Miami area, 67.1 percent of sales were cash deals; New York posted 57 percent; Detroit recorded 53.5 percent; Atlanta had 53.2 percent, and Las Vegas posted 52.2 percent, according to Irvine, California-based RealtyTrac.

In Manhattan, buyers are using cash for trophy apartments and to gain an advantage over borrowers who must depend on loans to finance a purchase. Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said three of his five current clients buying homes prevailed with all-cash offers.

Barlavi said two of them are hedge fund managers who used year-end bonuses to buy the properties: a $2.2 million two-bedroom apartment in Midtown, selling for $150,000 above the asking price; and $1.5 million for a one-bedroom in Tribeca. His client in the second transaction was “nudged higher by a foreign buyer” before being chosen by the seller, Barlavi said.

Foreign Buyers

“In Manhattan, you have foreign buyers coming in and using properties as a second, third, fourth or fifth home and hedging risks in their home countries,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.

Private-equity firms, hedge funds and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.

New York-based Blackstone Group LP, the biggest U.S. single-family home landlord, cut purchases by 70 percent from last year’s peak and is now concentrating on just five markets,Jonathan Gray, global head of real estate, said in a March interview. Blackstone has invested $8.5 billion since April 2012 to amass almost 44,000 rentals in 14 cities.

Strict Credit

American Homes 4 Rent and Colony American Homes, the second- and third-ranked U.S. home landlords, have also cut acquisitions as the rebound in prices requires them to raise capital or improve operations.

“As institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers, including individual investors, second-home buyers and even owner-occupant buyers,” RealtyTrac’s Blomquist said.

Banks’ stricter credit standards following the housing crash, in combination with rising mortgage rates, have put the brakes on lending. More than 40 percent of borrowers had FICO scores above 760 in 2013 compared with about 25 percent in 2001, according to Goldman Sachs Group Inc. analysts in a Feb. 20 report. The 4.22 percent average rate for a 30-year fixed mortgage on May 6 rose from 3.53 percent a year ago, following the Federal Reserve’s announced plan to taper its bond buying, according to

Wells Fargo

“The increase in all-cash purchases is partly because rates are higher than they were a year ago, so it’s made buying with a mortgage more expensive on top of home price increases,” said Jed Kolko, chief economist at real-estate information service Trulia Inc. in San Francisco.

At Wells Fargo & Co., the biggest U.S. mortgage provider, home-loan originations plunged to $36 billion in the first quarter after surpassing $100 billion for seven straight quarters ending in June 2013, according to the San Francisco-based bank. Second-ranked JPMorgan Chase & Co.’s $17 billion total in the first quarter fell below the trough in originations made during the housing crash.

First-time buyers in particular are struggling to get home loans. They comprised 30 percent of total existing-home sales in March compared with an average of 35 percent since October 2008, according to the National Association of Realtors.

Without these buyers, existing-home sales are declining. They fell 7.5 percent in March to a seasonally adjusted annual rate of 4.59 million compared with a year earlier, according to NAR. The sales volume in March remained the lowest since July 2012, according to the trade group.

“With fewer first-time buyers, you end up with more all-cash buyers and less trading up in home activity,” said Columbia’s Mayer. “To get that ecosystem working, you need to have first-time homebuyers so the trade-up purchasers can buy bigger homes.”

-By Dan Levy and Alexis Leondis

Toronto Bets C$2 Billion on Crack Haven Housing Makeover

Source: Bloomberg / U.S. Politics

It’s the dank, stinking stairwells of Toronto’s Regent Park housing project that for residents like Ines Garcia represent the failures of the past, and now, as they’re being demolished, hope for the future.

Garcia, a 48-year-old single mother of four, has been forced to shield her children from strangers shooting up heroin on the urine-soaked steps. One time, the Ecuadorean immigrant mustered the courage to tell a man smoking crack to do it elsewhere. He replied, “Bitch, you wanna die?” Garcia’s eyes teared up at the memory.

If all goes according to plan, Garcia, who makes less than C$10,000 ($9,174) a year juggling two jobs, soon won’t have to climb the stairs to her subsidized apartment. She’ll have elevators in a new unit in a new Regent Park, part of North America’s largest social-housing redevelopment.

“Everything there is brand new, beautiful,” Garcia says of the C$2 billion transformation taking place within sight of her 50-year-old apartment, where black mold is creeping down her bathroom wall. Every day, she passes the tidy red-brick townhouses and glass towers going up nearby, dreaming of a home where her children can grow up to fulfill their own dreams.

As its population swells to 17,000 from 7,500, the new Regent Park will mix renters in subsidized apartments with owners of market-priced condominiums and integrate the area into the city by adding through-streets, chain stores and amenities such as swimming pools. The project is a public-private experiment in housing that will provide a test case for cities from New York to San Francisco struggling to offer affordable homes as property prices soar.

Garden City

Toronto’s average home price reached a record C$547,786 in March, a 79 percent increase from a decade ago. The city of 2.8 million is tied with New York as the 14th least affordable of 85 major housing markets ranked by Belleville, Illinois-based researcher Demographia, with Hong Kong at No.1. There are about 168,000 people waiting for subsidized housing in the city where Toronto Community Housing is the second-largest social-housing landlord after New York.

Built in the 1940s to house World War II veterans and immigrants, Regent Park was laid out as a so-called garden city -- an enclosed neighborhood with no major through-streets and plenty of parks. The design was supposed to make the streets safer for pedestrians. Instead, it cut the area off from the city. As the area deteriorated, businesses fled and drug dealers, prostitutes, and gangs, including the Bloods, moved in.

Social Isolation

“The ideal is you won’t be able to tell where Regent Park was -- it will simply blend in,” said Ken Greenberg, principal at Greenberg Consultants Inc. and the lead urban planner on Regent Park’s revitalization. “It’s important to work on housing, but not in isolation. If you just rebuild, you’re going to get a more genteel form of ghettoization, the same social isolation, the same lack of employment, the same lack of education opportunities.”

Greenberg, who’s worked on New York’s Brooklyn Bridge Park and Boston’s “Big Dig” project, said he’s already sharing lessons learned in Regent Park with other projects he’s consulting on. At the Barry Farm redevelopment in Southeast Washington, D.C., he’s suggesting the community reconnect streets to the rest of the city.

In New York, Mayor Bill de Blasio presented a $41.1 billion plan on May 5 to build and preserve 200,000 units of affordable housing in the next decade by increasing rent protections for the poor and requiring developers to include below-market apartments in newly zoned areas.

Taking Shape

Bringing together lower-income and middle-class residents “reduces acute crime in the short-term but in the longer term it depends on how well it’s managed,” said Susan Popkin, a senior fellow at The Urban Institute, an economic and social policy organization, by phone from Washington, D.C. The question is, “Can you keep those higher-income residents there?”

With construction starting in 2005 and now about one-third complete, a new neighborhood of glass towers, brick townhouses and neatly laid out parks and streets is taking shape.

Eight condo towers are up so far, with five under construction and 22 planned, according to Daniels Corp., the developer that’s partnering with the city on the project. About 15 of these, or 1,848 units, plus an additional three towers TCH built nearby, will be for the original residents of Regent Park who pay rents based on their income.

Pools, Espresso

The rest, about 5,250 units and 20 towers, will be for buyers in an area that’s never had market-priced condominiums before. The development also includes about 27 blocks of townhouses for sale and rental.

The nine-story One Cole, the first building to go on the market, sold about half its units on the first day, according to Daniels.

The neighborhood’s amenities, designed to keep kids busy and off the streets, include an aquatic center, a 60,000 square-foot cultural center, and the Paintbox Bistro, serving steak frites and espresso. An athletic facility will host the Toronto Raptors basketball team and outdoor ovens and community gardens are planned.

At 69 acres (28 hectares) in central Toronto and a planned 7,500 units when it’s completed around 2025, the stakes are high and everyone from the private developer, to the city, to the residents is greeting it with a mixture of anxiety and hope.

Crack Epidemic

“When I first drove through the new Regent Park, I didn’t even know it was social housing,” said Eugene Jones, 58, former chief executive officer of TCH. “I thought, ‘Damn. This is the most amazing thing -- it’s not being done anywhere in the world like this.’” The interim CEO, Greg Spearn, took over last month.

It’s a far cry from the 1980s when crack began to infiltrate the neighborhood, said Diane MacLean, a community activist who raised three children in Regent Park.

“People would shoot up in the stairwell,” she said. “It changed the community in terms of crime rates, guns, homicides, assaults, drug addiction -- all that skyrocketed.”

The transition to a new community hasn’t been easy. While every current resident is guaranteed a replacement TCH unit, it may not be in Regent Park. Residents, many of whom have kids in local schools and work nearby, may also be relocated kilometers away for the several-year wait between demolishing units and getting new ones. That makes Garcia, who is facing at least five-year wait for her new place, worry about getting back in.

‘Huge Risk’

“Revitalizing Regent Park should have been called ’kicking out residents of Regent Park,’” Garcia said. “That’s the fear from a lot of the residents.”

TCH says it’s learned from mistakes made in the first phase when residents, many of whom didn’t speak English, weren’t clear on the process and sometimes signed away their right to return. The agency is now sending in more staff to explain the procedure.

In the first and second phases of the project, the city helped fund the construction of market units and received a premium from sales, which they reinvested in the community and other units in its portfolio. In the third phase, which started construction this spring, TCH is selling the land to Daniels, reducing its exposure to the housing market, but also giving up prime downtown property.

“We took a huge risk investing in this community,” Mitchell Cohen, president of Daniels, said at the Regent Park sales office. “Government alone can’t do something like this. The private sector alone can’t do something like this.”

No Income

TCH and Daniels declined to say how much they each contributed to the C$2 billion total cost and TCH declined to say how much of the profit from units and land sold is reinvested into the community, citing the information is proprietary. The partnership allowed the agency to save at least 30 percent on phases two and three, TCH said.

“There needs to be employment opportunities at the root of this,” Cohen, 63, said. “For many, many decades there was no grocery store, no coffee shop, no bank and no economic activity within Regent Park. People weren’t earning money here and weren’t spending money here. That is not a healthy community.”

Current residents have average annual income of about C$20,000, half that of the rest of Toronto,according to Dixon Hall, a local charity. About 20 percent of the neighborhood’s households report no income at all.

Daniels is busy putting streets and sidewalks back and drawing businesses to the area again.

‘Needed Believers’

Royal Bank of Canada, the country’s second-largest lender, Tim Hortons Inc. (THI), its largest doughnut-and-coffee chain, and grocer Sobeys Inc. each opened a location on-site, hiring locally in an area which was a commercial wasteland before.

Regent Park “needed believers -- from businesses, the city and the neighborhood itself,” Jennifer Tory, head of personal and commercial banking at the Toronto-based Royal Bank, said in an e-mail. “Four years on, our business has grown.”

In order for it to be successful, Regent Park needs people like Vanessa Yu too -- young professionals or empty nesters willing to put money on a bet that Regent Park won’t slide back into the crime-ridden neighborhood it was.

The 33 year-old moved two years ago into the 13th floor penthouse unit at One Park West, one of the first towers to go up. She bought her 800-square-foot home for under C$375,000.

Her Chinese parents in Nova Scotia fear for her safety. She’s had two bikes stolen and was accosted by a man one night in January as she went out to get some food. A streetcar driver who saw the attack stopped and the man fled.

Crime Declines

While the experience left her shaken, she has no plans to sell and move away. She likes being a 15-minute bike ride from the center of the city and being able to afford a home that won’t strain her pocketbook.

“I know what I was getting into moving here, I work in the community,” Yu said last month from the sofa in one of three community rooms in the building. “There are way too many upsides to living here but I know it isn’t for everyone.”

The crime has already declined, said Farzad Ghotbi, a 12-year Toronto police veteran whose first day on the force was in Regent Park.

“We were getting more calls 12 years ago even though there were less people and the area was smaller,” said Ghotbi, who’s been working the beat ever since. “Do we still have shootings? Yes, we do. But compared to what it was before, it’s a tremendous improvement.”

Reports of crime, not including traffic violations, dropped 12 percent in 2012 from the start of the revitalization in 2005 in Regent Park and the surrounding area, latest Toronto Police data show. Crimes include manslaughter, sexual assault, and breaking and entering.

Entrenched Gentrification

Ibrahim Hussein’s family was one of the first to get a house in the new development.

“The house we’re living in now, poor people shouldn’t be living there,” said the 29-year-old who works for TCH cleaning and maintaining new condo buildings. “It’s for rich people. The backyard is so big, we don’t know what to do with it.”

His house, with a neat front yard and jumbo-sized windows, faces a line of market-rate houses across the street. The two sides don’t communicate much. When his mother has bananas left over from baking, she takes them to her neighbors on either side, not across the street.

Community worker MacLean’s biggest fear is that in 10 years Regent Park looks like every other part of Toronto instead of the place where single mothers can leave their kids with neighbors, people swap food at well-attended events, and residents form a single voice on community issues

“Affluent members of the community will have the wealth and the power around planning and the future,” said MacLean, who moved one block away from the neighborhood after her rising income disqualified her for subsidized housing. “This is true entrenched gentrification. If you understand gentrification, it does mean the wealthy win.”

Getting Ready

For her part, Garcia has already started shedding items in anticipation of her move to a new home. An old mop handle stands near the door, one of the many things she needs to throw out before leaving.

“I saw one of the new homes and said ’Oh my God! It’s beautiful!’” she said. “The first thing I asked is ’does everything work?’ There’s so much light. There’s so much life there.”

-By Katia Dmitrieva

L.A. Mixes Grit With Glitz in Downtown Revamp: Cities

Source: Bloomberg / U.S. Politics

(Corrects ninth paragraph of story published yesterday to remove incorrect reference to restaurateur Thomas Keller. Click here for a map. For Cities columns, click here.)

Near streets so gritty they were used as the backdrop for a shootout in the next “Fast & Furious” movie, million-dollar condos and $38 racks of lamb beckon the urban pioneers of Los Angeles.

The rehab of warehouses and factories in the Arts District is the latest wave in a revival transforming the core of the second-largest U.S. city. Since 2011, about $7 billion has been poured into downtown. A decade ago its most prominent residents were the homeless. Now condos sell for a median of $523.36 a square foot -- more than in Beverly Hills. Alma, Bon Appetit magazine’s best new U.S. restaurant in 2013, is a few blocks from the convention center the city plans to renovate.

“All of a sudden, overnight, you have more cranes going up in downtown L.A. than any other neighborhood in Southern California, by far,” said Lew Horne, head of the regional CBRE Real Estate Group Inc. (CBG) office.

More than 21,000 residential units and 3,780 hotel rooms are under construction or planned, financed by investors in China, Singapore and Korea and U.S. developers including New York-based Related Cos.

In a famously spread-out city, the center’s reawakening is still a work in progress, as office development lags behind. Its golden age was before World War II, when the region was served by a rail network and Angelenos flocked downtown to shop and see movies in the ornate palaces on Broadway. After the war, L.A. grew to became an archetype of sprawl as the core decayed and areas closer to the coast, such as Century City and Santa Monica, became commercial and residential hubs.

Hollow Center

“I have always been concerned with this region and this city not having a vibrant center,” said Eli Broad, 80, the billionaire arts patron and philanthropist who has lived in the L.A. area for 50 years. “I can think of no great city in the world today or in history that hasn’t had a vibrant center.”

Now downtown is filling in. Broad, in an interview in Bloomberg’s Los Angeles office, said his wife, Edythe, plans to buy a condominium at the Parcel Q mixed-use complex going up across from the Frank Gehry-designed Walt Disney Concert Hall. It’s part of the $2 billion Grand Avenue project of residential, retail and hotel developments Broad has championed.

Timothy Hollingsworth, former chef at the French Laundry in Napa Valley, is part of a team that will open an eatery in the plaza of The Broad, a museum set to open next year to house the couple’s collection of contemporary art.

South Park

Downtown’s awakening started in 1999, with the opening of Staples Center, home of the National Basketball Association’s Lakers and Clippers and the Kings hockey franchise. Staples became the anchor of the South Park district that includes the L.A. Live entertainment center.

The city gave downtown a nudge by making it easier to repurpose old factories and warehouses. A declining crime rate helped: The police station covering downtown reported a 25 percent drop in serious offenses between 2006 and 2011, the most recent data available, even as the population grew.

In addition to private investment, public spending has brought more rail transport with downtown as the hub, and a planned trolley loop will connect various light-rail lines. Broad said it will link downtown’s neighborhoods, allowing visitors to park once and tackle the sights on foot.

‘Walking Dead’

Ringed by freeways and the concrete-encased Los Angeles River, downtown still has rough patches.

“If I didn’t know any better, I’d have thought I had stumbled onto the set of ‘The Walking Dead,’” a Bon Appetit reviewer wrote about the area around Alma.

The most decrepit part is Skid Row, roughly half a square mile near police headquarters with a homeless population of about 3,500. Los Angeles County health authorities in 2012 ordered the city to attend to the “immediate threat to public health” presented by human waste there, and the City Council was asked in April to more than double spending on street cleaning and public toilets.

The homeless often set up camp beside historic Arts District buildings, where actors Diane Keaton and Kevin Spacey own homes and the TV show “New Girl” is set, and where a two-bedroom condo recently sold for $1.25 million. The price for two-bedroom downtown condo resales has climbed more than 60 percent from $322.34 per square foot in 2009, according to John Karevoll,an analyst at DataQuick, a San Diego-based property-research company.

Human ‘Rainbow’

“You have all these different slices of life,” said Halli Kristjansson, 53, a writer from Iceland who moved to an Arts District live-work unit a year ago. “I walk out the door past all these homeless people to go to the Los Angeles Athletic Club for a nice workout. Down here, it’s still a rainbow of humanity.”

The central district developed as a jobs center in the 1980s, its skyline topped by the 73-story U.S. Bank Tower that opened in 1989. By 1999, downtown had about 500,000 jobs and 18,700 residents, the Downtown Center Business Improvement District says. Residents since have tripled to 53,320, while the number of jobs is the same. The city’s unemployment rate in March 2014 was 9.7 percent, compared with 6.7 percent nationally.

The single largest share of investment since 1999 -- $6 billion or about 35 percent of the $17.3 billion spent -- has been residential. Only 5 percent was commercial.

On Fifth Street near Grand Avenue, Singapore-based Overseas Union Enterprise Ltd. is struggling to fill the U.S. Bank Tower, which it bought last June for $367.5 million.

Relatively Cheaper

About 44 percent of its 1.3 million square feet are vacant, and the goal is 80 percent to 90 percent occupancy in the next three to five years, according to Richard Stockton, the company’s chief executive officer for the Americas.

Offices are relatively cheaper than in other major cities. Rents in downtown San Francisco, with a business-vacancy rate of 6.2 percent, reached $2.97 per square foot this year, up from $1.83 in 2009, CBRE data shows. Downtown Los Angeles, where vacancies were 18.5 percent, averages $1.96 per square foot, up from $1.85 in 2009.

This puts downtown L.A. among the “best relative opportunities,” said Sonny Kalsi, co-founder of GreenOak Real Estate LP, a New York investment firm. “I like L.A. and particularly downtown, because it is lagging recovery wise.”

One of the biggest downtown projects is a $1 billion office and hotel tower for Korean Air Lines Co. that will be the tallest building in the western U.S.

Grand Central

Optimists see the influx of residents as a first step. The jobs will follow, said Bert Dezutti, executive vice president for the western region at Brookfield Office Properties Inc. (BPO), downtown’s largest office landlord with 8.5 million square feet.

At some point, potential tenants “will look inward at downtown’s high-rise core,” Dezutti said. “We’ve seen it in Seattle and in San Francisco. Some of the buildings that are in vogue are not necessarily suitable with amenities for blue-chip and growing firms.”

While long-timers have expressed concern about the newcomers ruining the area’s character, some things aren’t changing. Just go to Grand Central Market, a 30,000-square-foot collection of vendors, one of the few constants since 1917.

Spanish-speaking patrons eat spiced fruit next to visitors sipping $6 Press Brothers raw juices. Potatoes retailing for 25 cents a pound are on sale around the corner from Lincolnshire Poacher cheese for $14.25 per half-pound.

There’s still room for everyone, said Christophe Farber, vice president of the Yellin Co., which runs the market.

“There will always be $2 tacos here,” Farber said. “Legacy tenants are the history and the future.”

-By James Nash and Nadja Brandt

Carney Keeps Rates on Hold as BOE Seeks House-Price Tools

Source: Bloomberg / Luxury

The Bank of England kept borrowing costs at a record low today as policy makers look to untested tools to control Britain’s surging housing market.

The Monetary Policy Committee led by Governor Mark Carney voted to leave the benchmark interest rate at 0.5 percent, reinforcing his view that the panel is the “last line of defense” against property risks. That will intensify the onus on the BOE’s Financial Policy Committee to devise a plan of action for real estate. Home values are surging about 10 percent a year.

The Organization for Economic Cooperation and Development warned this week of overheating in the property market and BOE Deputy Governor Jon Cunliffe said it’s “dangerous” to ignore its momentum. Officials say the debate over borrowing costs centers on the amount of spare capacity in the economy, leading investors to bet the central bank will refrain from raising the key rate until 2015.

“We think the major action in the coming months is going to be on the FPC,” Kevin Daly, an economist at Goldman Sachs Group Inc. in London, said in a Bloomberg Television interview today. “We do think there’s a high chance that they will tighten macroprudential policy in June. All else equal, the more they tighten on the macroprudential side, the less they have to tighten on the conventional monetary policy side.”

The MPC met days after the OECD said that house prices are “buoyant and significantly exceed long-term averages relative to rents and household incomes.” The Royal Institution of Chartered Surveyors said today in its monthly house-price report that values are on a “firmly upward trend” that will probably be sustained over the next year.

‘Gathering Pace’

Separately, Halifax said U.K. home values rose in the three months through April and demand for properties continues to outstrip supply. “Housing demand continues to be supported by an economic recovery that is gathering pace,” the mortgage lender said.

The cost of a two-year fixed-rate mortgage covering 75 percent of the value of a home dipped to 2.37 percent in March, the lowest rate since at least 1994, BOE data show.

“It would be dangerous to ignore the momentum,” Cunliffe, who sits on both the MPC and FPC, said on May 1. The FPC “will need to be both vigilant and ready to act.”

The 10-member FPC holds its next meeting on June 17 and will publish its recommendations the following week. After its March meeting, the committee said a tool to toughen affordability tests of borrowers will be available as soon as June. It’s already withdrawn mortgage incentives in the credit-boosting Funding for Lending Scheme and said it will take further “proportionate” action if needed.

Overheating Risk

For the central bank, action may mean addressing capital requirements or maximum loan-to-value ratios on mortgages, according to the OECD. For the government, that could mean curtailing its Help to Buy program, set up to assist people with small down payments.

That may not be enough. The OECD has warned there’s a risk that microprudential and macroprudential policies are “ineffective in containing the housing market, resulting in overheating.” The BOE has said that macroprudential policy is “relatively untested” in most developed countries. Chancellor of the Exchequer George Osborne said this week that the government will be “vigilant” on housing.

Slowing Inflation

While Britain’s recovery has gained traction this year, cooling inflation is giving the MPC scope to keep rates unchanged. Consumer-price growth slowed to 1.6 percent in March, the least since 2009 and below the BOE’s 2 percent target.

All 51 economists in a Bloomberg News survey forecast the key rate would stay at 0.5 percent today. The MPC also kept its bond-buying plan at 375 billion pounds ($636 billion), as unanimously forecast in a separate survey. Carney said in March officials should only begin to unwind the program known as quantitative easing after “several” interest-rate increases.

Derivatives known as Sonia contracts signal the bank will raise rates a quarter point by April, with the benchmark reaching 2 percent by the end of 2016.

Carney has revamped his forward-guidance policy to focus on slack in the economy after unemployment fell below the 7 percent he set as a key threshold. Minutes of this week’s MPC meeting, to be published on May 21, will reveal any divisions among policy makers on the level of slack or the inflation outlook. The record may also show a discussion of the pound, which rose close to $1.70 two days ago, the highest since August 2009.

The currency was at $1.6970 as of 11:51 a.m. London time, up 0.1 percent from yesterday. The 10-year gilt yield was at 2.67 percent, 119 basis points more than equivalent German debt.

At this week’s meeting, the MPC had new economic projections prepared for the quarterly Inflation Report on May 14. In February, it predicted growth of 3.4 percent for this year.

“Inflation means there’s not a huge amount of pressure to hike rates,” said Alan Clarke, an economist at Scotiabank in London. “The forecasts will be similar to February, and though the data will be nudging them in a hawkish direction we won’t see a dissenting vote for a rate increase this soon.”

-By Jennifer Ryan