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14th November 2014

Top Stories

Bosses back idea on use of worker levies

Ploughing funds back to foreign workers benefits employers too, they say

Source: Straits Times / Singapore

EMPLOYERS have thrown their support behind businessman Ho Kwon Ping's idea to channel foreign worker levies into Central Provident Fund-like saving accounts.

Mr Ho suggested in a lecture on Tuesday that money in these accounts can be withdrawn when workers leave Singapore.

This will increase foreign workers' overall pay and help Singapore to attract higher-skilled talent, said the executive chairman of hospitality group Banyan Tree Holdings in the second of five Institute of Policy Studies-Nathan lectures he is giving.

Company bosses and business associations said ploughing back the levies to workers also benefits employers.

"Workers are encouraged to stay on in Singapore as they can grow their savings accounts. With more experienced workers, companies become more productive," said Mr Dominic Choy, director of projects at Hexacon Construction.

As of June, there were 980,800 foreign work permit holders in Singapore.

Foreign work pass holders do not get CPF.

The Singapore Business Federation (SBF) raised a similar idea of channelling levies into a fund for foreign workers during talks with the Manpower Ministry over the past year.

The fund can be used for training and other costs, such as when workers are repatriated or fall sick or are injured.

SBF's chief operating officer Victor Tay said levies should be used more effectively to ameliorate the higher costs to bosses. Currently, they go to the Consolidated Fund used to pay for the Government's operating expenditure.

"The objective of levies is to restrict the number of foreign workers by making it more costly to hire foreign workers or provide parity to local workers salaries. But the numbers have already come down because of stricter quotas," said Mr Tay.

"As business costs remain high and there is an absence of grants for foreign worker training, it is a win-win situation to use the levies to defray business costs. We can also upskill and motivate workers."

Dr Ho Nyok Yong, president of Singapore Contractors Association, also noted that the foreign worker quota scheme for the construction industry, which relies heavily on foreign labour, has already been tightened significantly.

"It is more important now to raise productivity of the foreign workforce through training," he said. This is where the levies can be used.

He suggested the levies could also be reduced since foreign worker numbers have already come down.

However, migrant worker groups and economists were less convinced that channelling levies back to workers would lead to more getting retained and a higher-skilled workforce in the short-term.

Mr Alex Au, vice-president of Transient Workers Count Too, said the idea does not address underlying problems such as employers getting illegal kickbacks from employment agents to hire new workers.

Some employers also prefer to hire new workers who command lower pay.

"Economically vulnerable ones are much less likely to complain," he said.

To motivate employers to do better in staff retention, Mr Edlan Chua, boss of Chinese restaurant chain Paradise Group, suggested that the fund created with the levies is offered only to firms with low foreign worker turnover rate.

Nominated MP and UniSIM professor Randolph Tan disagreed with Mr Ho that transitioning to a higher-skilled workforce can be a quick and cost-free process.

"He (Mr Ho) believes the benefits can be achieved 'immediately and without an increase in cost to employers' by simply converting the role of the foreign worker levies. I do not think that it will occur immediately. With a rise in salaries, you need turnover before better skilled workers replace lower-skilled ones, so it should, in my opinion, be a process rather than a switch," said Prof Tan.

A statement from the Manpower Ministry said it noted Mr Ho Kwon Ping's proposal.

"We recognise the importance of raising the quality of the foreign workforce in Singapore as key to maintain Singapore's continued economic competitiveness. We will study the merits and feasibility of the proposal and how it best complements our overall manpower planning strategies," said MOM.

-By Amelia Tan

MND takes issue with town council's claim

WP-run council stopped reporting S&CC arrears 'months before AGO audit'

Source: Straits Times / Singapore

THE Ministry of National Development (MND) has taken issue with a claim by the Workers' Party-run town council that it could not submit its service and conservancy charges (S&CC) arrears report because its staff were tied up with work for an audit by the Auditor-General's Office (AGO).

It pointed out yesterday that the Aljunied-Hougang-Punggol East Town Council (AHPETC) stopped submitting its monthly S&CC arrears report to MND after April last year.

"This was many months before the AGO audit, which started only in February 2014," the ministry said in a statement.

As a result, it does not know AHPETC's current rate of arrears, MND said, adding that the last available report shows an arrears rate of 29.4 per cent.

The MND statement is the latest response in an exchange sparked by the release last week of the annual Town Council Management Report.

AHPETC received a red banding - the worst - for the management of S&CC arrears, and for corporate governance. It was the only one of 16 town councils to get the banding.

WP chief Low Thia Khiang had reportedly said that the poor financial management did not impact the council's operations and services, and thus did not affect the safety and the living environment of the residents.

This prompted Minister of State for National Development Desmond Lee to express concern last Friday about the town council's financial health and its "shocking" arrears rate.

Responding to Mr Lee earlier this week, AHPETC chairman Sylvia Lim cited the AGO audit as a factor for her town council not being able to submit its arrears reports on time.

She said that "in order to get the arrears reports into the format MND required, our staff needed to spend time doing manual sorting and counting".

But, she added: "Our finance team had to prioritise the audit by our commercial auditors and then the AGO audit."

Last night, Ms Lim told The Straits Times she had offered to submit the data as is to the MND in July, but was told it had to be in its required format.

The MND, in its response, said "all town councils report their S&CC arrears rate monthly, using a simple table, stating how many households owed S&CC and for how long".

It added that AHPETC had done so as well, until April last year.

The AGO's audit of AHPETC's financial statements for the financial year 2012/2013 was ordered by Finance Minister Tharman Shanmugaratnam in February this year, after an independent auditor expressed concern about its accounts. The audit is still ongoing.

Besides the arrears report, Mr Lee also raised other issues related to the arrears in his statement last Friday.

He said the arrears rate of 29.4 per cent effectively meant that 39,000 households were subsidising 16,000 households, and warned that the town council's finances "must surely decline" if the trend continues.

He also noted that when Hougang Town Council was run separately, under Mr Low, it had the highest arrears rate among all town councils and had almost run into cash-flow problems, he added.

This was avoided, he said, only when Hougang Town Council merged with that of Aljunied GRC after the 2011 General Election, and their finances were co-mingled.

Ms Lim replied that the town councils had merged to take advantage of economies of scale.

She also said AHPETC was studying data on its overdue S&CC, and would address the issue after the AGO's audit on its financial statements was completed and made public.

She declined to give more details on the numbers cited by Mr Lee.

-By Tham Yuen-C

Singapore Real Estate

Property cooling moves pose challenge: 3 firms

Source: Business Times / Companies & Markets

The property cooling measures will continue to exert pressure, making the operating environment challenging, said three firms on Thursday, as they released their results for the three months ended September. Sing Holdings, saying it will monitor the market to identify opportune moments to market its development projects, said: "With the Total Debt Servicing Framework and cooling measures, the group expects the Singapore property market to continue to be lacklustre, with weak purchasing sentiments."

-By Mindy Tan

CapitaLand targets new integrated projects in Asia

Of 12 such developments, half will be in China and the rest could be in Singapore, M'sia, Vietnam and Indonesia

Source: Business Times / Real Estate

WITH more recurring income to be derived from a major pipeline of assets turning operational in the next few years, CapitaLand is looking to pump the cash into new projects, including 12 integrated developments across Asia over the next three to four years.

Of the 12 targeted integrated developments, half would be in China, while the rest could be in Singapore, Malaysia, Vietnam and Indonesia, said the largest listed property developer in South-east Asia.

The first of these mixed-use projects is Capital Tower Shanghai. The necessary approvals have been obtained and construction will begin early next year, said group chief executive officer Lim Ming Yan. When completed in 2016-2017, this project will have a total gross floor area of 66,160 sq m comprising office, serviced residence and retail.

The group's search for opportunities beyond behemoth China has also found bright spots in Kuala Lumpur and Penang, Ho Chi Minh City and Jakarta. CapitaLand is already in Malaysia through its shopping malls and Vietnam via its residential and serviced residence businesses, where there are "initial positive returns".

"For the next three to four years, we will have a significant pipeline of projects that will turn operational that will strengthen the portfolio significantly," Mr Lim told The Business Times after the group's celebration of its 20th anniversary in Beijing.

Given some S$4 billion in cash and undrawn credit facilities and S$1.6 billion sitting in the special business units, the group has much capacity to snap up assets but it stressed that there is no need to rush.

"In the past couple of years, there were less experienced developers buying into these investment properties. At some point in time, they may decide to get out. That may be a better time for us to decide whether to get into some of these assets," Mr Lim said.

Lucas Loh, CEO of CapitaLand China, said the group is keen to work with local partners that have significant land bank in China. One of them is Shanghai Metro, the rapid transit company that owns some land plots along its metro lines in Shanghai.

CapitaLand is already in a 70-30 joint venture with Shanghai Metro to develop an integrated project on a site at Hanzhong Road in downtown Zhabei District in Shanghai, above an interchange station of three metro lines.

Mr Loh revealed that the group has also been approached by some city and district governments on the possibility of working on urban renewal projects together, after its first urban renewal project on Datansha Island with the Liwan District government in Guangzhou. Phase one of this project is likely to be ready for launch in the fourth quarter of next year.

"We are studying the possibility of these projects and in discussions on some of these projects," Mr Loh told analysts and the media in a briefing in Shanghai.

Competition for mixed-use sites in China is relatively lower and offer better margins than pure residential sites, he explained, adding that further liberalisation of China's capital market will drive greater demand for commercial properties.

CapitaLand is no stranger to mixed developments, having built four integrated Raffles City projects in Shanghai, Beijing, Chengdu and Ningbo.

Four other Raffles City projects in Hangzhou, Shenzhen, Chongqing and Changning are set to complete over the next three to four years, bringing the group's total stable of Raffles City projects in China to eight with a total value of S$12 billion on completion.

While there have long been talks in the market that the group may spin off its S$6 billion Raffles City China Fund - that holds five of the eight Raffles City projects - into a Reit, Mr Loh said the group is considering all options and has not ruled out the possibility. The fund will expire in 2018, so it is "still early days to decide on this", he said.

Unfazed by a slowdown in the Chinese economy, Mr Loh noted that the mega cities that fall within the group's five city clusters - Beijing/Tianjin, Shanghai/Hangzhou/Suzhou/Ningbo, Guangzhou/Shenzhen, Chengdu/Chongqing and Wuhan - will continue to ride the urbanisation wave.

CapitaLand is launching another 3,900 residential units in China in the next three months from its current land bank, on the view that the Chinese residential market will pick up next year.

So far, the group has seen an 81 per cent take-up for units launched in China. CapitaLand is aided by a focus on the first-time home buyers and upgraders in key cities, as well as its 70-30 exposure to tier one and tier two/three cities, Mr Loh added.

But CapitaLand is looking to improve its return on equity by using modularisation to shorten the time-to-market for residential properties to nine months - from acquiring the site to launching the project - except in Chinese cities where the building structures have to be completed before the launch.

The group's ability to weather the cyclical residential market has showed up in its financial performance, thanks to having three quarters of its portfolio in investment properties.

Its net profit for the third quarter ended Sept 30 and first nine months inched up 1.3 per cent to S$129.98 million and 7.7 per cent to S$751.5 million; separately, its serviced residence arm Ascott announced this week that it has crossed its target of 12,000 units in China ahead of 2015, and is now on track to reach 20,000 units in China by 2020.

In Singapore, breakeven prices at its Bishan condominium projects Sky Habitat and Sky Vue are still significantly below average selling prices even after discounts are offered, according to CapitaLand Singapore CEO Wen Khai Meng, who recently took over the residential portfolio.

The first extension fees will kick in for Urban Resort Condominium in March and The Interlace in September, where there are 22 units and 175 unsold units respectively as of Sept 30.

Projects in Singapore that will turn operational in the next few years include mixed-use Project Jewel at Changi and CapitaGreen office in Singapore.

-By Lynette Khoo

A Raffles City China Reit in the making for CapitaLand

Source: Straits Times / Money

A REAL estate investment trust (Reit) housing CapitaLand's Raffles City developments in China may be in the offing once the latest four projects are completed.

The move could come once the four Raffles City developments now under construction are completed and turning in a stable performance.

Developer CapitaLand, the key investor in the projects, may then link these with the existing four outlets that are already operating and list the lot as a Reit or in a similar vehicle.

It is estimated that the complete portfolio of eight Raffles City outlets would be worth $12 billion.

Five of the developments are held in the Raffles City China Fund (RCCF), a US$1.18 billion (S$1.52 billion) private equity vehicle started and managed by CapitaLand with investors that include financial institutions and pension funds from Asia, Europe and North America. It has a lifespan of 10 years and winds up in 2018.

There are four completed projects - in Beijing, Shanghai, Chengdu and Ningbo - and Raffles City Hangzhou, which is under development.

The other three in China are held in various vehicles that CapitaLand has set up.

"Our exit strategy is to place all these Raffles City branded assets in a Reit vehicle," said fund managing director Gan Chong Min, who was speaking to reporters and analysts during a tour of CapitaLand's projects in China.

The idea of a Raffles City Reit was raised in 2007 by Capita- Land's then-president and chief executive Liew Mun Leong.

Mr Lucas Loh, chief executive of CapitaLand China, said on the tour that the company is working on various options, including a Reit, separate listed platform, or keeping it as a private fund.

Mr Loh's team manages 32 projects, the eight Raffles City developments and seven private equity funds, with assets under management of about $13 billion.

Its plans to launch a number of residential projects next year.

Apart from the RCCF, CapitaLand has significant presence in China through its CapitaMalls Asia company.

The firm has 62 malls in China - of which 51 are operational - in 37 cities, with a total gross floor area of 69.1 million sq ft and $17.3 billion in property value.

The second phase of Capita- Mall Fucheng in Mianyang and CapitaMall Tianfu in Chengdu are both due to open next month.

CapitaLand itself will focus on integrated developments in China, using its strength in the area to acquire projects, said Mr Loh.

"Hopefully within the integrated development, we can have a mix of both trading-type properties and those we can hold long term. CapitaMalls and CapitaLand China and Ascott will be working together to further deve- lop ourselves in China," said Mr Loh.

In terms of investments in China, the company is not in a hurry to acquire any properties in the next few months, said CapitaLand president and chief executive Lim Ming Yan, who was also on the tour.

"There will be opportunities coming up in the next one or two years... In the past few years, there have been less experienced investors investing in properties who may at some point be thinking of getting out," he noted.

CapitaLand has 50 projects worth $36 billion to be completed across Asia over the next three years, said Mr Lim.

Once some of the projects are completed and generate recurring income, the company can look at possibly recycling some of the capital and reinvesting it into the 12 additional integrated projects it intends to develop over the next three years, he added.

The first of these integrated projects, Capital Tower in Shanghai, is estimated to be completed in the fourth quarter of 2016.

"We also have a strong Reits and (private equity) funds platform that will continue to sustain growth of the company," said Mr Lim.

CapitaLand is also set to explore new markets in Vietnam, Malaysia and may take a closer look at Indonesia.

-By Rennie Whang

CapitaLand to focus on integrated and mixed-use projects in China

The property developer has been growing its brand in China, moving into Tier 2 and Tier 3 cities such as Chengdu.

Source: Channel News Asia / Business

SINGAPORE: CapitaLand is focusing on integrated and mixed-use projects, especially in China, to drive earnings. The property developer has been growing its brand in China, moving into Tier 2 and Tier 3 cities such as Chengdu.

Raffles City Chengdu is a mixed project comprising office, retail, serviced residences and residential components, while Raffles City Changning in Shanghai is also a mixed-use development - with office towers and retail podiums. The latter is still under construction and is expected to be completed by 2016.

These two projects are among the integrated or mixed-use projects under CapitaLand.

The property developer said it sees many opportunities in this space, whether in China, Singapore or other cities in South-east Asia. It aims to develop 12 new integrated projects in the region over the next three years - six of which will be in China.

Mr Lim Ming Yan, President and Group CEO of CapitaLand said: "Integrated developments are by nature, larger projects, and they are also much harder to execute because this requires expertise across the different asset classes. CapitaLand has done many of these projects and I think we are in a much stronger position to undertake integrated developments.”

Mr Vikrant Pandey, Senior Property Analyst at UOB Kay Hian said integrated projects may see a slightly lower overall return compared to a high-end segment, such as a residential development.

“But there are ways to mitigate this by following a capital recycling strategy,” he said.

At a briefing in Shanghai, Mr Lim said the company is looking at recycling some of its assets that have steady recurring income either into REITs or private equity funds.

Already, Raffles City in Singapore is jointly owned by two CapitaLand REITs – CapitaMall Trust and CapitaCommercial Trust.

In China, five Raffles City projects have been included in a private equity fund, the Raffles City China Fund. Currently, the group's assets in China are worth close to S$17 billion, or about 40 per cent of CapitaLand's total assets.

The developer said its exposure to China will be 70 per cent in Tier 1 cities, with the remaining 30 per cent in Tier 2 and Tier 3 cities.

"Since about 2006, we have sensed that the development has shifted from coastal areas. Economic development has started to move inland and Chengdu is definitely one of the major beneficiaries of this trend,” Mr Lim said.

Management consulting firm McKinsey predicts that 45 per cent of China's middle class and high income earners will come from Tier 2 and Tier 3 cities by 2022.

- CNA/dl

Companies' Brief

Frasers Centrepoint hit by one-off items

Full-year profit dives 31% to S$500.7m; revenue up 33%, fuelled by project completions

Source: Business Times / Companies & Markets

One-off items led net profit at Frasers Centrepoint Ltd (FCL) to fall 31 per cent to S$500.7 million for the full year ended Sept 2014. This was largely due to an exceptional loss of S$127 million this year, compared to a gain of S$46 million last year. "The one-off expenses were largely due to the restructuring costs of S$42 million arising from the repayment of related company loans prior to FCL's listing, and Australand acquisition costs of S$70 million," said FCL.

-By Lee Meixian

FCL to focus on overseas markets

Slowdown in real estate market here prompts move

Source: Straits Times / Money

PROPERTY giant Frasers Centrepoint (FCL) has plans to place bigger bets on Australia and China to offset the slowdown in Singapore's real estate market.

The strategy - outlined at a results briefing yesterday - was also the first indication of how the firm will incorporate giant Australian developer Australand, which it acquired in August.

FCL chief executive Lim Ee Seng said: "We are clearly established in Singapore; Singapore is our base... the second leg of our tripod is now firmly entrenched in Australia. (But) to make our foundation strong, we need to strengthen the third leg, and that is China."

The Australand buyout means Frasers' assets in Australia accounted for $7.17 billion - or 42 per cent - of its entire portfolio as at Sept 30, near the $7.58 billion worth of assets in Singapore.

Its Chinese assets stood at $1.17 billion.

Contributions from overseas properties to its profits, before accounting for interest and tax expenses, have increased markedly: they accounted for 42 per cent or $288.7 million in the 12 months to Sept 30, up from 13 per cent in the same period a year ago.

This was driven by developments in Australia, China and Britain as well as additional revenue streams from new hotel master lessees from its newly-listed Frasers Hospitality Trust. However, Australand only contributed a month's share of profits given it was acquired in August.

Chill winds brought on by cooling measures and stiff lending guidelines have swept over the local market, causing players to place their chess pieces overseas.

Frasers has only two sites in its landbank here. One is an executive condo plot in Sembawang Avenue acquired in July. The other will be Singapore's largest suburban mall, Northpoint City, in Yishun. Construction is slated to begin next year.

Though bids for Government land have moderated, Mr Lim pointed out that balance has to be struck between tendering to win and having the confidence to shift units within five years in today's market. Foreign-owned developers have to sell all units within two years of completing a project or face hefty penalties.

Mr Lim reiterated that the firm's "immediate priority" would be to integrate Australand's businesses with Frasers Centrepoint.

This could include building on the Australian firm's expertise in logistics properties in the region. There is also the possibility of starting in Thailand, where Frasers' major shareholder, TCC Group, has a significant portfolio of industrial and logistics properties.

The firm reported a 31 per cent dip in net profit to $500.7 million for the 12 months to Sept 30.

This was after accounting for a one-off expense of $42 million to repay loans when it split from Fraser and Neave and listed on the Singapore Exchange. It also forked out $70 million in costs associated with the Australand acquisition.

However, its profits before adjusting for fair value changes and exceptional items stood at $501 million, up 25 per cent from a year ago. Revenue hit a record $2.73 billion for the full year, up 33 per cent on a year earlier.

-By Cheryl Ong

Ho Bee's recurring income strategy pays off

Q3 net profit shoots up 83.7% to S$13.45m as turnover surges 64.8% to S$26.82m

Source: Business Times / Companies & Markets

Ho Bee Land's strategy of building a strong recurring income base has borne fruit as seen in its third-quarter financial report card. Net earnings rose 83.7 per cent to S$13.45 million for the three months ended Sept 30, 2014, from S$7.33 million in the same year-ago period.

City Developments

Source: Business Times / Companies & Markets

We expect it will take some time before City Developments' (CDL's) overseas residential projects start to contribute to earnings. In China, CDL is still awaiting the launch of Eling Residences and Suzhou HLCC, depending on market conditions. In Japan, CDL plans to develop luxurious high-end condominiums at the former residence of Seiko founder Kintaro Hattori's freehold land site in Tokyo.

Views, Reviews & Forum

Policy inconsistency hitting a group of HDB owners

Source: Today Online / Voices

Amid the authorities’ repeated statements to date that property cooling measures should not yet be lifted lies a policy inconsistency that denies a group of Housing and Development Board (HDB) owners from upgrading to potential private housing.

In an effort to bring financing for executive condominium (EC) purchases in line with public housing, a 30 per cent mortgage servicing ratio was placed on loans.

The National Development Ministry said this is to discourage buyers from overstretching their finances and support an affordable and sustainable EC market.

The inconsistency is firstly to do with new EC buyers who own an HDB flat with an outstanding mortgage.

For EC purchases, they are not subject to the 50 per cent loan-to-value cap and 25 per cent minimum cash downpayment for a second home loan.

This relief is given because the borrower must dispose of his HDB flat within six months of the issuance of the temporary occupation permit for his EC. His first mortgage would thus be discharged.

Secondly, new EC buyers who own an HDB flat are granted a remission of the Additional Buyer’s Stamp Duty of 7 per cent imposed on a second property, as they cannot end up owning a second home concurrently.

These concessions implicitly recognise that EC buyers would not be over-stretched by a higher loan-to-value or by having to service two mortgages.

The current mortgage servicing ratio, though, prevents EC buyers from taking up a loan that is within their financial capability after taking into account the proceeds from the eventual sale of their flat, which would reduce the new loan.

One perverse consequence of the cap is that buyers are prompted to switch to pricier private properties, where the restriction does not apply, resulting in overstretched borrowers and increasing the very risk of default the authorities are trying to mitigate. This measure has also disadvantaged certain second-timers in their purchase of ECs that are not subject to the resale levy. The number of such ECs will diminish.

Equally, HDB dwellers who wish or need to relocate to another HDB home or estate for good reasons are deterred from doing so. Also, there is a segment of the population close to the income ceiling; they will become ineligible to buy a flat or an EC over time due to salary increments.

There is a case for fine-tuning the financing for EC and HDB purchases. This could include recognising a portion of the nett proceeds from the sale of an existing HDB home, tied to a covenant by the borrower to pay down his loan utilising these proceeds.

-By Mun Cheong Fai

Set lower priority, not 30-month wait, for 2nd EC buy

Source: Today Online / Voices

It is impractical for a family with an existing executive condominium to buy a second one from a developer, due to the 30-month wait they must fulfil first.

Where would the family live in that period and in the three to four years it takes for an EC to get its temporary occupation permit? The Housing and Development Board should enforce housing priorities in a more practical manner. Why state that a citizen is eligible to buy two new ECs in his lifetime, yet make it difficult to do so instead of just according a lower priority to the second application?

On the one hand, owners must wait 30 months, like owners of private property. On the other hand, the former must pay a resale levy for some projects now, to bring terms for ECs closer to those for public housing.

EC owners are caught in between, despite having met the initial eligibility and ownership conditions such as the Minimum Occupation Period and the subsequent resale restriction until after the 10th year. The 30-month wait is on top of these.

The HDB should make up its mind which category EC owners should be in: HDB upgraders or private property owners?

-By Joanne Tan

Why isn’t ABSD refund applicable to single parents?

Source: Today Online / Voices

I am a divorcee with three children, living in a public flat, and I intend to buy a private apartment, as I am ineligible for an executive condominium.

If I were married and sell my flat within six months of the date of the temporary occupation permit for the new unit, the Inland Revenue Authority of Singapore would refund the Additional Buyer’s Stamp Duty (ABSD) of 7 per cent.

But the refund is not applicable to single parents. Why the bias?

Singaporeans are always encouraged to have more children, and nobody likes to become a divorcee. We do not ask for free government handouts, but we expect to be treated equally.

-By Teressa Tay

Global Economy & Global Real Estate

Asean-US economic engagement should go beyond just talk: PM Lee

He suggests developing the Expanded Economic Engagement, mooted by the US in 2012, to give it substance

Source: Business Times / Government & Economy

Asean tipped to keep medium-term growth: Report

Source: Business Times / Government & Economy

Stable outlook for emerging Asian economies: OECD

They'll grow in next 3 to 4 years, but need to manage external, domestic risks

Source: Business Times / Government & Economy

Slide in China property sales eases to -1.6% in October

But Jan-Oct investment growth in sector slows to 5-year low of 12.4%

Source: Business Times / Real Estate

Bank of America, Citigroup selling US$3b of soured mortgages

Banks have accelerated sales to cut holding costs and as hedge funds, firms seek to profit from rising home values

Source: Business Times / Real Estate

Salesforce to buy San Francisco office tower for US$640m

It already leases about 60% of the 41-storey building in the South of Market area

Source: Business Times / Real Estate

Ace Hotel creates new 'ecosystems' to beat rivals

It aims to stand out in crowded market of boutique hotels with unique experiences

Source: Business Times / Real Estate

London House-Price Index Drops as Capital Leads Slowdown

Source: Bloomberg / Luxury

A London house-price index fell to a four-year low in October, putting the capital at the forefront of a property slowdown in the wake of new rules on lending, according to the Royal Institution of Chartered Surveyors.

RICS said its house-price index for London dropped to minus 35, the lowest since October 2010, from minus 9 in September. A national index fell to 20 from 30, the lowest reading since May last year.

“The flatter trend in the market is partly a reflection of potential buyers becoming a little more cautious about making a purchase,” said Simon Rubinsohn, chief economist at RICS. Still, he said it “seems implausible that the dip in demand will result in very much of a decline in house prices.”

The report is the latest to capture the cooling in the housing market after the Bank of England introduced new rules to prevent a surge in risky mortgage lending. The central bank said yesterday that the near-term outlook for residential property has softened, citing in part “some restriction” in mortgage availability.

Out of the 12 regions tracked by RICS, London was the only one to post a decline in values in October. The imbalance between demand and supply in the capital that boosted prices during 2013 “has largely gone into reverse,” RICS said. There is anecdotal evidence that speculation of a so-called mansion tax is having a “deleterious impact” at the top end of London’s market, it said.

Nationally, an index of new-buyer demand dropped to a six-year low, with the gauge for London plunging to the lowest since April 2008.

-By Scott Hamilton

ARC Hospitality Changes Terms of Equity Inns Hotel Deal

Source: Bloomberg / News

American Realty Capital Hospitality Trust Inc. amended the terms of an agreement to buy the Equity Inns hotel portfolio.

ARC Hospitality will pay $1.81 billion for 116 hotels in 31 states, the non-traded real estate investment trust said today in a statement. That compares with an expected purchase price of $1.93 billion for 126 hotels announced on June 2.

Nicholas Schorsch, ARC Hospitality’s chairman, holds the same position at American Realty Capital Properties, the U.S. landlord that last month reported accounting errors that led to the resignations of two top executives. Schorsch is also chairman of RCS Capital Corp., which on Nov. 3 dropped a plan to buy private-capital management business Cole Capital from American Realty Capital Properties.

ARC Hospitality, based in New York, is buying the hotels from companies that are indirectly owned by one or more of Goldman Sachs’ Whitehall Real Estate Funds. The transaction, scheduled to close on Feb. 27, will increase ARC Hospitality’s portfolio to 122 hotels, according to the statement.

-By Andrew Blackman

DP World to Buy Dubai’s Economic Zones for $2.6 Billion

Source: Bloomberg / News

DP World Ltd. (DPW), the operator of ports from China to Peru, agreed to buy an industrial parks company for $2.6 billion in a deal that may help Dubai World pay debt five years after its near default roiled global markets.

Shares of DP World closed 2.7 percent higher in Dubai after the company said in an e-mailed statement it agreed to buy Economic Zones World FZE, which operates the Jebel Ali Free Zone in the emirate. DP World and EZW are both units of Ports & Free Zone World FZE, which is owned by Dubai World.

Dubai World, one of the Middle East business hub’s three main state-owned holding companies, sought a standstill on about $26 billion of debt in 2009. The company, which also owns private equity firm Istithmar World PJSC and shipyard Drydocks World LLC, reached a deal with about 80 creditors in 2011 to reschedule its loans. It needs to pay $4.4 billion in September next year, and more than $10 billion in September 2018.

“The flow of cash would enable Dubai World to repay its creditors,” analysts Shabbir Malik and Murad Ansari at EFG-Hermes Holding SAE said in a note. An “early repayment of the first debt tranche is now more likely,” they said.

The deal includes the assumption of net debt of $859 million, and is at about 10 times EZW’s earnings before interest, tax depreciation and amortization for 2013, DP World said. It will fund the acquisition from its existing cash holdings and committed conventional and Islamic loans as well as revolving credit facilities, according to the statement.

‘Strategic Risk’

DP World will also seek shareholders’ approval to delist the company from the London Stock Exchange while maintaining its NASDAQ Dubai listing, it said in today’s statement. As of Sept. 30, about 99 percent of DP World’s shares were held by investors using NASDAQ Dubai, according to the statement.

DP World’s shares in Dubai have advanced 14 percent this year. The emirate’s economy may expand 5 percent in 2014, the fastest pace since 2007, according to the International Monetary Fund, helped by a boom in trade and tourism. Container throughput at DP World’s more than 65 terminals globally jumped 10 percent in the nine months through September.

Jebel Ali Free Zone, a 57 square-kilometer (22 square-mile) industrial park adjacent to DP World’s flagship Jebel Ali port in Dubai, is EZW’s primary business unit and generated 97 percent of its revenue in 2013, according to the statement.

The Jebel Ali Free Zone surrounds Dubai’s port and a possible future sale by Dubai World would be “seen as a strategic risk for DP World,” Chief Financial Officer Yuvraj Narayan said at a news conference in Dubai today. “So we pre-empted any such move and made a compelling case to Dubai World” for the buyout, he said.

JAFZ Sukuk

Jebel Ali Free Zone’s $650 million sukuk and a syndicated Islamic loan will remain in place and DP World has the option “to explore financing options,” according to the statement.

“With JAFZ under the belt, DP World has a full supply chain and they become a more effective services provider to shipping companies,” Ahmed Shehada, head of advisory and institutions at NBAD Securities LLC in Abu Dhabi, said by e-mail. ’’It’s all about getting a better footing in the home market and leveraging on the Dubai growth story.’’

Moelis & Co., Citigroup Inc. and Deutsche Bank AG are financial advisers to DP World on the acquisition.

Dubai World has previously sold some assets to other companies in the emirate to raise cash. In December, it sold its Atlantis, The Palm resort to Investment Corp. of Dubai, and in January its Palm Utilities unit to a subsidiary of Dubai Electricity & Water Authority.

-By Arif Sharif and Deena Kamel Yousef

Shanghai Peace Hotel Owner Buys Louvre Group in Expansion

Source: Bloomberg / News

Jin Jiang International Holdings Co., which owns Shanghai’s 85-year-old Peace Hotel, agreed to buy Groupe du Louvre in a bid to expand its global franchise.

Jin Jiang signed an agreement with Starwood Capital Group to buy the hotel company and subsidiary Louvre Hotels Group for an undisclosed price, according to a statement on its website yesterday. The deal is valued at more than 1.2 billion euros ($1.49 billion), the Wall Street Journal reported, citing unidentified people familiar with the matter.

Chinese investors are snapping up trophy hotel properties around the world, seeking to cater to a growing number of wealthy Chinese that are traveling more outside the country. Anbang Insurance Group Co. is buying New York’s Waldorf Astoria hotel for $1.95 billion.

Jin Jiang, which wants to build itself into a “world-class brand name,” is expanding after profit more than tripled at its main domestic unit in the first half of this year on demand for domestic travel in China. The company owns 50 percent of IHR Group, which manages 434 hotel properties in 11 countries, mostly in the U.S.

“There is strong complementary synergy between Louvre Hotels and Jin Jiang in brand portfolio, geographic footprint and guest base,” Jin Jiang’s Chairman Yu Minliang said in the statement. “We are looking forward to working with the management, employees and other stakeholders of Louvre Hotels Group to create larger space for both parties to grow globally.”

Hotel Revenue

Paris-based Louvre Hotels is the second-largest hotel group in Europe, with more than 1,100 hotels in more than 40 countries, according to the statement. The transaction may be completed in the first quarter of next year.

Net income at unit Hong Kong-listed Shanghai Jin Jiang International Hotels (Group) Co. jumped 222 percent in the first six months of this year to 422 million yuan ($68.9 million) as revenue recovered. The shares have rallied 13 percent this year.

China’s hotel revenue per available room rose 1 percent in September from a year earlier, the third-consecutive month of increase, as occupancy rose, Bloomberg Intelligence analysts Margaret Huang and Brian C. Miller wrote in an Oct. 24 report.

The iconic Peace Hotel, built in 1929, has been a haven over the decades for celebrities visiting the city, including Charlie Chaplin and playwright Noel Coward.

-By Bloomberg News

Blackstone’s Gray Expects Moderate Growth in Real Estate

Source: Bloomberg / News

Commercial property is moving into a “moderate growth phase” amid limited construction and favorable demand, said Jon Gray, Blackstone Group LP (BX)’s global head of real estate.

While the rate of growth for commercial real estate isn’t as strong as in the past, supply and demand fundamentals remain good, Gray said in an interview today on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle.

“We are clearly past the distressed phase,” Gray said.

Blackstone, based in New York, is increasing its investments in real estate, the company’s biggest segment by revenue and profit. The private-equity firm has commitments of about $1.5 billion for its first fund to buy stable, well-leased U.S. property.

Commercial-property prices nationally have surpassed the peak reached seven years ago, before the financial crisis sent real estate values plunging, Moody’s Investors Service Inc. said last week. Apartment complexes in large cities and office buildings in central business districts led the recovery, according to Moody’s.

Blackstone still expects investment opportunities in distressed property overseas, in countries including Italy, Portugal and Spain, said Gray, 44. The company last year agreed to purchase 18 apartment blocks from the city of Madrid for 125.5 million euros ($171 million) after home prices fell more than 45 percent from their 2007 peak.

“We’ve been active in Spanish housing,” he said. “That could be up to a 40 billion-euro space.”

The firm also is expanding in Asia and may make more purchases in Latin America, Gray said.

-By Heather Perlberg

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