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5th November 2014

Top Stories

MND releases home price comparison in OCR

Source: Business Times / Government & Economy

The National Development Ministry has released the price comparison for homes in the OCR (outside central region) area of Singapore. The average price difference between HDB resale flats and Build-To-Order (BTO) flats is currently 31 per cent, up from 18 per cent in 2004.

Tighter rules ahead for large worker dorms

Licensing, and security, health and safety requirements to be imposed

Source: Business Times / Government &Economy

The Manpower Ministry (MOM) on Tuesday paved the way for additional regulations to be imposed on large purpose-built dormitories - those housing 1,000 or more foreign workers - with the tabling of the Foreign Employee Dormitories Bill. If the Bill is passed, all such dorms - current and upcoming - will have to be licensed in the second half of 2015, with each licence valid for up to three years. At present, 50 purpose-built dorms collectively provide about 200,000 beds.

-By Claire Huang

Stricter rules for operators of large dorms, pawnshops

Source: Straits Times / Singapore

LARGE dormitories built specifically to house 1,000 or more foreign workers will be governed by stricter rules from next year.

Under a proposed law introduced yesterday, dormitory operators will have to get a licence which requires them, among other things, to take steps to control the movement of workers, provide recreational facilities and have in place quarantine plans.

This new scheme was set out in the Foreign Employee Dormitories Bill tabled by Manpower Minister Tan Chuan-Jin in Parliament.

It will affect about 50 dormitories.

Explaining the need for the licence, Mr Tan said in a statement that large dormitories "are more complex to manage" and tighter controls are needed "to ensure they are managed effectively".

Operators will have six months to apply for a licence; the new law is expected to take effect in the second half of next year. Licences are valid for up to three years.

Those without a licence face a fine of up to $500,000 or a maximum jail term of two years, or both.

Those who breach the licensing conditions may be fined up to $50,000 for each breach or jailed up to one year, or both.

About 200,000 foreign work permit holders live in the 50 or so large dormitories.

A further 180,000 live in shophouses, dormitories converted from factory spaces and temporary quarters built at construction sites. These will not be covered by the proposed law but will continue to be regulated under existing laws of five statutory boards.

Pawnshops will also come under stricter regulations next year.

The Pawnbrokers Bill, introduced by the Law Ministry yesterday, seeks to raise the security deposit of each pawnshop branch from $20,000 to $100,000.

Pawnbrokers will also need to maintain a minimum paid-up capital of $2 million for the first branch and $1 million for each subsequent branch.

And they will need to take steps to prevent money laundering, such as conducting stricter checks on their customers and reporting suspicious transactions to the police.

But pawnshops will get more leeway to sell unredeemed pledges through any means. Currently, they can only auction these items.

Singapore has 204 pawnbrokers, up from 57 in 1993 when the law was last updated. They lent about $5.5 billion last year, up from $856 million in 1993.

-By Toh Yong Chuan

Larger foreign worker dorms must be licensed under proposed Bill

Dormitories for foreign workers with more than 1,000 beds will need to be licensed from the second half of 2015, should the new Foreign Employee Dormitories Bill be passed.

Source: Channel News Asia / Singapore

SINGAPORE: Large purpose-built dormitories for foreign workers will need to be licensed by the second half of next year (2015), should the Foreign Employee Dormitories Bill tabled in Parliament on Tuesday (Nov 4) be passed.

Under the proposed Bill, operators or proprietors must obtain a licence to run the dorms, on top of existing regulatory standards. The regulations will affect dormitories with 1,000 or more beds, and the Manpower Ministry said each licence will be valid for up to three years.

The licence will mandate three broad areas:

·         The management of public health and safety issues

·         The management of safety and public order

·         Operators must provide social and recreational amenities to foreign workers

For the management of public health and safety issues, operators are required to put in place measures such as quarantine plans, pest control systems as well as sickbay facilities. The management of safety and public order includes measures such as the provision of identification passes for residents, computerised access systems as well as provisions to isolate disturbances.

Social and recreational amenities to foreign workers will include facilities like minimarts, ATMs, regular recreational activities, as well as a canteen and cooking facilities.

The penalty for operating an unlicensed dormitory will be a fine of up to S$500,000 and a jail term of up to two years, and it will be doubled for repeat offenders. In addition, operators will also face fines and a jail term for each breach of licensing conditions.

The Ministry will also be able to suspend or revoke licences, as well as debar a person from operating larger dormitories, taking into account the scale of the breaches.

Authorities say these measures are pre-emptive and prudent as Singapore houses more Work Permit holders, and the priority now is to target large congregation areas where flashpoints could occur over seemingly trivial matters.

"For example, if they are watching cricket and it happens to be two opposing nations, maybe Bangladesh and India, all it takes is one nasty comment from some worker to lead to something bigger. Naturally, when they have a lot of foreign workers living in one area, it just feeds into the problem," said Mr Shaik Mohamed, Director at Mini Environment Service, which manages four dormitories that house nearly 24,000 beds.


Given the unique complexities and risks in managing larger dormitories, there is a need for tighter controls, said the Manpower Ministry.

"These dormitories carry a greater risk in the event of mismanagement, for instance during a public order incident or an infectious disease outbreak. They also have a greater impact on surrounding communities," said the Ministry. 

"Dormitory residents may also impose additional loading on the local transport network or contribute to over-crowding at shared communal facilities in the vicinity. Such larger dormitories have the scale to implement amenities and facilities such as outdoor recreation spaces, to address such concerns."

There are currently 50 Purpose-Built Dormitories that collectively house about 200,000 beds, and these dorms will be subjected to the new law if it is passed. The Manpower Ministry said it will be flexible when implementing the new law with existing dormitory operators, saying that they will be given up to six months to obtain a licence from the date when the proposed Bill comes into effect.


More Purpose-Built Dormitories will also be launched over the next two to three years, with a view to moving more Work Permit Holders into such self-contained housing over time.

"The Government has been speeding up the construction of dormitories which, beyond providing adequate living space, have self-contained amenities and recreational facilities which meet the daily basic living and recreational needs of foreign workers," said Minister for Manpower Tan Chuan-Jin. "As more of these dormitories come onstream, which given their size, are more complex to manage, we need to impose tighter controls on these dormitories to ensure they are managed effectively."

He added: "I am glad that from our engagements with industry, the operators are on board with us on this."


Dormitory operators Channel NewsAsia spoke to were concerned, however, that the rules will mean higher costs, which will inadvertently trickle down to employers. They said erecting perimeter security fences and changing florescent lights to LED ones could cost operators tens of thousands of dollars.

"In terms of space, services provided - we are increasing them. In terms of cleanliness, hygiene, we are making improvements" said Mr Shaik Mohamed. "This is additional manpower required on our part, in terms of inspections, in terms of frequency - it is much higher than before."


Affected operators say for more parity, some licensing conditions should also be applied to smaller dormitories, such as those located within worksites. Another 192,000 or so foreign workers are housed in such sites, including factory-converted dormitories.

Such dormitories may not have space for amenities, but operations, safety, and hygiene "are the things that they also have to upkeep, and maintain the same standards as the purpose-built dormitories," said Mr Kelvin Teo, President of the Dormitory Association of Singapore. 

"If you are staying in a purposed-built dorm, you have amenities and all those things. I hope we can have more purpose-built dormitories so we can house as many foreign workers who come to Singapore and they can have better living conditions," added Mr Teo.

The Migrant Workers' Centre (MWC) welcomed the Bill, but added that even as authorities scrutinise conditions for purpose-built dormitories as the favoured migrant worker housing solution for the future, they should not overlook smaller dormitories in the interim.

"We also urge them to continue building more dedicated migrant worker recreation centres in areas with larger clusters of dormitories not covered by the Bill, to ensure that the right amenities and services are available to our migrant workers, regardless of the size of their dormitory accommodations," said Mr Yeo Guat Kwang, Chairman of MWC.

"In particular, the Government should continue to step up its enforcement to ensure compliance with existing regulations and further raise the current standards imposed for living conditions within all dormitories." 

- CNA/av/xy

Singapore Economy

Yi Shyan: What it takes to be a world-class outfit

Source: Business Times / Government & Economy

The issue of what it means to be a "world-class Singapore enterprise" was debated in Parliament on Tuesday. Senior Minister of State for Trade and Industry Lee Yi Shyan listed two distinguishing attributes in order for a company to be defined as such. First, it should have a competent leader at the helm, backed by talented people. Second, it should have a business model that stands out from the competition in its industry.

-By Lee U-Wen

Call to tap on urbanisation megatrend in Asian cities

Singapore firms should create and export new infrastructure solutions, says minister

Source: Straits Times / Money

LOCAL firms should ride on the "urbanisation megatrend" in Asian cities by creating and exporting new infrastructure solutions, said Senior Minister of State for Trade and Industry Lee Yi Shyan yesterday.

Mr Lee told a gathering last night that many Asian cities are seeking to address "challenges such as overcrowding, traffic congestion and environmental degradation".

More cities are also introducing infocomm technologies and intelligence into their municipal services, he noted, adding: "We are keen to develop the related industries, such as engineering services, to serve this exciting growth frontier."

Mr Lee was speaking to 400 members of the built-environment sector - which includes builders, developers, architects and engineers - at the 40th anniversary celebration for building firms at the Shangri-La Hotel.

He noted the low levels of investment in the built-environment sector here, which, at 9 per cent of revenue, lags those of other countries such as Australia, Japan and France, where about 12 to 17 per cent of revenue is invested.

If local firms want to "seize the growth potential", they must "intensify technology acquisition and invest in more research and development", he said.

Meinhardt has done just that, partnering with the Economic Development Board (EDB) to establish two new business arms that will focus on smart cities consultancy and project and construction management consultancy here.

It will invest between $8 million and $10 million in the ventures, which will occur within the next three years and create up to 50 jobs.

Group chief executive Omar Shahzad said last night that there is strong demand for Singapore expertise to help plan and design new urban areas.

"Most of the new smart cities are planned in the Asia or Middle East region where Singapore is viewed as an operating example," he added.

Mr Lee cited Singapore's strong reputation in this area, pointing to Newater and the ERP road pricing system as examples of creative engineering solutions that were developed here.

Meinhardt, which received the International Headquarters award from the EDB last night, became the largest global engineering firm in Singapore after it moved its headquarters from Melbourne in 2010 following a management buy-out.

It has worked on many projects here, including the Downtown MRT line, Resorts World Sentosa and the upgrading work at Changi Airport Terminal 1.

-By Melissa Lee

Singapore still the most SME-friendly economy: survey

Source: Business Times / SME

Singapore small and medium-sized enterprises which responded to a global SME performance review appear to be happy with government initiatives, helping the city-state maintain its position as the most SME-friendly economy for the second year running. According to the survey which was conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA), 37 per cent of SMEs in Singapore are of the view that government spending in the medium term will roughly be at the right level.

-By Mindy Tan

Thomson-East Coast Line most accessible

It has average of 4 entrances at each station, against 2 to 3 for other lines

Source: Straits Times / Singapore

WHEN completed in 2024, the Thomson-East Coast Line (TEL) will have an average of four entrances at every MRT station, offering the most accessibility among all the rail lines.

The North-South, East-West and North-East lines have an average of three entrances at every station, while the Circle Line (CCL) and Downtown Line (DTL) have two entrances per station.

Of TEL's 31 stations, Mayflower in Ang Mo Kio will be the most accessible with seven entrances.

Despite the increase in the average number of access points, Singapore is still far behind Hong Kong's MTR system, which has 557 entrances for 84 stations, or six access points per station.

The Land Transport Authority (LTA) said designing stations with more entrances is part of its efforts to "improve first and last mile connectivity".

Some of the entrances on the East Coast stretch will be connected to longer underpasses of up to 400m, it added.

Mr Erwin Seah, 34, a computer engineer, said he is looking forward to the Marine Parade Station, which will be near the underpass to East Coast Park.

"The only way to get to East Coast Park now is by bus. It will be good for pak tor (dating) sessions with my wife," he said.

Commuters who want to know more about the new stations can visit the LTA exhibition which opened at Parkway Parade yesterday. The exhibition, which charts the milestones of Singapore's rail system, will move on to Thomson Plaza, Bedok Mall, Katong 112 and public libraries.

Visitors will be able to see models of rail infrastructure and what engineers use to build tunnels. The roadshow, which ends in May, will also feature anecdotes from LTA's veteran engineers.

LTA's senior group director of rail, Mr Sim Wee Meng, said that with different rail lines at varied stages of construction, Singapore is now being studied by other countries.

"From engineering design to... testing and commissioning... we offer the full suite for them to see," said Mr Sim, an LTA veteran of 31 years.

The exhibition also charts the challenges engineers faced in building Singapore's first rail lines.

LTA's deputy group director of rail for the CCL and DTL, Mr Ng Kee Nam, recalls feeling giddy in the early 1980s when compressed air tunnelling was used to build tunnels.

"They warded me for one week... I couldn't work in the tunnel anymore and ended up at the station, which wasn't bad too," he said.

-By Adrian Lim

Singapore Real Estate

GIC said to be in US$8b deal to buy Blackstone's property unit

World's biggest private equity firm has reached in-principle agreement to sell the industrial property company to GIC-led group: Sources

Source: Business Times / Real Estate

GIC Pte Ltd's planned purchase of Blackstone Group LP's US industrial property company signals the Singapore investment agency's appetite for real estate even as investments by other state funds wane (See what GIC has been buying). The Singapore fund, which manages more than US$100 billion, is leading a group to buy Blackstone's IndCor Properties Inc (See IndCor's portfolio companies) for more than US$8 billion, two people with knowledge of the matter said.

GIC-led group 'in talks to buy US industrial property firm for $10.3b'

Source: Straits Times / Money

SINGAPORE sovereign wealth fund GIC is leading a consortium to buy US-based IndCor Properties from Blackstone Group in a deal valued at about US$8 billion (S$10.3 billion) including debt, a person familiar with the matter said.

"Talks are still ongoing, we don't know whether there will be a deal yet," said the person, who declined to be identified as the discussions are confidential.

GIC is seeking US$5 billion in debt to finance the acquisition, Bloomberg News reported yesterday.

A spokesman for GIC declined to comment, while Blackstone did not reply to an e-mail message seeking comment sent after business hours in New York.

Chicago-based IndCor was formed in 2010 as a portfolio company of Blackstone and has a footprint of warehouses and distribution centres across the United States, according to the company's website. It said in September that it had filed with the Securities and Exchange Commission for an initial public offering.

GIC has stepped up its real estate purchases in recent months, buying office buildings in Tokyo and investing in Australian student accommodation, as a way to diversify its portfolio and secure better yields.

It announced plans on Monday to co-invest in Auckland's Viaduct Quarter, its maiden foray into the New Zealand property market.

GIC's purchases come at a time when, with more competition from insurers and pension funds, sovereign wealth funds are cutting back on real estate investments. Direct property investments declined 43 per cent to US$5.9 billion in the first half from the previous year, the London-based Institutional Investor's Sovereign Wealth Center said in a report on Monday.

"It appears that GIC is an exception as other state funds are investing less in real estate," said Mr Song Seng Wun, an economist at CIMB Research in Singapore. "They are thinking more long term than other state funds and going for higher risk and return."

Separately, GIC is reportedly selling a stake worth more than RM400 million (S$155 million) in Malaysia's property conglomerate Sunway, according to a term sheet seen by Reuters.

The shares are being priced in a range between RM3.20 and RM3.30 each, the term sheet showed, representing a discount of 1.5 per cent to 4.5 per cent to yesterday's closing price of RM3.35. GIC would cease to be a substantial shareholder in Sunway.

GIC holds a stake of 8.72 per cent in the company, according to Thomson Reuters data, and it is selling a stake of 7.26 per cent, with an upsize option to sell the rest, according to the term sheet.


GIC may be selling Sunway stake worth more than RM400m

Source: Business Times / Real Estate

Singapore's investment agency GIC is selling a stake worth more than RM400 million (S$155 million) in Malaysia's property-to-construction conglomerate Sunway, according to a term sheet seen by Reuters on Tuesday.

Dormitory, portal among productivity moves for Jurong Island

Source: Business Times / Government & Economy

THE government is stepping up initiatives to improve productivity for construction and maintenance work of the energy and chemicals sector, as activity increases on Jurong Island.

These include a dormitory near Jurong Island to reduce travelling time for workers, reducing fatigue and improving on-site productivity.

A second initiative is a portal that will start in the middle of next year to aggregate data in order to reduce overlaps in project scheduling among companies, a common problem in the industry now. This will smoothen demand for manpower and help local firms better plan for projects, said Deputy Prime Minister Tharman Shanmugaratnam on Tuesday.

These plans were developed by a committee made up of representatives from major plant owners, contractors and government agencies that started meeting in January last year. The Process Construction and Maintenance Management Committee will reveal more plans next year, said Mr Tharman. "This is for the long term, a multi-year journey."

HSL Constructor, a civil engineering firm active in the oil and petrochemicals sector, welcomed the plans for a dormitory, saying that it may facilitate the possibility of conducting industry-specific training for all workers. Its chief executive, Charles Quek, also suggested that more could be done to standardise safety standards that currently differs from one plant to another.

"Although we do understand that there may be factors such as insurance that influence their corporate policies, but if safety requirements can be standardised, it would enhance mobility of workers between plants, hence increasing productivity," he said.

Mr Tharman made the announcement at the opening of a chemical plant by specialty chemicals producer Evonik Industries on Jurong Island. The 500 million euro (S$807 million) plant, which will produce methionine used in animal feed, is the German company's largest chemical investment in the world. It will create about 200 jobs. With an annual capacity of 150,000 tonnes, the plant will make nearly a quarter of Evonik's total of 580,000 tonnes. Evonik has four other methionine plants; Singapore is its first in Asia.

Asia's appetite for methionine has grown due to progress in feed technology, rapid population growth and a rising consumption of meat, said Evonik. It added that it chose Singapore for its logistical capabilities. "As we are serving the agriculture industry . . . we have to reach many, many different points in each country. Therefore, it's very decisive for us to be in Singapore which has a lot of connections to the different regions in the world," said Rainer Beste, president of the health and nutrition unit.

However, another plant that was to be built alongside the methionine complex has been delayed. The facility, which was to produce 20,000 tonnes of polyamide-12 chemicals a year - used in the automotive industry - was reportedly to cost as much as half the methionine plant.

After "debottlenecking", or optimising the capacity, of its plant in Europe, supply is now sufficient for the foreseeable future, partly because demand growth has not risen as much in recent years, said Evonik chairman Klaus Engel. The company is also examining new alternative technologies in producing the chemical, to make sure the best available technology is used in its next production plant.

"In principle, Singapore is still an option for (the plant), but we can be relaxed on timing here since supply from the market is sure," Dr Engel said, adding that a decision on the next step would be made in 12-18 months' time.

The company, meanwhile, has reserved space on Jurong Island for future investments. "Our commitment to Singapore and Jurong Island is long term," said Dr Engel. Though Singapore is competing with other parts of the world, it has the advantage of providing proximity to the company's customers, he added.

Evonik is the market leader for methionine in Asia, and holds a 40 per cent global market share. It recorded revenue of almost 13 billion euros last year, with Asia accounting for 18 per cent.

-By Andrea Soh

Dorm to cut travel time to worksites

Move to boost output in process construction sector

Source: Straits Times / Money

A DORMITORY for workers in the process construction and maintenance sector will be built near Jurong Island to reduce travelling time to worksites.

The move is among a host of new measures aimed at improving output in the industry, Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam said yesterday.

A tender has been called for the dormitory's construction. It is expected to be completed by 2016.

HSL Constructor, Hiap Seng, Rotary and Hai Leck are among the 300 or so firms operating in the process construction and maintenance industry, which mainly supports companies in the energy and chemicals sector as well as those in power generation and biomedical science.

Mr Tharman was speaking at the opening of a €500-million (S$807 million) methionine plant on Jurong Island by German speciality chemicals giant Evonik.

The production facility, the company's largest investment in a single chemicals project, will have an annual production capacity of 150,000 tonnes of methionine, an amino acid used in animal feed, once it is running at full capacity.

The complex, expected to create about 200 highly-skilled jobs, is Evonik's first methionine plant in Asia and its largest such facility worldwide.

It will bring Evonik closer to its customers in Asia, where demand for meat, eggs and poultry - and by extension methionine - is rising, said Dr Reiner Beste, the head of Evonik's health and nutrition business unit.

"One of the main uses of methionine is in poultry feed, and for religious and cultural reasons there is a high demand for poultry in this part of the world," he added.

Dr Klaus Engel, chairman of Evonik's executive board, said Jurong Island is a "prime destination for future investment", given the trend of customers moving to Asia and Singapore's status as a regional logistics hub.

Evonik has a presence in more than 100 countries and employs 33,500 people. Singapore is its headquarters for South-east Asia.

The company generated sales of almost €13 billion last year, with Asia contributing close to 20 per cent.

Mr Tharman said the process construction and maintenance sector has grown in tandem with the chemicals industry, developing a strong track record in building world-class plants such as Evonik's facility. Still, the sector - like the rest of the economy - "will have to upgrade management practices, mechanise and redesign processes, and upgrade and upskill workers", he added.

Mr Tharman noted that the speciality chemicals industry also provides Singaporeans with skilled and well-paying job opportunities, regardless of their qualifications, citing two Singaporean employees of Evonik as an example. A centralised dormitory near Jurong Island will reduce travel time for workers and improve productivity, the Economic Development Board said in a statement yesterday.

Other steps to boost productivity include a data- sharing portal to be launched by the middle of next year. The portal aims to cut down on overlaps in project scheduling, a common occurrence in the industry. This is expected to help smooth manpower demand and allow companies to plan more effectively.

-By Chia Yan Min

UK chain Premier Inn to open in Singapore

Source: Business Times / Real Estate

UK-based hotel operator Premier Inn is opening its first hotel in Singapore, the 300-room Premier Inn Singapore Beach Road, in mid-2016 as part of its global expansion plans. This comes as the group plans to scale up to 50 hotels in South-east Asia - namely Singapore, Indonesia and Thailand - India and the Middle East by 2018. Target markets will include Bali, Jakarta, Yogjakarta, Bangkok, Goa, Mumbai, Dubai, Muscat and Doha.

-By Nisha Ramchandani

Property Data

Source: Business Times

A list of asking rents for office and industrial space, and sales caveats.

Companies' Brief

OUE H-Trust's Q3 DPS higher than forecast

Source: Business Times / Companies & Markets

OUE Hospitality Trust (OUE H-Trust) on Monday reported distribution per share of 1.64 Singapore cents in the third quarter, up 2.5 per cent from its forecast, on higher distributable income. Income available for distribution was stronger than expected for the three months ended September, as a result of higher net property income of S$25.4 million, which rose 1.6 per cent.

-By Jamie Lee

OUE Hospitality Trust posts distributable income of $21.7m

Source: Straits Times / Money

FEWER tourists and lower retail spending failed to dent the numbers at OUE Hospitality Trust in the third quarter.

It posted distribution per stapled security (DPS) of 1.64 cents, 2.5 per cent more than expected, on the back of a lift in distributable income to $21.7 million, which is 2.7 per cent higher than forecast.

Net property income for the three months to Sept 30 was $25.4 million, 1.6 per cent higher than predicted due to lower expenses, it announced yesterday.

Gross revenue was $28.5 million, 0.7 per cent above expectations. Higher room revenue and food and beverage patronage at Mandarin Orchard hotel helped revenue, as well as non-shop leasing like advertising space at Mandarin Gallery mall.

The properties, both in Orchard Road, are the only two in the trust's portfolio.

The trust, which listed in July last year, comprises stapled securities from the OUE Hospitality Real Estate Investment Trust (Reit) and OUE Hospitality Business Trust.

Mr Chong Kee Hiong, chief executive of the Reit manager, yesterday said the hotel's 160 newly renovated rooms have enabled it to achieve higher revenue per available room of $252, compared with the $248 forecast.

Mandarin Gallery should "continue to enjoy stable income as more than 98 per cent of the mall's rental income comprises fixed rent", the trust said in a statement.

The results were announced after the market closed. Unitholders can expect to receive their payout on Dec 3. OUE's stapled securities closed 0.5 cent higher at 91.5 cents yesterday .

-By Marissa Lee

PCRT paying one-off Q3 DPU of 0.95 cent

Source: Business Times / Companies & Markets

Perennial China Retail Trust (PCRT) on Tuesday declared a one-off interim distribution per unit (DPU) of 0.95 Singapore cent for its third quarter ended Sept 30, 2014, instead of the semi-annual payments it usually makes for six-month periods ending June and December.

-By Lee Meixian

OUE Q3 net profit up 23% as expenses fall

Source: Business Times / Companies & Markets

Aided by lower operating and financial expenses, OUE Limited reported a 23.1 per cent rise in third-quarter net profit to S$16.5 million despite a 10.8 per cent drop in revenue and lower gross margin. Group revenue fell to S$106.3 million for the three months ended Sept 30, from S$119.1 million a year earlier. This was due to lower residential sales and the absence of contribution from the China hotels which were disposed of last year. But cost of sales rose 6.2 per cent to S$62.9 million.

-By Lynette Khoo

Global Logistic Q2 profit falls 38% on forex losses 

Source: Business Times / Money

MAINBOARD-LISTED Global Logistic Properties (GLP) reported yesterday that its second-quarter earnings fell 38 per cent to US$89.5 million (S$115 million) from a year earlier.

One factor dragging down the bottom line was US$54 million of one-time foreign exchange losses.

The firm said the forex losses were in Japan and Brazil and related to the contribution of assets into its fund management platform. GLP noted the losses were not related to its ongoing operations but resulted from the fact that the firm reports in the greenback but has operations in the local currency.


Earnings for the first six months ended Sept 30 slid 23 per cent to US$269 million year on year.

Stripping out the forex losses, GLP's pro-forma earnings for the second quarter rose 11 per cent year on year to US$132 million. Its pro-forma earnings for the first half-year were up 12 per cent to US$319 million, driven by strong leasing in China and a recent portfolio acquisition in Brazil.

Revenue for the group - which provides modern logistics facilities in China, Japan and Brazil - jumped 32 per cent to US$193 million for the quarter. For the first half-year, revenue rose 25 per cent to US$362 million.

Quarterly earnings per share was 1.68 US cents, down from 2.87 US cents a year earlier. Net asset value per share was US$1.85 as at Sept 30, up from US$1.84 as at Dec 31 last year.

GLP said new and expansion leases grew by 55 per cent to 1.5 million sq m. It commenced US$1.5 billion of development starts across China, Japan and Brazil, up 160 per cent year on year.

The company said its US$13.2 billion fund management platform continued to register strong growth, with fund fees growing 87 per cent year on year in the first half-year.

Last week, GLP announced an injection of an additional US$2.5 billion of assets from Japan and Brazil into the platform, which it said will boost its return on equity in the longer term.

GLP also announced that co-founder Jeffrey Schwartz, 55, will be taking time off from work to focus on his health. It did not elaborate.

The company was "respecting Mr Schwartz's privacy", a spokesman said, adding that he will stay on as chairman of the executive committee and, through this role, will still be involved in strategic decisions.

Co-founder Ming Mei, who is chief executive officer, will continue to lead the company, "supported by a strong and deep management team that has worked together for more than a decade".

"GLP's growth strategy and expansion plans remain the same," said the spokesman. "If there are any material updates, we will...inform the market through the normal channels, in line with our commitment to transparency."

-By Ann Williams

Global Economy & Global Real Estate

Thakral invests S$42m in Osaka office buildings

Source: Business Times / Companies & Markets

Thakral Corporation, a trading and property firm, on Tuesday said it has invested S$42 million in two office buildings in Osaka, Japan. The investment will be made through Thakral Japan Properties Pte Ltd - a pooled investment vehicle - with equity from the group, and other investors. Thakral will hold about 50 per cent of the equity in the vehicle.

-By Jamie Lee

UK construction sector grows at weakest pace in 5 months in Oct

Signs of a housing market slowdown caused a slack in the building of new homes

Source: Business Times / Real Estate

Australia's tale of 3 cities highlights RBA loan curbs dilemma

Prices along the east coast are surging, while the rest of the country fell in Oct

Source: Business Times / Real Estate

Baghdad mansions are hot property for Iraqi elite

Source: Business Times / Real Estate

HomeAway says San Francisco law favours Airbnb

Source: Business Times / Real Estate

Uptick in bubble index points to rising risks in Switzerland property

Source: Business Times / Real Estate

London Shard Developer Wins Approval for Tower Nearby

Source: Bloomberg / Luxury

Sellar Property Group, developer of the Shard in London, won local government approval to build a 26-story residential tower close to the skyscraper on the south bank of the River Thames.

The council for the Southwark borough voted in favor of the 148-apartment project, which also includes a 16-story tower, at a meeting yesterday, Sellar spokesman Baron Phillips said by e-mail. The project, like the Shard, will be developed in a partnership with the state of Qatar.

Developers plan to construct more than 25,000 luxury properties in London worth more than 60 billion pounds ($96 billion) over the next decade, EC Harris said in an Oct. 7 report. The homes approved yesterday at the Fielden House site are expected to sell for about 800,000 pounds each, according to a filing by the borough.

The project “is vital to the urban regeneration of London Bridge that was started with The Shard. The mixed-use high density tower provided the catalyst for the regeneration of the station,” architecture firm Renzo Piano Building Workshop wrote in an April filing to the borough. The buildings on London Bridge Street and St. Thomas Street “will complete the transformation.”

Sellar and Qatar also developed The Place office building at London Bridge station.

-By Neil Callanan

Paris Second Homes Face Tax That May Hit Foreign Owners

Source: Bloomberg / Luxury

If you own an apartment in Paris that’s not your primary residence, brace yourself for a new tax.

French President Francois Hollande is planning a new levy next year on second homes in areas with housing shortages, looking to raise 150 million euros ($188 million) annually.

The new levy would represent 20 percent of the existing housing tax and be imposed on properties in about 30 metropolitan areas in France, including Paris. Owners of second homes would pay the levy to local government.

Hollande has pledged several times that there would be no new levies. Still, with a budget deficit that the government expects to top 4.1 percent of gross domestic product in 2015 and an economy that will barely grow 1 percent, the French president is looking into ways to fill the state’s coffers.

More than 174,000 properties in Paris, or about 16 percent of the housing in the French capital, are second homes. That share is rising, according to the city’s rental watchdog, having climbed 3 percentage points in the past five years. 

In the upscale parts of town in Paris’s 6th, 7th and 8th arrondissements near the Champs Elysees, the Latin Quarter and the Eiffel Tower, the share of second homes -- often owned by foreigners -- touches 40 percent.

After Hollande’s much publicized “millionaire tax,” a 75 percent levy on income of more than 1 million euros, expires on Jan. 1, his government needs to fill the gap. The new measure has not been welcomed, even by Hollande supporters.

“Clearly there are a lot of rich foreigners owning homes,” Labor Minister Francois Rebsamen told I-tele news channel today. “But when we say no new taxes, it means no new taxes. Voila!”

Easing Shortage

Finance Minister Michel Sapin defended the government’s plan saying at a press conference today that “fiscal stability isn’t an absolute freeze on everything.”

The government says the new levy is meant to force owners to rent or sell their property as Hollande’s ministers pledge to free up the thousands of unoccupied homes.

“Our analysis is not a fiscal one but a real estate one,” Jean-Marie Le Guen, the minister in charge of parliamentary relations told reporters today. “There is an important problem with vacant homes and we need to find elements to regulate that.”

The planned tax, which will be debated in parliament this month as part of the 2015 budget law, is also meant to appease local governments. The state is shrinking transfers to local governments by 3.7 billion euros each year until 2017, according to the 2015 budget bill.

Local municipalities are themselves looking for new ways to raise funds. Paris Mayor Anne Hidalgo’s office is considering a tax on the person-to-person rentals for the likes of Airbnb Inc.

Faced with resistance, the government showed signs of hesitation on the new tax.

“The government is proposing considering targeted measures,” Budget Secretary Christian Eckert said today in the National Assembly. “Local governments will have the right to accept it or refuse it.”

-By Helene Fouquet and Mark Deen

Gulf Region Investment in U.S. Real Estate Surges 51%

Source: Bloomberg / Luxury

Persian Gulf investors from sovereign wealth funds to rich individuals increased spending on U.S. real estate, attracted by the pace of economic growth, a survey by Jones Lang LaSalle Inc. showed.

Gulf Cooperation Council countries invested $1 billion in U.S. property this year, a 51 percent gain over the year-earlier period, according to the survey released in Dubai today.

“It’s about grabbing a share of the American economy, which has been recovering consistently and effectively since 2011,” said Fadi Moussalli, Jones Lang’s regional director for the Middle East and North Africa. Investors see the U.S. as being “somewhere in the middle of the recovery cycle.”

Wealth funds and institutional investors are spending more on real estate to diversify their holdings, Jones Lang said. The U.S. economic recovery is attracting the attention of GCC investors who are traditionally more accustomed to London and the rest of Europe.

Texas, California, Washington and Massachusetts have attracted the majority of property transactions completed this year, according to Moussalli. Gulf investors favor multifamily homes and residential compounds where they can improve yields before selling the assets, Moussalli said.

The U.S. economy expanded at a 3.5 percent annualized rate in the three months through September, following a 4.6 percent gain in the previous quarter. That’s the best back-to-back increase for U.S. gross domestic product since 2003.

“All indicators of the U.S. economy are green and that makes it appealing,” Moussalli said.

Asia remains the most underrepresented in terms of investment from the six GCC states of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.

“The elite of the GCC tend to send their kids to study in the U.S. and the U.K. so they are used to these countries,” Moussalli said. “Usually those elite are the decision makers and the investors of wealthy families and they tend to go with their comfort zone.”

-By Zainab Fattah

U.K. Homebuilding Falls to 12-Month Low as ‘Chill Winds’ Bite

Source: Bloomberg / Luxury

U.K. construction growth cooled more than economists forecast last month as homebuilding slumped to the weakest in a year.

Markit Economics said its Purchasing Managers Index fell to 61.4, the lowest in five months, from 64.2 in September. Economists had forecast a decline to 63.5, based on the median estimate in a Bloomberg News survey. A reading above 50 indicates expansion. A gauge of housing dropped to 61 from 65.8.

The data follow reports in recent months showing housing demand has weakened as new Bank of England rules make it harder to get a mortgage and consumers brace for the prospect of higher interest rates next year. Nationwide Building Society said last month that the housing market has “lost momentum.”

“October’s survey provides the first indication that the chill winds blowing across the U.K. housing market have started to weigh on the booming residential-building sector,” said Tim Moore, senior economist at Markit.

Survey respondents said “less favorable housing-market conditions had resulted in greater caution among clients,” according to Markit. Commercial activity slowed in October, though it remained the strongest-performing category.

A report yesterday showed U.K. manufacturing growth unexpectedly accelerated to the fastest pace in three months in October as buoyant domestic demand offset weakening sales to the embattled euro region. The factory index climbed to 53.2 from 51.5 in September.

-By Fergal O’Brien

Japan REIT Rally Seen Short-Lived After Pension, BOJ Boost

Source: Bloomberg / News

The rally that sent Japanese real estate investment trusts to the highest in almost seven years is set to be short-lived as more state buying paves the way for higher taxes, said Deutsche Bank AG and Nomura Securities Co.

The Tokyo Stock Exchange REIT Index rose 1.1 percent today to its highest close since January 2008, after the nation’s pension fund and the Bank of Japan said they would boost property-related investments. The Topix Real Estate Index surged 3.4 percent to the highest level since January. The gains won’t be sustained if the government increases the sales tax a second time, Deutsche Bank and Nomura analysts said.

Prime Minister Shinzo Abe will decide by year-end whether to raise the levy to 10 percent next year, after lifting it to 8 percent from 5 percent in April. Nomura says the BOJ’s additional easing comes with the tax in mind.

“Although the Bank of Japan said that this move had nothing to do with the government’s decision about whether to hike the consumption tax for a second time, we think it has increased the likelihood of this,” Nomura analyst Daisuke Fukushima said. “One risk is that investors may regard the announcement of additional quantitative easing as the peak of positive news for the housing and real estate sector.”

The Government Pension Investment Fund will invest as much as 5 percent of its $1.1 trillion portfolio into alternative investments, which include private equity, infrastructure and real estate, it said Oct. 31. The BOJ said it plans to triple the purchase program of REITs to 90 billion yen ($794 million).

‘Very Modest’

GPIF is a latecomer to alternative assets and the amount it plans to allocate to real estate is low compared to other retirement funds such as the California Public Employees’ Retirement System, or Calpers, according to SMBC Nikko Capital Markets Ltd. Calpers has a 10 percent target allocation to real estate, according to the fund’s website.

“Property has been a major part of most long-term pension investment in the rest of the world for decades,” Jonathan Allum, a strategist at SMBC, said by phone from London. “I am really surprised more hasn’t been made of GPIF’s complete lack of property investment. That is being addressed, but the numbers are still very modest.”

The world’s largest pension funds have increased their asset allocations to alternative investment, which exclude equities, bonds and cash, over the last two decades, according to a report in January by Towers Watson. Alternative investments rose to 18 percent from 5 percent in 1995, it said.

Killing Efforts

The rally will continue for the time being, said Tim Gibson, co-head of property equities at Henderson Global Investors who manages about $2.5 billion in real estate equities.

The Topix Real Estate Index dropped 29 percent from a peak in December 2013 through Oct. 17 after the government increased the tax in April. The Japanese economy shrank an annualized 7.1 percent in the three months through June.

“There is a high possibility the government will increase the consumption tax,” Yoji Otani, a Deutsche Bank property analyst who accurately predicted the effect of the last tax increase. “I see profit taking after that announcement. The consumption tax hike will kill the monetary easing effort.”

-By Kathleen Chu and Tom Redmond

Yield Hunters Sought for Mexico Mortgage Investment IPO

Source: Bloomberg / News

A Mexican mortgage trust, looking to close the country’s largest initial public offering in over a year, is hoping to compel investors to buy its shares with one thing: yield, and lots of it.

Concentradora Hipotecaria SAPI, which is seeking to raise as much as 9.6 billion pesos ($706 million) from its IPO today, has spelled out a plan to deliver dividend yields of 14 percent to prospective investors. That’s better than the dividend projections of 36 of 38 global mortgage REITs, and more than twice the yield on 10-year fixed-rate Mexican bonds, according to data compiled by Bloomberg.

Central to its strategy is a growing pool of homebuyers in Latin America’s second-biggest economy, where mortgage rates far exceed the fund’s cost of debt financing. FHipo, as it is known, is working with the National Workers’ Housing Fund Institute, the state-backed mortgage bank that goes by Infonavit, to fund home loans at an average rate of 9.5 percent, all the while borrowing at 6.5 percent.

“The dividend yield makes it a great play,” Gerardo Sienra, a trader with Intercam Casa de Bolsa SA whose clients are evaluating the investment, said in a telephone interview from Mexico City. “What’s particularly attractive is the alliance they’re going to have with Infonavit, which is what makes this REIT solid.”

Exclusive Access

FHipo, which was created by the founders of Mexico City-based boutique investment banking firm Vace Partners, plans to sell about 320 million shares for 25 pesos each, before a so-called hot deal option that could increase the IPO by 20 percent. An overallotment option would boost the size another 15 percent of the base if it’s exercised.

The money will be used to co-originate mortgages which FHipo can do exclusively with Infonavit for a year. In keeping with the practice among Mexico’s REITs, which are known locally as fibras, FHipo plans to pay out 95 percent of profit as dividends.

Mortgage REITs use the difference between mortgage rates and their own borrowing costs to maximize returns, sometimes deploying considerable leverage. FHipo says it could pay a dividend yield of 14 percent through leverage -- by raising debt financing to double the amount of money it has to invest. Under the terms of the fund, its maximum debt-to-equity ratio is currently one, according to a prospectus.

The company may sustain high dividend payouts in part because the Infonavit mortgages have an inflation-protection mechanism linked to wages. Without such protection, consumer prices and rising interest rates can erode the attractiveness of investing in mortgage-related securities.

The IPO will be the first of a mortgage trust in Mexico, and the largest IPO in the country since dairy producer Grupo Lala SAB raised about $1 billion in October 2013, data compiled by Bloomberg show.

FHipo’s Novelty

FHipo’s novelty could dampen demand as investors wait until the company builds out its portfolio and starts making promised payments, said Jorge Lagunas, who oversees about $200 million as a money manager at Grupo Financiero Interacciones SAB.

“This is a totally new instrument, and some investors will want to wait and see how the security matures,” Lagunas said by phone from Mexico City. “Many investors are still nervous about the volatility in the market.”

Developing nation stocks, as measured by MSCI Inc.’s Emerging Markets Index, have fallen 8.2 percent from their 12-month high in September. Mexico’s benchmark IPC index is down 2.5 percent from its high.

Infonavit was founded in the 1970s as a government-backed entity to help curb a housing deficit. Infonavit can keep a lid on borrower delinquencies because most of its home loans are structured as so-called payroll loans -- paid directly out of the borrower’s paycheck.

The government’s support for the mortgage market has translated into consistent growth, despite the recent financial struggles of homebuilders. According to data provided in FHipo’s investor presentation, Mexico’s mortgage market has grown at a compound annual growth rate of 7.7 percent since 2007.

The Mexican mortgage market “has been growing and has great potential,” Sienra said. “It’s one of the few securities that’s paying you that type of rate.”

-By Jonathan Levin

China Home Buyers Rushing Online to Finance Downpayments

Source: Bloomberg / Personal Finance

Qian Kaishen and his wife almost gave up in August on buying a bigger home. As apartments at Shanghai Villa, a project they liked near the city’s Hongqiao Airport, started selling, the money they had saved for the deposit was tied up in a 5 percent-return investment.

Then property agency E-House China Holdings Ltd. offered the couple a 280,000 yuan ($45,546) one-year bridge loan at zero interest. The loan came from online investors through E-House’s Internet finance website. It covered about half the down payment and was just enough to make up the shortfall.

“Now we’re good both on our investment and home purchase plan,” Qian, 31, who works for a local logistics company, said by phone from Shanghai. “We would’ve given up if it weren’t for the loan. I don’t like borrowing from my parents or relatives, especially because we have the money.”

E-House is joining peer-to-peer lenders to finance down payments for buyers struggling to scrape together a deposit after home prices had tripled since 2000. Mortgage lending remains tight, even after the central bank eased its policy in September, as banks anticipate an extended property market decline because of a high supply of housing, according to Standard Chartered Plc.

Home prices in China are now equivalent to 40 years’ average income for a 100-square-meter (1,076-square-foot) apartment. That compares with 26 years’ median income in New York for an apartment of the same size. The average price of a typical 900-square-foot home in Singapore is 11 times the median household income, while that for a 50-square-meter flat in Hong Kong is 14 times, according to local official data.

Government Restrictions

In China, homebuyers need to pay a minimum down payment of 30 percent of the purchase price for a first home, and at least 60 percent for a second before they can take out a mortgage. The limits are the result of a four-year campaign to stem property speculation.

Those restrictions have helped drive demand for the down payment loans.

“The phenomenon emerged in the past year or two largely because of mortgage restrictions and high down-payment requirements,” said Zhang Haiqing, a Shanghai-based research director at Centaline Group, China’s biggest property agency.

The central bank on Sept. 30 eased some mortgage rules to make it easier to purchase second properties in a bid to revive the market.

“We can’t exclude the possibility that as the market recovers, more people will want to buy and some of them will still have to use this channel because they don’t have the money,” Zhang said.

Sales Falling

New-home sales slumped 11 percent in the first nine months of the year and prices fell in all but one of the 70 cities monitored by the government in September from August.

Being able to borrow for a down payment means unqualified borrowers are getting mortgages, a practice that led to the U.S. housing crash in 2007, according to Standard & Poor’s.

“The pressure on the borrowers to repay the down payment in a year together with the mortgage is fairly high,” Bei Fu, S&P’s Hong Kong-based property analyst, said by phone. If this becomes a trend, “investors will be bearing the brunt of the default risks when the market or economy makes a negative turn.”

Low down payment lending to subprime borrowers, those with poor credit and limited cash, also contributed to the surge in foreclosures in the U.S.

“The less of the homeowner’s own money is put into the payment, the more likely he or she will default” when asset prices plunge, Centaline’s Zhang said. “The risk is brewing slowly.”

Relatives Help

In China, most of those who borrow for down payments have money invested elsewhere, according to E-House Deputy Chief Financial Officer Ma Weijie. Buyers who want to purchase homes and don’t have the money often turn to relatives or take out consumer loans from banks to use as deposits, a practice the banking regulator has banned, Centaline’s Zhang said.

E-House, based in Shanghai, has helped more than 70 homebuyers seeking deposits raise almost 20 million yuan through online finance platform, which it set up in July with web portal operator Sina Corp.

It caps lending for deposits at 15 percent of the price of a buyer’s first home and 20 percent for second properties, and only lends to owner-occupiers.

The company collects a 1 percent fee from borrowers like Qian, E-House’s Ma said. Developers who want to boost sales subsidize the interest payments to investors and provide guarantees or deposits to E-House against potential defaults by the borrowers.

Homebuilders Join

China Overseas Land & Investment Ltd. (688) and Poly Real Estate Group Co. (600048)are among 22 homebuilders that have signed up with E-House to provide the service at some of their projects, Ma said.

Online property lending may rise to 20 billion yuan this year and has the potential to grow to about 1.2 trillion yuan a year assuming 15 percent of home sales are financed by peer-to-peer investors, E-House’s Ma estimates.

“That’s a huge market,” he said in a Sept. 10 interview in Beijing. The central bank’s easing may spur borrowing demand as the market recovers even if buyers don’t have the money, he added later.

Peer-to-peer lending has taken off in China since 2011 as traditional methods of private lending among family and acquaintances, part of the country’s unregulated $6 trillion shadow-banking system, move online. Peer-to-peer lending refers to borrowers bypassing banks by connecting directly to lenders via the Internet.

Investors through peer-to-peer websites have helped drive a 50-fold increase in online financing to 64.6 billion yuan as of Sept. 30, for anything from weddings to personal medical expenses, according to, which tracks more than 1,000 of such little-supervised sites in China. The country has no regulations governing Internet finance.

Micro Credit

Shenzhen World Union Properties Consultancy Inc. (002285), based in the southern Chinese city that borders Hong Kong, granted 551 million yuan in similar loans through a micro-credit unit in the first half of this year, after introducing the service in July 2013 for clients who didn’t have a down payment.

Shenzhen World Union charges interest of more than 20 percent on some of its loans. Financial-services’ income jumped 139 percent in the first half, driven mostly by the 60 million yuan from the loan service, according to company filings.

The trend gained momentum in September when Ping An Insurance (Group) Co. (601318), China’s second-largest insurer, began offering loans to buyers of 121 residential projects by Shimao Group and Greenland Group at interest rates as low as zero.

Ping An, based in Shenzhen, is ready to extend 10 billion yuan each in Beijing and Shanghai for down payments, and as much as 8 billion yuan in the southern city of Guangzhou, Zhuang Nuo, chief executive officer of Ping An’s real estate e-commerce unit, said.

Online Investors

Ping An pools the money to finance the deposits mainly from online investors at its peer-to-peer lending unit, said Zhuang. Developers subsidize the returns to the investors.

The insurer is targeting people who buy homes to live in, not property speculators. It doesn’t charge borrowers a fee.

“Since traditional banks can’t finance down payments and aren’t doing it, can we use Internet finance to support those people?” said Zhuang. “The default risk is not big. They see their home as a necessity.”

Requests have so far exceeded 1 billion yuan for Ping An’s service, the company said.

Lending to finance down payments is hard to regulate, said Johnson Hu, Hong Kong-based property analyst at CIMB Securities Research.

“As long as the money is in the account, you can simply say you borrowed it from a friend,” Hu said.

Not Recorded

Borrowing from peer-to-peer websites is not recorded in the central bank’s credit information database, which banks rely on for borrowers’ credit history, said Ping An’s Zhuang. Ping An controls Shenzhen-listed Ping An Bank Co.

The Qians’ investment through the Industrial & Commercial Bank of China Ltd. matures in June and their E-House loan becomes due two months later. They borrowed 600,000 yuan from the local housing providence fund, which pools money from urban residents and their employers for housing needs. The couple is also selling their 40-square-meter current home for about 1 million yuan to finance the new one that’s double the size.

Although home prices are still falling, Qian said he didn’t want to wait. “If our living conditions improved, that price difference doesn’t matter,” Qian said.

-By Bloomberg News

Blackstone Said Near $8 Billion Deal to Sell IndCor Unit

Source: Bloomberg / News

Blackstone Group LP (BX) is close to a deal to sell IndCor Properties Inc., an owner of U.S. industrial real estate, to investors led by Singapore’s GIC Pte for more than $8 billion, said two people with knowledge of the matter.

The GIC partnership is seeking $5 billion in debt to finance the acquisition, said one of the people, who asked not to be identified because the negotiations are private. The two sides have reached an agreement in principle that could still fall apart, another person said.

IndCor had planned to raise about $1 billion through an initial public offering, which would have valued the company at about $8 billion, a person with knowledge of the plans said in August. A private sale would give Blackstone an assured profit on a major asset at a time when stocks have been volatile.

Peter Rose, a spokesman for New York-based Blackstone, and Jennifer Lewis, a spokeswoman for GIC, Singapore’s sovereign-wealth fund, declined to comment.

IndCor, based in Chicago, said on Sept. 8 that it confidentially filed with the Securities and Exchange Commission for an IPO as a real estate investment trust. IndCor could still go public should Blackstone and the GIC group fail to reach a definitive agreement, said one of the people with knowledge of the plans. The Bloomberg REIT index has climbed 9 percent in the past month.

Blackstone, the world’s biggest private-equity firm, started accumulating property in 2010 to build the industrial landlord. IndCor has about 118 million square feet (11 million square meters) of warehouses throughout the U.S.

Shopping Spree

GIC has been on a worldwide shopping spree for real estate, which accounted for 7 percent of its assets in the fiscal year ended March 31. Last month, the wealth fund bought a building next to Tokyo Station for $1.7 billion.

Last fiscal year, GIC acquired Blackstone’s 50 percent stake in London’s Broadgate office complex for more than $2.7 billion and teamed with New York-based developer Related Cos. and the Abu Dhabi Investment Authority to buy Time Warner Inc. (TWX)’s headquarters in Manhattan for $1.3 billion.

The Singapore state fund is the world’s sixth-biggest, with estimated assets under management of $315 billion, according to the website of London-based Institutional Investor’s Sovereign Wealth Center.

GIC has been expanding beyond prime office towers in major cities. In September, a GIC affiliate and two Canadian pension funds invested $700 million in XPO Logistics Inc. (XPO), a provider of services including airfreight forwarding and warehousing management that’s based in Greenwich, Connecticut.

Trade Surge

Warehouse properties and logistics-services companies have attracted investment as global trade increases. Brookfield Property Partners LP (BPY) and TPG Capital also have been acquiring such assets in the past two years.

IndCor would have been the fifth real estate IPO of a Blackstone-owned company since October 2013, when Brixmor Property Group Inc. (BRX), the second-largest U.S. shopping center landlord, went public. Brixmor was followed by last November’s IPO of Extended Stay America Inc. (STAY), a lodging company part-owned by Blackstone. In December, Blackstone completed the largest-ever hotel IPO with Hilton Worldwide Holdings Inc. (HLT), then took lodging operator La Quinta Holdings Inc. public in April.

Blackstone has been reducing its stakes in Brixmor, Hilton and Extended Stay through stock sales this year. Blackstone yesterday sold 90 million Hilton shares at $25 each, or a total of $2.25 billion. The sale reduced the firm’s stake to about 57 percent from about 66 percent, excluding the exercise of options, according to a regulatory filing. Hilton closed at $25.25, up 26 percent from its IPO price.

Next Fund

Blackstone is stepping up real estate sales as it prepares to raise its next global property fund. The firm has said it plans to raise at least as much as its last fund, the $13.3 billion pool completed in 2012.

A private sale of IndCor would allow Blackstone to realize a profit sooner than an IPO. The firm similarly has been selling some assets from another major investment, Equity Office, purchased in 2007. IndCor would have been the largest U.S. REIT with purely industrial properties.

“Blackstone is agnostic in terms of how they execute their exit strategy,” Eric Frankel, an analyst at Green Street Advisors Inc., said in a telephone interview in September. “Some platforms get a better valuation going public and some are better off selling to third parties.”

-By Sarah Mulholland and Hui-yong Yu

Switzerland’s Property Market Bubble Risk Intensifies, UBS Says

Source: Bloomberg / Luxury

Risks to the Swiss real estate market increased in the third quarter, their first “significant” rise since mid 2013.

The UBS Swiss Real Estate Bubble Index rose to 1.29 points in the three months through September from 1.24 points, according to a statement from UBS AG (UBSN) today. A reading above 2 indicates a bubble.

“Low price increases induce a reduction of risks, only if at the same time incomes, consumer prices and rents increase more strongly,” Matthias Holzhey and Claudio Saputelli at UBS in Zurich said. “This did not occur.”

The Swiss National Bank’s expansive monetary policy has kept down the cost of taking out a mortgage, leading to a strong increase in residential property prices. To prevent Switzerland from suffering a real estate market crisis similar to that of the 1990s, the government has required banks to build up capital to make them more resilient to writedowns.

That so-called countercyclical buffer was doubled to 2 percent of mortgage-related assets in January, with banks given until the end of June to comply. The buffer, which the government implemented at the behest of the SNB, can be raised as high as 2.5 percent.

According to the UBS index, 17 regions are especially risky, with Lucerne being removed. That compared with 18 last quarter.

SNB Governing Board member Fritz Zurbruegg said in a speech last month that there were signs the property market’s rise had slowed.

Low Rates

“We are very aware that financial stability risks can emerge during this period of low interest rates,” Zurbruegg said. “We see that we have some moderation in the housing market prices and in the mortgage rates.”

Two decades ago, an overheating of the real estate market led to bank failures -- including Spar- und Leihkasse Thun and Solothurner Kantonalbank -- and caused a recession.

The UBS real estate index comprises six sub-indicators tracking the relationships between purchase and rental prices, house prices and household income, house prices and inflation, mortgage debt and income, construction and GDP, and the proportion of credit applications by UBS clients for residential property not intended for owner occupancy.

-By Catherine Bosley