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11th October 2014

Singapore Real Estate

Debt crunch for property industry

80 firms, Reits listed here have total of $23.5b in loans due within a year

Source: Straits Times / Money

SINGAPORE'S listed developers and real estate investment trusts (Reits) face their heaviest burden of near-term maturities on record just as home prices drop.

The 80 property companies on Singapore's stock exchange reported a combined $23.5 billion of borrowings that have to be repaid within a year in their latest filings, Bloomberg-compiled data shows.

The looming debt wall comes as the vacancy rate for condominiums soared to the highest since 2006, pushing prices to the lowest in almost two years, according to data from the Urban Redevelopment Authority (URA). Savills predicts refinancing for homebuilders and Reits will be more challenging as Singapore's economy slows, with expansion cooling to 2.4 per cent in the second quarter, from 4.8 per cent in the previous three months.

Population growth on the island is at a 10-year low and Standard & Poor's (SP) expects home prices have further to fall.

"We're at that point in the cycle when every quarter, you're seeing selling prices come down a little bit and secondary market transactions aren't very active," said SP property analyst Chan Kah Ling. "I suspect we haven't seen the bottom yet."

Developers of residential homes are suffering not so much from lower selling prices than "collapsed" sales volumes, said Savills senior director of real estate research Alan Cheong. Secondary home sales plunged to the lowest since 2003 in the first quarter, according to URA data, and as business slows, builders with less pre-sales money to finish projects have to rely on loans, boosting short-term borrowings.

Despite the weaker demand, the number of residential dwellings being built remains high. Units under construction reached a record in the second quarter of last year and URA data shows some 65,270 apartments were in the pipeline as of June 30. Regulatory measures have been introduced to dampen the market.

Between 2009 and mid-2013, the Monetary Authority of Singapore implemented eight rounds of property cooling measures to address its concerns that the low interest-rate environment would lead to a property price bubble, Moody's Investors Service said in an Oct 6 report. "Appetite to buy is already curbed" and rents could fall further, Ms Chan said. "We haven't seen the full impact yet."

The 42 listed developers on Singapore's exchange reported $13.4 billion of short-term borrowings in their latest filings, 42.5 per cent more than a year earlier, data compiled by Bloomberg shows.

City Developments posted debt of $1.66 billion in the second quarter, 48.6 per cent more than at the end of last year. Second-quarter profit fell 33 per cent, it said in August, and the company is looking to expand overseas to offset declining demand in Singapore. City Developments' $500 million of bonds due next September and sold to investors at par in August 2010 are trading at 101.2 per cent of face value, down from 101.25 per cent at the end of last year, DBS Bank prices show. It sold $100 million of 10-year 3.78 per cent notes on Thursday.

A spokesman for City Developments said the company has a strong financial position, noting its cash of $3.4 billion and 33 per cent net gearing ratio.

The three-month swap offer rate, a measure of borrowing costs in Singapore, touched 0.2561 per cent on Sept 16, the highest since June last year. Reits are in better shape than listed developers because they started refinancing with longer-tenor debt ahead of rising interest rates, according to SP.

"For the Reits, I don't see a major problem yet," Ms Chan said. "The bigger players are still getting good rates and valuations haven't fallen dramatically," she said.

Starhill Global Reit, which has $124 million of notes that mature in July, reported $129.1 million of short-term borrowings as of June 30, more than double the amount it had in December last year. Retail occupancy rates at the trust's flagship Wisma Atria mall slipped to 98.5 per cent in June, from 99.5 per cent at the end of 2012, company data shows. Office occupancy rates are 100 per cent.

Starhill spokesman Jonathan Kuah said the company has already refinanced its debt due within the coming 12 months. The "leverage situation hasn't worsened", he said.

Fund manager Danny Tan of Eastspring Investments, which managed $115 billion of assets as of June 30, said: "In 2008, when the refinancing situation was quite bad, the Reits still managed to pull through. There's a high probability these Reits will be able to refinance, especially because the loan market is also open to them."

Hiap Hoe, which recently started selling apartments in its prestigious Skyline 360 building, reported short-term borrowings of $287.6 million for the quarter to June 30, 94 per cent more than the $147.9 million for the three months to December. It raised $115 million selling three-year 4.75 per cent notes at par in September last year, which now trade at 100.317. A spokesman for Hiap Hoe declined to comment.

Developers on the island are changing their business models and reducing exposure to the local market, according to Singapore-based Tim Gibson, who helps run Henderson Global Investors' global property equities fund.

"By buying Singapore developers now, you're really buying exposure outside of Singapore and into markets like China," he said in an interview. It "doesn't give you a huge amount of confidence that a turnaround in the residential market is coming anytime soon", he added.

-By Bloomberg

Listed developers face hefty short-term debt

The 80 property firms on SGX have to pay S$23.5b within a year, amid record vacancies

Source: Business Times / Real Estate

Proposed Reit rule changes timely but can be better

Source: Straits Times / Money

SINGAPORE is one of Asia's largest real estate investment trust (Reit) markets, with a total market value above $61 billion. Given that, observers say central bank proposals to strengthen rules governing Reits and Reit managers are timely moves to boost transparency and better entrench unit-holders' interests.

But some observers point to areas that could be improved.

The Monetary Authority of Singapore (MAS) has proposed to impose a statutory duty on the Reit manager to prioritise unit- holders' interests over those of the manager and its directors, if a conflict of interest occurs. While that should enhance governance, corporate lawyer Robson Lee of Shook Lin & Bok asked why it is necessary to impose a statutory duty only if there is a conflict of interest, as that could "dilute" its effect. "By including that condition, you are creating a legal obstacle for minority unit-holders, by making them prove there was a conflict of interest."

To ensure accountability of the Reit manager, MAS proposed they submit themselves for reappointment at regular intervals, and be subject to unit-holders' approval at a general meeting.

Mr Lee suggested there should be an independent financial adviser, appointed by the audit committee of the Reit manager, assessing the manager's performance so that unit-holders can be guided objectively.

Also, the decision to re-elect the manager should be made by minority unit-holders, while the sponsor should abstain from voting. "There's no secure tenure for the Reit manager, if their reappointment is subject to unit- holders' approval," he said.

Most observers also backed the proposal to restrict the remuneration of executive directors of the manager from being linked to Reit revenues as they may be in the sponsor's employee share option plans or get part of their compensation in the form of sponsor shares. That could remove the incentive to prioritise the sponsor's interests over unit-holders'.

Ascendas Funds Management (AFM) chief executive Tan Ser Ping noted it may be necessary to consider independent Reit legislation to govern the industry, which now accounts for about 8 per cent of total market capitalisation on the Singapore Exchange.

A-Reit and its manager AFM already practise many of the proposed governance changes, he said. AFM's board has five independent directors out of seven, including an independent chairman; and A-Reit's performance fee structure is already linked to distribution per unit, he said.

MAS proposes to calculate the performance fee by linking such fees to "an appropriate metric" - net asset value per unit or distribution per unit - taking into account the long-term interest of the Reit and its unit-holders.

Meanwhile, a proposal to remove the option for credit-rated Reits to leverage up to 60 per cent, and instead put in place a single-tier leverage limit of 45 per cent, up from the current 35 per cent, whether the Reit has a credit rating or not, would likely help the Reit's growth potential. DBS Group Research said this would allow more flexibility in acquisitions, and place S-Reits in line with regulations in Malaysia and Hong Kong.

While acknowledging that taking on development risks may lead to higher returns, DBS in a report yesterday said it remains cautious on proposals to raise the development limit to 25 per cent to enable a Reit to undertake redevelopment projects as it may imply "potentially higher earnings volatility" for a stable sector.

-By Grace Leong

Proposed Reit reforms may turn out to be a win-win for all parties

Smaller fees for sponsors seen compensated by a bigger pie as changes boost Reit market

Source: Business Times / Companies & Markets

September new home sales tipped to pick up

Experts forecast 500-600 units sold, ahead of release of official figures

Source: Straits Times / Money

SALES of new homes last month probably picked up as developers were eager to push out new units to capture buyers before the Christmas holidays.

Consultants tip that between 500 and 600 units were sold last month - an improvement on the 432 units moved in August, which was the lowest since the meagre 259 transactions in December.

Official sales numbers will be out on Wednesday.

If expert estimates are on the money, around 1,500 to 1,600 new units would have been sold in the third quarter.

"Developers started rolling out their launches from September to capitalise on existing demand ahead of the annual school-holiday season," said Mr Tan Tee Khoon, executive director of residential services at Knight Frank Singapore.

This was in marked contrast with August when few projects were launched, given the Hungry Ghost month - largely seen as an inauspicious time to buy a home.

New home sales averaged between 480 and 760 units a month for the first eight months of the year, except for May when City Developments' (CDL) 944-unit Coco Palms in Pasir Ris helped to rack up transactions of 1,488 units.

September's launches included Keppel Land's Highline Residences, Seventy St Patrick's from UOL and Forte Holdings' Forte Suites.

About 30 per cent of the 106-unit Forte Suites has been sold at an average price of $1,748 per sq ft (psf). The 186-unit Seventy St Patrick's has moved around 64 per cent of its units at around $1,630 psf. At least a quarter of the 500-unit Highline Residences has been sold at an average $1,900 psf.

Mr Mohd Ismail, chief executive of Propnex Realty, expects sales from earlier launches, such as Commonwealth Towers and The Panorama, to have contributed to September's score card.

He said: "In view of the continued enforcement of various government policies and loan curbs, as well as purchasers' price-sensitivity, developers are also expected to price their projects competitively to maintain sales momentum to attract potential buyers."

Developer M+S has sold around 300 of the 1,042 units at Marina One Residences since bulk sales began last weekend for between $1,960 and $3,100 psf.

However, Mr Joseph Tan, executive director of residential at CBRE, reckons developers will focus their efforts on launching projects that are nearing completion in order to avoid penalties levied on unsold units. These could include upmarket properties such as Wheelock Properties' Ardmore 3 and Nouvel 18, by a joint venture between Wing Tai and CDL.

Consultants Knight Frank added: "Alternatively, developers may not officially launch a luxury project and conduct viewings by appointment only until a more opportune time to stage a launch. That's largely the reason why some new developments are taking a longer time to hit the market."

-By Cheryl Ong

Marina One Residences launch sees lukewarm response

Marina One Residences, a joint-venture development between Temasek Holdings and Malaysia's state investment arm Khazanah Nasional, saw lukewarm response at its public launch on Saturday (Oct 11).

Source: Channel News Asia / Singapore

SINGAPORE: Luxury project Marina One Residences opened its doors to the public on Saturday (Oct 11) but saw a lukewarm response, with only 20 units sold. Its developer had cleared 300 units in the past week during private sales.

Business owner Lim Jit Song, who was at the public launch, was looking for a unit for investment purposes. The 39-year-old eventually settled for a S$1.7 million one-bedroom unit on the 13th floor, which works out to almost S$2,300 per square foot (psf).

Mr Lim said: "First of all, the location is very good, it is in the Marina area. Price-wise, it is also very reasonable. We saw the furnishing and it is very good - we are very happy with that. There are three MRT stations around, and amenities within walking distance. The last point - the developer is very dependable. So with all these reasons ... we decided to go for it."

The project is a joint-venture between Temasek Holdings and Malaysia's state investment arm Khazanah Nasional. It is their second residential development after DUO Residences in Bugis, which was launched in November last year. Buyers had snapped up more than 60 per cent of DUO's 660 units in just three days. Prices had averaged S$2,000 per square foot, with over S$2,600 per square foot for a studio apartment.

Private sales for Marina One started on October 3 to those purchasing multiple units. The developer said the majority of its buyers are Singaporeans (70 per cent). Malaysians make up 20 per cent, while the remaining 10 per cent are Indonesians and Chinese.

One analyst described the sales as "commendable" for the current market, but said prices - which now range from S$1,960 to S$3,100 psf - might need to be lowered to further boost demand.

Ku Swee Yong, CEO of Century 21 Singapore, said: "The current competition of the unsold units along the Shenton Way stretch, up to Tanjong Pagar, as well as future Government Land Sales of parcels around Marina One would affect investment sentiments in the project." Mr Ku said units from older projects nearby are going at competitive prices, averaging about S$2,000 to S$2,500 psf.

The launch of Marina One comes on the back of lacklustre sales in the city area, weighed down by property cooling measures. In the second quarter of this year, 95 high-end homes were sold, down from 121 units in the previous quarter and 365 units in the same period last year. Prices in the city area have also declined for the fifth consecutive quarter since Q1 2013.

Its developer is also taking a cautious stance. The project has two residential towers comprising about 1,000 units, but only one tower is currently open for sale.

- CNA/al

More than 100 Marina One units snapped up on Friday

Source: Business Times / Real Estate

Kallang-Lavender area sees greater commercial interest

Mixed-use projects lift rents and prices of industrial, retail spaces

Source: Straits Times / Money

THE Lavender-Kallang area is gentrifying with a blend of the old and new: shophouses under conservation alongside new commercial developments, including City Square and Kallang Leisure Park.

The mixed-use developments ARC 380 and City Gate will add to the eclectic mix. Rents and prices of commercial and industrial properties have also been given a lift by the two projects and the completion of mixed-use Aperia.

Aperia has two towers zoned for Business 1 (B1) use - meaning it is suitable for light and clean industrial use - with a gross floor area of 72,290sqm, and a three-storey retail podium of gross floor area 14,406sqm. The project is available only for lease and it has already secured commitment for over 50 per cent of its space. It will be home to tenants including Intel, Audi, McDonald's, Cold Storage and Tim Ho Wan, said a spokesman for Ascendas Reit, which bought Aperia in August.

Another recent entrant is mixed-use CT Hub 2, set for completion next year. It offers about 310 strata B1 units and 41 retail units, with about 186 units sold overall. A further 77 office units have not yet been released.

"Those who bought strata units at CT Hub and CT Hub 2 during 2011 and 2012 are likely to be investors that switched over from the residential sector, when it was slapped with several rounds of cooling measures," said Ms Elaine Chow, executive director and head of research at Chestertons Singapore.

But given patchy manufacturing growth, end-users and small and medium-sized enterprises are not likely to fork out high rentals for a smallish industrial unit, she said. "Investors may need to review their rental and yield expectations for these newly completed strata industrial units," she added.

Still, demand has been healthy enough in the Kallang planning area for rents to rise from $5.50 to $6.50 per sq ft per month for new B1 industrial spaces, said Mr Nicholas Mak, executive director at SLP International.

Demand for CT Hub 2 could also have contributed to the profitable subsale deals at the project in 2012 and 2013, which had about 18 to 22 per cent per annum annualised profit margin, he added.

"Industrial real-estate prices are likely to remain steady in the area, with no new supply of industrial land site for sale here in the second-half 2014 industrial government land sales programme."

Over the past year, the median price of shop units in the Kallang planning area had declined steadily until City Gate, launched in the third quarter this year, pushed the quarterly median price up from $1,084 in the second quarter to $3,824 in the third, he said.

"Prices of retail space are likely to remain healthy due to limited supply and steady demand."

Ms Chow added that investor interest in commercial properties in the area is strong, evident when all strata office units at ARC 380 were sold out earlier this year.

-By Rennie Whang

'Smart nation' sensors here, there and everywhere

Up to 1,000 islandwide to monitor everything from traffic to air quality

Source: Straits Times / Top of The News

THEY will be on the front line of Singapore's push to be a "smart nation", popping up on roads, in drains or in high places to keep tabs on everything from traffic to water levels and the air.

Up to 1,000 sensors - which can be in the form of computer chips or surveillance cameras - will be deployed across Singapore as the Government officially kicks off its "smart nation" plan.

These sensors will support various government projects, such as one to increase surveillance in Little India and Geylang, and another to better monitor the risk of the Singapore River flooding.

"These are places where agencies have immediate operational requirements and need system rollout as quickly as possible," said Mr Khoong Hock Yun, assistant chief executive of development group at the Infocomm Development Authority (IDA).

He said a tender will be called by the year end for the installation of the sensors, as part of Singapore's Smart Nation Platform. To be completed by the end of next year, this system is expected to lead to substantial savings as the infrastructure will be shared by various agencies.

The sensors will be linked to Aggregation Gateway boxes, typically installed at traffic junctions, parks or bus stops to feed data from, say, surveillance cameras or air quality sensors, to the relevant agencies for analysis.

For a start, the sensors and boxes will be mainly in high-traffic areas including the Civic District and Orchard Road.

The rollout will run alongside similar trials in Jurong Lake District, named in June as the test bed for Singapore's push to be a smart nation.

The 15 trials in Jurong include sensors in parks that adjust lighting based on motion and the time of the day, and high-tech cameras that help wardens issue tickets for illegal parking more swiftly.

IDA said lessons from the trials in Jurong Lake District will be applied to the Smart Nation Platform's rollout next year.

Wider applications being looked at for nationwide deployment include flood and traffic jam prevention, and better patient monitoring in moving ambulances. Free public Wi-Fi services can also be deployed quickly throughout Orchard Road, for instance.

Mr Khoong said a common platform could spur better data sharing and coordination across agencies to meet the public's needs.

Separately, Punggol and Yuhua have been picked to provide the first prototypes of what a "smart home" here would look like.

IDA is looking for ideas from the private sector on possible applications, which could include better security monitoring or Wi-Fi connectivity throughout the home.

Engineer John Wong, 36, said he hopes these high-tech installations will solve his daily transportation woes, among others.

"My idea of a smart nation is citizens being able to board a bus or flag down a cab, peak hour or not. This comes with high-tech prediction capabilities," he said.

-By Irene Tham, Technology Correspondent

S'pore steps up to 'Smart Nation' vision

Source: Business Times / Technology

-By Chan Yi Wen

News on foreign worker quotas welcome

Bosses relieved at PM's remark that a further squeeze is unlikely

Source: Straits Times / Money

RELIEVED bosses say Prime Minister Lee Hsien Loong's comments that foreign worker quotas are unlikely to be squeezed further means they can plan with far more certainty.

Mr Lee said at the launch of the National Productivity Month on Tuesday that the growth in foreign worker arrivals has slowed to a five-year low and that he expects "(no) further major measures to tighten our foreign worker numbers".

Employers can now look ahead and invest in manpower without worrying about a further squeeze on quotas.

"It's good that there will be no more tightening because it provides businesses with a lot of certainty going forward, and allows us to plan and better recruit employees," said Mr Kurt Wee, president of the Association of Small and Medium Enterprises.

Mr Victor Tay, chief operating officer of the Singapore Business Federation, agreed: "It's definitely welcome news.

"Paring down has been painful especially since Asia is growing, and the inability to deliver due to shortage of manpower has forced some of us to turn away contracts."

There were 1.32 million foreign workers in Singapore last year - 1,107,100 if foreign domestic workers are excluded - a growth of 4.57 per cent from 2012. This is nearly half the pace of growth between 2010 and 2011, when the number of foreign workers grew by 8.75 per cent.

The Government's bid to wean firms off the foreign workforce began as part of a productivity drive in 2010, with measures ramped up after the 2011 General Election.

Having weathered stricter foreign worker quotas and a series of hikes in levies for less-skilled staff, businesses welcome a breather.

"We are very happy because it means our companies can grow," said Mr Raymond Wong, co-owner of Nonya dumpling shop Rumah Kim Choo. "As a small business, if we cannot hire local people, we rely heavily on family members to go through tough times, and we've got ourselves drained out."

Mr Wong's family let go of two restaurants over the last two years when they could not find enough locals to take up the jobs vacated by foreigners.

The highly regulated construction sector is also glad to get more time to adjust to existing measures. "The cuts have been quite unbearable," said Singapore Contractors Association president Ho Nyok Yong. "Now many contractors are already on the productivity journey and that just takes time to realise."

Bank of America Merrill Lynch economist Chua Hak Bin agreed that the time is right to "pause and assess" the impact of the quotas since productivity has fallen in some domestic sectors, including construction and food services.

Dr Chua also flagged the scheduled hike in foreign worker levies next July. Contractors will be levied a new high of $1,050 a month for each unskilled worker hired beyond the quota.

But complaints aside, more companies have been warming to the idea of less foreign labour, said Minister of State for Trade and Industry Teo Ser Luck.

"In some ways, it has already sunk in that we have to do something about it. I see more and more awareness and understanding of this, and to me that is a positive sign," said Mr Teo.

-By Marissa Lee

Real Estate Companies' Brief

Mapletree Inv a top bidder for Aussie asset

Reports say it's in tussle with rivals for A$100m office block

Source: Business Times / Real Estate

In what could be its first move in Australia, Mapletree Investments has emerged as a top contender for a near A$100 million (S$111 million) A-grade office building in Brisbane. Mapletree is competing with offshore rivals for the asset, according to a media report in Australia. The seller, US property group Hines, had bought the asset just two years ago for A$88 million, The Australian report said. CBRE is brokering the sale for Hines, according to online marketing materials.

-By Lynette Khoo

Mapletree Logistics Trust

Source: Straits Times / Money

  • Broker: CIMB Research
  • Call: Add
  • Fair value: $1.24

MAPLETREE Logistics Trusts (MLT) has announced it has entered into two separate sale and purchase agreements with its sponsor for the acquisitions of:

Mapletree Yangshan Bonded Logistics Park, for a purchase consideration of 197.2 million yuan (S$41 million), and

Mapletree Zhengzhou Logistics Park, for a purchase consideration of 205.6 million yuan.

Despite the tight market for good quality assets, we believe MLT will continue to grow via future acquisitions. Its sponsor still has sizeable logistics developments yet to be injected into the trust.

Chip Eng Seng's S$150m notes issue well received

Source: Business Times / Companies & Markets

Construction and property group Chip Eng Seng Corporation has seen strong demand for its S$150 million fixed-rate notes, which are being issued under its S$500 million multi-currency debt-issuance programme. The final order books stood at over S$600 million due to robust interest from Singapore-based investors such as private banks, fund managers and banks. As a result, it was able to price the new issue at 4.25 per cent per annum, payable semi-annually. This is 0.25 per cent inside the initial guidance.

-By Nisha Ramchandani

Hotel Royal buys The Baba House in Malacca

Source: Business Times / Companies & Markets

Hotel Royal Ltd is adding to its portfolio of hotels in Malaysia by acquiring The Baba House in Malacca for RM26.1 million (S$10.2 million), to be paid through internal funds and bank borrowings. The hotel has potential for capital appreciation, Hotel Royal said.

Kian Ho to buy two Sophia Rd properties

Source: Business Times / Companies & Markets

Kian ho bearings - in its effort to expand the scope of its bearings, seals and power transmission belts business - is planning to buy two properties on Sophia Road for a total of S$15.27 million. Each has a lot area of 260 square metres, and has 55 years remaining in its tenure.

Global Economy & Global Real Estate

Tharman stresses urgency of structural economic reforms

The global economy faces the real risk of a prolonged period of sub-par growth, which underlines the need for greater urgency when it comes to implementing structural reforms, said chairman of the International Monetary and Financial Committee (IMFC) Tharman Shanmugaratnam. Mr Tharman and International Monetary Fund (IMF) managing director Christine Lagarde were speaking at a press conference on Saturday in Washington, DC after the meeting of the IMFC, the policy-setting body of the IMF.

S’pore trusts eyed as Asian property deals hit record

Beijing, Tokyo and Shanghai popular for commercial property investments in first half of 2014

Source: Today Online / Business

SINGAPORE — In Asia’s real estate market, deal-making just reached a record and more is to come, with undervalued Singapore-listed trusts expected to become takeover targets.

Property deals in China and its neighbours amounted to US$34 billion (S$43.2 billion) last quarter, Bloomberg data show, a tally that includes the 10.6 trillion won (S$12.6 billion) purchase of a site in Seoul’s Gangnam district by a Hyundai Motor-led group and the A$2.6 billion (S$2.9 billion) takeover by Singapore’s Frasers Centrepoint of the Australand group Down Under.

Singapore-listed CapitaRetail China Trust, with 10 malls in eastern China, is among the next possible targets as it trades below the US$1.7 billion estimated value of its assets, said analysts at Standard Chartered. Saizen REIT, another Singapore-listed trust that owns about 5,500 apartments in Japan, is also undervalued by that measure.

For a global buyout firm or Hong Kong developer, buying Chinese malls would be a way to profit as Asia’s largest economy becomes more consumer-centric, property consultancy CBRE said. “Being in retail is a natural way to front-run that trend. We see very strong demand in all the key gateway markets for good-quality real estate,” said Mr Marc Giuffrida, CBRE’s Singapore-based executive director for global capital markets in Asia.

Representatives for CapitaRetail and the company that manages Saizen, Singapore-based Japan Residential Assets Manager, declined to comment on the prospects for any takeover.

Last quarter’s record deals for real estate companies and investment trusts in Asia pushed this year’s total to US$82 billion, Bloomberg data showed. Beijing, Tokyo and Shanghai were the top destinations for commercial property investments in Asia in the first half of 2014, property consultancy Cushman & Wakefield said. China alone attracted 73 per cent of the total.

“Asian consumers have continued to expand spending, creating vast incentives for continued investments,” said Mr Priyaranjan Kumar, Singapore-based regional director of capital markets at Cushman.

CapitaRetail’s Draw

CapitaRetail’s properties draw 73 million shoppers a year, more than three times the population of Beijing, the company’s website says. Almost every square metre of CapitaRetail’s mall floor space is leased, with tenants including global brand names like Wal-Mart and fast-food chain KFC.

“Definitely, it could be a target,” said Mr Desmond Chua, an analyst at CMC Markets in Singapore, said of the property trust. “It’s an appealing vehicle” to tap Chinese consumers, he said.

Earnings before interest, taxes, depreciation and amortisation at CapitaRetail will jump 52 per cent to about S$147 million in 2016 from last year, according to analysts’ estimates compiled by Bloomberg. Rental revenue at CapitaMall Grand Canyon in Beijing, the company’s biggest shopping centre, may jump 26 per cent between 2014 and 2016 as tenants sign up for more expensive leases, StanChart said.

Shares in CapitaRetail have climbed nearly 19 per cent this year after closing 2.3 per cent higher at S$1.58 yesterday, giving the company a market value of S$1.3 billion. That compares with StanChart’s estimate of S$2.1 billion, or S$2.58 a share, for CapitaRetail’s revalued net asset value. Potential acquirers include private equity firms and real estate developers, CBRE said. CapitaLand, CapitaRetail’s largest shareholder with a 19 per cent stake, is also a possible buyer, StanChart said.

Saizen’s Appeal

Saizen REIT, which owns apartments in cities including Tokyo and Sapporo, also may attract suitors because it’s so undervalued, said Ms Regina Lim, an analyst at StanChart in Singapore. About 91 per cent of Saizen’s units are occupied, its website says.

Saizen shares have fallen 2.7 per cent this year after closing 1.1 per cent higher at 90.5 Singapore cents yesterday, compared with its net asset value of S$1.22 a share at the end of June.

Real estate prices across Japan have risen about 20 per cent since Prime Minister Shinzo Abe took office about two years ago, according to an estimate by Deutsche Asset & Wealth Management. Property investment in Japan rose 70 per cent to ¥4.6 trillion yen (S$54.2 billion), the highest level since March 2008, in the 12 months ended March, according to the asset manager. Residential prices in Japan’s three largest metropolitan areas increased for the first time in six years, the government said last month.


Still, property owners and developers in Japan face the prospect of waning demand from a population that has shrunk every year since 2008, according to data from the International Monetary Fund. More than one in four people in Japan are older than 65, the highest proportion in the world, Bloomberg data show.

And in China, some investors are concerned that economic expansion will slow. Growth will probably be 7.3 per cent this year, a Bloomberg survey of economists showed last month. It would be the slowest pace since 1990.

However, that may not prevent bids for undervalued property companies such as CapitaRetail and Saizen.

“We could see more deals,” said Mr Terence Wong, head of research at DMG & Partners Securities in Singapore. 

-By Bloomberg

Global economy could be in prolonged sub-par growth: Tharman

Singapore's Tharman Shanmugaratnam, the chairman of the International Monetary and Financial Committee (IMFC), also said some countries need to step up the pace of structural reforms.

Source: Channel News Asia / Business

WASHINGTON: The global economy could get stuck in a prolonged period of sub-par growth and some countries need to step up the pace of structural reforms, said Singapore's Tharman Shanmugaratnam, the chairman of the International Monetary and Financial Committee (IMFC).

"To solve today's growth problems, we have to lift potential growth. That means reforms that don't pay off immediately but reforms that build confidence over the medium to longer term," said Mr Tharman, who is also Singapore's Finance Minister and Deputy Prime Minister. He was speaking at a news conference in Washington on Saturday (Oct 11) after chairing the IMFC, which is the policy-setting body of the International Monetary Fund (IMF).

Mr Tharman added that low growth would leave the global economy more vulnerable to "financial Ebolas" that are bound to happen from time to time. He said: "If we have low growth persisting over a long period, we will always be vulnerable. We will be vulnerable to geopolitical risks because they will have that much more impact on growth, on jobs, on confidence, we will be vulnerable to biological pandemics and we will be vulnerable to financial Ebolas which are bound to happen from time to time." 

Earlier, the IMFC said in a communique that while the global recovery continues, it is uneven and weaker than expected, and downside risks have increased. A revival in economic activity is underway in some advanced economies, notably in the United States and United Kingdom, but the recovery is modest in Japan, and tentative in the euro area.

"Particular emphasis must be placed on measures to: boost labour demand and supply, including through reducing youth unemployment and increasing opportunities for women and older workers in the economy; improve credit flows to productive sectors; and enhance the business environment to support private investment," the IMFC said.

The committee added that increasing the resilience of the financial system remains a priority in all countries, including through well-designed micro- and macro-prudential measures in the context of prolonged monetary accommodation and excessive risk-taking in some asset markets. 

- CNA/xq/ir

Greece Seeks $508 Million by Securitizing Real Estate

Source: Bloomberg / News

The Greek fund charged with selling state assets will attempt to raise 400 million euros ($508 million) by securitizing real estate in a move designed to attract investment to the debt-stricken country.

The Hellenic Republic Asset Development Fund will sell shares in a company with about 300 properties ranging from retail, office and tourism-related real estate including land for development, Andreas Taprantzis, the fund’s executive director, said in an Oct. 8 interview in his Athens office. The company will then sell debt backed by the properties.

“This transaction is important for investment in Greece and for society, not just because of the immediate returns it will generate, but this will bring multiple sums of money into the real economy of Greece,” Taprantzis said.

The privatization fund is tapping into renewed investor demand for Greek assets as the country emerges from a six-year economic crisis, which enabled it to return to bond markets in April after a four-year exile. The fund has completed 1.9 billion euros of real estate transactions over the last year.

Vacant buildings account for about a third of the real estate that’s being sold by the fund, while another third of the properties are occupied and generating rental income, Taprantzis said. The rest is made up of development land, he said. The fund aims to complete the deal by the first quarter of 2015.

Appealing Structure

“The idea is to create a transaction structure that will invite a variety of institutional investors to invest in Greece, from private equity funds to hedge fund investors,” Taprantzis said. “It also offers investors a safe way to invest in property developments.”

The fund has held two road shows in London and is seeing strong interest from investors, Taprantzis said. If the project is successful, the fund will seek to replicate the deal and has an additional 1,000 properties that could be securitized, he said.

There is “window of opportunity” to invest in Greece as markets such as London become overpriced, according to Paul Gomopoulos, a managing director at Hines who recently moved to Athens from London to explore investment opportunities.

“The country is on the radar of investors and that was not the case five or six years ago,” he said at a conference in Athens this week.

U.S. Investors

Money managers including Paulson & Co., Fairfax Financial Holdings Ltd. and Fidelity pumped 8.3 billion euros into Greece’s four biggest banks in the first half, while investors such as David Einhorn and Wilbur Ross have taken stakes in Greek lenders. In July, seven funds managed by GSO Capital Partners, a unit of the Blackstone Group LLC, acquired 4.4 million shares, or 10 percent of the voting rights, in Lamda Development SA, Greece’s largest publicly traded developer.

The Athens Stock Exchange General Index has jumped 112 percent since reaching a 22-year low in June 2012 and the economy is set to grow in 2014 for the first time in seven years.

Greek bonds have delivered the highest returns this year out of 34 sovereign securities tracked by Bloomberg, gaining 21.5 percent, as the country narrowed its once ballooning budget deficit and returned from a four yearlong market exit.

-By Sharon Smyth and Eleni Chrepa