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17th October 2014

Singapore Real Estate

Ascott Residence Trust acquires hotel in Tokyo

Source: Business Times / Companies & Economy

Ascott Residence Trust (ART) has announced its acquisition of a hotel in Tokyo's Shinjuku area for eight billion yen (about S$95.2 million). The acquisition will be accretive at an earnings before interest, tax, depreciation and amortisation (Ebitda) yield of 4.3 per cent and is expected to increase Ascott Reit's FY2013 distribution per unit by 0.6 per cent from 8.40 Singapore cents to 8.45 Singapore cents on a pro forma basis.

Ascott Residence Trust

Source: Straits Times / Money

ASCOTT Residence Trust has bought a hotel in the heart of Tokyo for 8 billion yen or about S$96.2 million.

It bought the 206-unit asset in Shinjuku, which is now operating as Best Western Shinjuku Astina, from Japanese property firm Kabushiki Kaisha Oumi.

The hotel, which has an occupancy rate of above 90 per cent, will be converted into a Citadines-branded serviced residence next year.

It is near an underground linkway leading to Shinjuku Station, a busy transport hub that connects central and western Tokyo.

The acquisition is expected to increase Ascott Reit's distribution per unit for this year to 8.45 cents from 8.4 cents. Ascott Reit owns three other serviced residences and 31 rental housing properties in Japan.

InterContinental plans to more than triple its properties in India

It'll first target mid-scale segment with Holiday Inn, then offer premium brands

Source: Business Times / Real Estate

Intercontinental Hotels Group plc, the owner of the Holiday Inn and Crowne Plaza brands, plans to more than triple its properties in India amid signs of a rebound in demand under Prime Minister Narendra Modi. Europe's second-largest publicly traded lodging operator, which has 18 hotels in the South Asian country, plans to add 46 more over three to five years, said Clarence Tan, senior vice-president of development for Asia, Middle East and Africa.

Real Estate Companies' Brief

Singapore Reits can be made more attractive to global investors

Source: Business Times / Opinion

Real estate investment trusts (Reits) are a staple in retail investors' portfolios, thanks to zero interest rates, an ageing demographic and a hunger for yield. Singapore investors are spoilt for choice; there are more than 30 Reits listed, with a combined market capitalisation of over S$60 billion. The Monetary Authority of Singapore's (MAS) latest review of the rules and governance of Reits through a consultation paper is thus timely. The proposals seek to strengthen the framework in terms of protecting unitholders' interests and mandating greater disclosure

MAS proposals to tighten S-REIT rules are credit positive: Moody’s

Source: Today Online / Business

SINGAPORE — The proposals by the Monetary Authority of Singapore (MAS) to tighten the regulation of Singapore real estate investment trusts (S-REITs) are credit positive for the sector because they would foster financial discipline, enhance corporate governance and strengthen investor confidence, Moody’s Investors Service Singapore said yesterday.

In its first major review of the sector in seven years, the MAS last Thursday proposed changes to the regulatory regime governing S-REITs and their managers, including lowering the borrowing limit for trusts that are assigned a rating by a major credit rating agency such as Moody’s, Standard & Poor’s or Fitch.

Lowering borrowing limits for rated S-REITs would ensure the trusts maintain a prudent approach when funding expansion plans and reduce potential losses to creditors, Moody’s said.

Under the current rules, rated S-REITs can borrow up to 60 per cent of their total assets, while unrated S-REITs can leverage up to 35 per cent. The MAS proposed a single leverage limit of 45 per cent across the sector, regardless of whether the S-REIT is rated or not. The single leverage limit would also reduce the industry’s overall refinancing risk, since about two-thirds of S-REITs are rated, Moody’s said.

As shown in the table, the leverage ratios of the 17 S-REITs that Moody’s rates, as measured by total adjusted debt to total deposited assets, were all below 45 per cent as of the end of June.

“We do not expect any S-REIT to breach this level. Rated S-REITs have capped their leverage ratios under 45 per cent since emerging from the global financial crisis in 2009,” said Moody’s analyst Jacintha Poh.

Other proposals to strengthen corporate governance and enhance disclosures on income support arrangements, total operating expenses, length of new leases and debt maturity profiles were also credit positive, Moody’s said.

These included imposing a statutory duty on the S-REIT manager and individual directors to prioritise the interest of the unit holders in the event of a conflict of interest. The MAS also proposed increasing the number of independent directors on the board, disclosing remuneration policies and remuneration bands of directors and executive officers and having S-REIT managers put themselves up for re-appointment at regular intervals.

Moody’s viewed the proposal to increase an S-REIT’s development limit to 25 per cent of its deposited property from 10 per cent as marginally credit negative. However, it said that while the increased ability to take on development projects exposes S-REITs to the greater risks and uncertainties associated with property development, it would also give them more operational flexibility to renovate older properties, which would increase rental yields and improve financial performance.

Keppel Reit Q3 distribution dips 6.1% to 1.85 cents a unit

Factors include higher borrowing costs, trust expenses; DPU translates to yield of 6.2%; fundamentals stay healthy, says Reit manager

Source: Business Times / Companies & Markets

Keppel Reit's distribution per unit (DPU) dipped 6.1 per cent from a year ago to 1.85 cents for the third quarter ended Sept 30, due to factors such as higher borrowing costs and trust expenses. The DPU translated to an anuualised distribution yield of 6.2 per cent based on the units' closing price of S$1.19 on Sept 30.

-By Lynette Khoo

Keppel Reit posts steady earnings

Source: Straits Times / Money

REAL estate investment trust Keppel Reit posted steady earnings, on the back of better performance from its assets and strong tenant records.

Net property income for the three months to Sept 30 rose 12.4 per cent to $38.5 million from the preceding year, said Keppel Reit yesterday. Income available for distribution fell 3.8 per cent to $52 million while property income grew 8.4 per cent to $47.6 million.

Its distribution per unit (DPU) fell 6.1 per cent to 1.85 cents, after 195 million new units were issued last month.

Keppel Reit reported a better performance from Ocean Financial Centre and contribution from its 50 per cent stake in 8 Exhibition Street, acquired in August last year.

During the quarter, about 25,000 sq ft of space was leased to tenants - or renewed - from businesses in sectors including energy and natural resources and retail.

The Reit has retained 227 tenants from various business sectors in the portfolio's tenant base. It said that it is committed to optimising and upgrading its portfolio to ensure long-term sustainable income for Keppel Reit unitholders.

This includes the sale of its 92.8 per cent stake in the 16-year-old Prudential Tower for $512 million on Sept 26.

Last month, Keppel Reit also proposed to buy a one-third interest in the two-year-old MBFC Tower 3 for $1.25 billion or $2,790 per sq ft (psf).

Excluding the five-year rental support of up to about $49.2 million, the net purchase price will be $1.2 billion or $2,680 psf.

Keppel Reit said that credit rating agencies Moody's and Standard & Poor's "expect the addition of MBFC Tower 3 to augment the overall quality of Keppel Reit's portfolio".

It added: "The manager also strives to deliver sustainable returns to unitholders by maximising the performance of its properties as well as continually enhancing and optimising its portfolio to generate stable returns."

-By Rachael Boon

New award launched to honour best efforts in CSR

Source: Business Times / Companies & Markets

Singapore Compact president Kwek Leng Joo said: "We believe in the importance of recognising the efforts of companies that demonstrate excellence in CSR." Speaking at the opening of the International Singapore Compact CSR Summit, he also stressed that the assessment of a company's accomplishments would be "highly rigorous" and that only the most deserving corporations would make the cut.

-By Lee U-Wen

Views, Reviews & Forum

Take more steps to conserve energy, reduce noise, HDB

Source: Today Online / Voices

The Home Improvement and Neighbourhood Renewal programmes to make Housing and Development Board (HDB) flats and towns continually liveable is laudable, as the maintenance of public housing in many countries is often neglected after some time.

The HDB could take a step further in these programmes to also focus on energy conservation for households and reduction of noise from busy road junctions, bus interchanges and train tracks near homes.

For example, it could offer, as a cost-sharing option in its flat improvement programme, to replace owners’ sliding windows with casement ones that allow for more natural ventilation as every window can then be opened.

Sun panels could be installed at blocks that do not have them. An extra layer of plastering could be applied externally to reduce the sun’s heat from permeating through the walls. These could help households reduce their energy consumption if fans and air conditioners are used less often.

Finally, noise from identified sources could be reduced by installing barriers, including tall trees with thick crowns. This would also lead to a greener environment.

-By Jolly Wee

Global Economy & Global Real Estate

GLP leases space in Brazil to PepsiCo

Source: Business Times / Stocks

Global Logistic Properties Ltd (GLP) has leased 13,000 square metres to PepsiCo in Sao Paulo, Brazil. This leasing agreement marks the first collaboration of PepsiCo and GLP in Brazil. The stabilised logistics portfolio lease ratio in Brazil stands at 98 per cent.

HK home prices seen firm as volume drops amid protests

The number of home transactions has fallen 20 per cent so far this month, says realtor Midland

Source: Business Times / Real Estate

Rights issue shrinks to HK$1.65b; executive director missing

Founder's family trustee to be new underwriter; more downgrade pressure

Source: Business Times / Real Estate

Prologis steps up Europe development as e-commerce boosts demand

Source: Business Times / Real Estate

Hyundai's cash deal for land raises dividend concerns

Source: Business Times / Real Estate

Hyundai’s $10 Billion Cash Deal Damps Dividend Hopes

Source: Business Times / News

Hyundai Motor Co. (005380) and two affiliates said they will use cash to fund their 10.6 trillion won ($10 billion) purchase of a land site in Seoul, damping optimism that the companies will raise shareholder payouts.

Hyundai Motor, Hyundai Mobis (012330) Co. and Kia Motors Corp. (000270) won’t issue debt to fund the acquisition, Seoul-based Hyundai Motor said in an e-mail on behalf of the group. The automaker will build its new global headquarters at the site, located in the city’s central Gangnam district.

The decision reduces the chance that South Korea’s largest automaker group will increase dividends. The government announced plans in August to encourage businesses to raise wages and dividends by levying a 10 percent punitive tax on corporate cash hoards. The three companies have lost almost $18 billion in combined market value since the group won a bid for the site after offering triple the assessed value.

“We had hopes for a higher dividend, but those hopes are all gone,” said Heo Pil Seok, chief executive officer at Midas International Asset Management Ltd., which oversees $10 billion. “The three companies involved in the property purchase hold enough cash to fund the deal, and therefore it won’t have an impact on the companies’ credit ratings.”

The three companies had cash, near cash and short-term investments amounting to about $38 billion at the end of June, according to data compiled by Bloomberg.

Board Approval

Hyundai Motor declined 3.6 percent to 162,000 won in Seoul trading, its lowest close since August 2011, while South Korea’s benchmark Kospi index fell 1 percent. Mobis and Kia were both unchanged.

The boards at the three companies, all part of billionaire Chairman Chung Mong Koo’s automotive group, approved the offer for the land without knowing the price, according to Solidarity for Economic Reform, a South Korean corporate watchdog, citing minutes of the board meetings obtained from the companies.

Hyundai Motor will pay 55 percent of the total, followed by Mobis with 25 percent and Kia footing the rest. The land was put on the market in July by state-run Korea Electric Power Corp. ahead of its relocation to the south of the country as part of a regional development plan by the government.

Hyundai Motor Group has said its plans for the site include a hotel, convention center and auto theme park. The group plans to move 30 of its affiliates to the new site, it said in a statement.

-By Bloomberg News

Apps for American tenants to keep negligent landlords on their toes

The tech-based tools cover heating problems, repairs and other housing issues

Source: Business Times / Real Estate

Blackstone Third-Quarter Profit Rises on LBOs, Property

Source: Bloomberg / News

Blackstone Group LP (BX) said third-quarter profit increased 18 percent as the world’s largest alternative-asset manager collected profits from its biggest buyout fund and sold real estate holdings. The shares slid as the earnings missed analysts’ expectations.

Economic net income, a measure of earnings that reflects both realized and unrealized gains, rose to $758.4 million, or 66 cents a share, from $640.2 million, or 56 cents, a year earlier, New York-based Blackstone said in a statement today. Analysts had expected earnings of 71 cents a share, according to the average of 15 estimates in a Bloomberg survey.

Failing to meet analysts’ expectations “was driven by a combination of lower-than-forecast performance fees in the traditional private-equity segment as well as a higher-than-anticipated tax rate,” Jefferies Group LLC analyst Dan Fannon said today. “Underlying fundamentals including fundraising, realization activity, investment activity and portfolio performance all remain strong.”

Blackstone, which under Chief Executive Officer Steve Schwarzman has been the most successful leveraged-buyout firm to diversify beyond corporate takeovers and into businesses such as property and hedge funds, last week decided to spin off its advisory units in an effort to reduce conflicts of interest with its fund management groups. The firm, which is marketing its seventh global LBO fund, is benefiting from the $21.7 billion buyout pool it raised from 2005 to 2007, which in the second quarter crossed a return threshold that’s allowing Blackstone to collect performance fees at an accelerated rate.

Shares Slide

Blackstone fell 5.5 percent to $27.45 at 9:37 a.m. in New York, extending its decline this year to 13 percent. The stock more than doubled in 2013 as the firm prepared holdings such as Hilton Worldwide Holdings Inc. (HLT) and SeaWorld Entertainment Inc. for profitable exits.

The firm said its buyout portfolio appreciated 3.7 percent in the third quarter, outpacing the 0.6 percent advance in the Standard & Poor’s 500 Index of large U.S. companies. The gain compared with a 3 percent increase in the buyout holdings at Carlyle Group LP (CG), which releases fund performance earlier than its full earnings.

Blackstone’s real estate funds sold shares of hotel operator Extended Stay America Inc. in the third quarter and completed a sale of five Boston office properties to a venture led by Oxford Properties Group Inc. for more than $2 billion. The private-equity group sold shares of oil and gas producer Kosmos Energy Ltd. and packaged-foods distributor Pinnacle Foods Inc. Blackstone also took public travel-booking platform Travelport Worldwide Ltd. (TVPT) and health-care products maker Catalent Inc. (CTLT)

Buyout Bellwether

Blackstone’s economic net income, or ENI, differs from U.S. generally accepted accounting principles. Under those standards, known as GAAP, the company had net income of $250.5 million, compared with $171.2 million a year earlier.

Blackstone is seen as a bellwether for the buyout industry given its size and reach across markets.KKR & Co. (KKR), the New York-based firm run by cousins Henry Kravis and George Roberts, is set to report third-quarter results next week, followed by Washington-based Carlyle on Oct. 29.

Private-equity firms pool money from investors including pension plans and endowments with a mandate to buy companies within about five to six years, overhaul and then sell them. The funds are returned with a profit to investors in the cycle, which lasts about 10 years. The firms, which use debt to finance the deals and amplify returns, typically charge an annual management fee equal to 1 percent to 2 percent of committed funds and keep 20 percent of profit from investments as a carried interest.

Record Assets

Blackstone raised $13.1 billion during the quarter, helping boost assets under management to an industry record $284.4 billion from $278.9 billion at the end of the second quarter. The firm said it will pay stockholders a dividend of 44 cents a share on Nov. 3.

Worldwide, the value of private-equity buyouts announced in the third quarter rose 12 percent to $26.4 billion from the same period last year, according to data compiled by Bloomberg. The number of deals rose 8 percent to 215 in the same period, the data show.

-By Devin Banerjee

Blackstone Boosts Europe Real Estate Fund to $8.4 Billion

Source: Bloomberg / News

Blackstone Group LP (BX), the world’s largest alternative-asset manager, will increase the size of its latest European real estate fund by about $2 billion, seven months after completing the fundraising.

The company has secured additional commitments from investors to bring the pool to 6.6 billion euros ($8.4 billion), up from the 5.1 billion euros it amassed in March, Tony James, president and chief operating officer of Blackstone, said on a conference call with reporters today.

“Given demand from our limited partners, we are taking the unusual step of reopening and expanding this fund by $2 billion,” James said. “There’s plenty of demand from existing investors to take all of the increment. I don’t anticipate it extending the investment period or materially changing.”

Blackstone’s pool, which will invest in real estate assets in the U.K. and continental Europe, was already the largest pool ever raised dedicated to buying assets in the region, according to the New York-based company’s website. The firm has already spent about two-thirds of the fund, James said today.

-By Kiel Porter and Devin Banerjee

Easing home loans not likely to revive China market

Buyers unlikely to get back into market until prices become more affordable: Analysts

Source: Today Online / Business

BEIJING — Real estate consultant Zhou Bingguo had expected to find a few buyers for the 20 apartments for sale next to Beijing’s Central Business District in the first week of October. It was after all the Golden Week holiday, traditionally a peak period for home sales and China had just eased mortgage restrictions.

“Quite a few people visited, but nobody bought. People are still waiting for prices to fall,” said Mr Zhou, a consultant in the asset management department of CBD Private Castle, a residential development.

China is lowering down payment requirements and discounting mortgages as declining housing sales weigh on Asia’s largest economy. After four years of government restrictions to cool housing prices that had tripled since 2000, the central bank is reversing course, making it easier for homeowners to buy second properties.

However, these investors are not likely to get back into the market, several analysts said, until prices become more affordable.

“The property downturn will continue as buyers stay on the sidelines in anticipation of further price declines,” said Hong Kong-based Standard & Poor’s credit analyst Bei Fu.

“Longer term, the central bank’s latest move is a big step forward. It will allow more buyers to qualify for preferential mortgage rules and should help to release pent-up demand,” she added.

Chinese Premier Li Keqiang is trying to prevent economic growth this year from drifting too far below the government’s 7.5 per cent target, already the slowest pace since 1990. The real estate sector, as well as related sectors including electric machinery, chemicals and metals used in construction, accounts for more than a quarter of the economy, UBS economists estimated.

New home sales slumped 11 per cent to 3.43 trillion yuan (S$713.6 billion) in the first eight months of this year as the government curbed credit, reversing a 27 per cent jump last year, data from the National Bureau of Statistics showed.

The average new home price in 100 cities tracked by real estate firm SouFun Holdings fell 0.9 per cent in September from August, dropping for the fifth consecutive month. The price rose 1.1 per cent from a year earlier, narrowing for a ninth month in a row.

Weakening demand in a property market that “has lost power” will dim China’s economic prospects, dragging growth lower in the world’s second-largest economy, warned Mr Li Daokui, a former central bank adviser. In a similar vein, Moody’s Analytics economist Alaistair Chan said housing “remains the key downside risk to the economy”.

The new rules give homeowners who have paid off their loans and want a second property the same advantages as first-time buyers, the People’s Bank of China (PBOC) — the central bank — said on Sept 30.


Lenders can now give these second-home buyers a mortgage discount of as much as 30 per cent of the central bank’s benchmark rate. And buyers will need to provide a down payment of only 30 per cent, a drop from the government’s previous 60 per cent requirement, which Beijing, Shanghai, Guangzhou and Shenzhen increased to 70 per cent last year to curb soaring prices.

The central bank also eased a ban on mortgages for people without home loan debt who want to buy a third home, allowing banks determine down payments and rates. The move comes after all but five of the 46 cities that imposed home purchase restrictions since 2010 eased or removed such limits in recent months.

“Most people are not in a hurry to buy,” said Mr Jinsong Du, a Hong Kong-based property analyst at Credit Suisse.

He said that homeowners had already managed to circumvent the rules to qualify for loans to new buyers: More than 80 per cent of existing mortgages were for first purchases, even though in recent years such buyers made up only 35 per cent of all home purchases.

“The wait-and-see sentiment is still prevalent” among buyers, said Mr Donald Yu, Shenzhen-based analyst at Guotai Junan Securities. Meanwhile, developers “still feel that the situation hasn’t reversed, and it’s still best to keep prices stable. They will still moderately lower prices, but not as steeply as before”, he added.


Lenders probably will not significantly cut rates because profits are their primary goal, Moody’s said. Mortgages typically generate lower returns than other loans, Essence Securities noted.

The average interest rate for loans to individuals, 66 per cent of which are home mortgages, was 47 basis points lower than for corporate loans in the first half at Industrial & Commercial Bank of China, the nation’s biggest lender, according to its financial report.

Only five banks have released revised mortgage rules as of this week in Beijing to adapt to the central bank announcement, according to Bacic 5i5j Group, the city’s second-biggest realtor for existing homes.

While the likes of Shanghai Pudong Development Bank, Postal Savings Bank of China and Bank of Beijing now offer discounts of as low as 10 per cent below the PBOC’s benchmark for first-home buyers, ICBC and China Construction Bank, the nation’s second biggest, are keeping their mortgage rate unchanged at the benchmark, according to the property agency.

CBD Private Castle’s Mr Zhou said the lower rates will not help much with his apartment sales because prices have gone too far above income levels. In the development he is marketing, where apartments mostly exceed 1,700 sq ft, prices are above 8 million yuan.

“How many average Chinese households can afford that?” he said.

“Even if you can buy it with a 3 million yuan loan, the interest payment over 20 years will be almost as much as the loan itself. Your entire life is ruined.” 

-By Bloomberg