Singapore Economy S'pore market reacts calmly to Fed move Stocks perk up, taking end of stimulus as a sign US economy is back on track Source: Straits Times / Top of The News SINGAPORE'S stock market took the end of the final round of money printing by the United States central bank in its stride yesterday. Local stocks eked out a small gain on hopes that the decision indicates that the world's biggest economy is back on track. The US Federal Reserve said on Wednesday nightit was winding up its third round of the so-called quantitative easing, or QE3. The Fed began its huge QE stimulus efforts to kick-start the ailing US economy after the global financial crisis. The vast sums of freshly minted cash have washed across the global economy. The Singapore dollar weakened by a mere 0.02 per cent against the greenback on the news, staying at about $1.28 to the dollar. Analysts said the muted reaction here was expected given that market players knew for a while that the end of QE3 was near. "It was all expected. Everything has already been priced into the market for a very long time," CMC Markets analyst Desmond Chua told The Straits Times. Remisier Gary Goh said: "The market was pretty uneventful. People already started to reassess their positions in mid-October." All eyes are now on when US interest rates will go up and by how much, analysts said. The Straits Times Index rose 0.3 per cent yesterday to 3,234.31 points, on a par with its 0.4 per cent increase on Wednesday. Other markets across Asia were mixed. Analysts said local earnings may have played a role. Tokyo's Nikkei index rose 0.7 per cent, Shanghai gained 0.8 per cent and Sydney added 0.5 per cent. But Hong Kong slid 0.5 per cent and Seoul fell 0.1 per cent. Analysts said the Fed move showed the US economy was recovering, which could buoy the export-driven economy here. "Employment levels in the US are strong and there is increasing consumer confidence, suggesting that the US economy is now more supported by fundamentals," Mr Chua said. Still, some analysts warn the pace of recovery could be slow. "Assuming that the US economy is recovering, this would naturally be good for the global economy and Singapore's, which is export-driven," said DBS economist Irvin Seah. However, Mr Seah said investors "shouldn't get too carried away". The US labour market still has some way to go before regaining full strength and the US government is still "debt-ridden, which will limit growth", he said.
Mr Goh also said that a US economic recovery may not be enough for the languishing Singapore stock market to rally. -By Melissa Tan http://www.straitstimes.com/premium/top-the-news/story/spore-market-reacts-calmly-fed-move-20141031 Singapore Real Estate New rules to boost construction skills With the inflow of foreign workers easing to the pace that the government wants, the policy focus is now shifting to raising the quality of these workers - starting with the construction sector. Come Jan 1, 2017, at least one in 10 Work Permit workers on construction companies' payrolls must be higher- skilled R1 workers, Deputy Prime Minister Tharman Shanmugaratnam said on Thursday night. 2 mega private residential projects get URA's provisional nod in Q3 The projects at Sims Drive and Upper Serangoon View will have more than 1,000 units eachSource: Straits Times / Real Estate New rule sets targets for hiring of higher-skilled workers Source: Straits Times / Top of The News AFTER years of watching the construction industry falter on productivity, the Government has decided to introduce some tough love to get it up to speed. Firms in this sector will soon need to have a minimum percentage of higher-skilled workers on their payrolls, said Deputy Prime Minister Tharman Shanmugaratnam yesterday. He did so while acknowledging the patchy report card on productivity, ever since the Government set the ambitious target of raising it by 2 to 3 per cent every year by 2020. "Almost all the gains were achieved in 2010 when we were recovering from the recession." Raising productivity was the only viable route for Singapore if it were to avoid a "zero sum game" between business and labour, he added. The alternatives were not pretty: either jobs would be lost, or prices would go up or wages would stay down. And while some sectors have made an effort to raise their game, the construction industry remains a laggard, with its productivity in the first half of this year actually falling compared with last year. "Construction must be transformed into an efficient and more integrated industry, led by progressive firms and supported by a higher-skilled workforce," said Mr Tharman at an event held yesterday to mark the end of the inaugural National Productivity Month. The new rule could give it a push. It requires at least 10 per cent of work permit holders in each firm to be classified as higher-skilled, and will take effect from Jan 1, 2017. The changes will be phased in over the next two years to give firms in the industry time to adapt. Those that fail to meet the targets will face curbs on hiring. About 15 per cent of the 300,000 work permit holders in the construction industry are classified as higher-skilled, though these workers are unevenly distributed across firms. To retain experienced construction workers in Singapore, Mr Tharman said firms will also be allowed to hire workers at the end of their work permit period without them having to first leave Singapore. This will take effect from June 1 next year. Singapore Construction Association president Ho Nyok Yong said the changes will benefit construction firms in the long term, given that companies pay lower levies for higher-skilled workers. Construction companies now pay $250 less in monthly levies for each higher-skilled worker. This difference will rise to $400 a month over the next two years. Mr Eng Kim Chooi, the general manager of Kim Seng Heng Engineering Construction, said the company sends its employees for training to upgrade their skills. "After they pass, we increase their salaries," said Mr Eng. The company has 446 work permit holders on its payroll, more than half of whom are classified as higher-skilled.
DBS economist Irvin Seah said productivity-boosting measures are "likely to become more targeted towards specific industries or clusters" as the restructuring effort progresses. While construction companies will have to pay higher-skilled workers more, the new measures will help firms bring costs down in the long term if workers do become more innovative and efficient, he added. -By Chia Yan Min New rules aim to boost construction productivityFirms must upgrade 10% of their work-permit holders to higher-skilled R1 tier by end-2016 Source: Today Online / Singapore SINGAPORE — A string of measures — comprising a mix of tightened requirements and help for firms — targeted at growing the pool of skilled and experienced workers and spreading them out in the construction sector was announced yesterday, as part of the Government’s latest efforts to pull up the sector’s lagging productivity levels. Official data showed productivity in the construction sector grew by 1.2 per cent annually between 2010 and last year, far behind the Government’s target of growing productivity by 2 to 3 per cent annually by 2020. Announcing the new upgrading requirement during the Business Excellence and Productivity award ceremony yesterday, Deputy Prime Minister Tharman Shanmugaratnam noted that the Government’s strategy to manage the growth of foreign manpower in the construction sector as part of its restructuring efforts has seen results. The focus for the next stage is on raising the quality of the construction workforce, including bringing in more higher-skilled and experienced workers, he said. To that end, construction firms must upgrade 5 per cent of their work-permit holders to the higher-skilled R1 tier by the end of next year and a further 5 per cent by the end of 2016 or forgo their chances of hiring new work-permit holders for up to one year. Companies that already have 15 per cent of R1 workers will be exempted from the upgrading requirements. This phased upgrading requirement is in line with the new rule — announced by Mr Tharman in his Budget speech earlier this year — that will kick in on Jan 1, 2017. The rule requires all construction firms to have at least 10 per cent of R1 workers. About three in five construction firms here meet the 10 per cent R1 requirement. For those that do not, the majority — around four in five — need only to upgrade one or two of their work-permit holders over the next two years to meet the requirement. There are more than 10,000 construction firms in Singapore, employing about 300,000 workers. About 15 per cent of these workers are qualified as R1 workers, but they are unevenly distributed across firms. The Government hopes to raise the proportion of R1 workers to 30 per cent by 2020, a Building and Construction Authority spokesperson said. To help firms bring in more higher-skilled workers, the Government will allow greater flexibility for firms to upgrade and retain their workers. From Sept 1 next year, construction workers who earn a salary of S$1,600 or more and who pass a skills test can enter Singapore directly as an R1 worker. Currently, workers need four to six years of experience working here to qualify for the R1 status. As for keeping skilled and experienced workers from leaving for other countries, the Government will also allow firms to hire construction work-permit holders who are at the end of their work-permit period, without these workers having to first leave Singapore. This will take effect from June 1 next year. “This will enable firms to tap the experience these workers have built while on the job in Singapore, while reducing the firms’ search and hiring costs for skilled workers,” said Mr Tharman. Responding to the new requirement, Singapore Contractors Association president Ho Nyok Yong said they were largely reasonable and the flexibility in hiring and upgrading workers would result in savings in terms of worker levies for firms. -By Wong Wei Han http://www.todayonline.com/singapore/new-rules-aim-boost-construction-productivity Pre-packed screed soon mandatory for HDB floor replacements Currently, contractors use their own mix of cement, sand and water for such works, but pre-packed screed will now be required whether the work is done in wet or dry areas. Source: Channel News Asia / Singapore SINGAPORE: From December, Housing Development Board (HDB) renovation contractors will have to use pre-packed screed for floor replacements, regardless of whether the work is done in wet areas or in dry areas, such as the living room. Currently, contractors use their own mix of cement, sand and water for such works. The HDB said in a circular that pre-packed screed, a pre-packed cementitious material made with cement and sharp sand, reduces wastage and ensures a cleaner environment. However, some contractors say pre-packed screed is expensive, and renovation costs for HDB home owners would increase. An expert has said that while factory-packed screed gives a more consistent quality than cement and sand mixed at home, it sacrifices the control that some do-it-yourself renovators might desire. "Well, because this pre-mix is new to Singapore, selecting properly packaged mortar, pre-mixed mortar is very important," said Yang-En Hua, Assistant Professor at the School of Civil and Environmental Engineering at Nanyang Technological University. "You have different types and different choices of pre-mixed mortar, therefore different applications for different jobs."
- CNA/ek http://www.channelnewsasia.com/news/singapore/pre-packed-screed-soon/1443250.html Spike in bad home loans swells Singapore banks' NPLs UOB housing NPL hits half a billion dollars at end Q3; Wing Hang consolidation pushes up figure at OCBC Source: Straits Times / Banking & Finance Sliding Singapore home prices - especially those of high-end residences - are piling on more bad loans onto local banks' non-performing loan (NPL) books. United Overseas Bank (UOB) yesterday said that its housing NPLs have increased in the past two consecutive quarters to S$502 million for its fiscal third quarter, due primarily to borrowers investing in a particular high-end residential project in Singapore. -By Siow Li Sen http://www.businesstimes.com.sg/banking-finance/spike-in-bad-home-loans-swells-singapore-banks-npls Banks feeling pressure as new home loans fall Source: Straits Times / Money LOCAL banks are feeling the pressure from the slowing property market as bad debts filter through and new home loans fall. OCBC chief executive Samuel Tsien told a briefing yesterday that the number of new mortgages issued has dropped by 40 per cent for the year so far, compared with the same period two years ago. Mr Tsien chose 2012 as the base of comparison as that was the peak of the recent property market boom. Unless there is a significant uptick in the property sector, the impact of slower growth in the mortgage book could put a dent in earnings next year, he said. "New housing loan origination has come down significantly," Mr Tsien said at the briefing on OCBC's third-quarter results. "We expect by the second half of next year, you will start to see the impact of the lower loans origination, which started two years ago." But he stressed that OCBC's overall housing loans may not come down as its newly acquired Wing Hang Bank is fairly strong in housing loan originations in Hong Kong. The local banks are being sheltered because of the strong pipeline of home loans that is still progressively coming through, depending on the completion status of properties. United Overseas Bank (UOB) reported yesterday that its non-performing loans (NPL) for mortgages came in at $502 million as at the end of September. That was 12.3 per cent higher than the $447 million NPL seen in the second quarter and 70.2 per cent higher than the $295 million for the same period last year. UOB said the housing NPL rose in the past two quarters primarily due to borrowers investing in a high-end residential project in Singapore. The total NPL associated with the unnamed project was $166 million, including $80 million logged for the second quarter and $59 million for the third quarter. UOB managing director for investor relations Jimmy Koh noted that the NPL amount set aside for the project had dropped in the latest quarter. "We are confident we're on the other side of this issue and we remain positive on the rest of our housing loan portfolio," he said.
Total NPL at UOB for the third quarter was $2.29 billion, down from $2.31 billion in the second quarter. -By Mok Fei Fei http://www.straitstimes.com/premium/money/story/banks-feeling-pressure-new-home-loans-fall-20141031 Lake Life releases pricing, brings public viewing date forward Pricing is on the higher end due to Evia Real Estate's record high land price of S$418 psf per plot ratio Source: Business Times / Real Estate The consortium behind executive condominium (EC) Lake Life on Thursday announced that units will range from S$799 to S$930 per square foot - a wider range than its earlier indicative price of S$880 to S$890 psf. Overall, the units will average S$857 psf in price. The 546-unit EC in the Jurong Lake District will open for public viewing from Nov 1, instead of the earlier announced date of Nov 5, to cater for the expected large crowds, it said. Already, it has achieved a record numbers of e-applications for an EC. -By Lee Meixian Lake Life to go on sale at lower prices Average psf is $857, down from indicative levels of $880 to $890 Source: Straits Times / Money DESPITE red-hot initial interest from buyers, Jurong Lake District's Lake Life project is going on sale at prices slightly below the initial indicative level. Lake Life is the first new executive condominium (EC) in Jurong in 17 years and, earlier this month, broke records for the most e-applications for an EC. But EC rules that took effect last year have placed borrowing restrictions on buyers. Lake Life is one of three ECs to be launched since cooling measures were imposed on ECs last year. The development is going on sale at an average $857 psf, a discount from its indicative market pricing of $880 to $890 psf. Unit prices for the 99-year leasehold project in Yuan Ching Road will range from $799 to $930 psf, giving the developers, a consortium led by Evia Real Estate, a 6 per cent profit margin, instead of its previous 10 per cent target. ECs are a public-private housing hybrid where buyer eligibility is restricted to Singaporeans, with a minimum five-year occupation period before the unit may be sold on the open market. Mr Vincent Ong, managing partner of Evia Real Estate, said the lower price factors in a shrinking market resulting from a cap on the Mortgage Servicing Ratio (MSR) for housing loans for purchase of EC units. "The name of the game is affordability," Mr Ong said yesterday. "Developers are now resizing their approach to look at dollar amounts rather than a per square foot price because banks lend at a quantum despite the square foot price." That is why the developer has decided that 84 per cent of units in Lake Life's five towers will be priced below $1.1 million. Lake Life's $857 psf price is also lower than that of nearby private condos such as Lakeville by MCL Land, where units are selling for an average of $1,328 psf. Earlier this month, Lake Life received a record 1,853 e-applications for 546 units. Typically, only one in 10 applications leads to a sale, said Mr Ong. "But because it's Jurong, I expect 15 per cent will convert." Lake Life showflats will be open for viewing tomorrow, and Mr Ong expects to sell half the units on the first weekend. Bookings for Lake Life begin on Nov 8. Two more ECs will also commence sales within the next two weeks: Qingjian Realty's Bellewoods in Woodlands opens for bookings tomorrow with an average price just shy of $780 psf, while Qingjian's Bellewaters in Sengkang launches next Friday.
Prices for Bellewaters have not been released, but the indicative price range is $750 to $820 psf. -By Marissa Lee http://www.straitstimes.com/premium/money/story/lake-life-go-sale-lower-prices-20141031 Lake Life EC priced below indication despite strong interestTODAY reports: The
executive condominium has been priced at an average of S$857 per square foot
(psf), below the indicative pricing of S$880psf to S$890psf. Source: Channel News Asia / Singapore SINGAPORE: Lake Life, the first executive condominium (EC) offering in Jurong in 17 years, has been priced at an average of S$857 per square foot (psf) for the 546-unit project, well below the indicative pricing as its developers seek to secure demand amid stricter financing rules. The consortium of developers led by Evia Real Estate had earlier said units at Lake Life EC could be priced at S$880psf to S$890psf amid strong interest in the project. However, after analysing the profiles of its 1,853 e-applicants – a record high for an EC development – it found that the purchasing ability of the potential buyers was lower than expected. “Most developers would target at least a 10 per cent margin, but then today we have the MSR (Mortgage Servicing Ratio), and looking at the buyers’ income levels and ability to borrow, I’m very reluctant to cross S$1.1 million for most units,” Evia’s managing partner Vincent Ong said on Thursday (Oct 30). “There’s also the risk that there’s still a lot of stock in the market – for private units, BTO (Build-to-Order) flats and ECs. I could have taken the position to price higher after receiving a record number of applications, but after our calculations, we have to price with buyers’ affordability in mind,” he added. Mr Ong said the price level translates to a margin of about 6 per cent. The consortium paid S$272.84 million in July last year for the 217,298sqft site at Yuan Ching Road/Tao Ching Road that Lake Life sits on. At about S$418 psf per plot ratio, it is the most expensive EC land to date. Several months after the record bid, the government announced in December last year that EC purchases would be subject to the 30 per cent MSR cap, a rule that many property analysts said would hit demand for the hybrid public-private homes. Lake Life’s show flats will open on Saturday and Mr Ong hopes to secure buyers for at least half of the units on offer this weekend. “While Lake Life is on the higher end of the spectrum, its lower selling price as compared to that of a private condominium means buyers will stand to reap even more returns in the future when taking into account the anticipated appreciation in market value when the EC is fully privatised,” he said. -TODAY/cy http://www.channelnewsasia.com/news/singapore/lake-life-ec-priced-below/1444766.html Lake Life EC priced below indication despite strong interestSource: Today Online / Business SINGAPORE — Lake Life, the first executive condominium (EC) offering in Jurong in 17 years, has been priced at an average of S$857 per square foot (psf) for the 546-unit project, well below the indicative pricing as its developers seek to secure demand amid stricter financing rules. The consortium of developers led by Evia Real Estate had earlier said units at Lake Life EC could be priced at S$880psf to S$890psf amid strong interest in the project. However, after analysing the profiles of its 1,853 e-applicants — a record high for an EC development — it found that the purchasing ability of the potential buyers was lower than expected. “Most developers would target at least a 10 per cent margin, but then today we have the MSR (Mortgage Servicing Ratio), and looking at the buyers’ income levels and ability to borrow, I’m very reluctant to cross S$1.1 million for most units,” Evia’s managing partner Vincent Ong said yesterday. “There’s also the risk that there’s still a lot of stock in the market — for private units, BTO (Build-to-Order) flats and ECs. I could have taken the position to price higher after receiving a record number of applications, but after our calculations, we have to price with buyers’ affordability in mind,” he added. Mr Ong said the price level translates to a margin of around 6 per cent. The consortium paid S$272.84 million in July last year for the 217,298 sq ft site at Yuan Ching Road/Tao Ching Road that Lake Life sits on. At around S$418 psf per plot ratio, it is the most expensive EC land to date. Several months after the record bid, the government announced in December last year that EC purchases would be subject to the 30 per cent MSR cap, a rule that many property analysts said would hit demand for the hybrid public-private homes. Lake Life’s show flats will open tomorrow and Mr Ong hopes to secure buyers for at least half of the units on offer this weekend. “While Lake Life is on the higher end of the spectrum, its lower selling price as compared to that of a private condominium means buyers will stand to reap even more returns in the future when taking into account the anticipated appreciation in market value when the EC is fully privatised,” he said. http://www.todayonline.com/business/lake-life-ec-priced-below-indication-despite-strong-interest Park Hotel Group to venture into Thailand, Indonesia in 2015 Source: Business Times / Real Estate Park Hotel Group is making its foray into Thailand and Indonesia with two new management contracts, which will boost its portfolio to 12 hotels. It has inked an agreement with the Southsea Group which will see it opening the Park Hotel Khao Lak Beach Resort Phang Nga in 1H 2015, and the Park Hotel Nusa Dua Bali resort in 1Q 2015. -By Nisha Ramchandani The Hour Glass buys Sydney property Source: Business Times / Companies & Markets The Hour Glass has bought a six-level freehold retail and office building on 192 Pitt Street in Sydney from Lee Tai Enterprises (Australia), a privately-held company, for A$32.8 million (S$36.9 million). Situated on a 186 sq m site, the building comprises five levels of office space and ground floor retail, with a net lettable area of 1,027 sq m. It is currently fully leased out. http://www.businesstimes.com.sg/companies-markets/in-brief-5 Court bid to quash HDB's seizure of couple's flat Businessman denies unauthorised subletting of whole flat Source: Straits Times / Singapore A BUSINESSMAN whose four-room flat was compulsorily acquired for unauthorised subletting is set to face the Housing Board in court today in a bid to quash the decision. Mr Per Ah Seng, 47, wants the High Court to review whether the HDB acted unfairly, as he claimed it did not disclose sufficient details on its investigations before the seizure to enable him to respond adequately. The HDB had found that the entire flat was rented out without Mr Per and his wife, the co-owners, first getting written authorisation as required by its rules. But Mr Per insisted they rented out only two rooms, which he registered online with the HDB as required. He denied renting out the entire flat. He did, however, admit that there were times such as the weekends when the couple and their two children stayed overnight in his mother's Hougang flat. This was because she lived alone and was depressed after her husband died in 2009. The HDB told The Straits Times that this is the first High Court case involving "a judicial review for compulsory acquisition of a flat that is going for a hearing". The test case may clarify what is required for an owner to show he is in continuous physical occupation of the flat and did not abandon the unit. It is understood that the HDB had conducted extensive surveillance and interviewed the flat's tenants in the run-up to its finding that Mr Per's whole flat was rented out without its approval. The flat was seized last year. Mr Per, who bought the resale unit in Bukit Batok Central in 2007 for $368,000, said he registered details of his sub-tenants online in April 2010. Three months later, the HDB notified him that he had let out the entire flat without consent. He applied for the judicial review through lawyer Kirpal Singh as a last resort, after appeals to the HDB and the Minister for National Development, including through his Member of Parliament, failed. The HDB told The Straits Times on Tuesday that five flats were compulsorily acquired in the last three years for unauthorised subletting. "Flats compulsorily acquired will be returned to HDB and may be offered to flat applicants," its spokesman said. "Where flat owners object to HDB's decision, HDB will consider their objections based on the merits of the case." The HDB has previously made it clear it takes a serious view of unauthorised subletting, since public flats are primarily meant for owner occupation. Top law firm Allen & Gledhill is representing the HDB, while the Attorney-General's Chambers is representing the minister. -By K.C. Vijayan, Senior Law Correspondent Companies' Brief Emerging-market IPOs set for good year Baker & McKenzie says cross-border IPOs from emerging-market issuers have seen a 154% rise in capital raised in the first three-quarters of 2014, compared to 2013Source: Business Times / Banking & Finance Initial public offerings (IPOs) from emerging-market issuers are set for their best year since the global financial crisis; this is despite investors becoming more selective about where they place their capital - amid a renewed appreciation of risk - towards the end of the year, says international law firm Baker & McKenzie. The firm noted that cross-border IPOs from emerging-market issuers have seen a 154 per cent increase in capital raised in the first three-quarters of this year, compared to 2013. -By Michelle Quah http://www.businesstimes.com.sg/banking-finance/emerging-market-ipos-set-for-good-year New rules to woo listings from developed markets Source: Business Times / Companies & Markets Singapore Exchange (SGX) has streamlined rules for secondary listings to encourage more companies from developed markets to list here. The new framework, which follows a public consultation in June, takes effect next Monday. SGX CEO Magnus Bocker said in a press statement on Thursday that a company that has a secondary listing on SGX will have a higher Asian profile and access to a wider pool of investors. -By Cai Haoxiang http://www.businesstimes.com.sg/companies-markets/new-rules-to-woo-listings-from-developed-markets SGX
introduces new regulatory framework for secondary listings Source: Straits Times / Money THE Singapore Exchange (SGX) is introducing a new regulatory framework for secondary listings in which additional oversight will not be required if their primary listing is from an established market. The change, which takes effect from Monday, will involve the SGX deeming a company as coming from a "developed" jurisdiction if both FTSE and MSCI classify the jurisdiction of the firm's home exchange as "developed". FTSE and MSCI, both leading international index providers, have classified 23 jurisdictions including Singapore as "developed". The SGX will treat all other jurisdictions as "developing". Where a company is secondary-listed on the SGX, and primary-listed on the main board of any of the 22 developed jurisdictions other than Singapore, the exchange will not impose additional regulatory requirements under the new framework. Such a company must remain primary-listed on its home exchange and comply with all its rules. This differs from the current framework in which firms may face additional requirements once secondary-listed on the SGX. For a company from a developing jurisdiction, the SGX will review its home exchange's legal and regulatory requirements and may impose additional requirements to enhance shareholder protection and corporate governance standards. The SGX will continue to assess whether a company seeking a secondary listing is suitable for the Singapore market, including whether it can meet its admission criteria. "When a company is secondary-listed on SGX, it enjoys a higher Asian profile and access to a wider pool of investors," said the chief executive of the SGX, Mr Magnus Bocker. "How we regulate secondary listings is now clearer for both companies and investors. We welcome more listings from developed and well-regulated jurisdictions joining our family of listed companies." The SGX website will carry more information on secondary listings from Monday, including a clear segregation between these and primary-listed companies, indication whether the secondary listing is from a developed or developing jurisdiction, and the scope of additional regulatory requirements for each secondary-listed firm, where applicable. Its new framework and rules on secondary listings follow a public consultation in June. The SGX is the world's most international exchange with 40 per cent of its listed companies coming from outside Singapore, including 34 secondary listings. Tuan Sing trebles Q3 gain; looks to better full year Source: Business Times / Companies & Markets Tuan Sing Holdings, which posted a tripling in third-quarter net earnings, is optimistic about better operational performance for the year ended Dec 31, 2014 compared to FY2013, said its CEO William Liem.
The group expects to complete the acquisition of its remaining stake in Australia's Grand Hotel Group (GHG) in December. "With the completion, the group would have full ownership and control over GHG and accordingly full consolidation of its financial results," Tuan Sing said in its results statement on Thursday evening. AA Reit Q2 DPU up on higher income, lower costs During the quarter, renewal contracts marked a weighted average rental increase of 8.6% Source: Business Times / Companies & Markets Aims Amp Capital Industrial Reit (AA Reit) posted a distribution per unit (DPU) of 2.77 Singapore cents for its fiscal second quarter ended Sept 30, 2014, up 0.7 per cent from the DPU of 2.75 Singapore cents a year ago. Net property income rose 8.2 per cent year on year to S$19.7 million on the back of higher gross revenue and lower operating expenses. -By Lynette Khoo http://www.businesstimes.com.sg/companies-markets/aa-reit-q2-dpu-up-on-higher-income-lower-costs Starhill Global Reit's Q3 DPU up 5% Source: Business Times / Companies & Markets Starhill Global Reit on Thursday reported a distribution per unit of 1.27 Singapore cents for its third quarter ended Sept 30, 2014. This was 5 per cent higher than its DPU of 1.21 Singapore cents a year ago. Net property income rose 4.1 per cent to S$39.6 million, thanks to lower operating expenses, positive rental reversions for the Singapore portfolio, and its David Jones Building in Perth, Australia. -By Lee Meixian http://www.businesstimes.com.sg/companies-markets/starhill-global-reits-q3-dpu-up-5 Starhill Global Reit Source: Straits Times / Money STARHILL Global Reit, which owns department stores here and abroad, yesterday posted a distribution per unit of 1.27 cents for its third quarter ended Sept 30, a 5 per cent increase from a year ago. On an annualised basis, this translates to a yield of 6.38 per cent. Unitholders can expect to receive their payout on Nov 28. Net property income rose 4.1 per cent to $39.6 million, due mainly to lower operating expenses and positive rental reversions for the Singapore portfolio. Revenue dipped 0.4 per cent to $48.6 million as lower contributions from China and Japan were partially offset by the rest of the portfolio. The trust's Singapore portfolio, comprising interests in Wisma Atria and Ngee Ann City, made up two-thirds of total revenue in the third quarter. Results were posted after market closure.
Starhill Global Reit units closed flat at 80.5 cents. http://www.straitstimes.com/premium/money/story/company-briefs-20141031 Keppel T&T plan to list data centre Reit underway Source: Business Times / Companies & Markets Keppel Telecommunications & Transportation has confirmed that efforts to list a data centre real estate investment trust on the Singapore Exchange mainboard are underway. It has submitted applications to SGX and the Monetary Authority of Singapore which are currently under review. The terms of the initial public offering are still being finalised. http://www.businesstimes.com.sg/companies-markets/in-brief-5 Keppel T&T confirms plans for data centre REITThis follows earlier reports that Keppel T&T is set to start pre-marketing for the IPO next week for a REIT of its data centres. The REIT is estimated at between US$200 million and US$400 million.Source: Channel News Asia / Business SINGAPORE: Keppel Telecommunications & Transportation (Keppel T&T) has confirmed that it is planning an initial public offering and that efforts to list a data centre real estate investment trust on the mainboard of the SGX are currently ongoing. The statement came in a stock exchange filing on Thursday evening (Oct 30). It follows earlier reports that Keppel T&T is set to start pre-marketing for the IPO next week for a REIT of its data centres. The REIT is estimated at between US$200 million and US$400 million (between S$255 million and S$511 million). In its statement on Thursday, Keppel T&T said that it has submitted applications for the IPO to the SGX and the Monetary Authority of Singapore. However, it also added that the details of the terms of the IPO are still being finalised and that the proposed listing will be subject to, among other things, market conditions and relevant regulatory approvals being obtained. A successful listing will make this the first data centre trust in Asia. - CNA/ac http://www.channelnewsasia.com/news/business/singapore/keppel-t-t-confirms-plans/1444368.html Parkway Life Reit's DPU up 8.9% Source: Business Times / Companies & Markets Parkway Life Reit posted an 8.9 per cent increase in distribution per unit to 2.90 Singapore cents for its third quarter ended Sept 30. Net property income grew 8.6 per cent to S$23.7 million while revenue rose 8.5 per cent to S$25.3 million due to rental income contribution from its Japanese properties, as well as higher rent from existing properties. http://www.businesstimes.com.sg/companies-markets/in-brief-5 Parkway Life Reit Source: Straits Times / Money PARKWAY Life (PLife) Reit has reported an 8.9 per cent rise in distributable income to $17.6 million for the third quarter. This represents a distribution per unit (DPU) of 2.9 cents, up from 2.66 cents in the same period last year. With contributions from yield accretive acquisitions, higher rent from existing properties and the positive effect of net income hedge, DPU for the first nine months grew 8.7 per cent to 8.62 cents. Gross revenue rose by 8.5 per cent to $25.3 million, which was primarily derived from rental income contributions from the Japanese properties acquired in the second half of last year and first quarter of this year, as well as higher rent from existing properties.
Net property income was $23.7 million, up 8.6 per cent. http://www.straitstimes.com/premium/money/story/company-briefs-20141031 Mapletree Greater China Commercial Trust Source: Business Times / Companies & Markets 2Q15 revenue and NPI (net property income) rose 7 per cent and 9 per cent year on year to S$67.5 million and S$55.2 million respectively; in line with expectations, and exceeded prospectus forecasts. The company should see robust uplifts in rents over the coming year with expectations of continued tenant sales growth and active tenant management. Gearing of 37.7 per cent provides additional headroom for acquisitions, especially with a potential window coming up in China due to a slowing economy. http://www.businesstimes.com.sg/companies-markets/brokers-take-10 M&C Hotels posts 6.6% rise in Q3 profit Source: Business Times / Companies & Markets Millennium & Copthorne Hotels' third-quarter profit rose 6.6 per cent as an increase in global business travel drove occupancy and room rates. Pretax profit rose to £50.2 million (S$102.8 million) in the quarter endedSept 30 from £47.1 million a year earlier. Revenue at the company, which operates the Millennium, Grand Millennium, Copthorne and Kingsgate hotels, rose 6.2 per cent to £215.9 million. http://www.businesstimes.com.sg/companies-markets/mc-hotels-posts-66-rise-in-q3-profit GIC takes 20% stake in Turkish property firm Source: Business Times / Real Estate Singapore sovereign wealth fund GIC will inject 250 million euros (S$405 million) to acquire a strategic stake in Turkey's leading commercial real estate developer Ronesans Gayrimenkul Yatirim (RGY), both firms said on Thursday. GIC will acquire "above 20 per cent shareholding in RGY" by subscribing to a rights issue, allowing it to become a "substantial minority" investor and strategic partner. http://www.businesstimes.com.sg/real-estate/gic-takes-20-stake-in-turkish-property-firm GIC to buy 20% stake in Turkish real estate firm Deal worth $405m is expected to be completed before the end of this year Source: Straits Times / Money SINGAPORE sovereign wealth fund GIC is buying around 20 per cent of Turkish real estate company Ronesans Gayrimenkul Yatyrym (RGY) for €250 million (S$405 million). The deal - GIC's first corporate real estate investment in a Turkish company - will "reinforce RGY's foothold as a leader in the Turkish commercial real estate market and allow for future expansion of its business", said both parties in a joint statement yesterday. GIC will also get representation on RGY's board. "As a long-term investor, we are confident that Turkey will continue to grow and present good investment opportunities," said Mr Chris Morrish, regional head of GIC Real Estate for Europe. Dr Erman Ilicak, chairman of RGY parent Ronesans Holding, said: "This partnership further bolsters our relationship with one of the most reputable long-term global investors in the real estate industry. "We look forward to solidifying RGY's presence in Turkish commercial real estate development, together with GIC's collaboration." The transaction is expected to be completed before the end of the year, subject to regulatory approvals. RGY plans to use the proceeds from GIC's cash injection to develop new commercial real estate projects in the country's largest cities. It also aims to develop its existing pipeline of retail, office and mixed-use projects, which has in excess of 460,000 sq m of area that can be leased or sold. RGY, which focuses on commercial real estate, holds 25 properties, including the Optimum, Piazza and Kozzy shopping centres, Ronesans Tower and RonesansBiz office centres.
RGY and GIC have participated in equal joint ventures for three shopping centres in Turkey since 2012. -By Jacqueline Woo http://www.channelnewsasia.com/news/business/singapore/gic-to-invest-s-403m-in/1444154.html GIC to invest S$403m in Turkish real estate firmThe investment will be in the form of a primary rights issue,
whereby GIC will inject funds into RGY to help finance acquisitions and the
development of new projects in Turkey. Source: Channel News Asia / Business SINGAPORE: Singapore sovereign wealth fund GIC plans to invest €250 million (S$403 million) to get an over 20 per cent stake in Ronesans Gayrimenkul Yatirim (RGY), the Turkish real estate firm said on Thursday (Oct 30). The investment will be in the form of a primary rights issue, whereby GIC will inject funds into RGY to help finance acquisitions and the development of new projects in Turkey. The transaction is expected to be completed in the fourth quarter of this year, subject to regulatory approvals. "As a long-term investor, we are confident that Turkey will continue to grow and present good investment opportunities," Chris Morrish, regional head of GIC Real Estate for Europe, said in a statement. Since 2012, RGY and GIC have formed 50-50 joint ventures in shopping centres Optimum Istanbul, Optimum Ankara and Optimum Izmir, the Singapore sovereign wealth fund added. RGY focuses on commercial real estate investments that generate stable and long-term rental income, such as shopping malls and office buildings. It has 25 properties in its portfolio, including 12 that are income-generating. Another eight properties are under development while the other five are held as land bank. GIC, which was established in 1981, has well over US$100 billion (S$127 billion) in assets under management. - CNA/ac http://www.channelnewsasia.com/news/business/singapore/gic-to-invest-s-403m-in/1444154.html Views, Reviews & Forum Cycling vision possible - with better infrastructure design Source: Straits Times / Forum Letters I UNDERSTAND Ms Jacqueline Lim Cheng Mui's ("Bumpy ride for cycling vision"; last Saturday) pessimism over National Development Minister Khaw Boon Wan's cycling vision, but I hope the authorities will not respond by introducing more rules to make cyclists behave. Instead, safety concerns can be addressed through better design of cycling infrastructure. Cycling in European cities is safe, viable and enjoyable because these places took concrete measures early on to separate cyclists, pedestrians and motorists. It would be costly and inconvenient to modify our roads to achieve this aim now. That said, there is enough room in heartland estates for cycling paths to be added to keep riders away from pedestrians and bus stops. At the moment, this "extra" space is occupied by drains, greenery, road signs and trees. A workaround would be to build cycling paths around these obstacles. The paths can be designed to bank inwards at every bend, to discourage pedestrians, wheelchair users or people with prams from using them. Surface design and finishing can be used to keep cyclists from speeding.
If we can find a solution that intuitively separates cyclists from pedestrians, we can accommodate other green commuting solutions such as the Segway and motorised scooters. -By Osman Sidek Global Economy & Global Real Estate QE is officially dead, but its ghost could linger Some investors detect hawkish tone from Fed's rate-setting board, but fund managers defer Source: Business Times / Government & Economy THE US Federal Reserve's quantitative easing programme is officially dead, but its ghost will continue to haunt the US stock market - at least until the Fed's next move becomes clear. US stocks and bonds fell slightly on Wednesday after chairwoman Janet Yellen's Federal Reserve confirmed that its bond-buying exercise would be consigned to the crypt on Friday - Halloween. For six years, the Fed's sorcery in the bond market had helped to keep mortgage and loan rates at historic lows. Now, the economy and stock market must contend with the ghouls of rising rates without Ben Bernanke or Janet Yellen's magic wand. For those who had expected a concession to the recent weakness in world markets and manufacturing data, the Fed's tone was frighteningly hawkish. While Ms Yellen's rate-setting board reiterated a promise to keep rates low for a "considerable time", the assessment of the economy was almost glowing. "Labour market conditions improved somewhat further, with solid job gains and a lower unemployment rate," the central bank crowed. "On balance, a range of labour market indicators suggests that underutilisation of labour resources is gradually diminishing." To many investors, that sounded a lot like laying the groundwork for an interest rate hike. The dollar gained in value against the euro, a bet that rates in the US will be higher than those in Europe where the central bank is still in rate-cutting mode. Traders sold out of gold, Treasurys, and high-risk small stocks - all popular investments throughout the years of the QE programme. "People are jumpy right now, and they read into the Fed statement relating to strong employment growth and overall benign inflation environment thinking, 'hey, that means maybe they're going to raise sooner rather than later'," said Oliver Pursche, president of money manager Gary Goldberg Financial Services. "I don't think that's what they said at all; if you look at the whole statement, it's very much in line with what they've been saying: continued improvement with pockets of weakness . . . (and they) remain data driven." The statement could not be considered purely hawkish - or leaning towards hiking interest rates - because the Fed said that there was nothing to fear from inflation, the motive for raising rates. Still, "investors are addicted to 'more dovish than expected'," or a lean towards cutting rates, said Lorenzo Di Mattia of hedge fund Sibilla Global Fund. The Fed pointedly left out any suggestion that stimulus could be reintroduced. Much of the trading on Wall Street has become a handicapping game on when the Fed will raise rates. Some are betting that the central bank will be forced to come back with more bond buying; others bet that "considerable time" of low rates means a year or more; a third camp are betting that the rate hike will come as early as the first or second quarter of 2015. St Louis Federal Reserve president James Bullard gave the first camp some hope in mid-October, when, during the wild trading in stock markets worldwide, he said that the Fed had cause to delay the end of quantitative easing. Those hopes were dashed on Wednesday. One of the only gainers in the wake of the Fed's statement was the financial sector, which is the only line of business that benefits from higher borrowing rates. Economists at Morgan Stanley recently noted that the divergent central bank policies and economic growth rates worldwide are further complicating the Fed's timing decision. They said in a research note that Ms Yellen's European counterpart, ECB president Mario Draghi, has asked her to share some of the US's domestic strength by tolerating an appreciating dollar vis-à-vis the euro, even as he stumbles along in the effort to provide more policy accommodation by his own central bank. They said that the Fed was prepared to sacrifice the competitive advantage of a weak currency, in part because "Fed officials understand that, while the US can temporarily expand faster than its G-7 colleagues, the best contributor to sustained expansion at home is assured expansion abroad". To one observer, when the Fed raises rates is not as important for the stock market outlook as why the central bank does so.
"If they raise rates because of jobs growth that's a big positive; if they raise rates because inflation is becoming an issue, that's a negative," said Mr Pursche of Gary Goldberg. -By Rob Curran http://www.businesstimes.com.sg/government-economy/qe-is-officially-dead-but-its-ghost-could-linger Fed forecast on US economy keeps STI up Market had also factored in move to end stimulus programme: Analysts Source: Straits Times / Money THE Singapore market reacted calmly to news that the United States Federal Reserve was putting an end to its massive stimulus programme and ended the day in positive territory. The benchmark Straits Times Index rose 10.28 points, or 0.32 per cent, to close at 3,234.31. Analysts said the market had largely been expecting the news and had factored the end of "quantitative easing", as the Fed programme was called, into its investment strategy earlier in the year. Phillip Futures market analyst Howie Lee noted that the minutes of the Fed meeting also contained a bright outlook on the US economy, which likely lifted investor sentiment. "The Fed has now started to acknowledge the strength in the labour market and has started to believe that price pressures will eventually pick up," he noted yesterday. "It may appear that US stocks are potentially in for another bull run next year." Regional bourses were mixed, as Tokyo rose 0.67 per cent, Sydney added 0.52 per cent and Shanghai gained 0.76 per cent, but Seoul eased 0.11 per cent and Hong Kong gave up 0.49 per cent. Commodity stocks continued to be among the top actives at home as palm oil prices hit a three-month high. Noble Group was flat at $1.185, Golden Agri-Resources was unchanged at 51 cents, while Wilmar International rose two cents to $3.18 and Indofood Agri Resources added two cents to 84.5 cents. Eu Yan Sang slipped two cents to 75.5 cents after CIMB Research reiterated its "reduce" recommendation on the stock. The traditional Chinese medicine supplier reported a 48 per cent drop in first-quarter net profit to $737,000 on Wednesday. CIMB analyst William Tng said this was below expectations, adding that the Occupy Central protests in Hong Kong are likely hurting revenue in this quarter. "Coupled with cost pressures and investments in food and beverage in China, and the inevitable foray into e-commerce, we believe operating costs will eat into profits in the short term," he added. Sheng Siong rose 1.5 cents to 66 cents after announcing that third-quarter net profit rose 15 per cent to $12.2 million. DMG & Partners Research analyst James Koh reiterated his "buy" call on the supermarket operator yesterday. "We continue to like management's initiatives to drive cost efficiency and are optimistic in the company's ability to open new stores with its $179 million war chest," he wrote in a note. -By Yasmine Yahah http://www.straitstimes.com/premium/money/story/fed-forecast-us-economy-keeps-sti-20141031 India eases rules on foreign investment Source: Business Times / Real Estate India has attracted foreign direct investment of US$23.7 billion for the construction of houses and towns since April 2000, about 10 per cent of total inflows. India conditionally permits overseas companies to fully own local units. http://www.businesstimes.com.sg/real-estate/india-eases-rules-on-foreign-investment China govt supports housing market again in U-turn Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/china-govt-supports-housing-market-again-in-u-turn Slowdown spurs China to back housing againSource: Today Online / Business BEIJING — With China headed for its slowest full-year expansion in a generation, the government has now listed housing as one of six sectors to be supported after years of trying to cool the real-estate industry. China will stabilise property-related consumption and make it easier for people to access mandatory housing savings, the State Council said in a statement late on Wednesday after Premier Li Keqiang presided at a regular meeting. The previous time China’s State Council documents mentioned stabilising housing consumption was in April 2009, when the government was rolling out a massive 4 trillion yuan (S$836 billion) stimulus plan it had announced in late 2008 to shield the economy from a global slowdown. Gross domestic product expanded 7.3 per cent in the third quarter this year from the corresponding period a year earlier, the weakest pace in more than five years. Growth is forecast at 7 per cent next year, based on a median estimate of 51 analysts in a Bloomberg News survey, as Chinese leaders have signalled they will tolerate weaker expansion amid economic rebalancing. This would see Asia’s largest economy heading for the slowest annual growth since 1990, which will weigh on China’s trading partners across the region. “(Wednesday’s) announcement marks a U-turn in stance towards the property sector after years of attempts to cool it down,” Mr Dariusz Kowalczyk, Credit Agricole CIB strategist in Hong Kong, wrote in a note to clients yesterday. It is the first time in recent years that the central government has officially declared direct support for the housing market, said Credit Suisse Group. New-home prices fell in 69 of 70 cities monitored by the government last month from August. Property prices may decline as much as 10 per cent this year and the slump may extend into next year, said SouFun Holdings, China’s largest real-estate website. MAJOR DRAG “The slowdown in the property sector has been a major drag on growth,” Mr Ting Lu, Bank of America head of Greater China economics in Hong Kong, wrote in a note to clients yesterday. The real estate sector, as well as related sectors including machinery, chemicals and metals used in construction, accounts for about a quarter of the Chinese economy. The government, which started tightening lending to property developers and buyers in April 2010 to prevent asset bubbles from expanding, has also signalled plans to reverse course on home financing, with the central bank on Sept 30 relaxing mortgage rules for home buyers who have paid off existing loans. “The government’s stance on the property market has changed to encouragement from caution,” said Mr Johnson Hu, a Hong Kong-based property analyst at CIMB Securities Research. “It realises the importance of real-estate consumption. Most cities no longer need curbs on housing-price increases.” Consumption is an important engine of economic growth, the State Council said, adding that the government would also support e-commerce, environmentally-friendly products, tourism, education as well as old-age related products and services. It did not provide details. -By AGENCIES http://www.todayonline.com/business/slowdown-spurs-china-back-housing-again UAE developers prefer bank loans to bonds Though banks offer greater flexibility, analysts say dependence on loans in times of crises is risky Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/uae-developers-prefer-bank-loans-to-bonds Spain's small shops fear end of rent regime Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/spains-small-shops-fear-end-of-rent-regime Google Data to Help Auction.com Predict Homebuying Trends Source: Bloomberg / Tech Auction.com LLC, which got a $50 million investment from Google Inc. (GOOGL) in March, said it will use the Internet-search company’s big-data capabilities to try to predict U.S. home sales and other trends ahead of competitors. The new product, known as Auction.com Real Estate Nowcast, based on Google Trends information and other data, predicts that existing homes will sell at an annual pace of 5.18 million in October, according to a statement today. That estimate is ready about four weeks before the National Association of Realtors reports its seasonally adjusted annual sales rate, which was 5.17 million last month and 5.13 million in October 2013. “It’s based on search activity right before they close on a house,” Rick Sharga, executive vice president at Irvine, California-based Auction.com, said in a telephone interview. “As we back-tested this against about 10 years of data, the results are pretty accurate.” Real estate information companies such as Auction.com, Zillow Inc. (Z), CoreLogic Inc. and RealtyTrac are jockeying to harness technology to give individual and professional consumers a market edge. Auction.com uses Google Trends data to look at searches such as those for real estate agents, property listings, mortgage rates and home inspectors, Sharga said. It also uses results from its online auctions of commercial and residential real estate as well as publicly released housing-market data, he said. ‘Powerful’ Models“By layering industry-specific transactional data and subject-matter expertise over that search data, organizations such as Auction.com are able to create powerful predictive models for accurately forecasting buying behavior in the present and for the coming months,” Hal Varian, chief economist at Mountain View, California-based Google, said in the statement. The National Association of Realtors relies on surveys of members to compile its monthly sales figures, slowing the release of results, Sharga said. The Realtors also report pending home sales, a leading indicator of transactions. Other companies, such as CoreLogic, rely on property-record filings, which take even longer, he said. Auction.com plans to begin issuing its national Real Estate Nowcast in the middle of each month, with future reports breaking out sales and pricing data on a regional and local basis, Sharga said. Google Trends, with data that go back to 2004, catalogs information on numerous searches for such topics as shoes, laptops and celebrities. Yesterday’s “hot searches” leader was an article about 1976 Olympic decathlon gold medalist Bruce Jenner’s pink nail polish. The Google data are anonymous and publicly available, according to Tim Drinan, a spokesman for the company. Mobile ApplicationsClosely held Auction.com, which is valued at $1.2 billion, based on Google’s stake, also is working with the Internet company to develop mobile and Web applications and improve its search-engine optimization for marketing, Sharga said. Auction.com, the largest U.S. online real estate auction company, is on track to exceed last year’s sale of $7.4 billion of 35,000 commercial and residential properties, he said. The real estate information industry is consolidating. In July, Seattle-based Zillow agreed to buy San Francisco-based Trulia Inc. (TRLA) for $3.5 billion, and last month Rupert Murdoch’s News Corp. (NWSA) made a deal to purchase Move Inc. (MOVE), the owner of Realtor.com, for $950 million. -By John Gittelsohn Riskiest WTC Debt From $1.6 Billion Muni Offer Gains After Sale Source: Bloomberg / U.S. Politics The riskiest part of this week’s $1.6 billion tax-exempt bond sale to finance the construction of 3 World Trade Center is rallying, driving yields down more than 1 percentage point. Developer Larry Silverstein’s Oct. 28 offering, the largest-ever unrated deal in the municipal market, was divided into three classes based on the priority of repayment. The most subordinate securities mature in November 2044 and priced to yield 7.25 percent, data compiled by Bloomberg show. The debt traded today at yields as low as 6.22 percent, and at an average of 6.31 percent. The $231 million tranche is “like pure equity” in terms of risk, Tom Metzold, co-director of municipal investments in Boston at Eaton Vance Management, which oversees about $24 billion in local debt, said before the sale. The more secure bonds haven’t rallied as much. The most senior debt, $1.1 billion of securities due in November 2044, priced to yield 5 percent, and traded today at an average of 4.98 percent. Bonds for 3 World Trade are backed by tenant leases and rents and secured by a mortgage. New York City and state will contribute $210 million and the Port Authority of New York & New Jersey agreed to let Silverstein use $159 million of insurance proceeds from a $4.6 billion payout after the Sept. 11, 2001, terror attacks. About 20 percent of the building is leased. Advertising firm GroupM is the only tenant in the 2.5 million square-foot tower, which is expected to be finished in 2018. Bond documents cite 118 investor risks, including the possibility the tower won’t be completed, insufficient tenant leases and the potential for terror attacks that could reduce revenue. -By Brian Chappatta China Backs Growth in Housing Again as Slowdown Prompts U-Turn Source: Bloomberg / Luxury With China headed for its slowest full-year expansion in a generation, the government has listed housing as one of the six consumption areas to be encouraged after years of trying to cool the property industry. China will “stabilize” property-related consumption and make it easier for people to access mandatory housing savings, the State Council said in a statement late yesterday after Premier Li Keqiang presided at a regular meeting. The last time China’s State Council documents mentioned “stabilizing” housing consumption was in April 2009, when the government was rolling out a massive stimulus plan to shield the economy from a global slowdown. Gross domestic product expanded 7.3 percent in the third quarter from a year earlier, the weakest pace in more than five years. “The announcement marks a U-turn in stance towards the property sector after years of attempts to cool it down,” Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong, wrote in a note today. It’s the first time in recent years that the central government officially declared direct support for the housing market, according to Credit Suisse Group AG. New-home prices fell in 69 out of 70 cities monitored by the government last month from August. Property prices may decline as much as 10 percent this year and the slump may extend into 2015, according to SouFun Holdings Ltd. ‘Major Drag’The “slowdown in the property sector has been a major drag to growth,” Ting Lu, Bank of America Corp.’s head of Greater China economics in Hong Kong, wrote in a note today. The Shanghai Composite Index (SHCOMP) climbed 0.2 percent at 11:13 a.m. local time. The Chinese government, which started tightening lending to property developers and buyers in April 2010 to prevent asset bubbles from expanding, has also signaled plans to reverse course on home financing, with the central bank on Sept. 30 relaxing mortgage rules for homebuyers who have paid off existing loans. “The government’s stance on the property market has changed to encouragement from caution,” said Johnson Hu, a Hong Kong-based property analyst at CIMB Securities Research. “It realizes the importance of real estate consumption. Most cities no longer need curbs on housing-price increases.” Consumption is an “important engine of economic growth,” the Cabinet said yesterday, adding that the government will also support e-commerce, environment-friendly products and tourism. It didn’t provide details. -By Bonnie Cao U.K. Housing Loses Momentum With Price Growth at 9-Month Low Source: Bloomberg / Luxury U.K. house price growth slowed to a nine-month low October, adding to evidence that the market for residential property is cooling. Annual price gains dropped to 9 percent from 9.4 percent in September in a second month of declines, Nationwide Building Society said today in a statement on its website. Still, prices rose 0.5 percent on the month after dropping 0.1 percent. Mortgage approvals fell to a 14-month low in September, Bank of England data show, and Hometrack Ltd. said London has hit an “inevitable” slowdown after values reached a record. The central bank imposed tougher mortgage rules to preserve financial stability. “A variety of indicators suggest that the market has lost momentum,” Robert Gardner, chief economist at Nationwide, said in the statement. “Some forward looking indicators, such as new buyer enquiries, suggest that activity may soften further in the near term, especially in London.” The average price is now 189,333 pounds ($303,000), with growth for the three months to October easing to 1.4 percent from 1.6 percent in the period through September, Nationwide said. Mortgage approvals fell to 61,267 while the 1.8 billion-pound increase in net lending was the least since January, BOE data yesterday showed. Prices in London rose 0.4 percent in September from August, when they gained 1 percent, property researcher Hometrack said last week. Record-Low RatesThe central bank put in place new mortgage rules as a majority of officials led by Governor Mark Carney say record-low interest rates are still needed to support economic growth. The BOE’s policy decision next week will be made in light of new quarterly economic forecasts. Deputy Governor Jon Cunliffe said today in a BBC Radio interview that while growth has shown momentum pay has not yet picked up and there isn’t much U.K. inflation pressure. He also said that rate increases from the current record-low 0.5 percent will happen gradually. “The housing market should be able to cope with higher interest rates, provided the increase is gradual and the economy and the labor market remain in good shape,” Gardner said. Gradual rate increases to a lower-than-average peak “should help ensure borrowing costs remain manageable,” he said. -By Jennifer Ryan Deutsche Annington Profit Gains on Higher Rental Income Source: Bloomberg / Luxury Deutsche Annington Immobilien SE (ANN), Germany’s largest publicly traded owner of homes, said nine-month profit rose about 26 percent after the company cut property-management costs and increased its rental income. Funds from operations excluding divestments, a measure of a property company’s ability to generate cash, climbed to 205 million euros ($258 million) from 163.4 million euros a year earlier, the Bochum-based company said in a statement today. Full-year FFO will be at the upper end of its target range, Deutsche Annington said. “We’re growing largely due to improved cost structures, more efficient property management and our modernization program,” Chief Executive Officer Rolf Buch said on a call with reporters. The company plans to spend 160 million euros this year and 200 million euros next year to modernize its apartments to attract tenants, Buch said. Deutsche Annington, which owns about 184,000 homes in Berlin, Cologne and other German cities, is taking advantage of rising demand for apartments in the nation’s economic hubs. The company plans to boost profits further in 2015 after agreeing to buy more than 45,000 apartments this year. Today’s results don’t include gains expected from these acquisitions, Buch said. More RentRental income in the first nine months rose 5 percent to 572.7 million euros from 546.1 million euros a year earlier, the company said. The vacancy rate fell to 3.6 percent from 3.9 percent. Net income in the third quarter rose to 50 million euros from 32.4 million euros a year earlier. FFO for all of 2014 will be 280 million euros to 285 million euros, rising to between 340 million euros and 360 million euros next year, the company said. German landlords are taking advantage of low interest rates and favorable stock marketconditions to raise money for apartment purchases. Investors bought 9.7 billion euros of apartment portfolios in the first nine months, up from 9.5 billion euros a year earlier, according to Jones Lang LaSalle Inc. Deutsche Annington plans to pay a dividend of 78 cents per share, compared with 70 cents a year earlier. -By Dalia Fahmy Fibra Uno Planning $1.5 Billion Acquisition in Mexico Source: Bloomberg / News Fibra Uno Administracion SA (FUNO11), Mexico’s biggest real-estate investment trust, plans to buy 20 billion pesos ($1.49 billion) of properties, according to the company’s adjunct Chief Executive Officer Gonzalo Robina. Fibra Uno is awaiting approval of the nation’s antitrust commission, known as Cofeco, to finalize the purchases, Robina told reporters in New York today. The five portfolios include 20 campuses of a university, office buildings, 13 retail properties, seven plots of land and three shopping malls in Mexico City, he said. “The more we grow, the more difficult it will be to find interesting portfolios to invest in,” said Robina. “We are really taking the opportunities we find.” Fibra Uno, the first to test Mexico’s tax-advantaged REIT structure, is benefiting from acquisitions that boosted net operating income by 61 percent in the third quarter and turned the company into the world’s biggest diversified property trust, according to data compiled by Bloomberg. The company plans to tap bond markets by the end of the first half of 2015, according to Jorge Pigeon, the head of investor relations at Fibra Uno. He said the company will need to refinance about $1 billion in peso and dollar debt coming due over the next three years, and will also return to equity markets. “The expectation is to deploy the capital that we still have sitting on the balance sheet in the next six months,” Pigeon said. “The only way you can grow to $4 billion a year is with a combination of debt and equity.” Debt IssuanceThe company will issue debt in short and long maturities, and is considering sales in both peso and dollar markets, he said. Fibra Uno isn’t currently considering a bond sale in other currencies, he said. Fibra Uno is also poised to get a boost from changes to the nation’s oil laws that will allow foreign producers to drill in Mexico for the first time in 76 years, said Robina. President Enrique Pena Nieto has said that ending the nation’s oil monopoly will bring an extra $250 billion in foreign investment and help lift annual growth close to 5 percent by the end of his term in 2018. Robina said an oil company he didn’t identify has already agreed to lease 2,000 square meters of office space. Fibra Uno anticipates that number to grow to 20,000 square meters within the next three years, he said. “We are already feeling the demand that is coming,” Robina said. -By Katia Porzecanski and Michelle F. Davis Expecting U.S. Growth to Slow? REIT Pair Trade Pays 1.6% Source: Bloomberg / Personal Finance Investors who see a slowdown for the U.S. economy may be interested in a strategy of being long Health Care REIT Inc. (HCN) and short Simon Property Group Inc. (SPG) Health Care REIT, the largest U.S. health-care landlord by market value, is up 32 percent since Dec. 19, outpacing the 22 percent gain for Simon Property, the biggest U.S. owner of shopping malls. Their stock-price ratio is rising from an all-time low -- see chart. Health Care REIT shares closed at $69.21 yesterday, while Simon Property was at $175.98. U.S. gross domestic product is forecast to grow 2.2 percent this year, down from 2.8 percent in January, based on the media estimate of economists surveyed by Bloomberg. This pair trade may appeal to investors with a contrarian outlook about the expansion, said Lance Roberts, who helps oversee $600 million as chief strategist for STA Wealth in Houston. That’s because it combines a defensive stock with one that’s pro-growth, offering a way to express a more skeptical view about the economy, he said. - Health Care REIT, based in Toledo, Ohio, is considered countercyclical because it benefits from a “forced spending cycle” on medical-related expenses for an increasing number of older Americans, Roberts said. Indianapolis-based Simon Property is “leveraged to overstretched consumers,” so it’s more dependent on strong economic gains. - U.S. GDP will expand 3 percent next year, according to the Bloomberg survey, though that projection could be “overstated,” particularly as millions of Americans still are out of work and haven’t benefited from the post-recession recovery, he said. This pair trade “pays investors to wait” because the dividend yield for Health Care REIT -- the long position in the strategy -- is bigger than the shorted stock’s, Roberts said. - The yield for Health Care REIT is 4.6 percent, compared with almost 3 percent for Simon Property, resulting in a positive differential of 1.6 percent, according to data compiled by Bloomberg. The ratio historically has increased leading up to and during U.S. recessions -- see chart, and its year-to-date performance is reminiscent of 2006-2007 when it rose ahead of “massive” gains coinciding with the 18-month slump that began in December 2007, said Jim Stellakis, founder and director of research at Technical Alpha Inc. in Greenwich, Connecticut. Traders increasingly shifting money into Health Care REIT and out of Simon Property illustrates some skepticism about economic growth that isn’t reflected by analysts’ recommendations yet, he said. - 38 percent of analysts have a buy recommendation on Health Care REIT, compared with 79 percent for Simon Property, the data compiled by Bloomberg show. - The price target for Health Care REIT -- at $66.83 for the next 12 months -- is 3.4 percent lower than its current share price, whereas Simon Property’s $191.72 target reflects an 8.9 percent increase, based on the consensus of analysts’ forecasts. Some investors may be dissuaded by Health Care REIT’s valuation, said James Sullivan, an analyst at Cowen & Co. This stock currently is trading at a 24 percent premium to his estimate of net asset value per share, compared with a 0.2 percent discount for Simon Property. - For this trade to work, the yield on 10-year Treasuries, currently at 2.3 percent, will need to fall more, after declining from a two-year high of 3.03 percent on Dec. 31. - There are some economic data -- including housing sales, manufacturing and hiring -- that should continue to benefit the shopping-mall operator. Still, more downward revisions to GDP forecasts “don’t bode well for Simon Property,” particularly given that the recovery is one of the longest in history and the Federal Reserve is completing its unprecedented quantitative-easing program, Roberts said. - As a result, this pair trade “makes excellent sense” for investors with a more skeptical economic outlook because of the ratio’s upside potential and attractive yield differential. -By Anna-Louise Jackson and Anthony Feld http://www.bloomberg.com/news/2014-10-30/expecting-u-s-growth-to-slow-reit-pair-trade-pays-1-6-.html |