Real News‎ > ‎2014‎ > ‎October 2014‎ > ‎

3rd October 2014

Singapore Real Estate

Relocations, tenants' surplus space to add over 1m sq ft to office supply: DTZ

Property observers say the price drop looks set to continue, with loan curbs remaining in place.

Source: Channel News Asia / Singapore

SINGAPORE: Prices of resale flats fell by 1.6 per cent on-quarter in the third quarter of 2014, according to flash estimates from the Housing and Development Board.

HDB on Wednesday (Oct 1) announced that its flash estimate of the 3rd Quarter 2014 Resale Price Index (RPI) is 192.5, a decline of 1.6 per cent over the previous three months. 

It is also the fifth straight quarter of decline. But property observers say the drop is "moderate" as overall price fall is in the single-digit range.

"We expect the index to weaken by between 5 and 6 per cent for the entire 2014. This can be considered a moderate rate of decline, compared to, for instance, when we were faced with economic recessions and financial crises, property prices then dropped 10 to 15 per cent or even 20 per cent in some cases," said SLP International Property Consultants Executive Director and Head of Research, Mr Nicholas Mak.

They say cooling measures such as the 30 per cent cap in the mortgage servicing ratio and the change in resale procedure have helped stabilise prices. Since March, the buyer can only obtain the valuation report after the deal is sealed and the Option to Purchase has been granted to him.

Real estate agency ERA Realty, which says it holds about 42 per cent of the HDB resale market share, noted that most of the transactions it handles are supported by valuation.

But property firm HSR says recently-completed executive condominium projects may have affected prices in the HDB resale market as buyers who are HDB upgraders would have had to sell their flats.

HSR said seven executive condominiums, with a total of almost 3,600 units, obtained their Temporary Occupation Permits during the past 9 months.

Looking forward, property watchers estimate that the HDB resale volume will settle at a new low of about 17,000 units this year, compared to last year's 18,000 units. 

The RPI for the full quarter and more detailed public housing data will be released on Oct 24.

In its press release, HDB noted that about 4,290 BTO flats in Sembawang, Sengkang, Tampines and Yishun will be offered in November. In addition, about 3,000 flats will be offered in a concurrent Sale of Balance Flats exercise. 


Prices of private homes have been falling for a year. In the third quarter of this year, prices fell by 0.6 per cent.

Homes in the core central region (CCR), continued to bear the brunt. Prices there fell 0.9 per cent, as buyers stayed away from these higher-priced properties due to loan curbs.

As for the suburbs, prices dipped by 0.2 per cent.

The city fringe, also known as the rest of central region (RCR), was the most resilient in the third quarter. Prices there dropped by only 0.1 per cent.

HSR International's Head of Singapore Projects Mr Alan Tan said that a large percentage of RCR property buyers would have originally thought of purchasing in CCR instead, but were deterred by the cash outlay as a result of the Total Debt Servicing Ratio (TDSR) and other measures.

"It is wiser for them to move to the RCR. That's why we call it city fringe - it is actually near to the city area, not exactly in the centre of the city area, but the amount of investment opportunities and activities that can happen there is quite great," said Mr Tan.

Observers say prices will continue falling, as long as current loan curbs remain in place. They also note any easing of the measures is unlikely to be soon, as Singapore's economy is in a good shape.

"Interest rates may be one of the considerations on when to ease the cooling measures, but it is not the crucial factor. The important factor is if the Government were to remove the cooling measures now - what are the possibilities prices could grow again at a robust pace," said Mr Mak from SLP International.

"The Government may have to wait for a situation where the chances of a strong rebound in property prices is unlikely to happen, then they will remove some of the cooling measures," Mr Mak added.

Mr Mohammed Ismail, Chief Executive of PropNex also said cooling measures will likely remain. "As long as borrowing costs stay low, the Government is unlikely to reverse the measures. With Total Debt Servicing Ratio being a long-term instrument and together with the Additional Buyers' Stamp Duty, it will continue dampen any speculative activity."

- CNA/es/dl

Kuehne + Nagel building 46,000 sq m warehouse

Source: Business Times / Singapore

LOGISTICS services provider Kuehne + Nagel has launched the construction of a 46,000 square metre multi-purpose warehouse facility in Singapore.

The build-to-suit (BTS) logistics centre will be ideally located within close proximity to major manufacturers and ports.

The new state-of-the-art facility will have 55 loading bays and five floors dedicated to storage, with up to 20,000 sq m to be used as a cold storage zone to manage temperature-sensitive goods for pharmaceutical and healthcare customers.

The remaining space will cater mostly for aerospace, spare parts and hi-tech products, with 4,000 sq m allocated to offices.

-By Malminderjit Singh

Marina One's developer to take cautious path in launching units

M+S to launch less than half the units in Tower 1, and Tower 2 only after the TOP

Source: Business Times / Property

M+S Pte Ltd, the developer behind the mega mixed-use project Marina One, is taking a calibrated tack with its upcoming launch of the residential units in the development, and is dangling early-bird discounts of 10 per cent on selected units.

On the expected launch date of Oct 11, it will release only 150 to 200 units in the first block, instead of all 521 at a go.

It will also hold back the release of the 521 units in the second residential block until after the project's temporary occupation permit (TOP) is issued, said Kemmy Tan, the chief operating officer of M+S.

Prices at Marina One Residences will range from S$1,960 to S$3,100 per square foot (psf), which is on par with transacted prices in the area, she added.

By Lynette Khoo

Strong investor interest in Marina One Residences

Source: Straits Times / Money

IN THE slow property market, the developer of the expansive Marina One Residences is dangling a 10 per cent early bird discount as it releases about 200 units.

The units, at one of two residential towers, with 1,042 units in all, will be launched only after the project gets its temporary occupation permit.

But developer M+S said it is "very pleased" with the interest in the preview period, which started on Sept 13.

"Over 800 people came to our showflat in the first weekend," said M+S chief operating officer Kemmy Tan at a media briefing yesterday.

She said the project's location and connectivity - near four MRT lines - and its backing by Khazanah Nasional and Temasek Holdings make it an attractive investment.

The project will be officially launched for sale on Oct 11. Bulk sales of at least three units will begin today, The Straits Times understands.

Already, more than 200 prospective buyers have put in expressions of interest.

Ms Tan said M+S will likely release 150 to 200 units at $1,960 to $3,100 per sq ft (psf) at the launch - more, subject to response.

This translates into starting prices of $1.4 million for one-bedders of 657 to 775 sq ft, and more than $2 million for two-bedders, which range from 969 to 1,130 sq ft.

The project also has three- and four-bedders and penthouses, with penthouse prices on application, but at least above $20 million for the 6,469 to 8,568 sq ft units.

Of the prospective buyers, about 70 per cent are investors and the other 30 per cent are owner-occupiers.

About 20 per cent of prospective buyers are foreigners so far with strong Malaysian interest. M+S has a sales gallery in Kuala Lumpur as well.

While rental yields are expected to be 2 to 3 per cent, it could improve significantly in years to come, said Ms Tan.

"We are looking to be the continued location of choice in the long term...We have a critical mass in retail offerings and are not just a standalone residence, compared with other developments."

Overall, Marina One, scheduled for 2017 completion, comprises a gross area of about 3.67 million sq ft - two 34-storey residential towers, two 30-storey Grade A office towers with about 1.88 million sq ft of net lettable area, a 140,000 sq ft retail area for about 110 shops, and a 65,000 sq ft garden.

Ms Tan said the company is still negotiating the leases, but has already found an anchor gym operator as well as foodcourt operator.

-By Rennie Whang

Marina One Residences to be launched next weekend

With two 34-storey residential towers, there will be a total of 1,042 units in the project. 

Source: Channel News Asia / Business

SINGAPORE: Luxury project Marina One Residences at Marina Bay is set to be launched next weekend, with its developer planning to release between 150 and 200 units in its first phase.

Its developers said many of those who have expressed interest are looking at buying a unit for investment. Units are expected to go for between S$1,960 and S$3,100 per square foot.

With two 34-storey residential towers, there will be a total of 1,042 units in the project. Seventy per cent of these are one- and two-bedroom flats.

The project, which comprises residential, office and retail components, is being developed by M+S Pte Ltd, a joint venture by Temasek Holdings and Khazanah Nasional.

- CNA/dl

Free activity lessons for Lake Life residents

Developers in various tie-ups to 'upend' condo conventions

Source: Business Times / Property

THE developers of the Lake Life executive condominium (EC) have confirmed collaborations with partners such as True Fitness and Tennis Allegiance Group International (TAG) to provide tennis, yoga, hot yoga, dance and swimming lessons for residents.

Most of these lessons will be free for the first year and subsidised thereafter.

Vincent Ong, managing partner of Evia Real Estate, which leads the consortium of developers, said it was going beyond providing facilities and hardware, which are passive, to create "software" with classes, activities and programmes.

"Lake Life is poised to upend conventions in condominium living," he said.

-By Lee Meixian

Shophouse among three sites recognised for quality restoration

Source: Today Online / Singapore

SINGAPORE — When the owner of a Neil Road shophouse was told that one of its beautiful, plastered walls had collapsed during restoration, she was dejected. As she felt the relief wall panels and antiquated pigmented cement tiles in the original courtyard had to be preserved, Ms Ho Ren Yung rushed to the shophouse to take a look, but realised the collapsed wall had, instead, revealed “cool” red and yellow tiles that looked “so much better”.

Located at 145 Neil Road, the 150-year-old heritage building is among a row of shophouses that have been earmarked for conservation by the Urban Redevelopment Authority (URA). It was also one of three sites that won the Architectural Heritage Awards presented by the URA yesterday, given to encourage quality restoration and conservation work in Singapore. The other two winners were Yueh Hai Ching Temple at 30B Phillip Street and J8 hotel on Townshend Road.

Speaking at the award ceremony yesterday, Mr Desmond Lee, Minister of State for National Development, said all three were “remarkable” examples of outstanding restoration.

For example, the Yueh Hai Ching Temple was “masterfully and meticulously restored” with the help of architectural historian Yeo Kang Shua, and skilled craftsmen were recruited from China to help in the restoration work, he noted.

Ms Ho’s mother bought the shophouse more than 20 years ago before she took over the property a few years ago. As one who has always had an appreciation for culture and heritage, Ms Ho saw the shophouse as the perfect place for a renovation and restoration project that would combine modern elements and heritage.

From the start, she decided to maintain the facade and interior of the two-storey terrace house in their original condition. The two-year project began only after she had conducted intensive interviews and house tours with five to six architects.

The first six months of the project were spent identifying all the elements they did not want to change.

Referring to an original calligraphic panel along the corridor on the second storey, Ms Ho said they had tried “very hard to keep that as the history of those words and where they came from is something we treasure”. Plus, they (the Chinese characters) say “celebrate goodness”.

The 28-year-old also went to great lengths to retain and restore as many vintage features in the shophouse as possible, even driving up to Malacca to source for and bring back reclaimed tiles from old homes that could be used.

Ms Ho also said there were unexpectedly few guidelines to follow in working on a heritage building, save for preserving the exterior. “We were not restricted at all.”

Revealing that the restoration work cost about S$1.2 million, Mr Mark John Wee, the project’s architect, said he believes conservation buildings have “character” and stories to tell.

“When we conserve buildings, I try to find out the story of the building — who lived in it before, what kind of life the place had and what kind of street it was on — and I try to retain as much of the building as possible, even scars — the imperfect areas — by expressing them instead,” said Mr Wee, who also worked on New Majestic Hotel & Bar, which won the URA Conservation Heritage Award in 2006.

-By Emilia Tan

Singapore Sports Hub wins award at World Architecture Festival

The Singapore Sports Hub beat five other entries, and the judges said the project "represents innovative engineering on all levels".  

Source: Channel News Asia / Singapore

SINGAPORE: The Republic's Sports Hub has won the 'Completed Buildings - Sport' award at the World Architecture Festival 2014, the festival announced in a media release on Thursday (Oct 2). 

The Hub, designed by the Singapore Sports Hub Design Team comprising Arup, DP Architects, and AECOM, beat five other entries, including the WMS Boathouse in Chicago and the Hong Kong Velodrome. 

The judges commended the Sports Hub as a project “designed with a nation’s health, sustainability, and legacy in mind", saying it "represents innovative engineering on all levels and shows a new approach to an integrated sports, leisure and entertainment district. The project exemplifies the successful fusion of architecture and engineering”.  

The World Architecture Festival is the largest annual festival and live awards programme for the global architecture community. It is held at the Marina Bay Sands in Singapore from Oct 1 to 3.

- CNA/dl

Views, Reviews & Forum

Unlock value of property to fund retirement: Aviva chief

Source: Straits Times / Money

PROPERTY is a great asset but Singaporeans need to consider how to unlock its value if they wish to have an easier life in retirement, advises insurance boss Nishit Majmudar.

The Aviva Singapore chief executive believes investors may not be getting the most out of their real estate when it comes to funding their golden years.

Much of the problem lies with people not monetising their home based on sentimental reasons. But that serves only to erode the potential gains generated over time, he said.

"We earn those returns on property but we don't want to use those returns to convert that into a good retirement, we just want to keep the property for ourselves," he told The Straits Times on Tuesday.

The need to be able to derive good returns from property also stems from the fact that it takes up a significant portion of a person's savings.

It is also one of the most common investments, with about 90 per cent of households in Singapore owning their own homes last year.

Mr Majmudar said the situation is different in the United States or Britain, where people invest between 40 and 50 per cent of their savings in equities.

"When the Americans and British retire, the appreciation they gained in equities will be used to fund their retirement.

"We invest more in property than equities. The appreciation we get in property, are we willing to use that?"

Mr Majmudar also expressed concerns about the proposal for retired Central Provident Fund (CPF) members to withdraw part of their CPF savings in a lump sum, subject to limits.

He acknowledges the money is useful for emergencies such as medical crises. But he reiterates the importance of ensuring that savings can continue to add to the pool of retirement funds.

"That lump sum of money is the result of many years of hard work and it is hard-earned savings. Will they be able to invest that money over a 20-year period and earn a good return?"

Mr Majmudar, who has been in the industry for about 30 years - with stints in India, Britain, the Philippines and Thailand - said many countries are facing the same pressures in meeting retirement funding needs.

That means helping people save enough in a low interest rate environment by ensuring they start saving early and are well-equipped to have a diversified portfolio to grow their savings - a strategy that is especially important given that people are living longer.

"We are on the right track, we have high savings, we are getting more aware of our responsibilities on what we need to do and we are beginning to see people invest at an early age."

-By Mok Fei Fei

Huge rent increase in HDB-run industrial building

Source: Straits Times / Forum Letters

MY FATHER rents a unit at AMK Autopoint - an HDB-managed industrial building for small and medium-sized enterprises in the car repair, servicing and refurbishment business.

His rental contract is ending at the end of this month, and we received an invitation to renew it in the middle of last month.

We were shocked by the increase in rental. If we were to sign a one-year contract, the rent would increase by 31 per cent. If we signed a three-year contract, there would be a 10 per cent increment each year until the third year, when there would be a 31 per cent increase over the current rate.

Landlords of private commercial properties are known to be profit-driven, but why is a government statutory board charging such high rental, which surpasses even that imposed by some private landlords?

Is this fair to small businesses, and is there a regulatory body overseeing this?

It is no wonder that the cost of running a business is ever-increasing - and this will eventually be passed on to consumers.

Also, the late notice of the increment caught us off guard, leaving us with little time to seek alternative arrangements.

-By Kee Mui Hong

Worrying signs on property front

Source: Straits Times / Forum Letters

MONDAY'S article ("Downtown home prices take a big hit") points to trouble ahead.

Technically, a property bubble occurs when there is a run-up in housing prices fuelled by demand and speculation, followed by a period when supply exceeds demand and prices plunge, with some owners desperately selling off their property assets at a loss.

This has happened in seven loss-making transactions in the downtown area in the first eight months of the year.

Unless some measures are taken, the trend may escalate as indications are that, over the next three years, more than 20,000 units are coming on-stream each year but the take-up may be less than half.

The HDB also adds to the supply equation.

A drop in HDB resale prices may worsen the problem as many who have booked new private residential units are expected to sell their current HDB flats to pay for their purchases.

The solution may not be a simple one as developers need to move their units to get their cash flow, and some industry sources say developers have started to offer promotional discounts.

This situation mirrors the United States mortgage crisis that threw financial institutions into a negative economic spiral and which took many years to fix.

Singapore, being a small open economy, cannot afford a plunge in real estate prices.

Perhaps easing the restrictions on buyers may stimulate demand, but this lends itself to the problem of individuals over-extending themselves.

Ultimately, the only solution may be to restrict developers to offloading their units on a staggered basis, and offer them a moratorium on repayment of their bank loans.

-By Anil Bhatia

Global Economy & Global Real Estate

KepLand starts work on office levels of Saigon devt

Source: Business Times / Companies

KEPPEL Land on Thursday said that it is progressing into the next phase of developing its 42-storey Saigon Centre Phase Two with work starting on 37 storeys of offices and serviced apartments in its landmark mixed-use development in Ho Chi Minh City.

The retail podium, currently under construction, has a pre-commitment of about 40 per cent. Anchor tenant Takashimaya will house its first department store in Vietnam here, taking up 

about 15,000 square metres. The retail podium comprises five levels of retail space, and the 37-storey office tower is above this five-storey retail podium.

Saigon Centre Phases One and Two are jointly owned by Keppel Land, Toshin Development and Vietnamese partners Southern Waterborne and Transportation Corporation and Saigon Real Estate Corporation. Keppel Land holds a 45.3 per cent stake in the development.

Keppel Land last month announced that it will divest its one-third stake in Marina Bay Financial Centre Tower 3 to Keppel Reit for S$1.248 billion.

The divestment will enable it to recycle capital to reinvest in other commercial projects in its core markets, Vietnam being one of them, it had said.

Linson Lim, president (Vietnam) of Keppel Land, reiterated this on Thursday, adding that Saigon Centre Phase Two will help to meet the demand for prime office and retail space in HCMC.

Keppel Land said that there is currently a limited supply of quality office space in the area's central business district. As at end-March 2014, there were only 190,000 sqm of Grade A offices of the estimated 1.6 million sqm of office space.

TheSaigon Centre Phase Two will comprise 40,000 sqm of premium Grade A office space,50,000 sqm of retail space and about 200 units of luxury serviced apartments. Its total investment cost will be about US$255 million (S$325.1 million).

Phase One is currently 95 per cent leased to several diplomatic corps, multinational companies, as well as banking and financial institutions including DBS Bank, AIG, Reuters, Mitsubishi Corporation, and IE Singapore. Its 4,000 sqm retail mall is fully leased.

-By Lee Meixian

GIC to buy 30% stake in Spanish property firm

$321m deal allows fund to gain access to diversified office portfolio in Madrid

Source: Straits Times / Money

SOVEREIGN wealth fund GIC has agreed to pay more than €200 million (S$321 million) for a 30 per cent stake in Spanish real estate firm Gmp. The investment will enable Gmp to strengthen its position as a major investor in the office and business park segment in Madrid and Barcelona, GIC said in a statement.

"This is a good opportunity for GIC, as a long-term value investor, to gain access to a large and diversified office portfolio in Madrid, and to leverage on Gmp's local expertise to grow our exposure," Mr Chris Morrish, regional head for Europe at GIC Real Estate, said in the statement.

Gmp chief executive Francisco Montoro said the funds "will be used to foster growth through new investments, refurbishment and development projects".

Growth plans include making selective investments in office buildings aimed at leveraging the growth potential in the market. There will also be active management of the existing Gmp portfolio, encompassing refurbishment work, repositioning and improvements in building sustainability and energy efficiency. In addition, non-strategic assets will be disposed of.

In line with this strategy, Gmp acquired the former headquarters of tobacco group Altadis on July 15. The office building at 10 Eloy Gonzalo Street, Madrid, has a gross leasable area of more than 13,000 sq m, and full refurbishment work has already begun.

Established in 1979, Gmp is a major unlisted property group that currently owns more than 410,000 sq m of space in operation, including 4,200 parking spaces. There is a land bank for new projects as well, with a buildable area amounting to 86,601 sq m.

Moreover, the company has managed more than 300,000 sq m of buildable space for third parties during the past 10 years.

Its property portfolio includes buildings such as Genova 27, Hermosilla 3, Castellana 81 and Alcala 16, as well as business parks such as Parque Norte, Castellana Norte and Iberia Mart.

Spain's economy was badly affected during the euro zone crisis, but its property market is seeing signs of recovery, experts said.

Among GIC's recent investments is a stake investment in roadside assistance company RAC, purchased from Carlyle Group. Carlyle and GIC will jointly own a majority stake in the business, with RAC management holding the remaining shares.

Little danger of a property-sector crash hurting China: ADB economist

Source: Business Times / World

A WIDELY forecast correction in China’s property markets would be unlikely to have a severe impact on the Chinese economy as a whole, recently appointed chief economist at the Asian Development Bank (ADB) Wei Shang-Jin said in Tokyo on Thursday.

An expert on China, Shanghai-born Mr Wei suggested that even if the Chinese government was forced to bale out banks exposed to property-sector debt, the cost should not amount to more than several percentage points of GDP.

Former head of a working group on China in the US National Bureau of Economic Research, Mr Wei called on China to cut taxes rather than increase credit in order to maintain growth in the world’s second largest economy.

He noted the ADB’s forecasts of 7.5 per cent growth in China this year, and 7.4 per cent in 2015. But he argued that China does not need ambitious growth targets in order to preserve employment.

-By Anthony Rowley in Tokyo

Marriott eyes 'super growth' in three African countries

It mulls 40-50 hotels each in Nigeria, South Africa, Egypt

Source: Business Times / Property

[ADDIS ABABA] Marriott International Inc may build 40 to 50 hotels in Nigeria, South Africa and Egypt each by 2020 to benefit from a surge of travellers, said Alex Kyriakidis, the chain's president for the Middle East and Africa.

The plan is to add 10,000 hotel rooms apiece in Africa's three biggest economies, targeting "super growth" based on their economic potential and tourist attractions, Mr Kyriakidis said on 

Thursday in an interview in Ethiopia's capital, Addis Ababa.

"We see tremendous growth opportunities in Egypt," he said. "As Nigeria's economy powers on, the demand for hotel rooms is going to be substantially greater."

The Bethesda, Maryland-based company sees the region as its highest revenue-growth market to 2020, Mr Kyriakidis said.

-From Addis Ababa, Africa

Aussie regulators set to tighten home lending to pre-empt bubble

Source: Today Online / Business

SYDNEY — Australian regulators are considering new steps to rein in lending for housing investment and an initial announcement is likely to be made by the end of the year, the central bank said yesterday, in a move to pre-empt a property bubble.

Reserve Bank of Australia (RBA) Assistant Governor Malcolm Edey said the aim would be to avoid a run-up in house prices that could potentially spill over into a bust that will hurt household wealth and spending. He said the Australian Prudential Regulation Authority (APRA), which oversees banks in the country, had already tightened its oversight of lending, but was now considering “turning up the dial” with new measures aimed at borrowing for investment in buy-to-let housing.

“We are discussing with APRA steps that might be taken to reinforce sound lending practices, particularly for investor finance, though not necessarily limited to that,” Mr Edey told a Senate inquiry into affordable housing. A preliminary announcement on the steps is likely to come before the end of the year, he added.

The RBA last week surprised the market by saying it was open to tougher rules on lending for housing investment, given rapid loan growth and rising home prices. Such macro-prudential measures aim to limit the build-up of leverage in the banking system as a whole rather than just at individual banks.

That led senators to invite the central bank to a hastily-arranged committee meeting to discuss the new measures, with an eye to making sure they would not harm housing affordability or the supply of new homes.

Mr Edey, who heads the financial system unit of the RBA, said regulators were trying to devise rules that would specifically target imbalances in investment lending, without hurting home construction or the housing market in general.

The central bank has been keen to see a revival in home building as one way to offset the winding down of a decade-long boom in mining investment. However, a surge in investor borrowing to buy homes in Sydney and Melbourne risked causing an upward spiral in prices that might eventually lead to a severe downswing.

Price growth, while having slowed somewhat last month, was still up 9.3 per cent from September last year, property consultant RP Data said. In Sydney, annual price growth was running at a rapid 14.3 per cent, with Melbourne following at 8.1 per cent.

Mr Edey said rules to set a cap on loan-to-valuation ratios were unlikely to be included since they would have little impact on investors who typically were wealthy enough to afford large deposits on properties.

Analysts said the steps are more likely to focus on greater interest rate buffers for investor loans, increased capital provisions against such loans, and reduced exposure to geographical areas with investor concentration.

Mr Ku Swee Yong, chief executive of property firm Century 21 Singapore, said many Singaporean and Chinese investors do not take up loans when buying the lower-priced homes in Australia ranging from A$300,000 (S$335,120) to A$400,000, with mortgage rates hovering at 5 per cent.

“Rates are much higher Down Under than in Singapore. For the higher-quantum properties, they may take a loan, but the risk of leaving the investment property sitting empty is much lower with Singaporeans (than with the Chinese).” 

-By Agencies

Emaar Properties mulls listing hotels unit

Source: Business Times / Property

[DUBAI] Emaar Properties, Dubai's largest listed developer, may take its hotels unit public after the successful listing of its malls and retail subsidiary, the company's chairman told reporters on Thursday.

Emaar sold a 15.4 per cent stake in Emaar Malls Group (EMG) in an initial public offer last month, raising US$1.6 billion after heavy oversubscription. The stock jumped 13 per cent after listing on Thursday.

This week, local media quoted its chairman Mohamed Alabbar as saying that the hotels unit could follow in a few months. However, on Thursday, Mr Alabbar declined to indicate any timetable for the flotation. "Emaar Hospitality is going to go public when the board of the company decides. The percentage, size and when - all of that I will come back to you with. But the intention is to move forward as soon as possible," he said on the sidelines of an event to mark the start of trading in EMG.

"We are in the business of enhancing shareholder value," Mr Alabbar added. "If there is value to be created for shareholders, then that is what we will do."

-From Dubai, UAE

Canadian Pacific Taps C$1 Billion of Property in New Plan

Source: Bloomberg / News

Canadian Pacific Railway Ltd. (CP) will seek to develop or sell about C$1 billion ($896 million) of real estate assets as part of a new plan to cut costs and double profit in four years. The shares surged to a record.

Canada’s second-largest railroad is in talks with “a number of major North American property developers” over ways to develop and “realize significant value,” Chief of Staff Mark Wallace said today at the company’s investor day in White Plains, New York. Wallace said he plans to recommend possible partnerships to Canadian Pacific’s board at a meeting next month, without identifying potential firms.

Canadian Pacific began a review of its property holdings after Chief Executive Officer Hunter Harrison -- hired out of retirement in 2012 -- put in place a strategy to reduce costs and improve efficiency that included closing some rail yards and shrinking the workforce. Harrison yesterday outlined a new four-year program to more than double per-share earnings.

“We expect to generate significant value from these properties over time,” Wallace said in webcast.. “Would I and this management team be disappointed if we didn’t see significant value creation near the second half of this business plan? The answer to that question would be a strong ‘Yes.’”

Canadian Pacific climbed 5.3 percent to a record C$234.70 at the close in Toronto today for its biggest gain in more than 11 months, as the company wrapped up its two-day investor briefing.

‘Strategic Options’

Options for the property that may be considered include putting some of the lands into real estate investment trusts, Wallace said.

“We will always maintain the flexibility for future strategic options,” he said. “It could mean bundling these assets or revenue streams into separate businesses, looking at different options like REITs or other vehicles to maximize” shareholder value.

REITs, with their primary income from real estate, distribute a portion of their taxable earnings to shareholders as dividends.

The C$1 billion estimate is based on the gross sale value of the undeveloped land, Wallace said.

Canadian Pacific’s portfolio of “surplus land” includes more than 45 sites in Canada and the U.S. covering about 4,000 acres (1,600 hectares) that could be used for industrial, office, retail or residential projects, Wallace said.

Advertising Boards

The assets include a 75-acre site in Schiller Park near Chicago’s O’Hare International Airport, Obico Yard in Toronto, and a three-acre site in downtown Montreal next to the Bell Centre arena.

Canadian Pacific will soon begin the process of selling properties that are not targeted for development, with results likely in 2015, Wallace said.

The railroad will extract maximum value from the land it keeps by installing advertising boards, mobile telephone towers or fiber-optic cable, Wallace said. Those steps would help “ancillary” revenue -- which now amounts to about C$50 million a year -- to double within five years, he said.

“If the property is required for rail operations, we’re going to make the property sweat and earn its keep.”

Revenue will probably climb to C$10 billion in 2018 from last year’s C$6.1 billion, the Calgary-based railroad said in a statement. Canadian Pacific is targeting revenue of C$2 billion by 2018 from intermodal cargo, which moves by a combination of trains and trucks or ships, according to its slide presentation today. Intermodal sales were C$667 million in this year’s first half.

Widely Watched

The company is also moving to cut costs. Operating ratio, a widely watched measure of railroad efficiency that expresses expenses as a percentage of revenue, will probably drop to “the low 60s” at the end of the four-year period, CEO Harrison said yesterday.

“We’re where we need to be from a cost structure standpoint,” the CEO said. “Could it ever be below 60? Yes,” he said, referring to the efficiency ratio.

Canadian Pacific’s operating ratio improved by 680 basis points to 65.1 percent in the second quarter of 2014 from a year earlier. Only Canadian National Railway Co. (CNR), the country’s biggest railroad, fared better with a 59.6 percent ratio, according to data compiled by Bloomberg Intelligence.

Harrison, 69, who agreed in May to extend his contract until 2017, said yesterday he’s “running out of time” to make changes at the railroad.

“This is probably going to be my last plan, my last cut at the apple,” he said. “So I’m very engaged this year that this is another step in the right direction.”

While Canadian Pacific didn’t provide a detailed per-share target for 2018, it predicted in January that adjusted 2014 earnings will rise at least 30 percent from a base of C$6.42 a share, implying profit of at least C$8.35. On that basis, a doubling by 2018 implies profit of at least C$16.70.

-By Frederic Tomesco

BOE Signs Off Housing Stimulus as FPC Requests More Powers

Source: Bloomberg / Luxury

U.K. Chancellor of the Exchequer George Osborne’s housing initiative doesn’t pose a risk to financial stability, the Bank of England said today as it asked the government for more powers to limit mortgage lending.

With U.K. house prices climbing to a record this year and BOE Governor Mark Carney saying the property market poses one of the biggest risks to the recovery, the Financial Policy Committee today asked the government for the ability to limit loan-to-value ratios and debt levels in the buy-to-let market.

In a letter to the chancellor published in London alongside a record of the FPC meeting held last week, Carney said there were “no material” threats from the government’s Help to Buy program that enables buyers to purchase homes with a down payment of as little as 5 percent, suggesting the key threats to the economy come from other parts of the market.

The FPC “assesses that the scheme does not pose material risks to financial stability, either directly, or through its impact on the wider housing market,” the governor wrote. The stimulus “does not appear to have been a material driver” of house-price growth, he said.

Stimulus Plan

Osborne’s policy has been criticized by Prime Minister David Cameron’s Liberal Democrat coalition partners and former Chancellor Nigel Lawson, who say it risks fueling a property bubble. The chancellor has asked BOE financial-stability officials to carry out an annual evaluation of the program, which aims to help first-time buyers.

The statement from the Sept. 26 meeting showed that officials also wanted to extend their oversight of the property market. The FPC has already sought to curb riskier mortgages with loan-to-income caps. Under final rules published yesterday, no more than 15 percent of mortgages offered by banks can exceed 4.5 times a borrowers’ income.

The committee agreed that the additional power to limit the proportion of high loan-to-value ratio loans “would add to its ability to tackle sources of housing risk that arise directly through lenders’ balance sheets,” according to the statement. Such limits have been effective internationally, it said.

“Substantial and rapid increases in household debt can make recessions deeper and longer, which then feed back into financial sector stability,” Jon Cunliffe, deputy governor for financial stability, said in a statement. “We were asked the question ‘what tools do you need to deal with pressures that could come from the housing market in the U.K.?’ and we’ve answered that question.”

The Treasury will now consult on the BOE’s proposals, which would allow stability officials to intervene should they have concern that there’s a direct threat to the financial system.

Household Debt

Household debt in Britain stood at a record 1.46 trillion pounds in August, according to the BOE. Indebtedness, at about 140 percent of gross disposable income, is higher than in the U.S.,Germany, France and Japan.

While the FPC said geopolitical risks “appeared more marked” in October, than at their last meeting in June, they noted that financial markets remain “remarkably resilient” to those threats.

Banks remain “on a path of gradually improving resilience,” the FPC said. Officials will bring forward proposals on the level of the so-called leverage ratio for banks by the end of October. They had originally planned to issue that number next year.

The panel also published a recommendation it had made privately to the bank and the Financial Conduct Authority in June last year, that they should promote contingency plans in case benchmarks such as the London Interbank Offered Rate became unavailable.

Publishing the recommendation was judged to be against the public interest at the time “because of the risk of precipitating the unavailability of benchmark quotes that the recommendation was seeking to avoid,” according to the statement. The FPC closed the recommendation last month as the Financial Stability Board, chaired by Carney, had started contingency planning.

-By Ben Moshinsky

Nursing Homes for Sale as N.Y. Counties Cut Costs

Source: Bloomberg / Personal Finance

New York municipalities are getting out of the nursing-home business, ridding themselves of a financial burden just as baby boomers head into old age.

Four publicly owned homes for the elderly are on the block, after at least 11 of the 40 counties outside New York City that owned the safety nets for the poor sold or closed them since 1997, according to data compiled by Bloomberg and the Center for Governmental Research in Rochester.

The governments are responding as Wall Street takes note of the fiscal strain: Orange County, a New York City exurb, lost its top grade from Moody’s Investors Service in March and had its rating cut again in August. The company cited almost $37 million in subsidies to Valley View Center for Nursing Care & Rehabilitation since 2012. In contrast, Moody’s raised neighboring Rockland in July after the county found a buyer for its Summit Park Hospital and Nursing Care Center.

“They’re a big drain on the finances and I’m not sure if a county should be in that business,” said Howard Cure, head of municipal research at New York-based Evercore Wealth Management LLC, which oversees about $5.2 billion. “We are very cautious about counties that have that type of exposure.”

Collective Loss

The municipalities are contending with pension costs for unionized nursing-home workers that are climbing more quickly than Medicaid reimbursements. In 2010, New York’s municipally owned homes collectively recorded a $201 million net loss, according to the Center for Governmental Research.

Closures and sales, mainly in the northeast U.S, where some facilities for the indigent elderly have existed for more than a century, have set off battles between unions and elected officials. In the aftermath of the recession that ended in 2009, lawmakers from New York to California have sought to cut costs amid ballooning pension obligations and climbing wages.

Rockland and Orange counties have fought union-supported lawsuits attempting to stop efforts to sell the homes. Unions and some residents say privatizing the facilities may leave the poor with no place to go. About 25 percent of residents admitted to county-owned nursing homes are on Medicaid, the health-care program for the poor, compared with 10 percent for other types of homes, according to CGR.

‘Public Benefit’

The governments are trying to unload the assets as the nation’s population is graying. The first of the baby boom generation reached 65, the traditional retirement age in the U.S., in 2011, and about 8,000 attain that milestone daily, according to AARP, a nonprofit group representing people aged 50 and older.

In the 33 counties that still owned homes last year, the number of residents aged 75 and older is expected to grow 30 percent by 2030, according to the CGR report.

“They do provide a public benefit,” Rob Weber, a Moody’s analyst in New York, said by phone. “It’s a place of last resort.”

County officials say they have little choice but to sell. In 2011, Democratic Governor Andrew Cuomo imposed a Medicaid spending cap that limited expenditure growth to 4 percent in the first year, with subsequent annual changes pegged to the 10-year average for the consumer price index for Medicaid.

Meanwhile, in the decade ending in 2010, median employee benefit costs calculated on a daily basis at county-owned homes rose 181 percent, after deals between unions and elected officials, compared with a 74 percent increase at for-profit homes, according to CGR.

Fiscal Shortfall

The combination helped create as much as a $100 daily shortfall for each Medicaid recipient at the median county-owned home in 2011, CGR said.

Investors in the $3.7 trillion municipal market have demanded higher yields on Orange County debt, while the relative borrowing costs for Rockland, graded two steps above junk by Moody’s, at Baa2, have fallen.

Rockland County general-obligation bonds maturing in September 2027 changed hands today at an average yield of 3.69 percent, the lowest since May 2013, data compiled by Bloomberg show. On Sept. 16, the bonds yielded as little as 1 percentage point above benchmark munis, the smallest gap since at least 2012.

By contrast, Orange County general obligations due in July 2019 have traded at an average yield 0.1 percentage point above benchmark munis since Aug. 26, when Moody’s lowered the county’s rating. The debt, with Moody’s fourth-highest rating of Aa3 and a negative outlook, had changed hands at yields below AAAs as recently as Aug. 20.

Bids Considered

“Legacy costs will rise each year Valley View remains a taxpayer-subsidized nursing home,” Dain Pascocello, a spokesman for Orange County Executive Steve Neuhaus, said by e-mail. “The traditional funding sources for Valley View nursing home and other county expenses are dwindling or gone.”

The county is considering at least four bids for the 360-bed facility. Neuhaus proposed a budget yesterday that closes a $60 million deficit in part by eliminating 149 county jobs while calling for the sale of Valley View.

Stephen Madarasz, spokesman for the Civil Service Employees Association, which represents nursing-home workers, said some companies that take over public facilities have cut costs on the backs of workers, undermining the quality of care.

‘Big Picture’

“We are troubled that in a number of places, public officials have not been appropriately concerned about this big picture,” Madarasz said by e-mail. “That should be the overriding concern in Rockland and Orange now, but it’s not clear if it is.”

Neuhaus said in an e-mailed statement that some bidders are promising to retain unionized workers, including CSEA members.

Rockland selected a $36 million bid in July for its 321-bed facility, though it doesn’t expect to close the sale until at least June, when the state health department may finish its review of the buyer, Stephen DeGroat, county finance commissioner, said by phone. Rockland spent about $24 million subsidizing Summit Park in fiscal 2013, he said.

“If we don’t sell it, the only other option is that we’ll shut it,” DeGroat said. “Governments are starting to realize we’re not in the business of running nursing homes.”

-By Freeman Klopott

Manulife Hires McNamara to Run Real Estate Investment

Source: Bloomberg / News

Manulife Financial Corp. (MFC), Canada’s largest life insurer, hired Michael McNamara as global head of real estate investments as the firm expands its asset-management business.

McNamara joins from Brookfield Office Properties Inc. and will work for the private markets asset-management unit, Toronto-based Manulife said today in a statement. He is based in New York and reports to Kevin Adolphe, the unit’s chief executive officer.

“Michael brings 34 years of experience in commercial real estate investments,” Adolphe said in the statement. “His depth of expertise will be invaluable as we look to grow our institutional-investor platform globally.”

Manulife is among life insurers expanding investment in office towers and other properties in a search for stable returns and fee income. The insurer said it has about C$75 billion ($67 billion) in private assets under management for institutional clients and in its general fund, including commercial real estate, mortgages and private-placement debt.

McNamara was head of acquisitions at Brookfield and earlier worked at Trecap Partners LLC and Lehman Brothers Holdings Inc., according to the statement.

-By Katia Dmitrieva

ECB Keeps Rates on Hold as Focus Shifts to Asset Buying

Source: Bloomberg / News

The European Central Bank kept interest rates unchanged at record lows as investors wait for President Mario Draghi to reveal details of a plan to buy assets.

The 24-member Governing Council left the main refinancing rate at 0.05 percent at its meeting today in Naples,Italy. The decision was predicted by all 60 economists in a Bloomberg News survey. The deposit rate and the marginal lending rate remained at minus 0.2 percent and 0.3 percent, respectively.

The focus now shifts to Draghi’s press conference at 2:30 p.m., when he is due to unveil the specifics of a plan to buy asset-backed securities and covered bonds. Greek debt climbed yesterday on speculation the ECB will reduce the requirements on the quality of assets it can accept.

“We want to know what, how much, from whom, and when the ECB plans to buy,” said Robert Kuenzel, an economist at Daiwa Capital Markets Europe Ltd. in London. “Standards may have to be revised for the program to be effective and equitable.”

A proposal by the ECB’s six-person Executive Board foresaw that existing requirements on the quality of assets accepted are relaxed to allow purchases of some Greek and Cypriot ABS, the Financial Times reported this week, citing unidentified people familiar with the matter. An ECB spokesman declined to comment on the article.

Peripheral Debt

Bonds backed by mortgages to Greek civil servants rallied yesterday to the highest since the nation requested its first bailout in 2010.

The ECB’s asset-buying plan is part of a range of stimulus measures it has announced since June to fight the threat of falling prices in the 18-nation currency bloc. Inflation (ECCPEST)slowed to 0.3 percent last month, the least in almost five years, and the central bank’s preferred measure of medium-term inflation expectations has extended its decline.

While Draghi pledged to start the program this month, initial purchases will probably be modest, according to two euro-zone central bank officials who asked not to be identified because the matter is private.

The ECB president said last month that it’s “very difficult to assess the size” of purchases. One challenge is building the logistical operation to make the purchases.

Balance Sheet

An early proposal last month foresaw the ECB outsourcing purchases to external asset managers, with national central banks buying shares in a fund, according to two officials familiar with the proposal. Policy makers rejected the draft and decided that purchases would be made by the ECB, on the recommendation of outside advisers, and held on its balance sheet, the officials said.

The ECB is seeking tenders for cash-flow modeling and market prices data, as well as calculations on the likelihood for losses, on asset-backed securities and covered bonds, according to a notice on its website. The contracts are envisaged to start in November and last four years, the document shows.

Draghi has said he wants to steer the central bank’s balance sheet back to the levels seen at the start of 2012, signaling as much as 1 trillion euros ($1.3 trillion) in assets could be added. His plan got off to a weak start last month, when a four-year funding program tied to the size of banks’ loan books attracted subdued demand.

QE Option

We “remain unconvinced that these measures will be sufficient to turn the downward trend in inflation expectations,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “Draghi will thus need to maintain a very dovish message, promising further action if needed.”

Should the plan fail to boost the outlook for consumer prices, Draghi may have to step up to large-scale buying of government debt. That threatens to widen a rift in the Governing Council, where Germany’s Jens Weidmann has already opposed the ABS plan.

“The ECB’s credibility is at stake so it cannot afford to allow inflation and inflation expectations to undershoot the target for too much longer,” said Andrew Bosomworth, a Munich-based portfolio manager at Pacific Investment Management Co. “I favor elevating QE to the central policy tool.”

-By Stefan Riecher and Jana Randow

Indians join wave of foreign buyers in US housing

Source: Today Online / Business

NEW YORK — Indians are joining a wave of foreign buyers who see the recovering United States housing market as one of the best places to put their money these days, offering a security blanket from what some consider a bubble in real estate prices in major Indian cities and a sometimes jittery Bombay Stock Exchange.

For Indians, who have long put their trust in gold to protect their wealth, US real estate offers a “very, very attractive destination”, said Mr Subir Gokarn, director of research at Brookings India in New Delhi.

Mr Jed Kolko, chief economist at Trulia, an online marketplace for residential real estate, said the most popular property searches for people from India were in and around Silicon Valley, where technology firms recruit heavily from India; in the Boston and Philadelphia areas near universities that have numerous students from India; and in suburban areas of New Jersey and in Queens, where there are established Indian-American communities.

In an echo of the late 1980s, foreign investment in US real estate has taken off again. A recent survey from the National Association of Realtors estimated that from April 2013 to March this year, total sales to international clients amounted to about US$92.2 billion (S$117.3 billion), a 35 per cent surge from the previous 12 months. The figure includes purchases by recent immigrants.

Foreign buyers now make up 7 per cent of total existing-home sales of US$1.2 trillion, according to the survey. Of those, Indians represent 6 per cent of the purchases, spending US$5.8 billion, up from US$3.9 billion over the same period a year ago and on par with buyers from Britain.

Canada still accounts for the largest share of buyers, but China is the fastest-growing source of foreign investors, according to the realtors’ group. And the Chinese buyers are big spenders: Their real estate purchases in the US nearly doubled from last April to last March, increasing to US$22 billion from the previous period. They account for nearly a quarter of all international sales in the current period.

“Most people who can come here, they are pretty wealthy,” said Ms Grace Tian, a broker with Realty Mark Associates in Philadelphia who often works with Chinese clients.

In contrast, buyers from India are a more eclectic group. These include parents living in India who buy apartments for students attending college, making sure the units have concierge service and an extra bedroom so they can visit for extended periods, real estate agents said. After the students leave college, the parents often keep the apartment and rent it out.

The riverfront Newport area of Jersey City has also emerged as popular with Indian buyers.

Ms Irene Barnaby, a broker with Weichert Realtors in Jersey City, said her Indian clients generally spent about US$600,000 to US$800,000 on condos. Some buyers pay cash because traditional banks won’t give them mortgages without a credit history in the US. But she has also created relationships with smaller banks that will lend money to her clientele. “They can get exactly what they want in this area,” she said. 

-By The New York Times