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4th September 2014

Singapore Economy

S'pore still 2nd most competitive in the world

But further foreign labour tightening could harm its future ranking

Source: Business Times / Top Stories

[SINGAPORE] Singapore has again been ranked as the world's second-most competitive economy by the World Economic Forum (WEF), but economists warn that a further tightening of foreign labour policies could knock the country off its perch.

They qualify, however, that if ongoing restructuring efforts pay off, the Republic would reap the rewards in the long run - boasting higher competitiveness levels on a more sustainable basis.

Barclays economist Leong Wai Ho told The Business Times: "Our labour constraints will no doubt affect the ratings, and we've been told that (these policies) will be with us for quite some time. But we've engineered this for a reason - we're setting the stage for the next quantum leap in productivity, which should show up in the rankings later."

According to the WEF's latest Global Competitiveness Index (GCI), Singapore kept its No 2 spot for the fourth year running. It was trumped only by Switzerland, which has been in first place for six consecutive years.

The 2014-2015 report released on Wednesday uses 12 pillars - including infrastructure, macroeconomic environment, and health & primary education - to rank the competitiveness performance of 144 economies worldwide. Because of its scale and depth, the GCI is viewed as the most comprehensive assessment of its kind globally.

Once again, Singapore was the only economy to feature in the top three spots in seven out of the 12 indicators. It topped the goods market efficiency pillar, placed second in terms of labour market efficiency and financial market development, and came in third on institutional frameworks.

While economists weren't surprised by Singapore's strong performance - citing the Republic's world-class infrastructure, prudent fiscal management, and transparent policy-making processes - they warned that the country could slip from its No 2 spot in the years ahead, due to labour constraints.

Said CIMB economist Song Seng Wun: "There's a real risk of Singapore moving down if policy missteps occur - for instance, if the government meets populist calls to tighten the foreign labour population further."

Added DBS economist Irvin Seah: "The only reason we've not taken a hit (on the GCI) is because it's a much broader index that measures other things. But if it measured export competitiveness alone, the drop would have been glaring. The impact of (foreign labour) tightening has already been felt in the economy and by businesses."

The WEF's poll of business leaders worldwide appears to support this. In tandem with the GCI, the WEF asked 14,000 top executives globally to select and rank the five most problematic factors for doing business in their economy.

In Singapore, where 163 business leaders were surveyed, the biggest gripe was "restrictive labour regulations" (28.2 per cent), followed by inflation (20.5 per cent).

Still, other economists such as Barclays's Mr Leong and Mizuho's Vishnu Varathan stress that a short-term loss of competitiveness would merely be a necessary, if painful, by-product of restructuring efforts.

Said Mr Varathan: "If labour constraints are a means to an end - and that is to raise productivity eventually - we shouldn't be too worried about this kind of fleeting loss of competitiveness. The labour market issue is perhaps more meaningful if you boil it down to whether or not certain industries can achieve the high bar that's set for them . . . Whether foreign labour restrictions will help to transform the sector, or cripple it."

Mr Varathan and DBS's Mr Seah also pointed out the need for Singapore to improve on the sub-index of innovation and sophistication. Here, the Republic ranked 11th, behind countries such as Switzerland, Japan and Finland, the top three. Business leaders had also flagged the "insufficient capacity to innovate" as the third-most problematic factor in Singapore.

Said the WEF: "Room for improvement exists in both areas, especially as these are the keys to Singapore's future prosperity."

-By Kelly Tay

S'pore retains spot as second-most competitive economy

Source: Straits Times / Top of The News

SINGAPORE retained its position as the world's second-most competitive economy this year despite concerns about business costs and tightening labour policies, according to the World Economic Forum (WEF) yesterday.

This is the fourth year running that Singapore has come in second behind Switzerland, which maintained its pole position in the annual Global Competitiveness Report, a ranking of 144 economies that is seen as the most comprehensive assessment of its kind.

The WEF said Singapore fared well across all 12 factors assessed in the study, such as infrastructure, health and education, and technological readiness.

The country scored especially well in terms of goods and labour market efficiency and financial market development, it added.

"Singapore possesses world- class infrastructure, with excellent roads, ports and air transport facilities," the WEF said.

"Its economy can also rely on a sound macroeconomic environment and fiscal management - its budget surplus amounted to 6.9 per cent of GDP (gross domestic product) in 2013."

The WEF said Singapore's competitiveness is enhanced by its strong focus on education, which has translated into a steady improvement in higher education and training. Singapore's private sector is also becoming increasingly sophisticated and more innovative, the WEF added, "although room for improvement exists in both areas, which are the keys to Singapore's future prosperity".

These are also the two areas in which top-ranked Switzerland does particularly well.

"Switzerland's top-notch scientific research institutions, along with other factors, make the country a top innovator," said the WEF.

"Productivity is further enhanced by a business sector that offers excellent on-the-job training opportunities, both citizens and private companies that are proactive at adapting the latest technologies, and labour markets that balance employee protection with business efficiency."

The report comes as the global economy seems to be finally leaving behind the worst crisis of the past 80 years. But the WEF said the resurgence is moving at a less decisive pace than it has after previous downturns.

The report also noted that both the United States and Japan had made significant progress.

It said that as the US, ranked No. 3, recovers from the crisis, it can build on strengths such as its highly sophisticated and innovative companies. Japan, which was in sixth place, posted the largest improvement of the top 10 economies, thanks to small improvements across the board.

Mizuho economist Vishnu Varathan said the Swiss approach shows that the Singapore Government's productivity push is necessary. Efforts to narrow the income gap and improve social mobility could also help Singapore score better in such international studies, he added.

CIMB economist Song Seng Wun, however, said that Singapore should be more concerned about the possibility of slipping in the rankings.

"Giving businesses access to the resources that they need will still be the main challenge going forward," he said. "The risk of a policy misstep from a further tightening of labour policy could cause businesses to change their minds about Singapore. That, to me, is the higher possibility than for us to move up to No. 1."

-By Yasmine Yahya, Assistant Money Editor

Singapore Real Estate

Developers have $52m incentive to take green route

Five-year initiative aims to spur research in energy-efficient technology

Source: Straits Times / Singapore

BUILDING developers looking to go green now have an even greater incentive in the form of new government funding to help them achieve their goals.

The National Research Foundation has set aside $52 million to spur greater research in energyefficient technology and the demonstration of resulting innovations.

The funding comes under a five-year initiative called the Green Building Innovation Cluster (GBIC).

It was launched yesterday by Mr Lee Yi Shyan, Senior Minister of State for National Development and Trade and Industry.

The fund, to be administered by the Building and Construction Authority (BCA), will allow developers to work with research partners to develop innovations that can boost a building's energy efficiency, and test-bed them in their own buildings.

The real-time or near real- time data from these projects will be collected and analysed in a database under the GBIC.

This database, part of the National Building Energy Efficiency Repository, will provide data for use in academia or be shared within the industry.

Relevant details, such as intellectual property rights protection and data sensitivity, are being worked out, said BCA chief executive John Keung.

The GBIC initiative will drive research in five areas: integrated designs, building envelope and facade systems, building management and information systems, air-conditioning and mechanical ventilation, and policy and behavioural studies.

More details, such as the criteria for funding, will be unveiled in the next two months.

Eight organisations, including developer CapitaLand, the Housing Board and Nanyang Technological University, have expressed interest in taking part in GBIC's initial phase.

 -By Audrey Tan

Research on green building solutions to focus on key areas

The research will focus on areas such as integrated building design, building envelope and facade systems, building management and information systems, and air-conditioning and mechanical ventilation.

Source: Channel News Asia / Singapore

SINGAPORE: A S$52 million fund for research on green building solutions will kick off with a focus on several key areas – integrated building design, building envelope and facade systems, building management and information systems, or smart buildings, as well as air-conditioning and mechanical ventilation.

The announcement was made by Senior Minister of State for National Development Lee Yi Shyan as he launched the fund, called the Green Buildings Innovation Cluster (GBIC), on Wednesday (Sep 3) morning.

GBIC is part of the Building and Construction Authority's (BCA) third Green Building Masterplan, announced on Monday by National Development Minister Khaw Boon Wan.

“GBIC will help build up research and development capabilities, conduct demonstration projects and 'match-make' academia and industry to accelerate the adoption of new and novel technologies,” Mr Lee said.

By bringing together researchers, tech firms, developers and users, GBIC hopes to facilitate breakthroughs, said BCA CEO John Keung, "We are talking about going beyond the 30 to 35 per cent in energy efficiency in our typical Green Mark Platinum building. We want to aim for 50, 60 per cent, or even a higher degree of energy efficiency with all these ideas and innovations," Mr Keung said.


Buildings in the tropics heat up quickly, and this means more energy is required to cool the interior. So developing building facades with better insulation is one area GBIC will focus on. It will also look into how to create smart buildings.

Experts say for this to happen, it is important to get the right information. Said Mr Nilesh Jadhav, Programme Director of EcoCampus at Nanyang Technological University: "Imagine if you're going to sign up for a limited broadband subscription plan, and you don't know what you're doing and you'll be incurring costs for every byte you consume. This is the impact of data. You need to know what exactly your consumption is and which part of your system is doing the consuming. Is it air-con which is consuming the most energy. Is it the computers? Is it the lights that are on all the time?"

A national repository of energy efficiency data will be set up under GBIC to provide the building industry with data. "This will provide easily accessible data for the building industry to gain confidence in adopting innovative technologies," said Mr Lee. 

Other areas of research for GBIC will include dehumidification technologies and more energy efficient air-conditioning. Apart from research, GBIC is also a platform that brings all building stakeholders together. For example, a researcher could test-bed new technology on a developer's site, or a developer could test a novel idea like a smart app that alerts residents when their energy consumption exceeds preset limits.

"In this way, home-owners will be able to adjust and optimise their consumption patterns to save energy," said Mr Allen Ang, the head for Innovation and Green Building at City Developments Limited. "In this way, they will be able to lower their electricity bills." GBIC funding will help defray some of the investment costs involved with developing the app, which is currently at the conceptualisation stage, he added.

GBIC funding will be disbursed over five years, and administered by the BCA's Centre for Sustainable Buildings and Construction at the BCA Academy. 

- CNA/cy/xy

Lease buyback: 75% of elderly HDB households can benefit

Source: Business Times / Top Stories

[SINGAPORE] Three in every four elderly HDB households can benefit from the enhanced lease buyback scheme (LBS), up from 35 per cent previously. But a huge jump in take-up rates of the scheme is unlikely, said Minister for National Development Khaw Boon Wan on Wednesday.

Other enhancements to the LBS, which will also kick in from April next year, are aimed at offering households greater flexibility on the length of lease to retain and the amount of proceeds 

to be received in cash upfront - issues that naysayers of the scheme have earlier picked at.

Mr Khaw said that he expects the take-up rate for the enhanced scheme to increase by a few hundred or thousand, but not jump by "tens of thousands".

Many residents that he spoke to in his Sembawang GRC hailed the LBS enhancements "a good idea" but expressed that they will not tap the scheme now as they are financially supported by their children or have passive income from subletting a room.

"But it does not matter whether it is a thousand or ten thousand. The scheme is there and we will make sure that it will be implemented the way we have described it," Mr Khaw said.

The scheme has seen a low take-up rate since its inception in 2009, when it allowed elderly households in three-room or smaller flats to retain a 30-year lease and sell back the remaining to HDB. The sales proceeds are used to top up their CPF Retirement Account (CPF RA), which can in turn be used to buy annuity plan.

So far, only about 800 households have signed up for the scheme, of which some 340 households joined only after some enhancements were made in 2013.

According to MND, Singapore is in a sweet spot for the enhanced LBS given that 80 per cent of the 290,000 HDB flats owned by seniors aged 55 years and above are fully paid-up and sitting on net equity.

Besides extending the scheme to four-room flats, the government is raising the household income ceiling from S$3,000 to S$10,000. Households joining the scheme can also choose the length of the lease to retain, up to 35 years, based on their age and preferences, instead of having one standard 30-year lease.

Instead of topping up their CPF RA to the full age-adjusted Minimum Sum, joint flat owners need to top up to only half of their Minimum Sums. This allows joint owners to receive more cash upfront, but still subject to a cap of S$100,000.

But Mr Khaw urged the elderly to exercise prudence with the excess cash proceeds - a point that he also stressed in his blog on Wednesday.

"While these enhancements are good, I do worry about some elderly spending unwisely away the substantial cash proceeds," he blogged. "For example, many overseas properties are being marketed here. There are bound to be disappointments and even losses."

The elderly have the option of voluntarily using these cash proceeds to top-up their CPF RAs or their spouses' CPF RAs, Mr Khaw said.

PropNex Realty chief executive Mohamed Ismail said he expects "multi-fold increase" in the applications for the scheme, with possibly more than 1,000 applicants within a year when 

changes to LBS kicks in.

ERA Realty key executive officer Eugene Lim noted that while the pool of eligible households is expanded, this is unlikely to cause a dent to the supply of resale flats in the market.

There remains a prevailing mindset among the elderly that the HDB flat is an asset that they wish to bequeath to the next generation, he said.

Cushman & Wakefield research director Teo Li Kim noted that one downside of the LBS scheme is still the uncertainty concerning life expectancy. "While HDB has given assurance that no one will be displaced if they outlive the 30-year lease, there is no clause covering such an event in the LBS contract," she said.

Mr Khaw told reporters that the scheme is continually reviewed to stay relevant to its targeted beneficiaries as their preferences and life expectancies change over time.

He also conceded that any changes in HDB resale prices could temporarily affect the scheme's demand, since the value of the lease is calculated based on prevailing market value. But there are bound to be market upturns and downturns within a 30-year lease period, he said, adding that this is a long term scheme.

-By Lynette Khoo

More cash upfront under enhanced lease buyback plan

Smaller sum goes into CPF; leases can vary and more will qualify

Source: Straits Times / Top of The News

MORE elderly flat owners will be able to sell part of their lease back to the Housing Board (HDB) for retirement income under changes to the Lease Buyback Scheme announced yesterday.

Those who co-own flats can also unlock more cash upfront while putting less in their Central Provident Fund (CPF) Retirement Account. All owners can also choose how many years of their lease to keep, within limits.

Currently, they can retain only a 30-year lease. All flat owners will get a new option of keeping a 35-year lease. Depending on their age, they can reduce this to as little as 15 years for those aged 80 and older.

These changes, made in response to feedback, will take effect from April 1 next year, when the scheme will also be extended from three-room and smaller flats to include four-room flats.

However, National Development Minister Khaw Boon Wan said he does not expect the change to result in a spike in interest in the scheme, which has seen a low take-up rate since its launch in 2009.

About 800 households have taken part so far, and Mr Khaw told reporters at a media briefing: "I don't think it will be in the tens of thousands... a few hundred definitely, maybe a few thousand."

Under the scheme, flat owners continue to live in their flats and sell a portion of their remaining lease.

The changes mean that for households with two or more owners, each owner has to top up his CPF Retirement Account to only half of his individual age-adjusted Minimum Sum, using proceeds from the sale of the lease.

Previously, proceeds were first channelled to meeting the full Minimum Sum. With the changes, flat owners can get more cash upfront, capped at $100,000.

"We have always said that the Minimum Sum is enough to look after the basic needs of a couple," said Mr Khaw. Owners will also get a cash bonus if they participate in the scheme - $20,000 for three-room and smaller flats, and $10,000 for four-roomers.

Fearing that some owners might "just spend or invest (the proceeds) unwisely", Mr Khaw urged seniors to be prudent.

The Government will also raise the monthly household income ceiling from $3,000 to $10,000, making more seniors eligible. The minimum age is 63.

With four-room flats included, 75 per cent of elderly HDB households could potentially take part in the scheme, up from 35 per cent now.

About 290,000 HDB flats are owned by Singaporeans aged 55 or older, and 80 per cent of these flats are fully paid for.

Mr Khaw said that the best option for elderly couples is to live with their children and rent out their flat. "Should you need it, the option is there... but most people do not need it."

Asked if five-room flats might qualify eventually, he said: "Let's do it for the four-room (flats) first."

Property experts welcomed the changes. PropNex Realty chief executive Mohamed Ismail Gafoor said of the scheme: "It is finally ready to take off."

-By Janice Heng

Sign-ups for enhanced Lease Buyback scheme unlikely to jump substantially: Analysts

This is because owners of four-room flats have other attractive options should they wish to monetise their property, say property analysts.

Source: Channel News Asia / Singapore

SINGAPORE: Property observers Channel NewsAsia spoke to said the opportunity to get more cash upfront may entice more people to sign up for the Lease Buyback Scheme following the changes to the scheme announced on Wednesday (Sep 3). But they said the numbers are unlikely to jump substantially.

The scheme has been extended to owners of four-room flats. But these owners, said REMAX Singapore Director Thomas Tan, are "are earning already, on a household level, maybe up to S$10,000. So they have some level of living expenses. They may not necessarily need this amount to help them in their retirement years".

Mr Lim Yong Hock, Key Executive Officer of PropNex Realty, believes that owners of four-room flats have more attractive options. "The four-room flat owner can actually sell his four-room flat and buy a three-room flat - fully paid-out. They don't have to take out a loan and at the same time they can also take back a large sum of cash," he said.

Only about 800 households have signed up for the Lease Buyback Scheme since it was introduced in 2009. National Development Minister Khaw Boon Wan said he does not expecting "tens of thousands" to sign up, even with the changes.

Many people he talked to said that while the scheme is a good idea, they do not need it, said Mr Khaw. "Sometimes I probe a little bit more and ask why they don't need it. They reply: 'My kids are good. They give me pocket money', or 'I have already rented out one room'. And one room is about a few hundred dollars a month. They do not need it. So, as I said, it is an option - should you need it, the option is there."

Mr Khaw added that there are currently no plans to extend the scheme to owners of five-room flats. The HDB also clarified that for owners who die before the end of their lease, a refund of the remaining lease will be given to their beneficiaries. 

- CNA/xy

More options in enhanced lease buyback plan

Joint owners need only top up CPF Retirement Accounts to half of Minimum Sum after sale

Source: Today Online / Singapore

SINGAPORE — Responding to public calls for greater flexibility in a scheme to allow the elderly to sell part of their flat’s lease back to the Housing and Development Board, the Ministry of National Development (MND) yesterday announced several enhancements that would see more elderly households qualify, as well as cater to seniors’ different preferences and needs.

The changes to the Lease Buyback Scheme will take effect from April.

An eye-catching move is the relaxation of the Minimum Sum top-up rules: Under the changes, joint owners can use the sales proceeds after selling their unit’s lease to the HDB to top up each of their CPF Retirement Accounts (RAs) to half of the prevailing Minimum Sum for their cohort, compared with the current requirement to top up to the full Minimum Sum.

This seeks to address a common grouse that participants will get little cash after topping up their Retirement Accounts (RAs).

Another common complaint that would be tackled is the fixed duration of the lease that can be retained. Instead of a standard 30-year lease for all, those aged 70 to 74 can choose a 25-, 30- or 35-year lease.

Seniors aged 75 to 79 can select a minimum 20-year lease in addition to the other options, while those aged 80 and above will have the choice of a minimum 15-year lease.

Any “unconsumed” lease will be refunded to an owner’s estate. A household must have at least 20 years of lease to sell to the HDB to be eligible for the enhanced scheme.

This new requirement ensures households will be able to “unlock meaningful proceeds” from the scheme to meet their retirement needs, said the MND.

The household income ceiling for eligible participants — who must have reached the CPF draw-down age, which stands at 63 — will also be more than tripled to S$10,000 a month from S$3,000 per month.

Correspondingly, the income ceiling for the Silver Housing Bonus scheme, which allows eligible seniors to receive a cash bonus if they move into a smaller flat and top up their RAs, will also be raised from S$3,000 to S$10,000.

Last month, Prime Minister Lee Hsien Loong announced during the National Day Rally that the scheme, which is applicable to three-room and smaller flats, would be extended to four-room units.

With the extension, three-quarters of elderly HDB households will be covered under the scheme, up from about a third currently.

The MND said the enhancements had been made in response to feedback received during the Our Singapore Conversation on Housing, when the ministry engaged Singaporeans, including the elderly, their children and experts, on monetisation options for seniors.

On raising the income ceiling substantially, National Development Minister Khaw Boon Wan said it was adjusted accordingly with the move to extend the scheme to four-room flats.

Since the scheme was rolled out in 2009, about 800 households have come on board.

Property analysts whom TODAY spoke to expect a surge of applications following the enhancements, while some observers questioned whether the elderly would still see the scheme as the “last option” — as the Government had positioned it to be — and be enticed to cash in on the leases of their HDB flats.

Mr Khaw admitted that he was worried some seniors joining the scheme might squander the cash proceeds or use them to make unwise investments. “My word of advice is, please, think a little bit,” he said.

Citing as an example the various overseas properties marketed in Singapore, he said there are “bound to be disappointments and even losses” with such investments.

Mr Khaw also advised those who do not have immediate needs to take care of to top up the RAs of their spouses who are homemakers and have not accumulated much CPF savings.

“It’s the proper thing to do; the responsible thing to do,” he said.

The minister added that, at the moment, there are no plans to extend the scheme to owners of five-room flats or private properties.

He said owners of five-room units, for example, have more options, such as renting out a room or living with their children and renting out their flat.

The MND said that of a total of 900,000 HDB flats in Singapore, 290,000 are owned by seniors aged 55 and above, with 80 per cent fully paid.

-By Joy Fang

Samsung Hub floor sold at S$3,225 psf

Source: Business Times / Top Stories

[SINGAPORE] The entire 18th floor of Samsung Hub has been sold at S$3,225 per square foot - the highest for an entire office floor in the 30-storey office tower in Church Street in the Raffles Place area. The building is popular among office investors due to the long tenure of the site - 999-year leasehold.

Samsung Hub's 18th floor, which has just been transacted, comprises six strata units adding up to 13,132 sq ft, resulting in a total quantum of slightly over S$42.35 million. The entire space is being sold to a single buyer, said to be an Asia-based group involved in the oil and gas business, among others, looking to occupy the space, as existing leases run out in phases starting later this year.

CBRE brokered the sale and Cushman and Wakefield also advised the seller, Church Street Holdings.

The psf pricing surpasses the S$3,030 psf at which the entire 14th floor in the building was sold earlier this year by Arch Capital Management.

-By Kalpana Rashiwala

Contractors urged to be vigilant in tender bidding

Source: Business Times / Singapore

SINGAPORE Contractors Association Ltd (SCAL) has urged its members to be "vigilant" in tendering for new projects and ensuring that they have factored all costs into their bids.

This comes as generally low tender prices for new projects have begun to result in cost overruns, which in turn lead to project delays.

Operational costs in the construction sector have been on the rise over the past few years due to several factors: manpower shortage - both of builders and management personnel, an imminent levy hike for basic skilled workers from July 2016, higher rental costs for site offices and storage facilities, as well as fiercer competition for projects which crimp tender prices and margins.

"Of all the challenges we have, the shortage of manpower is the biggest problem. As the tightening of foreign workforce measures come into full effect in July last year, the shortage of manpower in the industry has become a more serious problem.

-By Lee Meixian

Office revamp in S'pore offers high returns

Report ranks island No 4 among 15 global cities, with yield of 7.53%

Source: Business Times / Property

SINGAPORE has emerged fourth in a recent report that found that the city-state offers investors some of the most attractive returns for minor office building refurbishment investments at 7.53 per cent.

It is one of the top three Asian cities in the ranking, with Shanghai beating it to third place and Hong Kong, which ranked seventh.

The report, done by Arcadis - a leading global asset design and consultancy firm - considers both major and minor refurbishment projects in 15 cities across the world and ranks them by the best expected net rental income return.

According to the report, minor building refurbishment aims to extend the life of an office asset by up to five years, while major refurbishment aims to do so by 15-20 years.

-By Jan Lee

Indonesian tycoon Tahir picks up 12 Grange Infinite units

Deal amounting to S$70m prices 11 apartments at about S$2,050psf

Source: Business Times / Property

INDONESIAN tycoon and philanthropist Tahir is understood to be the buyer in the recent bulk transaction of 12 units at the completed, freehold Grange Infinite project. The transaction is said to have amounted to S$70-plus million.

The deal comprises 11 four-bedroom apartments ranging from around 2,560 sq ft to 2,700 sq ft each and a "junior penthouse" of 6,039 sq ft on the 20th level of the 36-storey freehold project.

The acquisition by Mr Tahir is said to price the apartments in the region of S$2,050 per square foot on average and the penthouse at around S$1,950 psf.

The 12 units were sold vacant.

-By Kalpana Rashiwala

Tuan Sing to buy over Aussie hotel associate

Completion of deal worth A$126m seen before year-end

Source: Business Times / Property

TUAN Sing Holdings on Wednesday said that it would buy the 50 per cent stake in Australia's Grand Hotel Group (GHG) belonging to joint venture partner Morgan Stanley, for A$126.04 million (S$147.38 million) .

If the deal goes through, Tuan Sing, which already owns half of GHG, will have full control over the Australian group, which owns two five-star hotels in Australia - Grand Hyatt Melbourne and Hyatt Regency Perth.

The transaction is expected to be completed before the end of the year, after all necessary approvals and consents from the relevant regulatory authorities and consortium banks have been obtained.

A wholly owned subsidiary, Tuan Sing Real Estate Pty Ltd, and a private trust, Tuan Sing Real Estate Trust, have been established in Australia and Singapore, respectively.

-By Claire Huang

Tuan Sing's Aussie property stake rises

Grand Hotel Group deal boosts its real estate there to a third of portfolio

Source: Straits Times / Money

AUSTRALIAN property now accounts for about a third of developer Tuan Sing's portfolio after its latest deal to buy up the rest of the upmarket Grand Hotel Group.

Tuan Sing, which already owns 50 per cent of the company, has paid A$126.04 million (S$146.7 million) for the remaining stake.

The transaction is expected to be completed before the end of the year, Tuan Sing said in a statement yesterday.

Grand Hotel Group, which owns the Grand Hyatt Melbourne and Hyatt Regency Perth, had a net asset value of A$276.6 million as at July 31.

The occupancy rate at the two hotels was more than 85 per cent last year.

Net property income from the hotels came in at A$23.7 million from January to July, up 2 per cent over the corresponding period last year.

The combined revenue per available room of the two hotels edged up 1 per cent in the same period from last year.

The company has spent more than A$70 million to renovate, upgrade and increase usable space at the two hotels over the past few years, said Mr William Liem, the chief executive of Tuan Sing.

He added that the company is "confident of reaping the benefits from these asset enhancements".

Mr Liem said: "Through a combination of the strategic plans we have in place, we intend to make Grand Hotel Group more efficient and therefore more profitable over time."

Tuan Sing recently posted a 24 per cent decline in net profit for the second quarter ended June 30 to $11.6 million, due to slower progressive recognition of sales at Seletar Park Residence and Sennett Residence and new bookings at Cluny Park Residence.

Tuan Sing also has an industrial services division with tyre distribution and commodities trading activities.

Apart from Australia, Tuan Sing has land in Jiaozhou, Qingdao in China.

-By Chia Yan Min

Fatal site incident: Contractor stops work

Worker killed after metal gate falls on him at Bartley worksite

Source: Straits Times / Singapore

WORK has stopped at a construction site where a man died after being hit by a falling metal gate on Tuesday.

The contractor of the site at Bartley Road East, Singapore Piling and Civil Engineering, said yesterday it had voluntarily stopped work and was investigating the case.

"We have to take the initiative, (our stop-work order) will last as long as we are able to conduct an investigation and find out the root cause," said Mr Kelvin Ho, safety manager of BBR Holdings, the contractor's parent company.

On Tuesday morning, a metal gate - about 4m high and 6m wide - fell on the worker, a 41-year-old Bangladeshi, killing him.

"Preliminary findings show that a worker was testing the sliding motion of a gate when it collapsed and pinned him to the ground," said a Ministry of Manpower (MOM) spokesman.

The worker, known to his friends as Mr Khorim, has a three-year-old daughter back home. He started working at Sterling Engineering, the sub-contractor, six months ago, according to reports.

The Straits Times visited Sterling Engineering's office yesterday but it declined to comment.

There were 17 construction fatalities in the first six months of this year, against 33 for all of last year.

All was quiet yesterday at the site. The accident area was cordoned off and the fallen metal gate remained on the ground. But other buildings looked finished and painted.

The gate - which allows access to a complex directly above the Downtown Line MRT tunnels - was going to be a permanent fixture, said Mr Ho. The work was nearing completion, he added. "We were going to hand over (the project). The gate was one of the last things we had to do."

MOM is investigating.

-By Danson Cheong

Views, Reviews & Forum

Too much CPF money in property?

Source: Straits Times / Forum Letters

THE current state of retirement savings is indeed not overly rosy ("Retirement savings: PM's account not overly rosy" by Ms Chong Wan Yieng, Press Secretary to the Minister for Manpower; Aug 21).

A lot of money has been diverted from Central Provident Fund savings for various purposes, particularly to service mortgages.

Last year, only half of CPF members turning 55 met the Minimum Sum. This included 15 per cent of members who pledged their properties to meet part of it ("Time to relook private pension plans"; Aug 26). This group will likely have insufficient retirement savings, and receive significantly lower CPF Life payouts.

Perhaps the CPF Board could reveal data on the CPF monies used for property purchases by members who reached the age of 55.

It would not be surprising to find more than half the funds locked up in property, leaving little in their Retirement Accounts.

This data will be useful to policymakers when making decisions on whether to rein in CPF use for non-retirement purposes.

Efforts should not be spared to find out why so much CPF money is tied up in property.

Have CPF members over-committed themselves to property purchases? Or did the policy of allowing citizens only a "single bite of the cherry" in terms of CPF housing subsidies and grants induce people to take as big a bite as possible?

CPF members should exercise prudence in their property purchases as overspending will reduce their retirement savings.

The CPF Board should also tighten withdrawal rules to ensure retirement savings are not depleted.

-By Thiew Ming Tuck

Global Economy & Global Real Estate

China services sector rebounds but property remains a worry

Source: Business Times

Activity in China's services sector rebounded in August after a drop in July, two surveys showed on Wednesday, offsetting factory-sector weakness and letting the government stick with its "targeted" policy stance to keep growth on track.

Logistics to acquire Johor land for development

Asian investors have ploughed more capital into global real estate this year, going by transactions valued at US$10 million and above, with Singapore overtaking China as the top source of Asian capital. According to 

Asia investments in global real estate soar 40% in H1: CBRE

Singapore overtakes China as top source of capital from Asia

Source: Business Times / Top Stories

[SINGAPORE] Asian investors have ploughed more capital into global real estate this year, going by transactions valued at US$10 million and above, with Singapore overtaking China as the top source of Asian capital.

According to global real estate consultancy CBRE, Asian outbound investments surged 40 per cent year-on-year to US$16.2 billion in the first half of this year.

Among the most active sources of Asian capital, Singapore accounted for 29 per cent, followed by Hong Kong at 25 per cent, China at 23 per cent and Malaysia at 5 per cent. Last year, Singapore was in second place behind China.

Singapore's outbound investments in real estate have been driven by a surge in overseas ventures by developers, as yields in the domestic market are compressed following a slew of cooling measures.

-By Lynette Khoo

Logistics Holdings snaps up industrial site in Iskandar

Source: Straits Times / Money

CONSTRUCTION firm Logistics Holdings has bought an industrial plot in Iskandar for RM38.8 million (S$15.3 million).

The 11.5ha freehold site in Senai Industrial Park could accommodate 70 to 80 factory units in light industries, said chief executive officer Phua Lam Soon yesterday.

"While there is potentially an oversupply in the Iskandar residential market, demand for industrial space is rising," he said.

"We foresee that foreign investors, especially small and medium-sized enterprises (SMEs) from Singapore, will move manufacturing operations there due to cost conditions back home."

The industrial park is in Flagship Zone E of Iskandar, where logistics, manufacturing - especially in aerospace and high technology - tourism and Cybercity-related activities are planned.

Scientex Innoparc, a township of more than 100ha that is slated to be a premier industrial hub of factories and residential units, is located just outside the park.

The new Logistics Holdings site is about a 30- minute drive from Woodlands Checkpoint and about 10 minutes from Senai International Airport.

It is also about 2km from the firm's precast factory, which became operational in July to supply its projects. It will likely start selling to third parties next year, said Mr Phua.

Property development and precast manufacturing mark new income streams for the company, which listed on the Catalist board in January last year.

The firm first expanded into property development in June last year, acquiring a freehold residential site in Paya Lebar Crescent.

Construction on eight cluster houses has begun and the company expects to launch in the next one or two months.

But Mr Phua said labour issues and land costs here have led the firm to develop property overseas, adding that it has been eyeing Iskandar for two years.

"Large-scale projects like EduCity have taken shape, as has infrastructure like highways. It's important to move in on opportunities early and now is a good time," he noted.

The company last week announced a full-year net profit of $4.95 million, down 5.4 per cent from the previous year.

The drop was attributed to higher operating expenses such as raised foreign worker levies.

Its order book stands at $356.8 million, including contracts with the Housing Board and the Ministry of Education.

Logistics Holdings shares closed up 1.5 cents at 27 cents yesterday.

-By Rennie Whang

M'sia developer mulls towers next to UBS HQ in London

Source: Business Times / Property

[LONDON] AlloyMtd Group, the Malaysian infrastructure builder, is considering developing two towers adjacent to UBS AG's new headquarters in the City of London financial district.

The buildings would have about 19,500 square metres of office space, a hotel and 21,700 square metres of apartments, according to a filing by the Hackney borough.

The land plot was bought by AlloyMtd from UBS subsidiary Sun Street Properties Ltd last year for £57.5 million (S$118.5 million), according to a separate filing to the Land Registry.

Hackney borough council members will debate the possible project on Sept 10.

-From London, UK

Failed home deals in UK rise with bank limits

BOE slaps mortgage lending curbs after home prices soar to record levels

Source: Business Times / Property

[LONDON] More Britons are pulling the plug on home purchases amid signs that the market's 16-month rally is coming to an end after banks tightened mortgage standards.

In August, failed deals rose to 26.4 per cent from 24.4 per cent a year earlier, driven by potential buyers getting cold feet and walking away, said Donna Houguez, a market analyst for residential property investor and data provider Quick Move Now.

In July, failed purchases were marked by willing buyers who were prevented from closing deals because they couldn't secure a big enough mortgage, she said.

"We saw a sharp increase in the number of buyers who made a generous offer in order to secure a property, then changed their minds and pulled out amid fears of an imminent property market collapse" in August, Ms Houguez said.

-From London, UK

Speculators leaving Brazil property market

Nation's residential real-estate bubble may deflate slowly, rather than pop

Source: Business Times / Property

[SAO PAULO] Brazil's residential real-estate bubble may deflate slowly, not pop, as speculators abandon the market and builders such as Rossi Residencial SA sell off less-profitable homes ahead of more lucrative sales.

Prices are levelling off this year, rising about one-third as fast as in 2011, when developers were offering homes due for completion now, according to data compiled by economic researcher FIPE and real-estate website Zap Imoveis. Short-term investors and some individual customers are backing away from their deals.

"We're seeing an excess of new home deliveries, so the market is adjusting," Rossi chief executive officer Leonardo Diniz said in an Aug 27 interview at Bloomberg's Sao Paulo office. "For investors to take on the risk, they have to see a high return, so they're increasingly choosing other opportunities."

The market adjustment may be good news for home buyers and builders, even after a government report showed on Aug 29 that Brazil's economy entered a recession in the first half of the year. Apartments are becoming more affordable as builders offer discounts. Clearing out the inventory of low-margin units should boost cash flow, paving the way for sales of more profitable homes, Mr Diniz said.

-From San Paulo, Brazil

Henderson to spend HK$6.5b on retail complex

Source: Business Times / Property

[HONG KONG] Henderson Land Development Co, controlled by billionaire Lee Shau-kee, will spend HK$6.5 billion (S$1 billion) on a shopping centre in Hong Kong's prime retail area after beating 17 rivals to win a land tender.

The complex in Tsim Sha Tsui, to be completed by 2019, will be used for retail, services and dining, and will include a public, 345-space carpark, according to spokeswoman Bonnie Ngan, citing vice chairman Martin Lee. Henderson won the site for HK$4.7 billion as the highest bidder, the government said in a statement on Wednesday. Henderson beat other developers to win the site in the district brimming with global luxury brands and hotels such as The Peninsula.

-By Bloomberg

Tokyo property investments surge on rising rents

Prime office rents expected to rise by about 30% over the next 3 years

Source: Business Times / Property

[TOKYO] Investment in Tokyo properties is surging on prospects that rents will rise, boosting returns, even after a 20 per cent gain in prices since Japanese Prime Minister Shinzo Abe took office almost two years ago.

"There is a sense of value here that you don't find in other major office markets," said Jon Tanaka, Tokyo-based managing director of Angelo Gordon & Co, an alternative asset manager with about US$27 billion in assets.

"Japanese and offshore core buyers have capital available and they are very eager to find investment opportunities in Tokyo," he added.

Real estate investment in Japan rose 70 per cent to 4.6 trillion yen (S$54.9 billion), the highest level since March 2008, in the 12 months ended in March from a year earlier, according to a report published in July by Deutsche Asset & Wealth Management.

-From Tokyo, Japan

Toll Falls After Luxury-Home Builder’s Orders Decrease

Source: Bloomberg / Luxury

Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, said orders for new homes fell and it lowered its forecast for sales (NHSLTOT) this year. The shares dropped the most in a month.

For the three months through July, the company reported net signed contracts for 1,324 homes worth $949.1 million, a decrease of 6 percent in units and 4 percent in dollars from a year earlier. Horsham, Pennsylvania-based Toll also said it expects to deliver a maximum of 5,500 homes in the full year, down from the previous quarter’s projection of as many as 5,850.

“Orders don’t appear to be tracking, suggesting a lack of buyer urgency,” Adam Rudiger, an analyst with Wells Fargo & Co. who has the equivalent of a hold rating on the shares, said in a note to clients today. “Overall, we see Toll as a well-positioned builder, but currently it just appears to us that it’s a waiting game on better demand.”

Sales of U.S. new homes have been choppy as the economy and housing market struggle to recover from the 2008 financial crisis. Purchases fell 2.4 percent in July from the previous month to an annual pace of 412,000, according to the Commerce Department. Sales plunged 31 percent in the Northeast, an area that accounts for almost half of Toll’s market.

Toll shares fell 4.7 percent to $33.95 in New York, the most since July 24 and the worst performance in the 11-company Standard & Poor’s Supercomposite Homebuilding Index, which declined 3 percent.

‘Choppy Seas’

Rather than a smooth housing recovery, there will be “choppy seas and a sloppy boat ride,” Chairman Robert Toll said on a conference call today. “But we’re not going back. We’re inching forward.”

Net income for the fiscal third quarter rose to $97.7 million, or 53 cents a share, from $46.6 million, or 26 cents, a year earlier, Toll said today in a statement. Revenue rose to $1.06 billion from $689.2 million a year earlier. The average price of homes sold in the quarter climbed to $732,000 compared with $651,000.

“We thought the pent-up demand would continue to build and ’14 would be a significantly better year than ’13,” Toll Chief Executive Officer Douglas Yearley Jr. said on the call. “So are we disappointed in flat or slightly negative order growth? The honest answer is yes. But are we happy with the way we generated strong margins off of our business? That answer is yes.”

Toll’s gross margin excluding interest and writedowns widened to 26.8 percent in the quarter from 25.1 percent a year earlier. The full-year gross margin will improve by 185 to 200 basis points compared with fiscal 2013, Toll said. It previously predicted an increase of as little as 175 basis points.

-By John Gittelsohn

Blackstone Said to Acquire Office Park for $180 Million

Source: Bloomberg / News

Blackstone Group LP (BX) acquired the Solana corporate park near Dallas for $180 million in a bet on growth in the area’s office market, according to a person with knowledge of the investment.

Blackstone plans to spend about $110 million to renovate and lease up the half-empty property, said the person, who asked not to be identified because the deal is private. The seller was a bondholder group represented by CWCapital Asset Management LLC, which foreclosed after developer Robert Maguire defaulted on $395 million of debt in 2009, the person said.

Peter Rose, a spokesman for New York-based Blackstone, declined to comment on the transaction. Mike Goodwin, a spokesman for CWCapital, said he had no immediate comment.

The Solana business park in the suburbs of Southlake and Westlake, Texas, includes about 10 office buildings with about 2 million square feet (185,800 square meters), a hotel operated by Marriott International Inc. (MAR), a fitness center, and about 70 acres (28 hectares) of undeveloped land, said the person.

Blackstone’s strategy is to buy assets at discounts that it can improve physically or lease up before selling. The firm in February bought the Four Seasons Resort and Club Dallas at Las Colinas in a CWCapital auction of troubled assets in the commercial mortgage-backed securities market.

In July, Blackstone acquired Park Avenue Tower in Manhattan for about $750 million and in August it agreed to purchase an office building in Boston’s Back Bay district for $117 million from Shorenstein Properties LLC.

Rent Growth

Dallas ranked fourth in the U.S. for office-rent growth in the second quarter, with rents after any landlord discounts rising 4.6 percent, above the national average of 2.5 percent, according to real estate researcher Reis Inc.

Blackstone plans to increase parking at Solana and may add new restaurants to improve the mix of amenities available to tenants, said the person with knowledge of the deal. CoreLogic Inc. (CLGX), a property-research company, is the largest tenant at the Solana park, leasing about 20 percent of the property. Other occupants include Verizon Communications Inc., Wells Fargo & Co. and LP.

Cassidy Turley will continue to handle leasing and management the property. HFF Inc. is arranging about $170 million in financing for Blackstone, according to the person.

Robert Maguire, who once ran Maguire Properties Inc., built the Solana complex for International Business Machines Corp. in 1988, according to the person. After the credit crisis forced the real estate company to relinquish many of its assets to lenders, Maguire changed its name to MPG Office Trust Inc. and was eventually sold last year to a unit of Brookfield Asset Management Inc.

-By Hui-yong Yu

Case-Shiller Redo Shows Less Severe U.S. Home-Price Slump

Source: Bloomberg / Luxury

The collapse in U.S. home prices that stoked the worst recession since the Great Depression wasn’t quite as severe as initially estimated, according to data from S&P/Case-Shiller.

Property values nationally fell 26 percent from the February 2007 peak to the December 2011 trough, not 34 percent as previously reported, revised data showed last week. The index will now be issued monthly rather than quarterly.

The change is the result of CoreLogic Inc. (CLGX)’s $6 million purchase of the S&P/Case-Shiller index from technology company Fiserv Inc. in March 2013. Case-Shiller has spent more than a year retrofitting its model with CoreLogic’s bigger, higher-quality data set, leading to a change in how the index looks.

Don’t read too much into that, said Case-Shiller principal economist David Stiff. The index only looks different because it’s been rebuilt with new, higher-quality data, he said.

“The data change made it looked like the philosophy had changed but it hadn’t,” Stiff said. “The only takeaway is the two indexes are different. I don’t think you can say anything more than that.”

In a crowded field of home-price data, Case-Shiller grabs the spotlight. Created in the early 1990s by Wellesley College Professor Emeritus Karl Case and Nobel Prize winner Robert Shiller, it’s known for its gauge of home values in 20 cities, which tracked the housing collapse in grim monthly installments.

Methodology Change

For housing nerds, buying Case-Shiller and fiddling with its methodology would be like buying Coca-Cola and changing the secret recipe.

The recipe hasn’t changed, Stiff said. The index has always measured repeat, arm’s-length transactions. Transfers of ownership such as bank repossessions are thrown out and the value of those foreclosed properties are captured later, when they’re sold. That ensures that sales of distressed properties aren’t counted twice, he said.

CoreLogic’s data allowed Case-Shiller to weed out more bank repossessions, Stiff said.

“It’s the old Coke, the formula hasn’t changed,” Stiff said. “It’s made with cane sugar instead of high-fructose corn syrup.”

Nationally, home values have climbed 19.4 percent since touching bottom almost three years ago, the new data show. They’re now 11.6 percent off the prior peak, compared with a previously estimated shortfall of 18.6 percent through the first quarter.

“They can say don’t read too much into it, but it is a different picture,” said Bank of America economist Michelle Meyer. “We don’t have as big of a hole to climb out of and the gains we’ve seen so far are that much more impressive.”

-By Lorraine Woellert

Kirkinis-Linked Luxury Beach for Sale After Bank Collapse

Source: Bloomberg / Luxury

A luxury seaside property linked to Leon Kirkinis, founder and former chief executive officer of the collapsed African Bank Investments Ltd. (ABL), is on sale in South Africa’s Western Cape for 60 million rand ($5.6 million).

Kirkinis, 54, is an executive director of UPbeatprops 167 (Pty) Ltd., according to Johannesburg-based African Bank’s annual report. In municipal documents the property company is listed as owning the house on Arctotis Road in Rooi Els, a village that looks across False Bay to Cape Town one hour away.

The beach home is described as having four en-suite bedrooms, a pool, jacuzzi, wine cellar, gym area, underfloor heating and automated timber shutters that open hydraulically to create verandas. The property offers a “combination of luxury living in the heart of nature,” Acquire Africa, the estate agent selling the house, said on its website. Acquire’s founder, Tara Whiting, declined to comment when contacted by phone yesterday, citing client confidentiality.

Abil, as the lender is known, failed last month after it forecast record losses and said it needed at least 8.5 billion rand to survive. The central bank stepped in and appointed a curator to save Abil’s performing loans book. Senior debt holders were told they would lose 10 cents in every rand of investment while subordinated debtholders, preference shareholders and ordinary shareholders may lose everything.

Calamari Lunch

Kirkinis, who stepped down as Abil’s CEO on Aug. 6, didn’t answer a call to his mobile phone or immediately respond to a voicemail message today.

UPbeatprops, registered at South Africa’s Companies and Intellectual Property Commission in Feb. 1998, bought the Rooi Els property where the house now stands for 3.7 million rand that year, according to a report from the property24 website.

The lot is the biggest in the village at 1.47 hectares (3.6 acres), according to municipal documents for the Overstrand district. The home was completed in 2011 by Elphick Proome Architects Inc. in Durban, according to the architects’ website.

The client was “a maverick businessman from Johannesburg” and the building was first sketched “on a paper napkin over a calamari lunch” in the seaside resort of Hermanus five years before completion, according to the architects. It required the biggest steel galvanizing undertaken in South Africa at the time, while the transport of large materials along small, windy seaside roads and dirt tracks “demanded special permits,” according to Elphick Proome.

Four Years

The house has a steel structure and took four years to build, according to Elphick Proome, which won the residential category in the 2013 Steel Awards for the Rooi Els home.

George Elphick, a founding partner of the firm of architects and part of the project team on the Rooi Els house, didn’t immediately respond to messages and his colleague Janeta Rockey declined to comment on the house.

The house appears to have been for sale since May, according to South African Afrikaans-language newspaper Rapport. That month African Bank posted a record fiscal first-half loss of 4.38 billion rand as bad debts jumped. Two weeks later, Moody’s Investors Service downgraded its foreign credit rating to junk.

In 2012 Kirkinis was ranked the 37th wealthiest person in South Africa in the annual Sunday Times Rich List, with his holding in Abil valued at an estimated 660 million rand. By November, when the company held a rights offer, his stake was worth 274.1 million rand. Following the bank’s breakdown all of his holdings may be wiped out.

Fraud Investigation

Abil and its management will be investigated for evidence of fraud, reckless lending and lack of disclosure in the wake of the company’s collapse, South Africa’s central bank said yesterday. The investigation will take five months, with a written report due a month after that, the Pretoria-based South African Reserve Bank said.

The probe will seek to determine if “any business of African Bank was conducted recklessly, negligently or with the intent to defraud depositors,” the central bank said. It will also probe management practices, material non-disclosures, and any intent to defraud depositors while identifying people “party to such questionable practices.”

-By Renee Bonorchis

Irish Face Uncomfortable Real Estate Boom, Goodbody Says

Source: Bloomberg / News

Ireland is in the midst of “uncomfortable” real-estate boom, as a shortage of homes and offices drives up values six years after a collapsing property bubble devastated its economy, Goodbody Stockbrokers said.

Values will continue to rise as supply remains limited, Dublin-based Goodbody said in a report published today. Home building is running at about a third of medium-term demand while no significant office completions are expected until 2016, the firm said.

“Irish property has been among the best performing asset classes in the world over the past twelve months, propelled by tightening supply and a broadening recovery, ” Goodbody economists Dermot O’Leary and Juliet Tennent said. “The supply response to the recovery in property prices has been surprisingly muted to date.”

Home prices surged an annual 23 percent in Dublin in July, pushing values 13.4 percent higher nationally, government figures show. Construction of homes and offices in Ireland dried up in the wake of the worst real estate crash in Western Europe.

Values will continue to rise as supply remains limited, Goodbody forecast. Dublin homes for sale have been below 3,000 since November 2013, meaning 0.5 percent of all homes are on the market, compared with an average of 1.1 percent since 2007, Goodbody said.

“There has been a problem in terms of the price of houses rising in the Dublin area in particular,” Deputy Prime Minister Joan Burton told state-owned RTE Radio today. “The housing market does have to be watched in a very, very careful way, but the critical issue is to increase supply in terms of social and affordable housing.”

No Bubble

Unemployment dropped in August to 11.2 percent from 11.3 percent in July, the government’s statistics office said today. The jobless rate, which rose to 15.1 percent in 2012, has fallen every month this year, as companies including Google Inc. and Airbnb Inc. hire in Dublin.

Talk of another bubble is “premature,” Goodbody said. “The Irish house price recovery is performing in line with the average of previous international cycles.”

Home prices in the capital remain 43 percent below their 2007 peak, while the national index is 42 percent off record levels.

-By Joe Brennan

Dublin Docklands Where U2 Fell Gets Bad Bank as Developer

Source: Bloomberg / News

At an abandoned bakery complex near the Dublin studio where U2 recorded “Sunday Bloody Sunday,” Ireland’s bad bank is trying its hand at being a developer on a scale it’s never attempted before in the Irish capital.

The National Asset Management Agency, responsible for cleaning up Western Europe’s worst property crash, is preparing a plan to turn Boland’s Mill and the surrounding docklands into a low-rise version of London’s Canary Wharf financial district at a cost of about 1.5 billion euros ($2 billion).

The project would transform the agency into a developer of Irish real estate, with all the risks associated with the project’s success or failure. Until now, it has mainly been an asset manager. Dublin’s docklands became a developers’ graveyard when the Irish bubble burst in 2008, though the man charged with reviving the area is undeterred.

“This has been thought through and challenged to ensure it makes commercial sense,” NAMA Chief Executive Officer Brendan McDonagh said in an interview. “If you have 20 office buildings over 75,000 square feet and you build a 21st, that’s speculative. If only one Grade A building is available and you build a second, that’s not.”

With the Irish capital running short of prime office buildings, one of NAMA’s main goals is to provide workspace for the technology and pharmaceutical companies flooding into Ireland to take advantage of its low corporate taxes. Both Google Inc. and Facebook Inc. chose Dublin as the location for their European headquarters, while Pfizer Inc. and Allergan Inc. also have operations in Ireland. Another aim is to cool Dublin’s soaring residential market.

‘Building Blocks’

The agency has the financing, expertise and contacts to help develop the docklands without risking the sort of oversupply that ruined the Irish market in 2008, according to McDonagh. NAMA will work with IDA Ireland, the agency responsible for bringing companies like Google and Facebook to the country, to gauge demand, he said.

“It’s building blocks, one site at a time,” McDonagh said. “Nobody’s going to build 3.5 million feet of new office space and hope they can be sold or leased. You might build 200,000 square feet and then talk to IDA, and they can tell us if more is needed.”

Not everyone agrees with McDonagh’s strategy.

“They’ve proven themselves very competent at the original brief,” said Paul McNeive, former managing director at Savills Plc’s Irish unit and now a real estate commentator. “But the fastest way to produce office blocks and houses is sell their sites and lend money to developers until banks return.”

Fast-Track Planning

By the end of 2011, NAMA had paid five banks 31.8 billion euros in bonds for loans with a par value of 74 billion euros. As a result, the agency owns or is linked through loans to 70 percent of the 22 hectares (54 acres) of undeveloped land in the docklands earmarked for fast-track planning, known as a special development zone.

Much of the wider docklands area, historically dominated by flour milling and gas storage, is already built up. On the north bank of the River Liffey lies the gleaming buildings of the International Financial Services Centre, where New York-based banks Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) have offices.

On the south docks, Facebook’s European headquarters is on nearby Grand Canal Square. The area, known as Dublin’s Silicon Docks, is dominated by the 15-story Montevetro building that Google bought in 2011.

Rising Rents

“With so many companies bringing a lot of new staff to Dublin, accommodation is a big issue,” Kevin Nowlan, a former executive at the agency and now Hibernia REIT Plc’s chief executive officer, told reporters in July. “It’s not healthy with our rents going up as quickly as they are.”

On Aug. 26, Hibernia agreed to pay about 18 million euros for a riverside site on the south docks. It earlier bought two other properties in the area, including the site of the Windmill Lane Studio, where U2 made parts of the albums “War” and “Boy” and where graffiti is still scrawled in honor of Ireland’s most famous rock group.

The docklands is also a testament to the real estate collapse that battered Dublin beginning in 2008. Boland’s Mill plunged 85 percent in value at the depths of the crash, and empty lots and idle sites still pockmark the area.

Even a skyscraper supported by U2 failed to get off the ground. A short stroll from Windmill Lane, a site that had been earmarked for the 120-meter (394-foot) U2 Tower is deserted. After suspending the development in 2008, the Dublin Docklands Development Authority handed the site over to NAMA in 2011.

Unfinished Building

Across the river, a planned Zaha Hadid-designed tower was also never built. A headquarters for the failed Anglo Irish Bank Corp. lies unfinished. Former head of asset management at NAMA, John Mulcahy, once likened it to a “burnt-out tank on the road.”

The property crash meant development finance dried up and no new Dublin office buildings have been completed in four years, leaving a shortage of quality workspace. Dublin office rents may rise about 7 percent a year through 2018, the most of 19 European cities surveyed, broker Jones Lang LaSalle Inc. said in July.

Home prices are surging too, with Dublin values rising 23 percent in June from a year earlier on a lack of supply. About 8,000 homes were built last year, down from 93,000 in 2006, the height of Ireland’s Celtic Tiger boom.

Against that backdrop, Irish Finance Minister Michael Noonan turned to NAMA, saying the docklands has the potential to be Dublin’s answer to Canary Wharf. The first phase will be Boland’s Mill, a landmark for Dubliners overlooking Grand Canal Dock and covering about 1.7 acres. The value of the mill, whose developer Versus Ltd. is in receivership, slumped from 61.3 million euros in 2007 to less than 10 million euros two years later, according to company filings by Versus.

Formal Application

NAMA now controls the loans and is due to send a formal application to city authorities for 35,000 square meters of offices and apartments in the weeks ahead.

“Once rents have gone through 35 euros per square foot, that’s the break-even spot,” McDonagh said. “Now rents are 40 to 45 euros per square foot, if you can deliver the building, it can be rented and sold.”

Most of the projects linked to NAMA will be completed by 2020, McDonagh said. NAMA will provide finance to current landowners or will bring in partners to help develop projects where it has taken possession of the land, he said.

The agency is already working with Hines, the Houston-based property investor, to develop Spencer Dock, Dublin’s largest city center office complex. Tenants include accounting firm PricewaterhouseCoopers LLP.

U2 Tower

NAMA also plans to develop buildings near Facebook’s offices in a venture with Oaktree Capital Management LP, the world’s largest distressed-debt investor, and Dublin-based construction company Bennett Group.

The agency is also seeking to resurrect the U2 Tower plan with Kennedy-Wilson Holdings Inc. as part of a venture to develop 5 acres of land, people with knowledge of the matter said last year. McDonagh and Kennedy Wilson declined to comment.

Boland’s Mill was originally built in the 1830s and stopped operating in 2001. Today, its courtyard is overgrown and all 11 stories have broken windows. Paintwork is peeling off concrete, and stone walls are festooned with graffiti at street level, where Google employees stroll past to the glass-fronted Montevetro building 300 meters (328 yards) away.

“It’s the only site on the south side of the Liffey that has decent height,” McDonagh said of the aging mill. After creating the commercial space and 150 apartments, “we’ll pick the sites and sit down with Dublin City Council to decide what you could put on each,” he said.

-By Neil Callanan and Dara Doyle

Henderson Land to Spend $839 Million on Hong Kong Retail Complex

Source: Bloomberg / News

Henderson Land Development Co. (12), controlled by billionaire Lee Shau-kee, will spend HK$6.5 billion ($839 million) on a shopping center in a prime retail area of Hong Kong after beating 17 rivals to win a land tender.

The complex in the Tsim Sha Tsui district will be completed by 2019 and will house retail, services and dining, as well as a public 345-space parking garage, spokeswoman Bonnie Ngan said yesterday, citing Vice Chairman Martin Lee, Lee Shau-kee’s younger son. Henderson won the site for HK$4.69 billion as the highest bidder, the government said in a statement yesterday.

Henderson beat other developers, including Cheung Kong Holdings Ltd. (1), Sino Land Co. (83), and Sun Hung Kai Properties Ltd. (16), to win the site in the district host to global luxury brands and hotels such as the Peninsula. The price was about 38 percent higher than the HK$3.4 billion median estimate of three surveyors compiled by Bloomberg News.

“The success of this project can showcase to investors the capability of the second generation of the Lee family,” said Joyce Kwock, an analyst at Credit Suisse Group AG, referring to Martin Lee. Lee is chairman of Miramar Hotel & Investment Co., of which Henderson is the largest shareholder.

The initial yield of the project is about 4.2 percent, she said.

Large Developers

The 2,630-square-meter (28,309-square-foot) site is only suitable for large developers because construction costs may be more than HK$1 billion, according to Thomas Lam, the head of valuation and consultancy at Knight Frank LLP in Hong Kong.

Companies are interested in the development as a long-term investment property, he said before the tender result. As much as 31,560 square meters of floor area can be built on the site, according to the government.

Henderson shares fell 0.3 percent to HK$54.85 as of 10:05 a.m. in Hong Kong trading, compared with the 0.2 percent decline in the benchmark Hang Seng Index. The stock has gained 36 percent this year, making it the best performer out of nine companies in the property sub-index.

-By Michelle Yun

Housing Woes Worse in L.A. Than New York, San Francisco

Source: Bloomberg / Personal Finance

Jeanette Cross took out a payday loan to cover her May rent of $1,600 in South Los Angeles. She skipped car and insurance payments to keep a roof over her head.

“I’m further and further behind,” Cross, a 34-year-old single mother of four, said in a telephone interview. “I make a payment on one thing and don’t pay others.”

She isn’t alone. Angelenos use a bigger slice of their paychecks on shelter than people in New York, San Francisco or Miami, studies show. Surging property prices in the second-largest U.S. city are driving up costs in once-impoverished areas while pushing lower-income households into converted garages or to distant suburbs, where the tradeoff is hours stuck in traffic each day.

“They’re bottom earners living in a high-priced housing market,” said Dowell Myers, a policy, planning and demographics professor atUniversity of Southern California in Los Angeles. “The L.A. market’s messed up on so many fronts.”

About half of area households spend at least 30 percent of their income on housing, including costs such as utilities and property taxes, the highest proportion among 381 U.S. metropolitan areas, according to a report by Harvard University’s Joint Center for Housing Studies. Housing costs of 30 percent of income or less are “the traditional affordability standard” and those paying more are “cost burdened,” the study’s authors wrote.

Rising Rents

The burden is heaviest for renters. According to Zillow Inc. (Z), Los Angeles rents average about 48 percent of the area’s median income. That’s more than any other city and up from about 35 percent in the 1980s and 1990s, the real estate data provider said in an Aug. 21 report.

Homebuyers in Los Angeles devote about 43 percent of their median income to shelter at current prices and mortgage rates, tied with San Francisco for first place, Seattle-based Zillow said. The Los Angeles region has the lowest homeownership rate - - the proportion of housing units occupied by the owner -- of the 50 largest U.S. metro areas, U.S. Census data show.

Cross spends two-thirds of her gross income to rent her four-bedroom home. She works at an apartment-leasing company, where she takes home about $2,100 a month. Every day, she hears stories from tenants struggling to pay the rent.

“In some situations, it’s heart-wrenching,” Cross said. “But it’s a business and they’re supposed to pay their bills.”

While home prices and rents are higher in San Francisco and New York, Los Angeles is less affordable because incomes are lower -- and lagging behind housing inflation.

Lower Incomes

The median household income in the Los Angeles metro area was $59,424 as of the second quarter, about 22 percent less than in San Francisco and 13 percent lower than in New York, according to a Zillow analysis of Census data and figures from the Bureau of Labor Statistics. Most new jobs in Los Angeles through 2018 will pay less than $23,000 a year, according to a December report by the Department of City Planning.

Mayor Eric Garcetti this week proposed increasing the city’s minimum wage to $13.25 an hour by 2017, almost twice the current federal regulation. It’s part of the “biggest anti-poverty program in L.A. history,” he said in a Facebook post.

The cost of buying a home has been rising even faster than rents, which increased 4.7 percent in Los Angeles County in the 12 months through July, reported Axiometrics Inc., a Dallas-based real-estate data company. Home prices climbed 7.6 percent during the period to a median $457,000, according to CoreLogic DataQuick, based in Irvine, California.

Renter Demand

In the 1970s, Los Angeles began turning into a market where most people rent their homes, and construction has failed to keep up with soaring demand, according to a July study co-written by Paul Ong, a professor of urban planning and social welfare at the University of California at Los Angeles.

That is driving renters and buyers to dodgier neighborhoods. Police shot and killed a man down the street from Cross’s house last month. The violent crime rate in her neighborhood was 52 percent above the Los Angeles average, according to data compiled by AreaVibes Inc., a Toronto-based company that rates quality of life in cities and neighborhoods.

“I don’t let my children play outside,” Cross said. “I don’t like the area. But for the same rent, I’d only get a one or two-bedroom apartment in a better neighborhood.”

Even in sketchier communities, prices are on the rise. In Highland Park, a neighborhood northeast of downtown where the crime rate is 39 percent higher than the Los Angeles average, a house sold in April for a neighborhood record of $1 million, $121,000 higher than the asking price.

Changing Neighborhood

Nearby, a two-bedroom home that’s just 892 square feet (83 square meters) sold last month for $611,000, $66,000 above asking, according to Deirdre Salomone, the real estate agent representing the sellers in both deals.

“It is surprising what is happening in these areas, but people tell themselves this kind of house would appraise in the Hollywood Hills at $2 million,” Salomone, an independent broker and co-owner of L34 Group with Keller Williams Los Feliz, said during a tour of the area. “They are seeing how this neighborhood is changing and are willing to take a chance.”

Christopher Sprinkle, 41, is looking to spend about $500,000 for a house in Highland Park, where many homes have dilapidated front porches, chipped paint and chain-link fences. Among them are spruced-up properties with new windows and solar panels -- signs of gentrification.

‘Million Dollars’

Sprinkle, a senior media producer at the Getty Trust, and his wife, Kira Kelly, 37, a cinematographer, can’t afford to buy on the westside or in the mid-city area where they rent, he said. Now they might not be able to buy in Highland Park.

“If we wanted to stay in our neighborhood, we’d have to drop close to a million dollars,” he said.

Some struggling Angelenos are opting to live in recreational vehicles or illegally converted garages. In June, a federal appeals court struck down a 31-year-old Los Angeles ordinance that sought to bar people from living in vehicles on the street after homeless residents sued the city.

The Department of Building and Safety has fielded more than 17,500 complaints of garages converted into illegal residences in the past decade. The number of unpermitted conversions driven by financial hardship has risen as housing costs climb, said Kim Darigan, founder of Property Forensic LLC, which advises homeowners who have received city citations for illegal structures.

Extra Money

“We’ve seen a lot more of this in the last few years,” Darigan, whose Van Nuys, California-based company advertises on the Web under, said in a telephone interview. “Many single-family residences, particularly in lower-income neighborhoods, do this to make extra money or to take in family members who can’t afford their own homes.”

The number of unpermitted housing units in Los Angeles may be as high as 70,000, according to City Councilman Paul Koretz. He opposes eliminating existing illegal apartments that are safe to occupy.

A dearth of funding for subsidized housing, community resistance to new projects and a decentralized power structure - - the county is divided into 88 separate cities -- contribute to the shortage of living options, particularly for renters, according to Ong, the UCLA professor.

Homebuilders have delayed, downsized or dropped plans for projects as residents thwart development using regulations such as the California Environmental Quality Act, established in 1970 to require environmental-impact reports, said Chris Thornberg, principal at Beacon Economics LLC, a Los Angeles-based research company.

Meeting Demand

“When you open it up like this, you just give people the chance to argue every stupid little point until you finally acquiesce and come up with some compromise that’s not even close to meeting the level of demand,” Thornberg said in a telephone interview.

From 2007 to 2011, almost 42,000 Angelenos moved to San Bernardino County in the region known as the Inland Empire, about 60 miles (97 kilometers) east of downtown Los Angeles, according to a Census Bureau report. It was the nation’s biggest net county-to-county movement in the period.

“People with modest means are being forced away from their jobs into the Inland Empire and therefore having to deal with enormous commutes,” John Husing, chief economist at the Inland Empire Economic Partnership, said in a telephone interview.

Joey D. Morales and his wife, Tammy Mortensen, pay $656.51 a month -- about two-thirds of his take-home pay -- for a rent-controlled studio apartment near University of Southern California. They ride the bus because they can’t afford a car, and buy groceries with food stamps.

Hardwood Floors

The most recently advertised vacant studios in the 26-unit building, where Morales has lived since 2009, rented for $850. The units are now outfitted with hardwood floors, updated kitchens and renovated bathrooms. The building sold in March for $1.7 million, five times its 1999 price of $340,000.

“They’re buying buildings and rejuvenating them and making prices sky high,” Morales, 58, who works for a training program at the Los Angeles Department of Aging, said in a telephone interview. “Pretty soon, affordable housing’s going to be like a dinosaur.”

-By Nadja Brandt and John Gittelsohn

Toll Profit Jumps After Luxury Homebuilder Raises Prices

Source: Bloomberg / Luxury

Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, said fiscal third-quarter earnings more than doubled as rising prices fueled a 53 percent increase in revenue.

Net income for the three months through July rose to $97.7 million, or 53 cents a share, from $46.6 million, or 26 cents, a year earlier, the Horsham, Pennsylvania-based company said today in a statement.

Buyer demand has remained strong at the upper end of the U.S. housing market, especially in areas such as California and New York, where Toll Brothers offers some of its most expensive houses and condominiums. The average price of new U.S. homes sold in July rose to $339,100, an all-time high, even as sales fell to the slowest pace in four months, the Commerce Department reported last week.

“We are driven by bottom-line growth and are pleased with our continued margin expansion through what we still believe is a recovering, albeit bumpy, housing cycle,” Toll Chief Executive Officer Douglas Yearley Jr. said in the statement.

Under Yearley, Toll has expanded its California and urban high-rise divisions while diversifying into apartment construction as demand for rentals grows. Signed contracts fell to 1,324 homes worth $949.1 million from 1,405 homes worth $992.6 million.

Revenue rose to $1.06 billion from $689.2 million a year earlier. The average price of homes sold in the quarter climbed to $732,000 compared with $651,000.

Toll’s gross margin excluding interest and writedowns widened to 26.8 percent in the fiscal third quarter from 25.1 percent a year earlier, the company said today. The full-year gross margin will improve by 185 to 200 basis points compared with fiscal 2013. Toll previously predicted an increase of as little as 175 basis points.

The results were announced before the start of regular U.S. trading. Toll was little changed at $35.63 yesterday. The shares are down 3.7 percent this year, compared with a 3.4 percent decline in the 11-company Standard & Poor’s Supercomposite Homebuilding Index.

-By John Gittelsohn