Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

17th January 2015

Singapore Economy 

PM Lee redefines 'economy faring well'

That's when GDP growth is 2 to 3 per cent a year over the next five years, he says

Source: Business Times / Government & Economy

THE Singapore economy has reached a stage of its development where it is no longer possible to expand by 5 to 6 per cent each year.

As far as Prime Minister Lee Hsien Loong is concerned, the country will have done well if it manages to achieve annual growth of 2 to 3 per cent in Gross Domestic Product (GDP) for the next five years.

"Domestically, we have to get used to what that means. Three per cent (growth) per year means wages will go up correspondingly, gradually, year by year. Maybe not every year, but over four to five years, you will see improvements if we are successful in our policies," he said.

For the whole of last year, the economy is estimated to have grown by 2.8 per cent, down from 2013's 3.9 per cent; this year, the forecast is for between 2 and 4 per cent.

The fact that economic growth will be slower than what the country enjoyed in the past was a point he raised in a wide-ranging, 75-minute interview with reporters at the Istana this week.

In recent years, the Republic has been tightening its policies, including the inflow of foreign labour, to bring the economy onto a path of sustainable, productivity-driven growth.

He said that while Singaporeans have to accept a slower pace of growth, the government would do all it can to help them through this period of economic restructuring.

The state is already doing more for the low-income groups here, while the tax burden for the middle-class has been kept down considerably, compared to what tax payers in Hong Kong and Australia pay.

The prime minister said: "What you earn, you keep, rather than (have the government) spending it on your behalf. If we can maintain that, then we can improve lives progressively. If we cannot maintain that, we will go to zero growth. Then I think we will have a problem."

The global economic outlook is "never going to be certain", he declared. If it were, that would only mean that the world was oblivious to an impending danger and about to experience a crash of some sort.

"That was the situation before 2007 and everybody thought things were well; the markets were brilliant and all making money, and then you ran into a serious disaster (with the global financial crisis)," said Mr Lee.

"The global economy will have uncertainties and will be so for a long time to come. Even if the global economy is doing well, it will always be in a flux - changing new technology, new players, new competitors, new partners to cooperate with - and we have to respond to that."

On a related note, he tackled the issue of productivity improvement in Singapore. The nation's productivity performance has been weak for the last three years, with growth even being negative in the first three quarters of 2014.

He described this ongoing productivity journey as one that needs much perseverance, given that results cannot happen quickly.

"(This is) something which we have to continue working on. We have the schemes. We have the emphasis. We are talking about SkillsFuture and upgrading people. There is no alternative to this," he added.

SkillsFuture is a national long-term drive, launched last year, to help Singaporeans develop skills relevant to their jobs, and to help them advance in their careers.

Meanwhile, this year is shaping up to be an eventful one for Mr Lee, who turns 63 next month. He is now into his second decade as Singapore's leader, at a time when the country is entering its year of golden jubilee celebrations.

"We have come a long way in 50 years. Fifty years for a country is nearly two generations. If you look at other countries which have made a 50-year journey, they have often had a lot more difficult of a time than we have," he said.

"We must use this as a jump-off point, not as a final destination. This is a good time for us. It is like reaching the end of a 50m swim: I touch, take a breath and swim on. I think, swimming on, we have to set broader targets. One common element will be that, in Singapore, we have a home, we have a future and our children can grow up and do well. We can work together to do that."

-By Lee U-Wen

On Parliament’s agenda: Oil prices, errant retailers, housing issues

Questions were filed on consumer protection in light of errant retailers at Sim Lim Square, on the impact of falling oil prices on the economy and on various housing issues.

Source: Channel News Asia / Singapore

SINGAPORE: Parliament will be in session for the first time this year next Monday (Jan 19). The impact of falling oil prices on the local economy, a review of consumer protection laws and various housing-related issues will be on the agenda.

In the wake of the Mobile Air saga, which threw the spotlight on dishonest retailers at Sim Lim Square, 10 questions relating to errant retailers and their sales tactics were tabled for the upcoming session. Consumers Association of Singapore (CASE) President and Mountbatten MP Lim Biow Chuan will ask if the Consumer Protection Fair Trading Act can be amended to give bodies such as CASE more powers to pursue criminal prosecution of errant retailers.

MP Hri Kumar Nair and NCMP Yee Jenn Jong will ask if the Government will give more teeth to Government agencies, or establish its own consumer protection agency to enforce consumer protection laws in Singapore.

In response to the Bukit Batok rat infestation late last year, MP Zaqy Mohamad will raise questions on whether regulation and enforcement on animal feeding are adequate. Authorities had blamed indiscriminate feeding of stray dogs for the proliferation of the rat population.

There were four questions on the impact of falling oil prices on Singapore's economy, and questions ranging from the Joint Singles Scheme to HDB's net deficit of S$1.97 billion in fiscal year 13/14 were also filed.

In total, there were 72 questions tabled for oral answers in Parliament, while 33 questions for written answers were filed.

Additionally, four Bills will be introduced during this month's Parliament session, including the Liquor Control (Supply and Consumption) Bill and the MediShield Life Scheme Bill.

- CNA/kk

Singapore Real Estate

70 units sold at The Amore EC launch

The Amore executive condominium (EC) opens for booking, with prices starting from S$660,000 for a 2-bedroom unit to almost S$1.4 million for a 5-bedroom unit.

Source: Channel News Asia / Business

SINGAPORE: The Amore EC - the last executive condominium (EC) for which HDB upgraders do not need to pay a resale levy - opened for booking on Saturday (Jan 17).

The project has 378 units on offer. As of 3pm, about 70 units have been sold. Channel NewsAsia understands that buyers picked up mostly the three-bedroom units, which make up 65 per cent of units sold.

Potential buyers whom Channel NewsAsia spoke to said prices start from S$660,000 for a 2-bedroom unit to almost S$1.4 million for a 5-bedroom unit - that is before a 10 per cent discount offered by the developers.

The EC project is located in Punggol, where another executive condo - The Terrace - was launched just a month ago. The Terrace has 619 unsold units, according to latest figures from the Urban and Redevelopment Authority.

Altogether, six EC projects were launched in Punggol over the past three years. Real estate firm Century 21 Singapore said this could have affected sales for The Amore.

Ku Swee Yong, CEO of Centruy 21 Singapore said: "If you were to expand the geography further to include Sengkang and Upper Serangoon, there have been about 10 ECs in the past three years. And then with the many new pieces of land sold, slated for executive condos, the EC segment itself is probably diminishing in terms of overall potential new demand."

Mr Ku added that the government could consider allocating less land to executive condominiums in its land sales programme for the next two years. "Everything is sort of indicating that perhaps this category of product, in terms of government land sales, could probably take a back seat for the next two years before we build up a potential demand." 

- CNA/al

Geylang re-zoning may raise condo values

Experts say less space means better returns for existing units

Source: Straits Times / Money

THE proposal to re-zone some residential parts of Geylang for commercial use could lift the values of nearby condominiums.

Property experts believe reducing the amount of space for homes will bolster values for existing residences as demand is strong, given the area's prime location and good transport links.

"With future supply strapped, owners of existing apartments can expect better returns from their properties, both in terms of rental as well as capital values," said Mr Donald Han, managing director of property consultancy Chestertons.

The proposed zone changes announced by the Urban Redevelopment Authority (URA) on Tuesday are aimed at stemming new residential developments from being built in the areas bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang.

They involve reclassifying land from "residential/institution" use to "commercial/institution".

The move was aimed at "managing friction" arising from the "incompatibility of uses" between residents and commercial activities in the red-light district. There are 24 condominium and apartment blocks - on freehold leases - in the affected zones, two still under construction.

Residents living in the area dotted by nightclubs, eateries and seedy joints have long been up in arms over issues such as noise pollution, illegal parking and littering. Some fear the proposed move will encourage even more shady establishments to be set up.

But experts say the area's proximity to the city centre, Aljunied MRT station and the Singapore Sports Hub make it a popular area, so curtailing the supply of residential land will deliver plenty of upside to existing owners.

Rental yields range between 3 and 5 per cent - about 1 to 1.5 per cent higher than other districts in some instances, because it is common for single units to be rented to multiple tenants in Geylang.

Capital values for existing residences could rise as well, as commercial land typically commands a premium. Though existing residences will not be affected, new developments built in the area must be for either commercial or institutional uses. This includes clans or places of worship.

While the en bloc market is virtually dead now, the small development sites available in Geylang could attract boutique developers or investors seeking to buy smaller buildings for offices, noted Mr Han. But Dr Chua Yang Liang, head of Southeast Asia research at JLL, added: "The fragmented ownership of the land parcels will make the development of any large- scale commercial project more arduous."

The proposed re-zoning would give the green light to offices, shops, restaurants and entertainment joints. There are already restrictions on the number of eateries in Geylang Road to address parking concerns but there are no limits on the number of commercial operators in the affected areas. However, proposals for new pubs and karaoke lounges would be assessed, taking into account the immediate surroundings. This would be done in consultation with the relevant agencies, said the URA.

Dr Chua also noted that a designated zone for commercial activity could stop an infiltration of businesses into the outlying residential areas but it would not prevent visitors from patronising the shops inside the re-zoned cluster.

A resident, who wanted to be known only as Bernard, was "dead against the move" as it would only "perpetuate the status quo" and "worsen the situation".

"Every day when I come home, I can see the sale of contraband cigarettes at a coffee shop; what has been done to stamp this out and other vices?"

Second Minister for Home Affairs and Trade and Industry S. Iswaran said in reply to a parliamentary question from Marina Parade GRC MP Fatima Lateef in April that the Geylang Neighbourhood Police Centre has about 160 officers - 60 per cent more than other areas. The significant police presence and regular enforcement has lowered the number of "major offences" in Geylang by 36 per cent since 2008, he said.

-By Cheryl Ong

Perennial could take up to a 30% stake in AXA Tower

Source: Business Times / Companies & Markets

Perennial Real Estate Holdings may take on the role of an asset manager and could take up to a 30 per cent stake in AXA Tower. Responding to The Business Times story published on Friday, Perennial said: "(The company) wishes to clarify that it is exploring the syndication of a consortium of investors to acquire AXA Tower, taking on the role of an asset manager and potentially investing up to a 30 per cent stake in the property."

-By Kelly Tay

Anson Rd office block now under single ownership

Top 3 floors of Hub Synergy Point have been bought for S$30m

Source: Business Times / Real Estate

A company controlled by a member of the Ho family of Keck Seng group is believed to have gained full ownership of a 28-storey freehold office block on Anson Road after it recently bought the top three floors for a total of nearly S$30 million. Standing at the Enggor Street/Anson Road corner and opposite M Hotel Singapore, the building now goes by the name Hub Synergy Point. It was previously known as Apex Tower and Tunas Building and completed in 1973 although it has been spruced up a few times.

-By Kalpana Rashiwala

Soilbuild Reit rent dispute with JTC going to court

Source: Business Times / Companies & Markets

SB Reit Management, the manager of Soilbuild Business Space Reit, will be taking JTC Corporation to court over some S$3.5 million in additional rent payable to the latter for Solaris, a property Soilbuild Reit acquired on Aug 16, 2013. In April 2014, JTC informed that there was an error on the rent charged for Solaris, and revised land rent from S$405.10 to S$855 per square metre and corrected subterranean rent from S$23.48 to S$70 psm per annum.

-By Chan Yi Wen

Soilbuild Reit manager to take JTC to court

It says move follows numerous attempts to resolve rent issue

Source: Straits Times / Money

THE manager of Soilbuild Business Space Reit (Soilbuild Reit) is taking legal action against industrial landlord JTC Corporation over a rent dispute.

The move comes after "numerous attempts" to resolve the issue, said SB Reit Management in a statement yesterday.

The Reit manager claimed that when it acquired the Solaris building in Fusionopolis Walk in August 2013, the annual rent for the land was set at $405.10 per square metre (psm) and $23.48 psm for the underground space.

JTC Corporation told it last April that there was an error on the rent charged.

It said it should be $855 psm a year for land rent and $70 psm a year for the underground space rent.

SB Reit Management also said in court documents that JTC Corporation wants to adopt the revised rates and claim back payment to make up for the difference between the two rates from when the purchase was completed.

The additional rent would amount to $3.5 million a year, excluding goods and services tax.

The Reit manager objects to the revised rates as it had "relied on JTC's determination on the (first set of rental rates) and proceeded to complete the acquisition of the property".

If SB Reit Management were to pay the additional rent, the value of Solaris would drop from $300 million to $275 million, according to a valuation by Colliers International Consultancy & Valuation, it said.

Solaris is a 15-storey commercial building in one-north, a business park and a high-tech research and development hub on about 200ha.

Soilbuild Reit's net asset value per unit would decrease accordingly as well, from 80 cents to 77 cents, based on its results as at 30 Sept last year, said the manager.

However, there would be "no impact" on the Reit's distributable income up to Aug 15, 2018 as Solaris is leased to SB (Solaris) Investment for five years under a triple net lease basis, where it is required to pay all the land rent.

SB (Solaris) Investment is a subsidiary of Soilbuild Group Holdings.

That would mean Soilbuild Reit would not be required to pay the additional rent during the lease term, added the manager.

Soilbuild Reit's portfolio also includes Eightrium @ Changi Business Park, Tuas Connection and West Park BizCentral in Pioneer.

Its units closed unchanged at 78 cents yesterday.

-By Jacqueline Woo

Jurong Port to install solar panels at cost of S$30 million

More than 95,000 square metres of warehouse roof space, equivalent to 13 football fields, will be installed with solar panels, which the company says would make it the world's largest port-based solar panel facility.

Source: Channel News Asia / Business

SINGAPORE: Jurong Port on Friday (Jan 16) announced it will install solar panels on more than 95,000 square metres of warehouse roof space, which it touts would make it the largest port-based solar panel facility in the world.

The system is expected to generate 10 megawatts of electricity at its peak capacity - equivalent to the consumption of 2,800 units of 4-room Housing and Development Board (HDB) flats annually, it said in its press release.

The installation will cost S$30 million, and is a collaboration with solar leasing provider Sunseap and their partner SolarPV Exchange. The electricity generated will be used by Jurong Port, with excess electricity to be channelled into the Singapore power grid for other users, it said.

The installation agreement was inked on Friday, and works are expected to commence next month. Completion is expected in December this year, the company said.

“This project is testimony to our ongoing efforts to promote environmental sustainability,” said Jurong Port CEO Ooi Boon Hoe. “The project will help promote Singapore as a hub for green energy generation.”

- CNA/kk

Companies' Brief

Cambridge Industrial Trust looks to tech sector

It expects more technology firms to take up space at its properties

Source: Straits Times / Money

MAINBOARD-LISTED Cambridge Industrial Trust (CIT) expects more firms from the technology sector to take up space at its industrial properties this year.

"The technology sector has been pretty vibrant, and we've had a lot of leasing inquiries in that respect," noted Ms Nancy Tan, head of real estate at CIT Management, which manages the real estate investment trust (Reit).

Potential tenants include those involved in semiconductor processing, nanotechnology, as well as product-testing services.

Speaking at a results briefing yesterday, Ms Tan said that this is "all part of the (evolving) lifestyle", much of which is centred on the use of smartphones.

CIT has 50 properties with a total gross floor area of about 8.4 million sq ft, including logistics, warehousing, general industrial, as well as car showroom and workshop properties.

The Reit announced a distribution per unit (DPU) of 5.004 cents for the financial year ended Dec 31 last year, up 0.6 per cent from the same period a year earlier.

DPU for the fourth quarter came in at 1.252 cents, just 0.1 per cent higher than the 1.251 cents in the previous quarter.

Gross revenue for the year rose 3 per cent to $99.3 million, driven mainly by "additional revenue from property acquisitions and newly developed properties, net of divestments, and rent escalations to several properties", said CIT.

It acquired 16 International Business Park in Jurong East - its first purchase of a business park - in December last year for $28 million.

Net property income for the year, however, dropped 3.2 per cent to $77.8 million as a result of higher property expenses due to the conversion of single-tenancy properties to multi-tenancy ones.

"We will continue to explore value-creating acquisition opportunities, proactively manage our high-quality Singapore portfolio, and deliver value through ongoing asset-enhancement initiatives, while maintaining a disciplined financial and capital-management approach," said Mr Philip Levinson, chief executive of the Reit manager.

For instance, CIT will install solar panels on 10 of its 50 properties by the first half of this year.

This will help tenants reduce their energy costs, while enabling the Reit to be "socially responsible in the way we manage our buildings", added Mr Levinson.

CIT units closed 0.5 cent higher at 68.5 cents yesterday.

-By Jacqueline Woo

Cambridge full-year DPU tops S$0.05 target

Over-supply still a problem but trust emerges well from a tough year

Source: Business Times / Companies & Markets

Cambridge Industrial Trust's full-year distribution per unit (DPU) has crossed the five-cent mark that it had hoped to achieve. On Friday, it reported a DPU of 1.252 Singapore cents for its fourth quarter ended December 2014 - versus the 1.251 cents it paid out a year ago. This brings its full-year DPU to 5.004 cents, compared to 4.976 cents in FY13.

-By Lee Meixian

Centurion exploring Reit listing for dormitories

Source: Business Times / Companies & Markets

Centurion Corporation is currently exploring the feasibility of spinning off a real estate investment trust (Reit) and injecting some of its worker accommodation assets into the Reit. If the plan materialises, the Reit will be listed on the mainboard of the Singapore Exchange, subject to the latter's approval, the group said on Friday.

-By Lynette Khoo

Centurion exploring possible REIT listing

In a filing with the Singapore Exchange (SGX) on Friday (Jan 16), Centurion said it is exploring a possible REIT listing with the help of Barclays, United Overseas Bank and UOB Kay Hian.

Source: Channel News Asia / Business

SINGAPORE: Centurion Corp, which owns and manages worker hostels in Singapore and Malaysia, is considering spinning off some of its assets via a real estate investment trust (REIT) to free up capital for expansion.

In a filing with the Singapore Exchange (SGX) on Friday (Jan 16), Centurion said it is exploring a possible REIT listing with the help of Barclays, United Overseas Bank and UOB Kay Hian.

Centurion, formerly known as SM Summit Holdings, owns and operates workers and student accommodation, as well as a storage disc manufacturing business. In Singapore, the group has 23,500 beds for workers in three facilities. A fourth facility, with 4,100 beds, is under construction.

In Malaysia, Centurion has 14,500 beds across five purpose-built workers facilities in Johor, with two more facilities underway. Centurion also owns student accommodation in Australia and the UK.

- CNA/ac/el

Centurion Corp

Source: Straits Times / Money

CENTURION Corp, which specialises in workers' accommodation, is exploring the feasibility of listing some of these facilities as a real estate investment trust on the Singapore Exchange, it said yesterday.

The Singapore company has 23,500 beds for workers across three of its facilities in Singapore, and 14,500 beds in Malaysia.

It is working with Barclays, United Overseas Bank and UOB Kay Hian to explore the proposed transaction, it said.

Mr Kong Chee Min, chief executive of Centurion, said the listing would unlock value for shareholders as well as free up capital for acquisitions.

-By Reuters

Keppel Reit

Source: Straits Times / Money

Broker: Lim & Tan Securities

Call: Hold

Target Price: $1.21

KEPPEL Real Estate Investment Trust (Keppel Reit) said that nine of its 11 completed office towers in Singapore and Australia have achieved 100 per cent committed occupancy.

These include Bugis Junction Towers, Marina Bay Financial Centre Towers 1 and 2, the North and South Towers at One Raffles Quay, as well as Ocean Financial Centre in Singapore.

Last year, rental rates for new leases and renewals at its properties in the Raffles Place and Marina Bay precincts averaged $12 per square foot a month, with some leases committed at $15 psf a month.

We also note that leases reviewed last year registered an approximate 17 per cent positive rental reversion on average. Keppel Reit's diversified portfolio, with its long weighted average lease expiry of approximately nine years for its top 10 tenants, should continue to provide unitholders with steady returns.

Nevertheless, we are downgrading our recommendation to hold, given its relatively high gearing of more than 40 per cent, as rising interest rates could increase its vulnerability.

Hotels: The main challenge is vigilance

Source: Straits Times / Insights

THE man wears an earpiece, a clear giveaway of his role as a security officer in an Orchard Road hotel. But it is his frequent rounds in the lobby that show he means business. He establishes eye contact with this reporter thrice in the 40 minutes she "loiters" there.

Later, he tells her: "Don't worry. If you were really a terrorist, I definitely saw you." He points to two closed-circuit TV cameras hanging from the ceiling: "So did these."

Security experts say there's plenty of surveillance equipment in most public places here. A post-9/11 world and an educational campaign have also made Singaporeans more aware of their surroundings: Many know that they must alert the authorities if they see suspicious items like an abandoned bag.

But is vigilance enough, if terrorists target hotels here?

Between 2002 and 2011, there were at least 18 major terror attacks against hotels worldwide, says the New York State Intelligence Centre, in a 2012 report. It defines a major attack as one which results in at least 10 casualties.

For many, the 2008 attack in Mumbai springs to mind. One of the 166 people killed was Ms Lo Hwei Yen, the first Singaporean to die in an overseas terrorist attack. Her body was found on the 19th floor of the Oberoi Trident Hotel.

What steps are hotel groups taking to prevent a similar tragedy here? Those who spoke to Insight did not give specifics, citing security concerns.

But they can look to the Singapore Standard for Hotel Security, set in 2009, for guidance. It covers, among other things, access, electronic surveillance and the quality of security personnel.

Most of the Singapore Hotels Association's members try to meet these guidelines, says executive director Margaret Heng, adding that the main challenge is ensuring "both staff and the public remain vigilant at all times".

A Marina Mandarin spokesman says security and surveillance equipment at its hotels are updated regularly, with the most recent taking place last November. In line with the new Personal Data Protection Act, staff also undergo training on how to secure guests' private details, to prevent sabotage.

Meanwhile, a Grand Hyatt spokesman says the hotel has "multiple measures in place", including regular emergency drills. And at the Swissotel Merchant Court, security officers monitor crime cases in the area and watch if weak spots emerge on the hotel's property.

Several hotels also participate in emergency response exercises, like the police's yearly Exercise Heartbeat, which simulates terror threats.

At the iconic Marina Bay Sands Hotel - the subject of a non-credible terror "threat" by an international student on Facebook in 2012 - it was clear to this reporter that there was a strong security presence, with at least one officer in full view of an entry or exit point. An officer there who spoke on condition of anonymity said all cars which park there are checked thoroughly by his colleagues.

But options are more limited when it comes to human traffic: An officer must make a judgment call based on body language.

That's because metal detectors can be troublesome, especially when it comes to tourists here to shop or hotel guests who wear jewellery or watches.

Additional measures would also change the environment. In 2004, 10 bombs aboard four commuter trains in Madrid were set off; 191 people were killed. Here, a year later, a new unit comprising armed police troopers was created to patrol MRT stations. Today, these guards can be seen at various stations occasionally.

Similarly, guards at various hotels say they step up checks after attacks in neighbouring countries, or based on advice from the police.

The officer at the Orchard hotel told this reporter that his colleagues checked the undercarriage of cars more zealously and frequently in the wake of the Bali bombings in 2002 and 2005.

Such measures come with a cost, says an expert, who asked not to be named. "It's not just inconvenient, it also impacts the psyche," he says. "Vigilance means you're less at peace."

-By Rachel Au-Yong

Views, Reviews & Forum

Not feasible to reduce cost of hiring foreign labour

Source: Straits Times / Forum Letters

IN ITS recommendations for the upcoming Budget, the Singapore Business Federation's SME Committee called for the Government to defer further planned increases in foreign worker levies and to remove the foreign worker levy for S-Pass holders ("Small companies' Budget wishlist"; Jan 8).

While I appreciate the need for businesses to minimise operating costs, doing so through reducing costs in hiring foreign labour is fraught with long-term undesirable consequences.

Singapore's economy is developed enough to completely wean itself off the low-wage development model.

Also, our productivity has remained stagnant for a while. To make labour cheaper would remove a powerful incentive for companies to improve productivity. If cheap labour is readily available, companies will delay investing in production capital, training, and research and development.

Finally, I wonder why some companies can afford to employ S-Pass holders as retail assistants in convenience stores and waiters in restaurants despite the levies and minimum salary requirements. Yet similar jobs are offered to Singaporeans at much lower salaries.

Are Singaporean staff comparatively less productive? Or are some businesses unscrupulously making illegal salary deductions from their foreign workers, or denying them rest days and overtime pay?

Overall, the best way to determine the health of the economy is to look at whether the incomes of average Singaporeans are increasing.

For that to happen, productivity needs to increase and the income generated needs to be returned to workers in the form of higher wages.

A healthy economy can support both higher corporate profits and higher wages.

I am not advocating a total ban on foreign labour. The Singapore Business Federation should instead work with the Government to promote a high-skilled, high-wage economy, and reduce companies' reliance on foreign labour, which undermines wages and undervalues training.

-By Edmund Lam (Dr)

Don't link housing applications to filial piety

Source: Straits Times / Forum Letters

HOUSING applications should not be linked to filial piety ("Tweak housing policies to reinforce filial piety" by Mrs Kok Kam Heng; Wednesday).

Living with one's parents is not a gauge of how much one wishes to take care of them. Some may live with their parents so that the latter will continue taking care of their needs.

It would be impossible for the Housing Board to monitor how such flat applicants intend to take care of their parents.

Truly filial children will find ways to love and honour their parents even if they live far apart.

-By Sophia Tay Chay Lee (Ms)

Global Economy & Global Real Estate

NZ bachelor pad beach homes get luxury makeover

Source: Business Times / Real Estate

Chinese developer clarifies project block

Source: Business Times / Real Estate

One57 Sets New York Record With $100.5 Million Condo Sale

Source: Bloomberg / Luxury

A duplex penthouse spanning the top two floors of the One57 condominium tower was sold for $100.5 million, setting a record for the most expensive residential deal ever completed in Manhattan.

The sale of Unit 90, which spans all of the 89th and 90th floors of the 1,004-foot (306-meter) tower, closed on Dec. 23, according to records made public by the New York City Department of Finance on Friday afternoon. The buyer was listed as P89-90 LLC.

The apartment, with almost 11,000 square feet (1,020 square meters) of space, including six bedrooms, was last for sale at $115 million, according to a price list filed with the New York state attorney general’s office. The duplex was marketed at $98.5 million before the builder, Extell Development Co., raised prices in response to strong demand.

The deal sets a new bar for the Manhattan residential market, breaking a record set in 2012 when former Citigroup Inc. (C) Chairman Sanford Weill sold his penthouse at 15 Central Park West for $88 million.

One57, located near Carnegie Hall, broke ground in the middle of the global property rout in 2009, setting off a high-end residential development boom in midtown Manhattan. At least six skyscrapers aimed at multimillionaires, including Zeckendorf Development Co.’s 520 Park Ave. and Vornado Realty Trust (VNO)’s 220 Central Park South, are under construction in the area. Another tower off 57th Street, 432 Park Ave., where a buyer agreed to pay $95 million for a penthouse, will open later this year.

Another Duplex

Sales at One57 began in 2011 and reached $1 billion in the first six months, including the deal recorded on Friday.

Another duplex at the building, spanning the 75th and 76th floors, is under contract to be sold for more than $90 million to an investment group that includes Bill Ackman, founder of New York-based hedge-fund firm Pershing Square Capital Management. That deal has yet to be recorded in public records.

Sales at One57 have slowed to a trickle amid competition from other properties reaching the market. Just one contract was signed in each of the first three quarters of 2014, Extell said in a filing on the Tel Aviv Stock Exchange, where the company sells debt to investors. As of the end of September, 24 of the project’s 94 condos were unsold.

-By Oshrat Carmiel

Ivanhoe Buys NYC Tower From Blackstone for $2.2 Billion

Source: Bloomberg / News

An Ivanhoe Cambridge Inc. venture completed the acquisition of a Manhattan tower from Blackstone Group LP (BX) for $2.2 billion, the largest transaction for a single U.S. office building since 2008.

Ivanhoe Cambridge, the real estate arm of Canadian pension fund Caisse de Depot et Placement du Quebec, and Callahan Capital Properties announced the acquisition of 1095 Avenue of the Americas on Bryant Park in a statement Friday. The investors signed a contract to buy the property in November, two people with knowledge of the deal said at the time.

The 42-story building, also known as 3 Bryant Park, is home to Verizon Communications Inc.’s headquarters and offices for MetLife Inc. The purchase extends a push by foreign buyers to invest in prime U.S. real estate as they seek higher yields than bonds and a way to benefit from the country’s economic rebound.

“Three Bryant Park represents a cornerstone of our expanding U.S. platform,” Arthur Lloyd, Ivanhoe vice president for global investments, said in the statement. “It fits perfectly into our investment strategy of building a diversified portfolio of top-quality office properties in gateway U.S. markets.”

The sale is the largest for an entire U.S. office building since a group led by Boston Properties Inc. (BXP) bought New York’s General Motors Building for a record $2.8 billion in 2008, research firm Real Capital Analytics Inc. said in November.

-By David M. Levitt

REITs Emerge as Saviors for Misfit American Borrowers

Source: Bloomberg / Personal Finance

Borrowers struggling to get home loans are catching a break from an unfamiliar benefactor.

Mortgage-focused real estate investment trusts, including those affiliated with Western Asset Management Co. and Pine River Capital Management LP, are backing loans to Americans who don’t meet banks’ requirements.

These borrowers have been shut out of the housing recovery since traditional lenders tightened credit standards following the 2008 housing crash. REITs, facing a decline in yields from government-backed mortgage bonds, are seizing the opportunity to serve these borrowers and boost profits. The firms are investing in lenders, forming partnerships or acquiring them, and agreeing to buy the new loans they make.

“They’re looking at where the needs are, at borrowers in the market where funding is not available,” said Steven Delaney, a San Francisco-based analyst with JMP Securities. “There is demand out there for a broader credit box than what banks are providing.”

Delaney estimates the volume of these misfit mortgages could be as high as $75 billion annually, giving a lift to the market for mortgages without government backing, where issuance was $200 billion last year, mostly jumbo loans.

Qualified Mortgages

Western Asset Mortgage Capital Corp., which has about $4.7 billion in assets, is partnering with lenders to make loans that don’t meet the qualified mortgage guidelines established to curb reckless lending, said Gavin James, chief executive officer of the firm. It may work with as many as eight lenders across the U.S. to ensure geographic distribution of the loans, Travis Carr, the REIT’s chief operating officer, said in June. 

“There’s a lot of due diligence that goes along with buying these loans,” James said. “It’s still a fledgling market.”

The REIT will focus on backing loans to borrowers with strong credit, such as those shut out because they’re self-employed, said Anup Agarwal, head of mortgage and asset-backed securities at Pasadena, California-based Western Asset Management.

Borrowing costs on loans through Western’s partners will be as high as 3 percentage points above conforming interest rates, Agarwal said. The average rate for a 30-year fixed mortgage was 3.66 percent this week, Freddie Mac said in a statement Jan. 15.

QM rules

The QM rules, which the Consumer Financial Protection Bureau rolled out in January 2014, make lenders take steps to ensure borrowers can repay their loans. Lenders will have greater legal risks if the mortgages have terms such as interest-only periods or debt-to-income ratios above 43 percent and don’t qualify for purchase from Fannie Mae, Freddie Mac or the Federal Housing Administration.

Banks had already started tightening standards before QM took effect. As many as 1.2 million borrowers whose FICO scores were high enough to buy a home in 2001 could no longer qualify for a mortgage in 2012, according to a March report by the Urban Institute.

“Lots of borrowers who fit the traditional profile and were kind of banned because of the QM rule were and are good credit,” Agarwal said. “That’s the new mortgage market.”

The U.S. homeownership rate declined to 64.4 percent in the third quarter of 2014, an almost 20-year low, according to the Census Bureau. Renter-occupied residences grew by 1.2 million while owner-occupied households fell about 657,000 in the 12 months through September.

“Some REITs could be important in the non-QM sector, or more broadly in expanding access to mortgage credit,” Raj Date, a former official at the CFPB, said in an email. “That will require either partnering with origination specialists who obsess over this kind of non-QM risk or buying origination specialists.”

Non-prime borrowers

Zais Financial Corp. (ZFC), which has about $722 million in assets, bought mortgage originator GMFS last year for access to new loans and to diversify its revenue stream, according to a third-quarter presentation by the Red Bank, New Jersey-based REIT.

GMFS is licensed in 29 states and originated about $991 million in mortgages for the first nine months of 2014, according to Zais. The purchases give the REIT “increased sourcing capability with control of the origination process” and the lender’s management team adds “strategic insight into credit expansion,” Zais said in the presentation.

Two Harbors Investment Corp. began working with lending partners after the third quarter to reach non-prime borrowers, CEO Tom Siering said during a November call with investors.

Average Credit

Non-prime borrowers are those who can’t qualify for traditional loans because of factors including a credit score below the average of 692 or uneven income.

The Minnetonka, Minnesota-based mortgage REIT, which is managed by hedge fund Pine River, targets borrowers with average credit quality who have been unable to get a loan due to tightened standards, executives said during the call.

The average FICO score on purchase loans backed by Fannie Mae or Freddie Mac as of November was 754 on a scale of 300 to 850, according to mortgage technology company Ellie Mae.

Two Harbors is also expanding its program for borrowers who want to make smaller down payments on jumbo mortgages, more than $417,000 in most areas.

“There continues to be a huge national cohort of people able to responsibly purchase a home that simply haven’t been able to get a mortgage,” Siering said on the call.

‘Strategic Investments’

Ellington Financial, an investment firm that operates like a REIT, has invested in at least two lenders. Larry Penn, CEO of the company, said during an August earnings call that the firm had hired two senior professionals to find “strategic investments” in originators and develop its non-QM business. 

“These will be relatively small investments to start with, but they should have the potential to generate a large pipeline of new investments for us, especially in the non-QM, non-prime space,” Penn said on the call. The firm has about $4.1 billion in assets.

In December, Ellington made a subordinated debt investment in Skyline Financial Corp., which owns NewLeaf Lending, an originator that plans to offer non-prime loans. Earlier in the year, the firm said it took a minority stake in Longbridge Financial, a lender of reverse mortgages, which let homeowners age 62 and older convert the equity in their houses to cash.

Falling Yields

The REITs have traditionally bought government mortgages and other bonds including those backed by jumbo or subprime loans. By law, they must pay out at least 90 percent of taxable earnings to shareholders as dividends. REITs don’t have to pay federal income taxes on those earnings and most of them distribute all of their earnings to get the full deduction.

The firms have lured investors with returns of about 70 percent over the span of the last five years including reinvested dividends, according to a Bloomberg index of 42 mortgage REITs. The index has declined 0.6 percent this year through yesterday.

The REITs are struggling with falling yields on mortgage securities issued by government-controlled Fannie Mae, Freddie Mac and Ginnie Mae as tumbling oil prices crimp the outlook for inflation and spur speculation the Federal Reserve may delay an interest-rate increase. The debt returned 6.8 percent through yesterday since the start of 2014, driving yields down by more than a percentage point to 1.95 percent, according to Bank of America Merrill Lynch index data.

Quality Partners

While mortgage REITs need to find incremental yield, the firms shouldn’t underestimate how difficult lending could be, according to Date, who is now a managing partner at consumer finance advisory firm Fenway Summer.

“Buying loans is pretty decidedly not the same as buying bonds,” he said. “You need a different kind of diligence, a different kind of process, and, frankly, often a different kind of staffing.”

The firms also have to be careful about the quality of their lending partners. Unlike government-backed mortgages, there’s no safety net if their loans default, said Jason Stewart, a Washington-based analyst at Compass Point Research & Trading.

Some REITs are avoiding the small market for non-QM loans, at least for now. Gary Kain, president of Bethesda, Maryland-based American Capital Mortgage Investment Corp., with $7.1 billion in assets, said his firm weighed getting into origination and buying companies but decided against it.

“We didn’t feel that it was scalable at this stage of the game,” Kain said. “It would be better to see if this really works and if it becomes a larger market and if there are any precedents around legal risk.”

Issuance of bonds tied to new loans that aren’t backed by the government was only about $8.8 billion last year, down from $1.2 trillion in each of 2005 and 2006, according to data compiled by Bloomberg.

“Last year was supposed to be the year where the start of non-agency/non-QM took off and it came in so much below expectations,” said Stewart of Compass Point. “People are looking at 2015 and saying now this is our year.”

-By Heather Perlberg and Alexis Leondis

China Overseas Land Plunges After Sale of Homes Is Blocked

Source: Bloomberg / Luxury

China Overseas Land & Investment Ltd. (688) led property stocks lower in Hong Kong after authorities in the southern city of Shenzhen blocked unit sales by the company and other developers.

China Overseas Land tumbled as much 7 percent, the most since March 4, 2013, and traded down 3.8 percent at HK$24.30 as of 1:17 p.m. local time. Fantasia Holdings Group Co. fell 3.7 percent, while Guangzhou R&F dropped 4 percent. The benchmark Hang Seng Index slid 0.8 percent.

More than 2,800 apartments developed by China Overseas Land, along with homes by other homebuilders including China Merchants Property Development Co. (000024) in Shenzhen, would not be allowed for sale, the local land bureau said on its website, without citing a reason. China Overseas Land said all the blocked units have been sold and the move won’t affect its business or finances, according to a company statement.

The Shenzhen authorities’ expanding restriction of property sales is fueling investor concern that developers are getting caught up in a government anti-corruption drive. Kaisa Group Holdings Ltd. (1638), which this month missed a coupon payment on a $500 million bond and also had units barred from sale in the city, is being investigated for alleged links to Jiang Zunyu, Shenzhen’s former security chief who was taken into custody over a graft probe, according to two people familiar with the matter.

“Risk aversion among investors has increased noticeably,” Alan Jin, Hong Kong-based analyst at Mizuho Securities Co., said by phone. “When people don’t know what actually happened, they always fear something bigger may be coming.”

Bonds Fall

The yield premium on China Overseas Land’s $300 million of 5.35 percent notes due 2042, sold at a spread of 255 basis points in November 2012, jumped 37 basis points to 363 basis points as of 11:55 a.m. in Hong Kong, the highest since February 2014, according to prices compiled by Bloomberg.

Shenzhen’s land and resources commission said on its official microblog today that authorities block transactions if developers are found to have violated laws or rules. Transactions may also be temporarily suspended for “normal processing,” it said.

The blocked China Overseas Land units belong to a social-housing project it built for the local government and handed over in 2013, and the developer doesn’t own them anymore, Hugo Hou, Hong Kong-based analyst at Haitong International Securities Co., wrote in an e-mailed note.


“Unlike some of the aggressive regional private developers, China Overseas Land is a prudent large national state-owned enterprise whose project acquisition and development activities have been standard,” Hou said. “We believe this has little to do with the company’s operations, and investors don’t need to overreact.”

Mizuho raised share-price forecasts for China Overseas Land and China Resources Land Ltd. as their state-owned background has become “more valuable,” Jin wrote in an e-mailed note dated yesterday.

“I still believe the state-owned developers, particularly the big ones, are relatively safe” because they face fewer risks from shareholder changes, he said today.

More than 2,300 units developed by China Merchants Property in Shenzhen are blocked from sale, according to the local land authority’s website. Two calls to the company’s branding department went unanswered.

“In the past, developers may have had projects blocked because they owed money to lenders or banks,” said Andy Lee, chief executive for Southern China at realtor Centaline Property Agency Ltd. “But now the restrictions seem to be targeting specific developers rather than projects, which is quite rare. Everyone is looking at this government website, talking about who’s next, but it’s all guessing.”

-By Bloomberg News

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