Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

22nd January 2015

Singapore Real Estate

Taking a 3rd HDB loan? Pay market rate, says Khaw

To discourage 'churning' of resale flats, HDB will grant a third loan only under exceptional circumstances, says Minister for National Development Khaw Boon Wan. 

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Developmental Board (HDB) may grant a third housing loan to home owners - but only in exceptional instances, and at the market rate, said Minister for National Development Khaw Boon Wan on Tuesday (Jan 21).

In a Parliamentary question, MP Zainal Sapari had asked about HDB’s rationale for imposing a higher interest rate for home owners who take a third housing loan. In response, Mr Khaw said HDB will grant a third loan only under exceptional circumstances.

“Typically, this is for those who are in urgent need of housing, but due to poor credit records, are unable to secure a bank loan even though they have a steady income. Providing a third housing loan at a higher rate is to discourage churning of resale flats,” he added.

However, HDB may help with a concessionary rate loan for genuine hardship cases that merit such consideration, he said.

HDB currently provides up to two concessionary rate loans to eligible flat buyers, with interest rate at below market rates over the long term.  

- CNA/ct

MTI to strike balance in unveiling more rent data

For a start, information on retail, office and industrial rents to include floor and unit size

Source: Business Times / Real Estate

To ensure that businesses have more meaningful data to guide their decisions in the leasing of space, the government is releasing more rental information in a way that seeks to strike a balance between market transparency and data privacy protection. The Ministry of Trade and Industry (MTI) said on Wednesday that it is releasing more detailed data on rents for retail, office and industrial space through a multi-agency effort with the Urban Redevelopment Authority (URA) and JTC - a process that started a year ago.

-By Lynette Khoo

More rental data to help track market rates

Aims are to improve transparency, help businesses in decision-making

Source: Straits Times / Money

DETAILED numbers on rent rates in the retail, industrial and office segments will be made available this week, in a move to improve transparency for businesses.

The data - for periods ranging from the first quarter of 2012 to the fourth quarter of last year - is being released by the Urban Redevelopment Authority (URA) and JTC Corporation.

The move is a "milestone" that the Government hopes will help businesses make "informed decisions" before signing on the dotted line, said Minister of State for Trade and Industry Teo Ser Luck at a briefing on the initiative yesterday.

"We hope that with more detailed data, businesses will have a better idea of market rental rates, which can in turn help them decide where to site their shops, offices and factories," added Mr Teo.

Only data on median rents sorted by the relevant street is available now.

The new set of figures, which will be compiled from stamp duty submissions to the Inland Revenue Authority of Singapore, will include specifics not accessible before.

These include refining retail and industrial rents by postal district as well as giving information on floor level and area.

Office rents will be further defined by location, such as the central region, city-fringe region and outside the central region, as well as by building classes.

Spaces in the Downtown Core and Orchard Planning Area are considered "Category 1" buildings, while the remaining office space is in "Category 2".

The new data will also include additional information on rents at the lower and higher ranges - called the 25th and 75th percentiles.

This is to give stakeholders a better sense of whether median rents are on the low or high side, said Ms Cynthia Phua, executive vice-president of Singbridge Corp and chairman of the Rental Practice Working Group set up by the Singapore Business Federation (SBF).

The SBF has been working with the Ministry of Trade and Industry, the URA and JTC for the past year to devise the best format for presenting the data.

The move underpins the SBF's Fair Tenancy Framework initiative unveiled on Tuesday that sets leasing guidelines and negotiation principles to help smaller firms and landlords understand what they are committing to.

Mr Teo pointed out that there are limits to what can be disclosed, given privacy rules, while only data points supported by at least three rental contracts in the quarter will be available.

Though the information will include rents at malls managed by real estate investment trusts, commercial office buildings and industrial factories, it excludes information on shophouse leases in both the private and public markets.

Mr Sin Lye Chong, group director of land sales and administration at URA, said he would look into this omission if the number of rental contracts grows.

Mr James Teh, whose firm is in an industrial building, said the changes were "helpful".

"There's no way of telling if you're paying the market rent, unless you go around asking your neighbours what kind of rates they're getting," he said. "It's always good to have more transparency because it helps us make decisions."

Updated industrial data for the fourth quarter of last year will be published on JTC's website today, while the URA will publish retail and office data for the same period on its website tomorrow.

-By Cheryl Ong

Rental data to be released on quarterly basis

The move comes on the back of calls from businesses for greater transparency in the rental market. This has led to the Singapore Business Federation introducing the Fair Tenancy Framework, which includes the release of clearer rental data as an initiative.

Source: Channel News Asia / Business

SINGAPORE: Businesses will get greater clarity on trends in Singapore's rental market. Starting on Thursday (Jan 22), more detailed data on rents for retail, office and industrial space will be released by the Government every quarter.

The move comes on the back of calls from businesses for greater transparency in the rental market. Earlier this week, the Singapore Business Federation (SBF) introduced the Fair Tenancy Framework, which includes the release of clearer rental data as an initiative.

Many businesses have complained of soaring rental rates imposed by landlords, which threaten to heighten operating costs. With the new move, the public can now view rental data at the 25th, 50th, and 75th percentile by floor level and area.

For instance, if one wants to find out the monthly unit rent for retail space at the 25th percentile in District 9, which includes the Orchard area, one can now look at what trends are like for basement units that are 30 square metres and below. Previously, rental data was only released at the 50th percentile and by street name, excluding information by floor level and area.

Ms Cynthia Phua, chairman of the rental practices working group at SBF, said: ”Having the 25th percentile and the 75th percentile - that part in itself will give a very good range for a tenant who is assessing the rental for that unit itself, whether they are transacting at the upper range of the rental range, or the lower range." 

The new data can be accessed on the websites of the Urban Redevelopment Authority (URA) and industrial landlord JTC Corporation.

The Ministry of Trade and Industry said the additional details covering floor level and unit size will help businesses make more informed decisions before signing a contract.

Minister of State for Trade and Industry Teo Ser Luck said: "Feedback from businesses is that we have to be a little bit more specific. Then the question is: How specific we want to go?

"If we want to be too specific, say, for example by every single building, we have a few considerations. Where do you get the data? And whether in obtaining the source of data, whether you actually intrude into the privacy or even ... contravene the data privacy law."

Depending on the response to the new set of data, further adjustments or additional information may be included in the future.

- CNA/ac/dl

URA reviewing short-term rental of private homes

Leases shorter than 6 months would benefit residential rental market and boost tourism but hit hospitality sector

Source: Business Times / Real Estate

The Urban Redevelopment Authority (URA) is reviewing its policy on short-term rentals of private homes in Singapore - a move that observers say may help to give some reprieve to landlords who are bracing for an onslaught of new units coming into the market. Under URA's guidelines, which were introduced in 2009 to safeguard the living environment of residents, private homes have to be rented out for no less than six months.

-By Chan Yi Wen

URA may step up action against short-term stays

Source: Straits Times / Top of The News

THE Urban Redevelopment Authority (URA) is considering beefing up enforcement against unauthorised uses of private homes.

Possibilities include acquiring powers to enter premises using force, and requiring suspected offenders to give statements and produce the necessary documents for investigation purposes.

The move comes amid public calls for greater enforcement against residential subletting violations, such as short-term stays, the URA said yesterday.

To help with the review, a public consultation was launched yesterday to get feedback on short- term rentals in private homes.

The consultation comprises a public online survey and talks with stakeholders like grassroots leaders, the Singapore Hotel Association and the Sharing Economy Association (Singapore) or Seas.

Through this, the URA will also review the need to adjust current guidelines, which do not permit rentals shorter than six months. The review will be completed later this year.

National Development Minister Khaw Boon Wan wrote on his blog yesterday that while sharing resources like cars via mobile apps such as Uber can benefit consumers, commodities like homes are "harder to share".

"While it earns extra income for the home owners, their neighbours would not like to see their quiet neighbourhood becoming a hotel district," he wrote. "I myself think it's not a good idea. We certainly do not allow such arrangements in HDB towns."

Mr Khaw added that while some private home owners enjoy the international friendships and cultural exchanges, others are uncomfortable with the presence of transient visitors.

The URA said some residents have raised concerns over noise, loss of privacy, security and the misuse of common facilities.

Last year, it received 375 complaints about short-term stays, up from 231 in 2013.

In response to the consultation, a spokesman for home rental site Airbnb said: "We encourage the URA to create fair, clear and progressive rules that allow individuals to occasionally rent out their primary residences."

Seas treasurer and chief executive officer of home rental site PandaBed, Mr James Chua, said: "There is a lot of misunderstanding about short-term rentals. We hope to provide market information, statistics and facts about home owners that can lead to a more informed decision."

Retiree Yeo Hock Yew, 66, who lives in a condominium near Chinatown, supports stepping up enforcement powers.

"Many of my neighbours and I are unhappy with some of the foreigners who stay here," he said of short-term tenants. "They litter, make a lot of noise and crowd the gym and multi-purpose rooms. If the owners are irresponsible, the law has to come in."

-By Yeo Sam Jo

Genting's Jurong hotel set for Q2 opening

New breed of buyers have boosted prices in New York and London

Source: Business Times / Real Estate

Resorts World Sentosa (RWS) is on track to open its latest Singapore hotel - its seventh - in Jurong East in the second quarter of this year, and is calling on Singaporeans to be part of the hotel's pioneering team. A host of jobs are being offered at a two-day recruitment fair starting on Thursday at the Devan Nair Institute for Employment and Employability.

Keppel units keep market guessing

Source: Business Times / Companies & Markets

INTENSE speculation gripped the market on Wednesday, after Keppel Corp and its real estate subsidiary Keppel Land halted trading in their shares "pending release of announcement" and called off their scheduled results briefings for analysts and media.

The rumours circulating in the market centred on the potential privatisation of KepLand by KepCorp and corporate restructuring, although other theories also broke surface.

KepLand's briefing was slated for Wednesday before being called off; the company released its fourth-quarter and full-year results via SGXnet later in the evening. KepCorp's briefing was scheduled for Thursday - it will also release its results electronically as scheduled. A spokeswoman for both companies declined to say when the briefings would be held next.

Analysts believe that the briefings were cancelled because the companies wanted to avoid questions on the speculation before they were ready to make a formal announcement.

The speculations started when KepLand hit a one-year high of S$3.65 on Tuesday. Its trading volume also more than doubled to 10 million shares, up from about two to five million shares traded daily last week. Meanwhile, KepCorp closed at S$8.10 on Tuesday, having lost 8.6 per cent year-to-date, due in part to plunging crude prices which widely affected oil-linked counters.

BT had earlier reported the spike in KepLand's share price, with market players attributing it to the anticipation of a special dividend, due to gains from its recently disposed stakes in properties. As it turned out, KepLand did not announce special dividends when reporting its results on Wednesday, and the suspension of KepCorp shares indicated that something bigger was afoot.

An industry observer who did not want to be named said: "I suspect something might have been brewing in the background and The Business Times article sort of triggered the need to halt trading while they were still in the midst of working out whatever they're trying to work out. Their respective share prices (showed) that people are playing the pair trade-off, long KepLand, and short KepCorp."

While privatisation was the most mentioned possible scenario, some thought it unlikely, citing a lack of synergy between the two companies and the high cost of doing so - around S$4 billion assuming the deal is transacted at KepLand's RNAV, or about S$2.6 billion based on its market capitalisation. They also noted the lack of a motivating factor from KepCorp's standpoint.

Others suggested that KepCorp might be looking to divest its 54.6 per cent stake in KepLand to its biggest single shareholder Temasek Holdings. According to Bloomberg data, Temasek owns 21.09 per cent of KepCorp.

"If KepCorp were to sell its stake (in KepLand) to Temasek, especially at an attractive premium, it would be able to raise a large amount of cash which it may need in its existing oil and gas business which is facing headwinds at the moment," the industry observer said.

Wong Yew Kiang, a research analyst at CLSA, posited various other possible scenarios, such as a joint bid both companies are making to acquire distressed developers of integrated projects (eg townships) in China, or a restructuring of jointly held assets such as Keppel Bay Pte Ltd, which owns condominium projects such as Reflections and Corals at Keppel Bay.

Mr Wong said that KepCorp could be divesting its 70 per cent stake in Keppel Bay to KepLand to streamline its business, which is "logical" as it could boost the rig builder's earnings amid weak oil prices. "However, as earnings recognition is likely to be a record high for KepCorp due to earlier contracts, we believe this move could be too early, if this is the motivation."

Others wondered if KepLand was following in the footsteps of SC Global and Popular Holdings where Simon Cheong and Chou Cheng Ngok respectively took the listed companies private to avoid qualifying certificate (QC) extension charges, which are imposed on developers whose directors and shareholders are not all Singaporeans and fail to sell their units within two years of the project completion. The rule applies to all listed developers.

But DMG & Partners Research analyst Ong Kian Lin said QC rules would still apply to KepLand if it went under KepCorp's listed structure. That said, the Keppel Bay land plots are exempted from QC taxes, because the land was bought before the revision to the Residential Property Act in July 2005.

Several also noted that KepCorp's newly appointed CEO (with effect from the start of 2014), Loh Chin Hua, is a 25-year property veteran and could be looking to restructure the group's portfolio. He founded Alpha Investment Partners, KepLand's property fund management arm, and before joining Keppel in 2002, was leading Prudential Investment Inc's Asian real estate fund management business.

-By Lee Meixian

Keppel Land's revenue rises but profit falls

Economic conditions in core markets unlikely to improve much, says CEO

Source: Straits Times / Money

PROPERTY developer Keppel Land warned of another challenging year yesterday as it posted gloomy fourth-quarter results.

Economic conditions in its core markets, Singapore and China, "are not expected to improve significantly", chief executive Ang Wee Gee said in a Singapore Exchange filing yesterday.

He said this as the firm's net profit for the three months to Dec 31 dived 21.6 per cent from the preceding year to $444.5 million. This happened despite a 39.5 per cent jump in revenue for the quarter to $705.4 million from the previous year.

Revenue rose on the back of higher turnover from its property trading and fund management segments, Keppel Land said in a statement. Property trading turnover climbed mainly due to Keppel Land's sale of Al Mada Towers in Jeddah, Saudi Arabia.

However, a lower fair value gain on investment properties hurt net profit. That figure came in at $220.2 million for the quarter, down 33.5 per cent from the previous year. Excluding that fair value gain on investment properties, Keppel Land's pre-tax profit increased a marginal 2.6 per cent to $309.5 million.

Mr Ang said this year would be "challenging", partly since Singapore's economy has been affected by an uneven global recovery and property cooling measures are "unlikely to be lifted soon". "However, we expect demand for well-located and well-planned residential projects, such as our Highline Residences, located in Tiong Bahru, to hold up better," he said.

Keppel Land moved 148 of the 500 units at Highline Residences by the end of last year after giving some discounts. In total, it sold 304 units worth $500 million last year, down from 370 units worth $850 million in 2013.

The group intends to expand its commercial property presence overseas, Mr Ang said, adding that the $1 billion in net proceeds from the properties it sold last year would help it "weather severe market downturn".

He added that it would continue to focus on Singapore, China, Indonesia and Vietnam but remained open to other markets.

Its commercial projects overseas include a Grade A office tower in Myanmar and an office tower in Vietnam. It has also bought a 75 per cent stake in Array Real Estate, which develops and manages retail space.

For the full year, the group's net profit fell 15.1 per cent to $752.5 million from the preceding 12 months, even though revenue grew 2.5 per cent to $1.5 billion. Earnings per share for the fourth quarter stood at 28.8 cents, down from 36.7 cents the previous year.

Net asset value per share rose from $4.52 as at Dec 31, 2013 to $4.95 as at Dec 31 last year.

The group proposed a final dividend of 14 cents per share for the full year, slightly higher than the 13 cents paid out last year.

Its shares closed at $3.65 on Tuesday, the highest since November 2013. Trading in Keppel Land was halted yesterday.

Both Keppel Land and its parent Keppel Corp have postponed their post-results analyst and media briefings until further notice.

-By Melissa Tan

CCT eyes higher rents at CapitaGreen, expects positive rental reversions

Source: Business Times / Companies & Markets

Amid limited office supply in the near term, CapitaCommercial Trust (CCT) is eyeing higher rents for the remaining 30 per cent of office space at CapitaGreen, where it hopes to achieve full committed occupancy by the end of this year. Office leases contributing 12 per cent of CCT portfolio's gross rental income are also up for renewal in 2015, and CCT said it is expecting positive rental reversions.

-By Lynette Khoo

Higher rents, lower interest lift CCT's income

Source: Straits Times / Money

CAPITACOMMERCIAL Trust (CCT) has reported a 5.7 per cent rise in fourth-quarter distributable income of $63.6 million.

Distribution per unit (DPU) for the three months ended Dec 31 was 2.15 cents, up 2.9 per cent from 2.09 cents a year earlier, the trust's manager said yesterday.

For the full year, distributable income rose 6.4 per cent to $249.2 million, driven by higher income and lower interest for its wholly owned properties. Full-year DPU was 8.46 cents, up 3.9 per cent from 8.14 cents previously.

The company said the boost in the bottom line was due to higher net property income as well as lower interest expenses, and higher distributable income from RCS Trust and Quill Capita Trust.

The increase came despite the enlarged base of CCT units owing to the partial conversion of CCT's convertible bonds due this year and the absence of yield protection income for One George Street in Raffles Place.

Based on CCT's closing price per unit of $1.835 on Tuesday, CCT's distribution yield is 4.6 per cent.

Fourth-quarter gross revenue rose 3.1 per cent to $66.4 million, while for the full year it added 4.4 per cent to $262.6 million, with higher revenue from all properties except One George Street.

The manager of the real estate investment trust (Reit) said this was due to higher rents across its properties, with the monthly average office rent of CCT's portfolio climbing by 5.9 per cent.

Net property income rose 3 per cent to $50.6 million in the fourth quarter and by 4.1 per cent to $205.2 million for the full year, with the rise in revenue partially offset by higher property tax.

The committed occupancy rate for CCT's portfolio stood at 99.5 per cent, excluding CapitaGreen. This was better than the core Central Business District's rate of 95.7 per cent. The Reit manager said its strong portfolio occupancy rate was underpinned by its high tenant retention rate of 86 per cent.

The committed occupancy rate of CapitaGreen, which obtained its Temporary Occupation Permit last month, is 69.3 per cent. CapitaGreen, a Grade A office building at 138 Market Street, is CCT's first development project.

The Reit's portfolio, which includes its joint-venture interests in Raffles City and CapitaGreen, was valued at about $7.4 billion as at Dec 31.

Mr Soo Kok Leng, chairman of the trust's manager, said: "Our strategy to create value through development has yielded positive results as demonstrated by the notable increase in the trust's net asset value following the completion of CapitaGreen."

Looking ahead, the Reit manager expects office market rent to continue to rise this year, owing to the limited new core CBD office supply. This will enable the Reit to sign higher rents on both new leases and leases up for renewal.

-By Michelle Lee

CapitaCommercial Trust posts DPU of 8.46 cents for FY2014

CCT's DPU for FY2014 is up 3.9 per cent from the previous year. CCT's distributable income of S$249.2 million was also 6.4 per cent higher than the S$234.2 million achieved in FY2013.

Source: Channel News Asia / Business

SINGAPORE: CapitaCommercial Trust (CCT) has reported a distribution per unit (DPU) of 2.15 cents for the fourth quarter of 2014. This is 2.9 per cent higher from a DPU of 2.09 cents in the same quarter a year ago.

Distributable income for the quarter also rose 5.7 per cent on-year to S$63.6 million.

For the full year ended Dec 31, CCT recorded a DPU of 8.46 cents, up 3.9 per cent from the previous year. CCT's distributable income of S$249.2 million in FY 2014 was also 6.4 per cent higher than the S$234.2 million achieved in FY 2013.

This was largely due to higher net property income and lower interest expense for CCT's wholly-owned properties.

Ms Lynette Leong, CEO of CapitaCommercial Trust Management Limited - which manages CCT, said: "In FY 2014, CCT's portfolio of buildings achieved higher occupancy and signing rents that were greater than expired rents. Including the committed rents of CapitaGreen, the monthly average office rent of CCT's office portfolio increased by 5.9 per cent from S$8.13 per square foot in Q4 2013 to S$8.61 per square foot in Q4 2014."

Looking ahead, CCT's manager said in a statement that it expects office market rent to continue to rise given the limited new CBD Core office supply in 2015. It added that the annual average gross new supply is estimated to be 1.1 million square feet from 2015 to 2019. 

- CNA/ac

Companies' Brief

KepLand Q4 profit down; talk of deal with KepCorp

Source: Business Times / Companies & Markets

Keppel Land on Wednesday reported a 21.6 per cent drop in net profit to S$444.52 million for its fourth quarter ended Dec 31, 2014. This resulted from a 33.5 per cent drop to S$220.2 million in fair value gain on its investment properties. Wednesday also saw Keppel Land and its parent Keppel Corp both requesting a share trading halt pending an announcement, fuelling market speculation of a brewing deal between the two.

-By Lee Meixian

Frasers Centrepoint to sell stake in building owner

Source: Business Times / Companies & Markets

Sinomax International Pte Ltd (Sinomax), an indirect wholly owned subsidiary of Frasers Centrepoint Limited, has conditionally agreed to sell its entire stake in Beijing Sin Hua Yan Real Estate Development Co Ltd (BJSHY) to Beijing Haina Junan Investment Co Ltd for about 357.4 million yuan (about S$76.6 million) in cash. BJSHY owns a retail mall-cum-office building with a net lettable area of 156,336 square feet known as "Crosspoint" and is located along the Second Ring Road in Beijing.

-By Joyce Hooi

MCT sees resilience in portfolio; Q3 DPU up 11.5%

Source: Business Times / Companies & Markets

Mapletree Commercial Trust (MCT) on Wednesday said its retail and office properties are expected to stay "relatively resilient". It noted in its financial statement for the fiscal third quarter that the outlook for the retail market is likely to remain challenging in the next 12 months, with the overall rental growth expected to be subdued.

-By Jamie Lee

Mapletree Commercial Trust posts 11.5% jump in DPU

Source: Straits Times / Money

HIGHER rental income for new and replacement leases helped Mapletree Commercial Trust (MCT) post an 11.5 per cent jump in third-quarter distribution per unit (DPU) to 2.08 cents.

The real estate investment trust (Reit) also received a lift from step-up rents in existing leases at VivoCity mall in HarbourFront and mixed development PSA Building in Alexandra.

The Reit has a portfolio of four properties, including two office towers - Mapletree Anson in Tanjong Pagar and Bank of America Merrill Lynch HarbourFront.

The DPU was a hefty increase on the DPU of 1.865 cents in the same period a year earlier. Unitholders will receive their payouts on March 5.

Income available for distribution in the third quarter rose 13 per cent from the previous year to $43.8 million.

Net property income was up 10.7 per cent at $54.7 million.

Gross revenue increased 6.5 per cent to $72.9 million from the same period last year, thanks to positive contributions from all properties.

Third-quarter property operating expenses fell by 4.4 per cent from a year earlier to $18.2 million, due mainly to lower utilities expenses and lower spending on marketing, though these were partially offset by higher property taxes.

VivoCity, the largest contributor to revenue, "maintained sound growth", said MCT's manager in a statement to the Singapore Exchange.

Shopper traffic and tenant sales inched up 0.7 per cent and 0.5 per cent respectively in the last nine months of 2014. Small-scale asset enhancement works have begun and are to be completed by end-September.

MCT's portfolio occupancy stands at 99.5 per cent as at Dec 31, up from 98.2 per cent in March 31 last year, while 84 per cent of portfolio leases expiring this fiscal year have been committed.

Ms Amy Ng, chief executive of Mapletree Commercial Trust Management, said: "Moody's upgrade of MCT's credit rating from Baa2 to Baa1 also affirms MCT's proactive approach to capital management and strong operating performance track record."

Earnings per unit for the three months ended Dec 31 was 1.95 cents, up from 1.739 cents in the same period a year ago. Net asset value per unit as at Dec 31 was $1.17, up from $1.16 as at March 31 last year.

The announcement was made after the market closed. The Reit's units closed half a cent higher at $1.475 yesterday.

-By Marissa Lee

Fortune Reit's Q4 DPU up 8% (Amended)

Source: Business Times / Companies & Markets

Fortune Reit posted an 8.3 per cent increase in income available for distribution to HK$197.2 million (S$33.95 million) for its fourth quarter ended Dec 31, 2014, on Wednesday. A distribution per unit (DPU) of 10.50 Hong Kong cents was declared for the quarter, an 8 per cent increase from the DPU of 9.72 Hong Kong cents in Q4 2013. 

-By Joyce Hooi

Rental returns lift Fortune Reit's Q4 earnings

Source: Straits Times / Money

ROBUST rental returns ignited fourth-quarter revenue at Fortune Real Estate Investment Trust (Reit) to give unit-holders a new year bonus.

Revenue for the Singapore and Hong Kong-listed Reit rose 8.4 per cent to HK$425.7 million (S$73.5 million) for the three months to Dec 31, pushing net property income up 6.7 per cent to HK$293.5 million.

"The improvement in financial performance compared with the fourth quarter of 2013 is mainly attributable to strong rental growth across the portfolio," said ARA Asset Management, the trust's manager, yesterday.

Net asset value was HK$11.93 per unit as at Dec 31, and income available for distribution was HK$197.2 million, up 8.3 per cent.

The earnings per unit for the quarter jumped from 65.88 HK cents to 104.22 HK cents, the Reit manager added, while announcing a final distribution per unit for the six months ended Dec 31 will be 20.8 HK cents, to be paid on Feb 27.

The strong fourth quarter sent full-year net property income up 25.1 per cent to HK$1.16 billion while income available for distribution rose 21.5 per cent to HK$780.8 million.

Full-year distribution per unit jumped 15.8 per cent to 41.68 HK cents.

The occupancy rate for the trust, which owns 18 retail properties in Hong Kong, was 97.3 per cent while rental reversion stood at a record-high 23.8 per cent.

ARA Asset Management noted that Fortune Reit's two flagship malls - Fortune City One and Fortune Kingswood - have continued to perform well, with Fortune City One increasing its net property income by 14.6 per cent year-on-year in 2014.

The manager said it is confident the trust will continue its trend of 11 straight years of earnings growth, given renovations at Belvedere Square are due to be finished by the end of this year and the acquisition of Laguna Plaza was completed on Jan 9.

-By Wong Wei Han

Mapletree Logistics Trust 

Source: Business Times / Companies & Markets

Mapletree Logistics Trust (MLT) reported a mild 1.6 per cent y-o-y growth in its Q3 FY2015 DPU to 1.87 Singapore cents on the back of a 6.2 per cent increase in its gross revenue to S$82.9 million. Results were in line with our expectations. Looking ahead, we believe the outlook remains challenging, especially in Singapore.

Centurion Corporation 

Source: Business Times / Companies & Markets

Centurion has announced that it is currently exploring the feasibility of establishing a Reit. Maintain "buy" with an S$0.83 TP (45.6 per cent upside). We think that it is mainly the Singapore dormitories that will be injected and regard this as a short-term positive for Centurion, as it could greatly lower its gearing and unlock its value for these Singapore dormitories. We also expect the management to reward shareholders with a special dividend if the listing goes through.

Oxley Holdings

Source: Straits Times / Money

OXLEY Holdings has terminated the main contract for the construction of its Devonshire Residences, with effect from Jan 6, after the main contractor, Admin Construction, was placed under creditors' voluntary winding up the day before.

Oxley said it has since appointed another contractor to complete the project.

Soilbuild Reit

Source: Straits Times / Money

SOILBUILD Reit has posted a distribution per unit (DPU) of 1.585 cents for the three months to Dec 31, 5.9 per cent higher than the forecast in its initial public offering.

The improved performance was mainly due to higher income from recently acquired properties which was partially offset by higher property tax incurred for West Park BizCentral.

For the full year, the Reit recorded a DPU of 6.193 cents. Net property income was $57.4 million, while gross amounted to $68.1 million.

Views, Reviews & Forum

Any checks on bidders for construction projects?

Source: Straits Times / Forum Letters

DISRUPTIONS to construction projects, as a result of contractors running into financial problems, need to be addressed quickly ("Braddell Rd project hits bump as work comes to a halt"; Tuesday).

If Hexagroup, the contractor behind the project to widen the stretch of Braddell Road between Toa Payoh Lorong 1 and the Braddell Flyover, posted an after-tax loss of $4.6 million in 2007 and did not submit profit-and-loss statements after that, why was it awarded the Braddell contract in 2012?

Did the Building and Construction Authority (BCA) follow the tender process? Were there adequate checks on the contractor's credibility and credit-worthiness, to ensure it could complete the project?

What controls are in place to ensure that contractors do not default on their projects?

Disruptions to construction projects cause considerable inconvenience to the public. They also damage the reputation of Singapore's construction industry.

We pride ourselves on having efficient systems, so it is imperative for the BCA to ensure that construction projects are awarded to contractors that can fulfil their obligations.

-By V. Subramaniam (Dr)

Global Economy & Global Real Estate

New JB waterfront city facing S'pore

Source: Straits Times / Top of The News

CHINESE state-owned developer Greenland Group is investing RM2.4 billion (S$889 million) to build "a waterfront city" near the mouths of two rivers that flow into the Johor Strait - the latest in a line of massive developments facing Singapore.

The deal to construct the Tebrau Bay Waterfront City in eastern Johor Baru was signed in Shanghai yesterday by Greenland and its Malaysian partner, Iskandar Waterfront Holdings (IWH).

The 15-year project, partly on reclaimed land near the mouths of the Tebrau and Pelentong rivers, will showcase a "snow-world theme park", an opera house and a hospital specialising in traditional Chinese medicine, the companies said in a statement.

Greenland Group, a Fortune 500 company, is controlled by the Shanghai state government. IWH is partly owned by Johor's investment arm, Kumpulan Prasarana Rakyat Johor.

They did not say what types of residential or commercial projects would eventually be built. The first phase will be on 52ha of land - about the size of 74 football fields - and is slated to begin this year.

Unlike most other projects announced in recent years in Nusajaya or around downtown Johor Baru, the Greenland-IWH development is in Permas Jaya on the eastern corridor of Johor Baru heading towards Pasir Gudang.

The project site faces the Admiralty Road area in Singapore between Senoko power station and Sembawang Park.

Johor Menteri Besar Mohamed Khaled Nordin, who was present at the Shanghai signing ceremony, said there are about 13 Malaysian and foreign companies involved in Danga Bay projects on the western corridor from Nusajaya to JB. "I now want to develop the eastern corridor of Johor Baru stretching from Tebrau Bay to Pasir Gudang," he said.

Mr V. Sivadas, executive director of PA International Property Consultants, said the snow-world theme park could be a major employment and tourism generator.

The Tebrau Bay Waterfront City joins other projects announced along the Johor Strait.

Last week, Malaysia approved the Forest City project to be built by China's Country Garden Holdings and a Malaysian partner. The project involves four man-made islands totalling 1,386ha - nearly the size of three Sentosa islands.

Malaysia also okayed reclamation of two pieces of land totalling 31.7ha on both sides of the Causeway. The Princess Cove development is backed by China's R&F Properties.

There has been concern that these projects, along with other residential developments in Danga Bay and Nusajaya, will cause a massive glut in property in the coming years.

Mr Wee Soon Chit, executive director of Landserve consultancy in Johor, said that as of last November, 548,295 residential units will be available in southern Johor by 2017. These include about 117,155 high-rise apartments.

"We have more than adequate residential stock. Unless developers are able to get foreign buyers to come in, it will not be easy to find takers," he added.

Mr Wee said that assuming Johor's population grows at 5 per cent a year, its two million population in 2017 would need just 500,000 units at a ratio of four people to a home.

-By Reme Ahmad & Rennie Whang in Permas Jaya (Johor)

China developer pays RM2.4b for Iskandar plot

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Source: Business Times / Government & Economy

Bank of Canada Cuts Rates to Protect Its Hot Housing Market

Source: Bloomberg / News

Canada’s soaring real estate market survived the 2008 financial crisis with barely a scratch. With a surprise rate cut, Bank of Canada Governor Stephen Poloz is trying to make sure it survives an oil price crash.

The central bank cut its benchmark interest rate a quarter of a percentage point to 0.75 percent on Wednesday, an unexpected move it said would buffer the Group of Seven’s largest oil exporter from a 55 percent drop in crude oil since June.

In addition to weighing on inflation, business and government spending, the central bank said the “unambiguously negative” drop in oil prices will be a hit to jobs and income that may rattle consumption and housing.

“The big point here is that this decline in oil prices has been a shock to Canadian incomes, which from a debt-to-disposable income point of view is not good news,” Carolyn Wilkins, senior deputy governor at the bank, said Wednesday in Ottawa. “Certainly the interest rate movement we made today is designed to offset part of that.”

Canada’s housing market has been on a decade-long tear, with the average price of a house in Vancouver rising 67 percent since January 2005 to C$638,500 ($517,200) in December. Toronto prices jumped 71 percent in the same period to C$521,300, according to the Canadian Real Estate Association.

The mortgages Canadians have shouldered to buy those houses helped send the ratio of household debt to a record 162.6 percent of disposable income in the third quarter.

Calgary Market

The bank said the slump in oil will affect housing activity in energy-intensive regions, noting there has been a decrease in housing starts and a “sharp” drop in resales and sales-to-listings ratios in Alberta in December.

Existing home sales slid 25 percent in December from November in Calgary, the country’s oil capital, while listings rose 36 percent, according to industry data.

“Near term housing activity elsewhere is expected to remain high, supported by very low mortgage rates, although the extent to which the downturn already evident in Alberta will spill over into other regions remains to be seen,” the bank said in its monetary policy report released with the rate decision from Ottawa.

The bank calculates that housing’s contribution to output would drop by 0.6 percent if oil prices stay at $60 a barrel through 2016, relative to $110, according to the policy report.

Job Cuts

The bank is concerned “with declining oil prices and the fact that that’s going to detract from the overall economic growth and housing market in the country,” Jim Murphy, chief executive officer of the Canadian Association of Accredited Mortgage Professionals, said by phone. “They take these measures to ensure the Canadian economy is stimulated.”

While the drop in oil prices should give consumers a break, the bank said the windfall may be used to pay debt rather than spending and stoking the economy, especially with energy companies such as Suncor Energy Inc. cutting 1,000 jobs.

“With increased risks of layoffs, those households whose incomes rely on the oil sector will have greater incentives to build precautionary savings or pay down debt,” the bank said in its report.

Conversely, the cut may encourage Canadians to increase their debt burden, Peter Routledge, an analyst at National Bank Financial, said. The bank itself has been long warning about the buildup of consumer debt in the economy.

Inflames Debt

“The risk is that household borrowing takes off again because you’ve cut rates,” he said. “They’re balancing that off against the risk of letting a period of disinflation that entrenches itself and creates longer-term problems for the economy and the housing sector.”

The cut will definitely be felt on housing across the country, especially where housing supply is constrained, Phil Soper, chief executive officer of Brookfield Real Estate Services Inc., said by phone Jan. 21. “Buyers will likely be financing their house purchase with a discounted rate.”

Canada’s largest lenders, including Toronto-Dominion Bank, have kept their prime rates unchanged so far following Wednesday’s move. That rate, which serves as a benchmark for borrowing rates on everything from variable mortgages to credit lines have been at 3 percent since September 2010.

“Our decision regarding our prime rate is impacted by factors beyond just the Bank of Canada’s overnight rate,” spokesman Mohammed Nakhooda said today in an e-mailed statement. “Not only do we operate in a competitive environment, but our prime rate is influenced by the broader economic environment, and its impact on credit.”

-By Katia Dmitrieva and Doug Alexander

Berkadia CEO Sees U.S. Property as Hot Space Amid Global Shocks

Source: Bloomberg / Personal Finance

Justin Wheeler, who was named chief executive officer last week of the commercial-mortgage business owned by Berkshire Hathaway Inc. (BRK/A) and Leucadia National Corp. (LUK), said global investors are increasingly betting on U.S. property.

“People just want to pump dollars into the U.S.” amid volatility in other markets, he said in a phone interview Tuesday afternoon New York time. Commercial real estate is a “hot space right now.”

Wheeler’s Berkadia Commercial Mortgage LLC originates and brokers loans, some of which are sold to U.S. government agencies. The company is also among the largest servicers of commercial real estate debt. Berkshire and Leucadia formed the company in 2009 after buying a business from bankrupt Capmark Financial Group Inc.

U.S. commercial property values surpassed the November 2007 peak by 2.4 percent, as measured by the Moody’s/RCA Commercial Property Price Index. Prices in major markets, which include cities like New York and San Francisco, have exceeded prior records by about 16 percent, Moody’s said this month in a report.

Markets have been rattled by plunging oil prices and central-bank moves like last week’s decision by the Swiss National Bank to abolish a currency ceiling. That’s driven investors to the U.S. even as its economy is still rebounding.

Chinese insurance companies are flooding into the global market for prime commercial real estate, helping to drive up property values. And Blackstone Group LP agreed to buy 36 apartment properties across the country for about $1.7 billion, two people with knowledge of the deal said this week.

The U.S. is the “tallest building in Idaho,” Wheeler said, referring to one of the least-densely populated states.

Making Deals

Berkadia has expanded in recent years through acquisitions. In May, it bought Keystone Commercial Capital, a mortgage-banking company. In 2013, it purchased Hendricks & Partners, a firm that advises clients on multifamily real estate.

Wheeler, who used to work on mergers and acquisitions for Leucadia and has been acting CEO of Berkadia since April, said there will be more chances for Berkadia to buy businesses. The company’s owners have the resources and long-term focus to do bigger deals when opportunities arise, he said. Berkshire is run by billionaire Warren Buffett and Leucadia by CEO Richard Handler.

“It’s rare to be part of an organization that thinks in decades, not months and quarters,” Wheeler said. “That’s a real competitive advantage for us.”

-By Noah Buhayar

Istanbul Ancient Wall Gives No Defense in Property Fight: Cities

Source: Bloomberg / News

For centuries, Istanbul’s ancient walls safeguarded the city from attack.

What remains of those 1,600-year-old battlements has become the source of conflict. Residents and elected officials are fighting over preservation and development in the ancient Turkish crossroads, whose 14 million people make it the sixth-largest city in the world.

“The city should be protecting its heritage rather than allowing swaths of concrete to be laid and new homes built,” said Ali Hacialioglu, a member of the board of the Chamber of Istanbul Architects.

While emerging megacities such as Mumbai, Cairo and Rio de Janerio have all witnessed families tossed out of their homes to make way for high rises, Istanbul is one of the few to displace residents in the name of historic preservation, Hacialioglu says. The tensions have deepened not only because of evictions but from residents’ doubts that protecting the Ottoman inheritance is the real motivation.

The drama is especially powerful because it follows a confrontation over developing Gezi Park, adjacent to central Taksim Square. A plan to build on a patch of green space there led to anti-government protests that claimed the lives of nine protesters and saw about 8,000 injured in 2013.

Not far from landmarks such as Hagia Sophia and the Blue Mosque, bulldozers have begun demolishing homes, some of which date to the 17th century, to create a buffer zone around a four-mile stretch of the historic city wall.

The stone fortification, still intact along much of its length, is as thick as 4 1/2 meters (15 feet) and 12 meters high. Unesco has named it a world heritage site, a designation that calls on the host government to protect and maintain it.

Experts Cited

Turkish officials have said in statements they’re following recommendations by the experts at the agency, whose full name is United Nations Educational, Scientific and Cultural Organization. Residents fear that the resulting space will soon be built upon. Two other areas along the barricade already have been turned into apartments.

“The government is using Unesco to destroy people’s houses, but in the process it’s wiping out hundreds of years of history,” said Aleksandar Shopov, a Harvard University doctoral student who is documenting the loss of ancient sites in Istanbul, which has been settled since the 7th century B.C.

He cites as an example sections of the land around Edirnekapi Gate, where Sultan Mehmet IIentered the city in 1453, that have been turned into a parking lot.

Unesco Statement

Unesco has not been kept informed about officials’ plans for the neighborhood or that its name was being used to justify evictions, according to an e-mailed statement. Its World Heritage Committee, which monitors more than 1,000 sites but has no enforcement authority, is “very conscious of the fact that management plans need to involve local communities.”

In August last year, about 100 families in the working-class Mevlanakapi neighborhood, which abuts the wall and dates to the 17th century, were asked by the council to attend individual meetings where they would each be told about eviction. Activists inlcuding Shopov say the council is contacting only a few families at a time to prevent a groundswell of opposition, as happened at Gezi.

The residents were offered $500 per square meter for their properties, below the market price, according to several residents who spoke to Bloomberg and asked not to be named for fear of government retribution.

The mayor’s office for the Fatih municipality, which runs the old city and drew up the buffer-zone plan, didn’t respond to phone calls or e-mailed questions.

Bulldozers’ Arrival

In September, the bulldozers arrived. Passing through the ancient gate that gives Mevlanakapi its name, one knocked down an Ottoman-era home. Residents then rallied, linking arms around an 18th century police station and nearby remains of a mosque, preventing their demolition, said Nuretim Turan, a shopkeeper. “By god, we stopped them, but we know they’ll be back,” he said.

While eviction notices continued to be issued, no more buildings have been razed, according to Yurdanur Kilic, who lives in the neighborhood.

Residents say they don’t believe the council’s promise that the space will be preserved for parkland. They point to the example of communities along the wall where homes have been demolished to make way for luxury condos that sell for as much as $1,900 per square meter.

The history of a gated community in neighboring Yedikule underscores the doubts.

Cause for Doubts

It’s built on a former historical gardens that were bought by Erdoğan Bayraktar, then a developer who went on to become housing minister.

Bayraktar sold the 8,000 square-meter parcel -- about the size of a football field -- before his government appointment for about $3 million when it was officially zoned as green space, according Soner Ozimer, a member of the local municipal council and documents seen by Bloomberg. Building work began on the Yedikule Konaklari complex in 2010 before it was rezoned for residential development, said Ozimer.

Permits were eventually issued in 2012 as the complex’s 118 apartments went on sale for up to $300,000.

“While we’re waiting for Turkey to get more enlightened, it feels like it’s heading further into darkness,” Ozimer said.

-By Jack Fairweather and Onur Ant

Dubai Island Developer’s Earnings Increase 43% on Home Sales

Source: Bloomberg / Luxury

Nakheel PJSC, the developer of man-made islands off Dubai’s coast, said 2014 profit rose 43 percent after an increase in delivery of homes and a reversal of provisions.

Net income rose to 3.68 billion dirhams ($1 billion) from 2.57 billion dirhams a year earlier, the company said in a statement today. Nakheel handed over 1,117 units last year and reversed a provision for 460 million dirhams after resolving a dispute about the Golden Mile development on the Palm Jumeirah, Chairman Ali Rashed Lootah said at a briefing in Dubai.

“We are still selling villas and development plots and we are selling without dropping our prices,” Lootah said. “Most of our investors are end users at the moment; it’s a healthy market with many cash buyers.”

Profit rose even after revenue declined to 7 billion dirhams from 9.3 billion dirhams as profit margins widened and the developer cut costs, Lootah said. Nakheel expects to complete about 1,200 villas this year and will award 7 billion dirhams worth of contracts compared with 5.3 billion dirhams in 2014, he said.

The earnings mark a turnaround for the developer, which wrote off $21 billion in assets and got an $8.6 billion bailout from Dubai’s government to help avoid default after the property market crashed in 2008.

Hotels, Malls

Last year, the state-controlled developer repaid its 7.9 billion-dirham bank debt four years ahead of schedule. It’s now focusing on building properties that increase its sources of steady revenue such as hotels and malls. Nakheel expects its recurring income to climb to 7.5 billion dirhams in 2017 after completing retail projects, from 1.3 billion dirhams last year.

The developer, which leases around 17,000 homes across Dubai, is also aiming to be the landlord for around 30,000 households in the city by the end of 2017, the chairman said.

Dubai’s property market slowed in the second half of last year as government measures halted prices that soared at the fastest pace in the world in 2013, CBRE Group Inc. said last month. Nakheel, owner of one of Dubai’s largest land banks, doesn’t plan to start a new development this year, Lootah said.

“We will monitor the market and if we feel demand is there, new projects will be announced,” he said.

-By Zainab Fattah

How U.K.’s Austerity Cost London 6,300 Affordable Homes

Source: Bloomberg / Luxury

London’s affordable housing investment will pay for about 15 percent fewer properties than it would have three years ago because of soaring construction costs, consulting firm EC Harris LLP said.

The city government will spend 1.25 billion pounds ($1.89 billion) constructing 45,000 affordable homes in London through 2018. If it had been invested in 2012, when the construction market was at a low point, the money London is spending now would have built 6,300 extra homes and created 2,000 jobs a year, Mark Farmer, head of EC Harris’s residential team, said in a report.

“It is surely a common-sense philosophy to maximize the expenditure of public money when you can get ‘more bang for your buck,’” Farmer said. “Some major infrastructure programs such as Crossrail have proceeded on this basis during the depths of the recession, but it would appear publicly funded or subsidized housing has not.”

Chancellor of the Exchequer George Osborne cut spending on housing for the country’s poorest by 60 percent from 2011 through 2015 as he focused on reducing Britain’s budget deficit. The number of social and affordable homes completed in England fell by almost 30 percent in fiscal 2014 from three years earlier, according to government statistics.

Every pound spent on homebuilding results in a 2.75-pound benefit for the economy, meaning the government should spend more on housing when the economy’s weak, Farmer said.

Private Homes

Much of the U.K.’s low-cost housing is funded today by private developers through levies paid in return for having their projects approved. That means affordable housing construction moves up and down with the private market, when it should be doing the opposite, Farmer said

Social housing delivery is now synchronized with the private market “and cannot act counter-cyclically as it has in previous economic downturns,” he said.

Central London is now the most expensive place to construct homes and commercial properties in the world, Arcadis NV said Jan. 15. Arcadis owns EC Harris.

A Greater London Authority spokeswoman didn’t reply to e-mails and calls seeking comment.

“This government is committed to delivering long-term economic stability and building the homes this country needs,” the Department of Communities and Local Government said in an e-mailed statement. “More than 217,000 affordable homes have been built since 2010 -– a quarter of these have been built in London. The National Audit Office has also endorsed this Government’s 2011 to 2015 affordable housing program as the best way of building new homes.”

Housing Boom

London home prices have risen 30 percent from 2012 to an average of 501,000 pounds as overseas buyers bought new luxury apartments and mansions and first-time buyers rushed to acquire homes as values soared. That stimulated homebuilding and rising construction costs because of a shortage of labor and higher prices for materials including bricks.

“Embarking on any major publicly funded house building drive at the moment in London will only further stoke build-cost inflation,” Farmer said. “It is a sad reality.”

-By Neil Callanan

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