Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

28th January 2015

Singapore Real Estate

Smart cities: What it takes to build a city

Apart from balancing the physical needs of land, water and the environment, analysts have pointed out that is also important to consider social needs in the entire ecosystem.

Source: Channel News Asia / Singapore

SINGAPORE: What goes into building a city and what does it take to build a city from the ground up?

Managing Director at PwC Capital Projects & Infrastructure, Keith Martin said on Tuesday (Jan 27): "The starting point of good planning is really to understand the demand for a new city space or new urban development. 

“So, there must be a way of measuring demand, assessing that demand, understanding the type of demand, the timing of that demand, the population growth, and the affordability of the demand, so that the master plan can be demand driven and reflect the needs of the end users.” 

An oversupply of infrastructure could be as detrimental as an under supply. The oversupply of housing in certain parts of China has sparked fears of an impending property bubble. 

Apart from balancing the physical needs of land, water and the environment, analysts have pointed out that is also important to consider social needs in the entire ecosystem. 

EY Advisory Services Partner, Sam Wong said it is not only important to look at the physical or infrastructure aspects, but the human side of it as well.

He said: “People make up and exhibit the culture and this is what a city should be known for. In commercial terms, we call it unique selling points. Similarly in a city, what is the unique selling point is that it is relevant to its stakeholder."

Microsoft Public Service Group Director, Stephanie Hung said there are three big development considerations when building a smart city. She said the first is to consider how the Government can be assisted to build trustworthiness while the second is to deal with building sustainability. The third, she added, would be to focus on the people in the cities.

While people build cities, it is equally important that cities today are built for its people.

- CNA/xk/el

Rising Vacancies and Default Auctions Show Singapore Property Is on the Decline

Source: Bloomberg 

(Bloomberg) -- Alex Zou joined about 100 Singaporeans who packed shoulder-to-shoulder into an auction at the Amara Hotel on a Friday afternoon looking for a cheap home to buy.

The bargain hunters who stuffed themselves into the 50-seat conference room are another sign of the decline of Singapore’s housing market. After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a decline in the number of foreign buyers. Banks auctioned 118 repossessed homes last year, about 10 times the number in 2013, said Mok Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle Inc.

As the auctioneer at the hotel bellowed apartment prices and scanned the room for bidders, Zou held back in anticipation of better deals later this year.

“I have been coming to these auctions hoping to find a bargain,” Zou, 50, said. “Hopefully prices will fall more.”

During the housing boom in Singapore, prices soared 40 percent to a record in 2013, spurred by low interest rates and demand from foreign buyers. As prices peaked, the government capped borrowers’ total debt repayments at 60 percent of their income, making it harder for Singaporeans to refinance loans, and placed additional taxes on home purchases by foreigners and levies on property sales.

The measures cooled the market: Singapore’s home prices fell 4 percent in 2014, the first year-on-year decline since 2008.

Vacant Apartments

The restrictions have had the biggest effect on landlords and the rental market. Landlords face a rise in vacant apartments as more new properties come on the market this year and the pace of foreigners arriving in Singapore slows.

Vacancy rates for private residential homes rose to 7.8 percent during the fourth quarter, up from 6.2 percent in the same period a year earlier and the highest level since the last three months of 2005, data from the Urban Redevelopment Authority show.

City Developments Ltd., Singapore’s second-biggest developer, warned last year that the local housing market may face “fire sales” and mortgage defaults due to falling rents, especially for high-end homes. Rental prices of residential properties fell by 3 percent last year compared to a 0.9 percent increase in 2013, URA data show.

CapitaLand Ltd., the island-state’s biggest developer, slid 0.3 percent to S$3.52 at 11:46 a.m. in Singapore trading. City Developments slid 0.1 percent to S$10.15.

Nonperforming Mortgages

“Some of the properties in the auction are those where the owner has multiple properties and he can’t rent them,” said Grace Ng, deputy managing director at broker Colliers International in Singapore. “If the government measures are not relaxed or removed we could see more sales” by homeowners who are in default.

Only a small portion of Singaporeans are having difficulty repaying their mortgages. Less than 1 percent of mortgages were in arrears, with payments more than 30 days past due, as of Sept. 30, according to the Monetary Authority of Singapore’s latest financial stability report released in December.

The authority said it’s closely monitoring non-performing loans after the slight increase in defaults to 0.36 percent from 0.28 percent of the total outstanding mortgages between the first and third quarters of 2014. The increase was “attributed to a handful of high-end housing projects,” the MAS said.

More than 20,000 new homes will come on the market in 2015 and a similar number in 2016, up from about 17,911 in 2014, according to the URA.

Ruling Party

Just as supply is rising, the demand for rentals is falling. The government, led by the People’s Action Party, has clamped down on expatriate hiring after the issue spurred some Singaporeans to vote against the ruling party in the last election they won in 2011.

The number of employment passes issued in the first half of 2014 rose only 0.9 percent to 176,600. That compares with a more than 20 percent jump in each of the two years to 2011.

Homes in some prime residential enclaves were offered at auction last year, data from Colliers showed. These included units at newer developments such as Marina Bay Residences, The Sail at Marina Bay, Reflections at Keppel Bay and Turquoise in Sentosa Cove.

“Besides the stringent loan curbs, which made it difficult for local homebuyers to secure loans, particularly for properties with higher price tags, the falling yields as a result of the softer rental market have also deterred investors from committing to purchases of investment homes,” Ng at Colliers said.

Repossessed Homes

Sales of repossessed apartments could climb by a third this year as credit remains tight and home prices decline, said Mok of Jones Lang LaSalle.

Zou, the homebuyer, is hoping to get a deal on a three-bedroom apartment in the same Singapore suburb where he currently rents, he said. He expects more homes to be repossessed and a further decline in prices.

“There are no bargains available yet,” Zou said. “For now, I’ll wait and watch the market.”


Greenwave looks to tap local talent for 'smart home' apps

Source: Straits Times / Money

LIGHT bulbs which can tell when you are on your way home and turn on accordingly? A smart thermostat which adjusts the temperature to help you save energy?

Those are a couple of the futuristic applications for "smart homes" Greenwave Systems has developed.

And with a new research and development (R&D) centre opened yesterday, it is looking to tap local talent to further its innovation.

The company, which creates Internet of Things software and managed services, moved its operations into The Alpha in Science Park II in late December. The R&D centre is at the same location. The Internet of Things (IoT) refers to the interconnection of devices using existing Internet infrastructure. It connects smart objects, such as lighting systems or thermostats, which can communicate with humans or each other.

With the opening of the new centre, the firm hopes to expand its Singapore team of 80 employees to about 120, and has plans to invest $100 million on the centre in Singapore over the next five years.

Greenwave Systems chief executive Martin Hanniche said: "Since Greenwave was already established in Singapore, we've had the opportunity to see first-hand how the nation's focus on innovation and technology has attracted superb talent and exciting business prospects."

Greenwave's Axon platform allows a wide range of IoT devices to "talk" to each other by translating their communications to a standard "language". It then works with customers such as Verizon, DirectTV and E.ON to develop smart products that communicate using this platform.

The market for IoT technologies is growing rapidly, with a recent report from International Data Corporation, a global market intelligence firm, forecasting it will grow from US$1.3 trillion in 2013 to US$3.04 trillion in 2020. Said Ms Thien Kwee Eng, assistant managing director of the Economic Development Board: "With the rise of digitisation and opportunities in consumer businesses, as well as media and energy management, we encourage Greenwave to continue to leverage Singapore's talent pool, research institutions... for the co-creation of advanced IoT technologies for the Asian market and beyond."

-By Michelle Lee

Companies' Brief

MGCCT posts 9.5% rise in Q3 DPU

Strong results beat forecast by 17%, translate to an annualised yield of 6.5%

Source: Business Times / Companies & Markets

Mapletree Greater China Commercial Trust (MGCCT) posted a 9.5 per cent year-on-year rise in distribution per unit of 1.662 Singapore cents for its fiscal third quarter ended Dec 31, 2014, translating to an annualised yield of 6.5 per cent. The Q3 DPU also beat the Reit manager's forecast by 17 per cent.

-By Lynette Khoo

Cache Logistics Trust's Q4 DPU up marginally

Source: Business Times / Companies & Markets

Cache Logistics Trust on Tuesday reported a distribution per unit (DPU) of 2.146 Singapore cents for its fourth quarter ended Dec 31, 2014, slightly higher than the 2.137 cents it paid out a year ago. This will be paid on Feb 27, 2015. The books closure date is Feb 4, 2015.

-By Lee Meixian

Starhill Global Reit posts 4.9% rise in Q4 DPU

Gross revenue dips, mainly due to weaker contribution from Renhe Spring Zongbei, Chengdu, Japan properties

Source: Business Times / Companies & Markets

Ascendas India Trust

Source: Business Times / Companies & Markets

The stronger performance was due to contribution from the Aviator, which became operational in January 2014 supported by higher revenues from Chennai. Given the recent appreciation of the Indian rupee vs the Singapore dollar, providing a tail wind to Ascendas India Trust's (a-iTrust) earnings, we tweak our FY15-16F distribution per unit (DPU) higher by 2-3 per cent.

UE E&C bidder cracks holdout, garnering stake of 92.61%

Substantial shareholder Singapore Tong Teik has either fully or partially sold its 9.2% interest

Source: Business Times / Companies & Markets

Private equity firm Southern Capital has garnered a stake of 92.61 per cent in UE E&C, paving the way for it to compulsorily acquire the rest of the engineering and construction company. The offeror's late announcement on Tuesday meant that it had acquired an additional interest of 11.46 per cent since Monday, when it had just 81.15 per cent of shares in its control.

-By Kenneth Lim

Tong Teik loses buyout battle, but retail investors the real losers

Source: Straits Times / Money

THE lengthy battle over the fate of mainboard-listed engineering firm UE E&C is now over.

Private equity fund Southern Capital Group has succeeded in its bid to buy out the company at $1.25 per share, valuing the company at around $337.5 million.

It told the Singapore Exchange (SGX) last night that it had taken its stake in UE E&C to 92.61 per cent - enough for it to compulsorily acquire all the shares it does not already own and then delist the stock. Although this dashes the hopes of any minority shareholders who may have wanted UE E&C to stay listed, retail investors can now at least take comfort in that they will not be left in limbo holding an illiquid investment. The sudden jump in Southern's stake from 81.15 per cent on Monday to 92.61 per cent indicates that Singapore Tong Teik, the main challenger to Southern's attempt to privatise UE E&C, yesterday bowed out.

Tong Teik, an investment vehicle linked to rubber veteran Oei Hong Bie, began snapping up shares on the open market in early November last year. It had holdings of about 9.2 per cent worth $31.1 million by the middle of this month.

It continued to buy stock even after Southern declared it would not raise its bid, which suggests that it was out to prevent a delisting rather than trying to agitate for a higher offer.

Although the stand-off between Southern and Tong Teik appeared to be at a stalemate up until the end of last week, it is not surprising that Tong Teik finally threw in the towel.

By growing its stake, it inadvertently contributed to the loss of UE E&C's free float - its 9.2 per cent holding could not be considered as part of the public float as it was more than 5 per cent.

The tipping point came yesterday morning when UE E&C told the SGX that the public now held less than 10 per cent of its stock. This is the threshold below which the bourse may suspend and eventually delist a counter.

Southern's success in lifting its stake would have effectively stymied Tong Teik, leaving it with few palatable options.

One was to hang on to its entire stake and end up as an oppressed minority shareholder in a delisted company. To reap the full returns on its investment, it would have had to wait for Southern to cash out, which could take years. Private equity funds typically aim to exit their investments in four to six years, but Southern's exit horizon could be much longer.

A second possibility was for Tong Teik to sell off enough shares to boost the public float to above 10 per cent and avert a suspension by the SGX.

However, Southern could still have proposed a voluntary delisting, and Tong Teik would have found it much harder to gather enough shareholders owning at least 10 per cent to block that.

The last option, and the one that makes the most sense, would be for Tong Teik to seek a more profitable use of its capital elsewhere. Keeping $31.1 million locked up in illiquid stock would constitute a significant opportunity cost, which Tong Teik may have wisely decided not to take on.

Fortunately for Tong Teik, it is likely to have made only a minimal loss on selling to Southern.

With yet another good company set to leave the SGX, it would appear that the real losers here will be retail investors.

-By Melissa Tay

OUE H-Trust DPU up 6.6% in Q4

Source: Business Times / Money

OUE Hospitality Trust's (OUE H-Trust) fourth-quarter distributable income rose 7.5 per cent on the back of better per-unit revenues in its hotel and mall assets. Income available for distribution rose to S$23.6 million in the quarter ended Dec 31, about 1.3 per cent more than the trust's own forecast. Distribution per unit increased by 6.6 per cent to 1.78 Singapore cents. Shares of OUE H-Trust gained 1.1 per

-By Kenneth Lim

PLife Reit posts 2.9% rise in Q4 distributable income to S$17.5m

Source: Business Times / Companies & Markets

Parkway Life (PLife) Reit has posted a 2.9 per cent rise in distributable income to S$17.5 million for its fourth quarter ended Dec 31, 2014, boosted mainly by acquisitions and rental growth of existing properties. This represents a distribution per unit (DPU) of 2.90 Singapore cents, against 2.82 cents in the same period the preceding year.

-By Claire Huang

Brimming occupancy, high rentals lift Mapletree Reit's income

Q3 distributable income rises 11% on back of foreign assets' strong showing

Source: Straits Times / Money

MAPLETREE Greater China Commercial Trust has posted an 11 per cent lift in distributable income for the third quarter, thanks to healthy rental reversions and high occupancy.

The Real estate investment trust (Reit)'s income available for distribution to unitholders rose to $45.1 million for the three months to Dec 31 with a distribution of 1.662 cents per unit, up 9.5 per cent from a year back.

Net property income rose 10.2 per cent to $59.3 million on the back of growing revenue. Gross revenue rose 12 per cent to $73.6 million due to higher rental rates achieved at its two assets - Festival Walk, a retail and office building in Hong Kong, and Gateway Plaza, a Grade A office block with a retail atrium in Beijing.

Gross revenue at Festival Walk grew 9.4 per cent year on year to $54.1 million, with retail and occupancy remaining unchanged at 100 per cent. For the half year to Dec 31, tenants' sales recorded a year-on-year increase of 4.1 per cent, the trust manager said.

All retail leases at Festival Walk expiring in the 2014/2015 financial year had been renewed or re-let as at Dec 31, with an aggregate 21 per cent rental uplift, it added.

Gross revenue at Gateway Plaza rose 20.1 per cent to $19.5 million, with occupancy rates at 99 per cent. About 87 per cent of leases expiring in the 2014/2015 financial year have been committed and were renewed or re-let at an aggregate rental uplift of 32 per cent. "Both assets remain well-positioned to benefit from healthy leasing demand and the limited supply in their respective locations," said Ms Cindy Chow, chief executive officer of the trust manager.

Property operating expenses were up 20.5 per cent year on year to $14.3 million, mainly due to higher staff costs, utilities and maintenance costs, and property and lease management fees.

Net asset value per unit was $1.06, up from $1.058 as at March 31.

-By Rennie Whang

Views, Reviews & Forum

Seller’s stamp duty redundant

Source: Today Online / Voices

More borrowers are defaulting on their home loans because of multiple factors, including interest rates trending up and the challenging rental market for landlords. (“Singapore empty homes may climb to highest since 1998”; Jan 16, online)

The seller’s stamp duty, a sliding scale of stamp duties until the fourth year after purchase, acts as an unnecessary obstacle to troubled borrowers who may be trying to sell their property to alleviate their financial woes.

The Total Debt Servicing Ratio has been effective in controlling property speculation, and the seller’s stamp duty is redundant. The authorities should consider abolishing the latter as we face an environment of rising interest rates.

The option of selling the property without having to incur a hefty seller’s stamp duty may offer some parties a feasible way out of their predicament and, possibly, the financial embarrassment of bankruptcy.

-By Nurul Ashikin A Ghapar

Global Economy & Global Real Estate

Sales of New U.S. Homes Rose More Than Forecast to End 2014

Source: Bloomberg

(Bloomberg) -- Purchases of new homes in the U.S. jumped in December to the highest level in more than six years, a sign the industry is poised to keep expanding in 2015.

Sales increased 11.6 percent to a 481,000 annualized pace, exceeding all estimates in a Bloomberg survey of economists and the most since June 2008, figures from the Commerce Department showed Tuesday in Washington. Demand increased in three of four regions.

Gains in employment, borrowing costs close to historically low levels and easing credit may prompt more prospective buyers to enter the housing market. The improving outlook is driving up confidence among builders, and companies such as D.R. Horton Inc. and Lennar Corp. project the recovery will be sustained.

“There are some encouraging signs that will play out over the next few months for the housing sector,” Tom Simons, an economist at Jefferies LLC in New York, said before the report. Jefferies was the top forecaster for new home sales in the past two years, according to data compiled by Bloomberg. “Mortgage rates are pretty attractive and the job market is doing well. The spring selling season should be good.”

The median forecast of 75 economists surveyed by Bloomberg called for 450,000. Estimates ranged from 430,000 to 475,000. The reading for the prior month was revised to 431,000 rate from a previously reported 438,000.

Annual Advance

For all of 2014, builders sold 435,000 new houses, the most since 2008. The market peaked at a record 1.28 million in 2005 and slumped to 306,000 in 2011 after the housing bubble burst, the lowest in data going back to 1963.

The median sales price increased 8.2 percent from December 2013 to reach $298,100, the report showed.

The increase in purchases was led by a 54 percent jump in the Northeast, which took the level to the highest since February 2008. Demand climbed 18 percent in the South and 3.1 percent in the West. Sales fell 12 percent in the Midwest.

The supply of homes at the current sales rate fell to 5.5 months from 6 months in November. There were 219,000 new houses on the market at the end of December, the most since March 2010.

New-home sales account for about 7 percent of the residential market and are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings. The latter are calculated when a contract closes, typically a month or two later.

Existing Homes

Existing home sales rose less than anticipated in December as prices accelerated and inventory declined, figures from the National Association of Realtors showed on Jan. 23. For all of 2014, sales of previously-owned houses fell 3.1 percent to 4.93 million, halting a three-year winning streak.

The share of first-time buyers fell in 2014 to its lowest level in almost three decades, according to a late 2014 survey by the Realtors group.

Toll Brothers Inc., the largest U.S. builder of luxury homes, in December said it is unable to raise prices in much of the country. Lennar, a Miami-based builder, said it expects the industry will keep expanding even though profit margins are being hurt by a reduced ability to charge more for its houses.

“While a number of macroeconomic factors have contributed to ongoing choppiness in the recovery, with more pressure on sales prices and gross margins, we remain optimistic about the continuation of the recovery,” Lennar Chief Executive Officer Stuart Miller said in an earnings statement on Jan. 15.

Home Builder

Some companies are faring better. D.R. Horton, the largest U.S. homebuilder by revenue, on Monday reported fiscal first-quarter earnings that beat estimates as sales jumped.

Overall sentiment in the industry is close to a nine-year high, according to data from the National Association of Home Builders/Wells Fargo builder sentiment index. Demand will get a boost from the labor market, which is coming off its best year since 1999 with growth in payrolls and an unemployment rate that’s at a more than six-year low.

Low borrowing costs are providing support. The average 30-year, fixed-rate mortgage was 3.63 percent in the week ended Jan. 22, data from Freddie Mac in McLean, Virginia, showed. It reached a low of 3.31 percent in November 2012.

Credit conditions also continue to ease. The proportion of banks reporting loosening standards for prime mortgages in the past two quarters was the highest since the Federal Reserve began records in 2007, according to the central bank’s October survey of senior loan officers.

The improved outlook was reflected in residential construction data from the Commerce Department that showed builders began work on 1.01 million houses in 2014, the most since 2007.

-By Bloomberg News

Home Prices in 20 U.S. Cities Increased 4.3% in November

Source: Bloomberg

(Bloomberg) -- Home prices in 20 U.S. cities rose at a slower pace in the year ended in November, a sign the industry struggled to find momentum even amid low mortgage rates.

The S&P/Case-Shiller index of property values increased 4.3 percent from November 2013 after rising 4.5 percent in the year ended in October, the group said Tuesday in New York. The median projection of 28 economists surveyed by Bloomberg called for a 4.3 percent year-over-year advance. Nationally, prices rose 4.7 percent after a 4.6 percent gain in the year ended in October.

Property prices slowed over the last year as home sales cooled, with demand stymied by sluggish wage growth and less household formation. More moderate price gains, combined with improvement in the labor market and low borrowing costs, may enable a wider swath of Americans to become buyers, providing a needed jolt to the industry.

“Home-price appreciation continued last year, but at a slower pace compared with 2013,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York and the second-best forecaster of the Case-Shiller index over the last two years, according to data compiled by Bloomberg. “Going into this year, we’ll see a moderate increase in home prices. Mortgage rates have fallen, and that may help sales pick up a bit.”

All 20 cities in the index showed a year-over-year increase, led by gains of 8.9 percent in San Francisco and 8.6 percent in Miami. Among cities whose annual growth rates climbed the most in November were Tampa, Florida; Atlanta; Charlotte, North Carolina; and Portland, Oregon. Cleveland showed the smallest increase, at 0.6 percent.

“Strong price gains are limited to California, Florida, the Pacific Northwest, Denver, and Dallas,” David Blitzer, chairman of the S&P index committee, said in a statement. “Most of the rest of the country is lagging the national index gains.”

Economists’ estimates in the Bloomberg survey ranged from gains of 3.9 percent to 4.8 percent. The S&P/Case-Shiller index is based on a three-month average, which means the November figure was also influenced by transactions in October and September.

Durable Goods

Another Tuesday report showed orders for U.S. durable goods unexpectedly decreased in December. Bookings for goods meant to last at least three years fell 3.4 percent after a 2.1 percent decline the prior month, a Commerce Department report showed in Washington.

Home prices in the 20-city index adjusted for seasonal variations increased 0.7 percent in November from the prior month, little changed from the previous month’s increase. The Bloomberg survey median called for a 0.6 percent gain.

The year-over-year gauge, which uses records dating back to 2001, provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Recovery’s Hurdles

“Difficulties facing the housing recovery include continued low inventory levels and stiff mortgage qualification standards,” Blitzer said.

Property prices before seasonal adjustment rose in 11 of 20 U.S. areas in November from a month earlier, led by a 0.8 percent jump in Tampa. Adjusted prices rose in all 20 cities.

Borrowing costs that have plunged this year amid a drop in long-term interest rates may help make homeownership a more affordable option for some Americans. The average rate on a 30-year fixed mortgage was 3.63 percent in the weekend ended Jan. 22, the lowest since May 2013, according to Freddie Mac data. The rate has dropped by 0.24 percentage point in just the first three weeks of 2015, compared with a 0.7 point decline in all of last year.

When combined with gains in employment and consumer confidence, lower borrowing costs will help put the housing market on better footing in the months to come.

Home Sales

Existing home sales totaled 4.93 million in 2014, down 3.1 percent from the 5.09 million houses sold the year before, figures from the National Association of Realtors showed last week. Meanwhile, builders broke ground in December on the most single-family homes in almost seven years, signaling construction will contribute more to economic growth this year.

That bolsters the outlook of more than just homebuilders, who are optimistic pent-up demand for homes will help the industry this year. Companies such as Toyota Motor Corp. may also benefit.

“ A rise in housing starts bodes well for the light truck and pickup truck market sales,” Bob Carter, senior vice president of Toyota’s U.S. operations, said at a Jan. 14 industry conference. “When homebuilding picks up, construction companies hire more people and those people go out and buy trucks to get the job done.”


European Banks Sold $91 Billion of Property Assets in ’14

Source: Bloomberg

(Bloomberg) -- European banks and asset managers in 2014 sold real estate loans and defaulted properties with a face value of a record 80.6 billion euros ($91 billion), Cushman & Wakefield Inc. said.

The increase in deals, 26 billion euros more than the previous two years combined, came as U.S. funds including Cerberus and Lone Star Funds sought to acquire more European assets, the New York-based broker said in a report today. Transactions will reach 60 billion euros to 70 billion euros this year, Cushman estimates.

The volume of “loan sales recorded highlights the full extent of the troubled assets European lenders have had to deal with since the crash,” said Federico Montero, Cushman & Wakefield’s head of European loan sales. “It also illustrates the vast amount of U.S. capital still hungry for distressed opportunities in Europe.”

The region’s banks and asset managers are selling real estate loans and properties as they repair balance sheets damaged during the financial crisis. Europe’s main banks hold 236.5 billion euros of soured loans and assets linked to non-residential real estate, the European Central Bank said in October.

U.S. investors acquired 77 percent of all of the loans and foreclosed properties by face value sold last year, up from 67 percent in 2013.

Biggest Buyer

Cerberus bought 17.7 billion euros of assets, almost 22 percent of the total and more than any other investor, Cushman & Wakefield said. Lone Star Funds bought 16.1 billion euros of loans and defaulted real estate and Blackstone ranked third with 8.7 billion euros.

The former Anglo Irish Bank Corp. and National Asset Management Agency, Ireland’s bad bank, sold 18.7 billion euros and 10.1 billion euros of assets respectively, making them the largest sellers, Cushman & Wakefield said. NAMA’s deals included joint transactions with other vendors. Royal Bank of Scotland Plc. was the third-largest vendor with 9.6 billion euros, including joint sales.

About 21.7 billion euros of property assets is currently being offered for sale by Europe’s lenders and asset managers, Cushman & Wakefield said. More foreclosed properties will be sold this year, particularly in Italy, because rising values will allow lenders to sell them at a higher price, the broker forecast.

“With activity levels from key vendors such as Lloyds and RBS expected to slow in 2015, lenders in southern and eastern Europe may have a gap to bring more product to the market,” Montero said.


Dubai’s Home Prices to Drop on Dollar’s Gains, JLL Says

Source: Bloomberg

(Bloomberg) -- Dubai’s residential property prices may fall about 10 percent in 2015, the first annual decline in three years, as demand from Europe and Russia diminishes, Jones Lang LaSalle Inc. said.

“Asking prices may drop as much as 25 percent,” said Craig Plumb, head of Middle East research at the Chicago-based real estate broker. Rents will also fall as 25,000 homes are completed, JLL said.

European and Russian buyers are being hurt by the strength of the dirham, which is pegged to the dollar, JLL said. The euro has lost 16 percent against the dollar in the past six months, while the ruble has declined 48 percent.

Home prices in the sheikhdom climbed by a total of 56 percent in the past two years, prompting the United Arab Emirates’ central bank to limit mortgages and Dubai to double a tax on transactions.

Dubai home sales fell 3.2 percent by value last year to 60 billion dirhams ($16.3 billion), Dubai’s Land Department said Jan. 13. Total real estate sales, including land and commercial property, dropped 7.6 percent to 218 billion dirhams.

In neighboring Abu Dhabi, a cap on rental increases is expected to be reinstated this year after it was removed in November 2013, Plumb said. The emirate is considering a rental index to replace the 5 percent increase allowed under the old cap, according to David Dudley, head of JLL’s Abu Dhabi office.

Home values in Abu Dhabi are expected to be stable, while rents will increase, Plumb said. Abu Dhabi’s housing market lags behind Dubai by about 18 months and will see around 10,000 homes completed this year, he said.


Shanghai Regulator Said to Order Widest Stress Test on Property

Source: Bloomberg

Trump Soho May Abandon Condos to Operate Mainly as Hotel

Source: Bloomberg

(Bloomberg) -- Lower Manhattan’s Trump Soho, the five-year-old tower that was seized in a foreclosure amid slow sales of its condominiums, may drop its focus on part-time residences and operate most of the property solely as a hotel.

The building’s new owner, Los Angeles-based CIM Group, is “stepping away” from marketing the roughly two-thirds of condos that remain unsold, said Gary Schweikert, the building’s managing director. The company is considering converting the unsold units at the tower permanently into hotel rooms, he said.

The 46-story building operates under a condo-hotel model that has struggled to find buyers since sales started in 2007. The property contains 391 units that may only be used by their owners for 120 days of a calendar year, a system put in place because of the neighborhood’s restrictive residential zoning laws, Schweikert said. For the rest of the time, they’re offered as hotel rooms, with owners sharing in the rental revenue.

“The highest and best use for this property, given the record visitor numbers in New York City and the zoning restrictions in that neighborhood, would be to use it as a straight-up hotel,” said Jonathan Miller, president of New York-based appraiser Miller Samuel Inc. and a Bloomberg View contributor. “This kind of repurposing would make a lot of sense.”

CIM Group took control of the building late last year after foreclosing on the original developers, Sapir Organization and Bayrock Group LLC. Donald Trump’s Trump Organization operates the hotel and licenses its name to the property, but doesn’t have an equity stake. Schweikert manages the hotel for Trump, and said he has been in meetings with CIM Group as the company evaluates the property’s future uses.

Bill Mendel, a spokesman for CIM, said the company wouldn’t comment on plans for the building.

Seeking Change

“CIM is looking for change,” Schweikert said. “The zoning around the property has changed in the last five years. They are looking at what is the best use of the building.”

The unsold condos currently operate as hotel rooms. The building’s lodging operations have an 80 percent annual occupancy and average nightly rates of more than $500, according to Schweikert.

At the time the tower was being developed, zoning laws in Soho prohibited any residential construction in the neighborhood. The developers used the condo-hotel model to get around the restrictions by dubbing the property a “transient” hotel where owners aren’t full-time residents, according to Andrew Berman, executive director of the Greenwich Village Society for Historical Preservation.

Since 2013, new rezoning laws have been allowing for some residential construction “on certain sites that don’t currently have any commercial uses,” he said, indicating that the Trump Soho still couldn’t operate solely for residences.

Hotel Upgrades

CIM Group is considering a remodel of the Trump Soho’s common areas, such as possibly adding a second restaurant and retail space, Schweikert said. The building may also get a room revamp, which could include technology upgrades such as key-less room entry, he said.

The building faces competition from new hotels in New York’s trendy Soho. Two blocks west, the Hotel Hugo opened its doors in September. Billionaire John Pritzker’s Commune Hotels & Resorts is developing one of its boutique Tommie properties in the neighborhood.

Seventeen condo units at Trump Soho are currently listed for sale, with prices ranging from $825,000 for a studio to $50 million for a 10,000-square-foot (930-square-meter) presidential suite, according to property-listings website


D.R. Horton Profit Beats Estimates as Home Sales Jumped

Source: Bloomberg

(Bloomberg) -- D.R. Horton Inc., the largest U.S. homebuilder by revenue, reported fiscal first-quarter earnings that beat estimates as sales jumped. The shares rose the most since October.

Net income was $142.5 million, or 39 cents a share, for the three months ended Dec. 31, compared with $123.2 million, or 36 cents, a year earlier, the Fort Worth, Texas-based company said Monday in a statement. The average of 14 analyst estimates was 35 cents a share, according to data compiled by Bloomberg. Results for the quarter included $6 million in inventory and land option charges, according to the statement.

D.R. Horton was one of the first builders to focus on boosting its sales count over increasing profit margins, offering incentives such as price cuts, free appliances and reduced closing costs. Orders in the first quarter rose 35 percent in volume to 7,370 homes and 40 percent in value to $2.1 billion.

D.R. Horton’s “continued solid execution, highlighted by above-average order growth and consistently solid operating margins,” led Wells Fargo & Co. to maintain an outperform rating, the equivalent of a buy, Adam Rudiger, a Boston-based analyst with the bank, said Monday in a note to investors.

The shares climbed 5.5 percent to $24.38, the biggest gain since Oct. 17 and the most among the 11 companies in the Standard & Poor’s Supercomposite Homebuilding Index, which rose 2.2 percent.

NVR Falls

The only company in the index that declined, Reston, Virginia-based NVR Inc., fell 2.7 percent after reporting fourth-quarter earnings that were below analysts’ estimates and orders that increased only 3 percent.

Builders broke ground on single-family homes at an annual pace of 728,000 last month, the most in seven years while remaining more than 30 percent below the U.S. average since 1995, according to Commerce Department data. The department reports December new-home sales tomorrow.

D.R. Horton’s homebuilding revenue rose to $2.3 billion in the quarter from $1.6 billion a year earlier. The gross profit margin for home sales fell to 19.8 percent from 22.3 percent a year earlier, according to Drew Reading, a Bloomberg Intelligence analyst. The average selling price was about $281,000 compared with $263,500 a year earlier, Reading said.

Margins were in line with expectations, according to Rudiger of Wells Fargo.

Volatile Stocks

D.R. Horton’s orders for the quarter and January commentary were both positive, “particularly in light of how volatile homebuilding stocks have been as of late,” Rudiger said in his note. “However, we caution investors from getting too excited as the company noted the same January trend last year, and the spring selling season largely turned out to be a disappointment.”

D.R. Horton sells houses ranging from entry-level Express models to its costlier line of Emerald homes. The company does business in 27 states.

Shares of other builders, including Lennar Corp. and KB Home, fell this month after the companies announced their margins will narrow on rising costs and limited pricing power.

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