Real News‎ > ‎2015‎ > ‎March 2015‎ > ‎

10th March 2015

Singapore Economy

 

Labour market to tighten further, but help will be available

Greater crunch a result of slower local employment growth and tight foreign-labour policies, says Tan Chuan-Jin

Source: Business Times / Government & Economy

SINGAPORE'S labour market will tighten even further over the next decade, as local employment growth slows dramatically and strict foreign-worker caps stay in place, said Manpower Minister Tan Chuan-Jin on Monday.

To help citizens and businesses remain competitive amid these structural shifts, the Ministry of Manpower (MOM) will develop Singaporeans through the SkillsFuture initiative; it will also take progressive steps to raise the productivity of the foreign workforce by introducing measures to encourage the retention of higher-skilled and more experienced foreign workers.

Even though local employment growth was 95,000 in 2014 - more than twice the 38,000 in 2011, thanks in part to women and older workers joining the labour force - Mr Tan warned that this increase in local hiring will not last.

"We expect our local employment growth to slow dramatically in the next few years, dropping from this base of 95,000 last year to around 20,000 per annum in the last part of this decade. This is largely due to our baby boomers gradually exiting the workforce, and our smaller cohorts entering the workforce.

"I am highlighting this situation not to signal a change in our direction. There will be no change, we will continue to keep foreign workforce growth sustainable and allow it to grow at the current tight pace. The main message is this: taken together with the slowdown in our local workforce growth in this coming year, companies must note that we will experience a very significant tightening of the labour market going forward. If businesses do not become manpower-lean, if they do not become productive, they will have great difficulty in finding enough manpower - be it local or foreign - to run their operations."

One sector that will have reason to cheer is the process sector, which includes plants in the manufacturing of petroleum, petrochemicals, specialty chemicals and pharmaceutical products.

Through changes to the criteria for higher-skilled or R1 workers, eligible firms in the process sector will pay a lower R1 levy for employees who possess the traits of skilled and productive workers - a combination of skills-test qualification, salary and experience. These changes seek to encourage the retention of skilled and productive workers.

Another policy change will enable employers in the process sector to hire experienced Work Permit (WP) holders at the end of their WP term, or at any time with the previous employer's consent, without having to send them back to their home country first - something companies have long called for.

These two changes take effect in 2017.

In addition, from June this year, WP holders in the construction, process and marine sectors will be allowed to take on driving as a secondary job function, subject to a cap. This will reduce the need for firms to hire additional foreign workers as dedicated drivers; this should achieve a more optimal deployment of resources.

As for Singaporean workers, Mr Tan reiterated that although the government is a "key enabler" in the SkillsFuture push, he added that the drive is "truly a national movement", involving individuals, employers and education and training providers.

He also assured Members of Parliament (MPs) that recognised courses will be varied, of high quality and be relevant to industry needs.

He added that SkillsFuture initiatives will be implemented in phases, to ensure that the training landscape is able to develop in tandem with the new measures. Early initiatives comprise the SkillsFuture Mid-Career Enhanced Subsidy, Earn and Learn Programme, Study Awards, Leadership Development Initiative and SkillsFuture Mentors.

"We need to avoid a case where training institutions face this sudden surge in demand, and resort to offering sub-standard programmes or expanding class sizes and compromising on quality. This will lead to a wastage of both individuals' time and public monies," said Mr Tan.

He also clarified that SkillsFuture Credits are meant to support training initiated by individuals - not to fund training employers send them for.

Responding to concerns about potential abuses of the SkillsFuture framework, he took pains to stress the need for a balance between a flexible system and one that is not too lax.

"We are always mindful that there will be people who want to take advantage, and that's where the audit trail is important, (and) individuals providing feedback," he said. "And I think the important thing is to have a sufficiently punitive series of measures that deter individuals (from abusing the system). And if they do, then we will have to whack them."

-By Kelly Tay

http://www.businesstimes.com.sg/government-economy/singapore-budget-2015/labour-market-to-tighten-further-but-help-will-be-available

http://www.straitstimes.com/premium/top-the-news/story/squeeze-get-tighter-workforce-shrinks-20150310

 

Significant tightening of labour market expected as workforce growth slows: Tan Chuan-Jin

TODAY reports: Manpower Minister Tan Chuan-Jin says the Singaporean workforce is expected to grow at 20,000 people per year over the next few years, much lower than growth of 95,000 registered last year.

Source: Channel News Asia / Singapore

SINGAPORE: The local workforce is expected to grow at a slower pace of around 20,000 per year over the next few years, compared to 95,000 last year, said Manpower Minister Tan Chuan-Jin on Monday (Mar 9). He cautioned of a “very significant tightening of the labour market going forward” and urged companies to come up with manpower-lean operations.

Mr Tan pointed to baby boomers in Singapore gradually exiting the workforce as smaller cohorts enter, while the Government continues in its efforts to tighten foreign manpower growth

Speaking at the Ministry of Manpower (MOM) Committee of Supply debate, he noted that the foreign workforce growth last year — at about 26,000 — was one third of the growth in 2011, when the figure was about 80,000.

With this smaller pool of foreign workforce, companies have turned to hiring more locals, and local employment growth doubled to 95,000 last year, compared to 38,000 in 2011, he noted.

Still, Mr Tan said there is no change in the Government’s direction to taper foreign manpower growth.

“Taken together with the slowdown on local workforce growth in these coming years, companies must note that we will experience a very significant tightening of the labour market going forward,” he said. “If businesses do not become more manpower-lean, if they do not become more productive, they will have great difficulty in finding enough manpower – whether local or foreign – to run their operations”.

He urged companies to tap onto technology advancements to increase productivity and innovate, in order to retain their competitive advantage.

-TODAY/dl

http://www.channelnewsasia.com/news/singapore/significant-tightening-of/1703800.html       

 

Labour market will tighten further, warns Chuan-Jin

Businesses have to become more manpower-lean, says minister

Source: Today Online / Singapore

SINGAPORE — With companies here already struggling with a manpower crunch, Manpower Minister Tan Chuan-Jin warned yesterday that the labour market will tighten significantly, as the baby boomers gradually exit the workforce and smaller cohorts enter.

In the last few years of this decade, local employment growth will slow dramatically to about 20,000 per annum — dropping from a base of 95,000 last year. “If businesses do not become more manpower-lean, if they do not become more productive, they will have great difficulty in finding enough manpower — be it local or foreign — to run their operations,” Mr Tan said.

Speaking during the Manpower Ministry’s (MOM) Committee of Supply debate, Mr Tan noted that instead of optimising their manpower, many companies resorted to hiring more Singaporeans following the Government’s curbs on foreign manpower in recent years. As a result, last year’s local employment growth was more than twice the figure (38,000) in 2011.

The Government began tightening foreign labour in 2010. Mr Tan noted that its deliberate policies have moderated foreign workforce growth steadily and progressively, from about 80,000 in 2011 to 26,000 last year. “Having more jobs for locals is a good thing … They (women or older workers) contribute to augmenting household incomes. The data on that front have been very positive and strong. Unfortunately … this increase in local hiring will not last,” he said.

Noting that Singapore is still some distance away from the most advanced economies in terms of productivity, Mr Tan reiterated that the Government is not changing its stance on foreign manpower. It will continue to keep foreign workforce growth at the current pace, he said.

Apart from a tight labour market, businesses will also be increasingly affected by technology. Businesses must capitalise on technological advancements to innovate, so as to establish new areas of competitive advantage, keep ahead of the curve and also grow within our national manpower constraints, Mr Tan added.

Economists TODAY spoke to pointed out that in terms of getting the economically-inactive, such as housewives and older residents, to enter the workforce, the Republic has reached the peak. When the labour market tightens further, wages could go up, but this would be unsustainable in the long term, they said.

“Companies might not survive and move out and this could lead to unemployment,” said UOB economist Francis Tan.

SIM University economist and Nominated Member of Parliament Randolph Tan agreed that the labour participation rates of women and older Singaporeans are “nearing their natural limits, after the jumps we have seen over the past decade”.

“The tight labour market is a natural part of our changing demographic profile,” said Associate Professor Tan. He also raised the possibility that essential skills needed for a competitive economy could be in shortage, as the manpower pool shrinks.

Nanyang Technological University (NTU) economist Walter Theseira felt that higher wages could attract more people, including retirees, to return to the workforce. Fellow NTU economics professor Chew Soon Beng noted that in some cases, the pay for workers aged above 62 — the official retirement age which Professor Chew said was too low — is not appealing enough for them to continue working.

Ms Selena Ling, treasury research and strategy head at OCBC Bank, noted that the slower local manpower growth might also be due to businesses becoming more cautious in hiring amid the uncertain economic outlook.

In his speech, Mr Tan stressed that Singapore is in a strong position. Citing the positive economic data last year, he noted that the Republic is making steady progress towards its goals. “We have managed to achieve positive real income growth and avoid the wage stagnation that many developed economies are facing,” he said.

-By Ng Jing Yng

http://www.todayonline.com/singapore/labour-market-will-tighten-further-warns-chuan-jin


Sibor jumps to 0.836% on further US dollar strength

Source: Business Times / Banking & Finance

The three-month Sibor or Singapore interbank offered rate jumped to 0.836 per cent on Monday from last Friday on continued US dollar strength. At Monday's level, the three-month Sibor which is used to price home loans is up almost 3 per cent from last Friday, and 115 per cent higher from the 2014 low of 0.389 per cent.

-By Siow Li Sen

http://www.businesstimes.com.sg/banking-finance/sibor-jumps-to-0836-on-further-us-dollar-strength


Singapore Real Estate

 

Condo developers dangle discounts in down market

Source: Straits Times

Lower prices have helped to entice buyers in a down market, going by sales at two recent property launches. Developers have adjusted their expectations in a bid to gain some traction amid falling sales, in the wake of cooling measures and stringent financing rules.

http://www.straitstimes.com/premium/money/story/condo-developers-dangle-discounts-down-market-20150310&RequestID=189476433&MajorVersion=1&MinorVersion=0&ProviderID=http:/www.straitstimes.com:80/amagent?error=3#sthash.HLOqvrAQ.dpuf


S'poreans bought fewer private homes last year

Source: Straits Times 

Singaporeans bought a smaller share of private homes last year while permanent residents (PRs) increased their impact due to a Housing Board rule change. The August 2013 rule stipulated that newly-minted PRs must wait three years before they can buy a resale HDB flat.

http://www.straitstimes.com/premium/money/story/sporeans-bought-fewer-private-homes-last-year-20150310#sthash.tjDYy1KK.dpuf


Sprawling GCB site at Ridout Road on the market

The 73,277 sq ft freehold site can be subdivided into four smaller plots; seen fetching about S$88m

Source: Business Times / Real Estate

A sprawling 73,277 sq ft freehold Good Class Bungalow (GCB) redevelopment site along Ridout Road has been put on the market. Located at 35 Ridout Road in District 10, the property is expected to fetch around S$1,200 per square foot on total land area, amounting to S$88 million, according to market watchers. This takes into account setting aside space for roads assuming the buyer decides to carve out the site into four smaller plots.

http://www.businesstimes.com.sg/real-estate/sprawling-gcb-site-at-ridout-road-on-the-market


Gudang Garam family member pays top notch price for Pagoda St shophouses

S$20m for the two adjoining 999-year shophouses translates to S$3,500 psf on built-up area and reflects just 1.8% gross yield based on current rental income

Source: Business Times / Real Estate

A member of the family behind Indonesian cigarette maker Gudang Garam is understood to have bought a pair of adjoining shophouses along Pagoda Street, at the busy entrance/exit of Chinatown MRT Station. The price of S$20 million works out around S$3,500 per square foot based on the estimated built-up area of 5,700 sq ft.

-By Kalpana Rashiwala

http://www.businesstimes.com.sg/real-estate/gudang-garam-family-member-pays-top-notch-price-for-pagoda-st-shophouses


Sam Goi's GSH to start selling strata offices at GSH Plaza

Source: Business Times / Real Estate

The consortium behind GSH Plaza is launching more than 100 strata titled office units in the 28-storey Central Business District building. The units will range in size from 480 to 1,700 square feet, with an average price of S$2,850 to S$3,500 per square foot.

http://www.businesstimes.com.sg/real-estate/sam-gois-gsh-to-start-selling-strata-offices-at-gsh-plaza

http://www.straitstimes.com/premium/money/story/sam-goi-launch-gsh-plaza-project-end-march-20150310


Buyers paying premium for Tanglin Halt Sers flats

Source: Straits Times

Tanglin Halt flats marked for redevelopment are fetching premiums in the resale market, as buyers look forward to new replacement flats in nearby Dawson estate, also in Queenstown. At least 41 units have been sold since the estate was announced for the Selective En bloc Redevelopment Scheme (Sers) last June. The estate comprises 3,480 units in 31 blocks in Tanglin Halt Road and Commonwealth Drive.

http://www.straitstimes.com/premium/singapore/story/buyers-paying-premium-tanglin-halt-sers-flats-20150310#sthash.EZTsEzsp.dpuf


Stiffer penalties for contractors who flout worksite safety rules

Source: Straits Times 

Contractors who flout safety rules will be barred from hiring any new foreign workers under a new stiffer demerit point system. This ban will be imposed on the company when it accumulates a specified number of points. Currently, the punishment is confined to specific worksites.

http://www.straitstimes.com/premium/singapore/story/stiffer-penalties-contractors-who-flout-worksite-safety-rules-20150310#sthash.G69NfuVa.dpuf


More incentive for process firms to hire skilled foreign workers

Source: Straits Times

Firms in the petrochemical and pharmaceutical manufacturing sectors will have more incentive to train and retain their skilled foreign workers. The Government will introduce new ways for firms in the process sector, which employs about 30,000 foreign workers mostly from India and Bangladesh, to get a special skilled worker status for their workers, called R1.

http://www.straitstimes.com/premium/singapore/story/more-incentive-process-firms-hire-skilled-foreign-workers-20150310#sthash.I6rem30H.dpuf


Fewer complaints of bosses hiring foreigners over locals

Source: Straits Times

There were fewer complaints about employers hiring foreigners over locals last year than a year ago, said Senior Minister of State for Manpower Amy Khor yesterday. Even so, the Ministry of Manpower (MOM) remains focused on wiping out the scourge, she said during an update in Parliament on measures like the Jobs Bank and Fair Consideration Framework (FCF) that aim to ensure fair employment for locals.

http://www.straitstimes.com/premium/singapore/story/fewer-complaints-bosses-hiring-foreigners-over-locals-20150310#sthash.M4xfTIR5.dpuf


Companies' Brief

 

Sino Construction rebound rests on transformation success

Source: Business Times / Companies & Markets

The massive collapse in Sino Construction's shares once again highlights the dangers of punting on fast-rising "concept" plays. Last week, Sino Construction - a civil engineering and construction company that is in the process of transforming into an energy conglomerate - took a huge hit, with its shares losing some 76 per cent of their value within just two days.

-By Chan Yi Wen

http://www.businesstimes.com.sg/companies-markets/sino-construction-rebound-rests-on-transformation-success


Yongnam joint venture secures JTC project

Source: Straits Times 

A $159 million project to house 50 small factories at the JTC's new food zone in the north will be built by a unit of Singapore-listed Yongnam Holdings and a partner. The seven-storey project will be built at the upcoming Senoko Food Zone, in the Woodlands East industrial estate. Yongnam's unit, Yongnam Engineering & Construction, has formed a joint venture with Singapore-based Jian Huang Construction for the project.

http://www.straitstimes.com/premium/money/story/yongnam-joint-venture-secures-jtc-project-20150310#sthash.dl2PYUcC.dpuf


Global Economy & Global Real Estate

 

Kaisa offers sharp haircut but milder than expected

Source: Business Times / Real Estate

http://www.businesstimes.com.sg/real-estate/kaisa-offers-sharp-haircut-but-milder-than-expected


Plans for new Danga Bay project unveiled

Co-developed by firm linked to Charles & Keith owner, Senibong Hills will have over 55 landed homes, with more units being planned

Source: Business Times / Real Estate

AUSTRALIAN developer Walker Corporation and an investment firm linked to the Wong family behind popular footwear retailer Charles & Keith have unveiled their plans for their first joint project - Senibong Hills in Permas Jaya, the Eastern region of Iskandar.

Jointly developed by Walker Corporation and Wang & Wong Pte Ltd, Senibong Hills is expected to comprise 55 landed homes, with another 65 terraces and 1,800 high-rise apartments being planned, as well as a 2,300 square metre club house.

Wang & Wong Pte Ltd is equally held by the family of Charles & Keith CEO Charles Wong and JMD Investment Pte Ltd, the investment arm of the Wang family, the paternal relatives of the Wong family.

This 16-hectare site sits right next to Walker's mega residential project Senibong Cove, which has launched and sold residential units in phases since 2010.

During a recent soft launch for Senibong Hills, 15 out of 33 landed homes eligible for non-bumiputra purchase are sold at RM1.88-2.3 million (S$700,000-860,000), or an average of RM480 per square foot (psf). This is below current resale prices of landed homes launched earlier in Senibong Cove, which have jumped over 100 per cent from their initial launch prices.

Quay Chew Keong, project director of Walker's wholly-owned Malaysian unit Front Concept Sdn Bhd, told BT on Monday that "the perception of over-supply" in Iskandar remains the biggest risk facing the project as competing developers launch thousands of units at high-density condo projects over a short span of time.

Hence, the strategy for Senibong Hills is to push out landed homes first before getting the high-rise apartments launch-ready over the next six months, Mr Quay said. These high-rise units are likely to start from RM550 psf. Units at a competing project Country Garden Danga Bay are reportedly selling for RM700 psf.

"Buyers are very savvy now. Because they are buying for owner-occupation, they go around the whole of Johor before they settle down for a unit," Mr Quay said. "We are catering from RM500,000 to RM1 million, so that those who cannot afford to buy landed properties but they want to live here because of what we are offering in terms of amenities and design can opt for an apartment."

Senibong Cove is a 220-acre (89 ha) gated project with a marina and a 20,000 sq m boutique mall. It is estimated to yield over 8,500 residential units comprising landed homes and high-rise apartments upon completion. So far, overseas buyers make up 40 per cent of sales at Senibong Cove.

Mr Quay pointed out that speculative fervour has subsided in Iskandar. While foreign buyers are cautious due to Malaysia's cooling measures such as a levy on foreign buyers and concerns of sheer oversupply, other favourable factors have emerged.

For one thing, weakness in the ringgit is making it cheaper to snap up Malaysian properties now, Mr Quay said. "This year, because of the Goods & Service Tax (GST) coming up, we start to see sales slowing down, so there's a lot of uncertainty in the market. But we believe that in the long-run, over the next six months and next year onwards, the market will be more favourable," he added, citing the proposed Rapid Transit System link between Singapore and Johor.

Eyeing future upside, Walker Corporation and Wang & Wong Pte Ltd actually walked away from an offer by a Chinese developer last year to acquire the Senibong Hills site for RM180 psf, much higher than the RM43 psf that Wang & Wong Pte Ltd paid for the land, Mr Quay disclosed.

Desmond Wang, executive director of JMD, said that the family investment firm decided on the Senibong Hills site after scouting around in Iskandar. He is a paternal cousin of Mr Wong.

JMD Investment is no novice in the real estate sector, having invested in several projects in Singapore, including a substantial equity investment in 50 Scotts Road. It jointly acquired The Adelphi with Sun Venture in 2011 and sold all the office and retail units. JMD was also part of the consortium consisting of Sun Venture, Guthrie and Low Keng Huat in developing the commercial development Paya Lebar Square.

It is now exploring other key cities in Malaysia such as Kuala Lumpur and Penang, Mr Wang said. "We are always looking for good deals or properties worth investing."

-By Lynette Khoo

http://www.businesstimes.com.sg/real-estate/plans-for-new-danga-bay-project-unveiled


HK non-bank lenders thrive amid bank mortgage curbs

Source: Business Times / Real Estate

http://www.businesstimes.com.sg/real-estate/hk-non-bank-lenders-thrive-amid-bank-mortgage-curbs


Simon’s Pursuit of Macerich Shows Allure of Top Malls

Source: Bloomberg

(Bloomberg) -- Simon Property Group Inc.’s unsolicited bid to buy Macerich Co. for more than $20 billion shows how enticing a top-flight U.S. mall business can be at a time when other parts of the retail real estate industry are struggling.

Simon, the No. 1 mall owner, went public with its bid on Monday after being rebuffed privately by Macerich. Indianapolis-based Simon offered $91 a share in cash and stock for its Santa Monica, California-based competitor. The offer was valued at $22.4 billion, including debt.

Simon has become the biggest real estate investment trust in part by doing deals both in the U.S. and around the world. By buying Macerich, which owns or has stakes in more than 50 malls, Simon would expand in its home country, particularly on the West Coast. Takeovers of competitors are one of the few ways large U.S. mall owners can grow because high-quality retail centers rarely come up for sale.

The possibility of adding so many top-tier malls with one transaction “is a unique opportunity,” said Rich Moore, an analyst at RBC Capital Markets, in Solon, Ohio. “The chance to get a hold of something like this is almost too good to be true.”

The offer is setting up a buyout fight. Simon, which has a history of shrewd dealmaking and has walked away from deals in the past, may have to boost its offer, with its target not appearing eager to be purchased.

“Macerich has an excellent portfolio of malls,” Alexander Goldfarb, an analyst at Sandler O’Neill & Partners LP in New York, said in a telephone interview. “The deal makes sense, but it takes two to tango and you have to have a willing seller.”

Tysons Corner

Simon would expand in California and Arizona and add major properties in the eastern U.S., he said. Macerich’s properties include Tysons Corner Center in Virginia, Fashion Outlets of Niagara Falls in New York and Santa Monica Place in Southern California. Simon’s malls include Roosevelt Field in New York, King of Prussia in Pennsylvania and the Forum Shops at Caesars in Las Vegas.

While some retailers have contracted, malls with higher sales have maintained elevated occupancies and generated better growth in same-store net operating income, Jeffrey Langbaum, a REIT analyst with Bloomberg Intelligence, wrote in a March 5 report.

Top-tier regional malls, or Class A properties, have higher tenant sales per square foot than lower-quality malls, or Class B centers, which tend to be in smaller metropolitan areas or are in larger areas but don’t dominate their markets. Shares of Macerich, Simon and General Growth Properties Inc., which have mostly Class A malls, have performed better than other retail landlords in the past 12 months.

Tenant Sales

After spinning off its lower-tier shopping centers last year, Simon’s portfolio had average tenant sales of $619 a square foot in the fourth quarter, above the mall-REIT average, according to Langbaum. Macerich’s average was only slightly lower, at $587. Class B mall owners CBL & Associates Properties Inc. and Pennsylvania Real Estate Investment Trust had sales of $360 and $394 for the year, respectively.

Macerich shareholders would receive the equivalent of $91 a share as 50 percent cash and 50 percent Simon stock under the deal, Simon said in a statement Monday. The transaction would include the assumption of about $6.4 billion of debt.

‘Very Compelling’

“This is a very compelling offer that will enable Macerich stockholders to realize a substantial and immediate cash return while building long-term value through ownership of Simon shares,” Chairman and Chief Executive Officer David Simon said in a letter to Macerich Chairman and CEO Art Coppola, included in the statement.

Macerich said in a statement that it received Simon’s unsolicited offer and that its board will review the proposal with its financial and legal advisers.

Also on Monday, Simon said it has reached an agreement to sell certain Macerich assets to General Growth, the No. 2 U.S. mall landlord, in connection with completion of a Macerich deal.

Simon has also been active in transactions outside the U.S. In 2012, the company acquired an interest in European mall owner Klepierre, based in Paris.

The REIT hasn’t always been successful in trying to complete deals. Simon failed in an effort to buy General Growth after its smaller competitor filed for bankruptcy protection in 2009. Chicago-based General Growth left bankruptcy in November 2010 with financing from a group that included Brookfield Asset Management Inc. and Pershing Square Capital Management after fending off a takeover attempt by Simon.

-By Brian Louis

http://www.bloomberg.com/news/articles/2015-03-09/simon-s-pursuit-of-macerich-shows-allure-of-top-malls          


Macerich Investors Want More to Clinch Mall Megadeal: Real M&A

Source: Bloomberg

(Bloomberg) -- Simon Property Group Inc.’s $22.4 billion appraisal of shopping mall rival Macerich Co. is coming up short with investors.

The offer is only 6.6 percent higher than Macerich’s average price in the previous 20 days. One reason the premium looks miniscule is because Macerich’s stock had already jumped 24 percent since November on takeover speculation fanned by Simon’s purchase of a small stake. Even so, Macerich traded on Monday above Simon’s $91-a-share bid to acquire the rest of the company, signaling that shareholders are intrigued but think the price is too low.

Simon, the biggest U.S. mall landlord, made the proposal public after discussions between its chief executive officer, David Simon, and Macerich’s Arthur Coppola didn’t go anywhere. If Santa Monica, California-based Macerich were prepared to accept the transaction, a joint agreement probably would have been reached behind the scenes first, said Jeffrey Langbaum, an analyst for Bloomberg Intelligence.

“This has basically been a poorly kept rumor since November,” and “Macerich has so far been unwilling to bite,” Langbaum said in a phone interview from Princeton, New Jersey. “The market is betting that a deal will get done, but that $91 is not the number.”

Macerich shares ended on Monday at $92.76.

Western Expansion

Corporate takeovers are one of the few ways large U.S. mall owners such as Simon can grow because high-quality properties rarely come up for sale. In what would be Simon’s biggest purchase, the Indianapolis-baed company would gain more properties in the western states such as California and Arizona. Analysts also see Macerich’s operating profit doubling this year, according to the average of 10 estimates compiled by Bloomberg.

Simon probably wouldn’t start with its best and final offer, Paul Adornato, a New York-based analyst for Bank of Montreal, said in a phone interview. He estimates that the $91 bid translates to a 4.8 percent capitalization rate, a measure of investment yield used in real estate that’s calculated by dividing net operating income by sale price.

Assuming Simon can pay a 4.5 percent cap rate, that implies a takeout price of $99 a share for Macerich, or $115 at a 4 percent rate, he said.

“Perhaps at or near these prices, Macerich may be tempted,” Adornato said. And it would still be cheaper than other recent transactions involving “top-quality malls,” such as General Growth Properties Inc.’s joint-venture deal for the Ala Moana Center in Honolulu, which sold this month for about a 3 percent cap rate, he said.

Opening Salvo

Macerich will likely look for other suitors willing to pay more than $91 a share, according to Nathan Isbee, an analyst for Stifel Financial Corp. General Growth Properties, the other industry giant, has an agreement to buy some Macerich assets in connection with the Simon deal, though that wouldn’t necessarily prevent it from bidding for Macerich itself. Some private-equity firms have also taken an interest in REITs in the past.

“We think $91 is just an opening bid/salvo in what could be a long takeover battle,” Isbee wrote in a report. “Macerich could hold out for at least a high $90s bid.”

-By Tara Lachapelle

http://www.bloomberg.com/news/articles/2015-03-09/macerich-investors-want-more-to-clinch-mall-megadeal-real-m-a


Gaming and Leisure Offers to Buy Pinnacle’s Real Estate

Source: Bloomberg

(Bloomberg) -- Gaming and Leisure Properties Inc. made an unsolicited $4.1 billion offer to buy Pinnacle Entertainment Inc.’s brick-and-mortar assets, starting a shareholder fight as the casino industry moves toward real estate investment trusts.

Pinnacle last year announced plans to split into separate companies handling its operating assets and real estate following pressure from activist shareholder Orange Capital LLC. Under Monday’s offer, which includes the assumption of net debt, Pinnacle investors would receive $36 a share, Wyomissing, Pennsylvania-based Gaming and Leisure said in a statement. That is a 31 percent premium over Pinnacle’s closing price on Friday.

A number of casino operators have been considering shifting assets into REITs since Penn National Gaming Inc. spun off Gaming and Leisure in November 2013. REITs can trade at higher stock market values since they don’t pay income tax, distributing the profits instead directly to shareholders.

Orange Capital, which owns about 4.3 percent of Pinnacle, said that while the offer price “dramatically undervalues” the company’s real estate assets, it sees “significant merits” in Gaming and Leisure’s plan. “We urge Pinnacle to avoid any action that could thwart an enhanced GLPI proposal,” the New York-based hedge fund said in a statement.

Pinnacle said it’s reviewing the offer with its independent financial and legal advisers.

“Pinnacle’s board of directors and management team are committed to acting in the best interests of all Pinnacle shareholders,” the company said in a statement Monday.

Market Reaction

Pinnacle jumped 15 percent to $31.61 at the close in New York. Gaming and Leisure gained 13 percent to $36.43.

“The deal is clearly a positive” for Pinnacle holders, Carlo Santarelli, a Deutsche Bank AG analyst, said in a note Monday. “We see significant benefit for GLPI as well.”

Gaming and Leisure’s size after such a deal may attract more REIT investors to the company’s shares, he said.

Pinnacle, which owns and operates 15 gambling properties in the U.S., said in November that it planned to spin off the property holdings into a publicly traded REIT. Caesars Entertainment Corp. has proposed turning its bankrupt operating company into a REIT, while Las Vegas-based Boyd Gaming Corp. is studying a similar arrangement.

Pinnacle shares fell after the Las Vegas-based company announced it was pursuing a REIT structure, on concern about how long it would take to complete such a deal, analysts said at the time. Gaming and Leisure declined 14 percent through Friday since being separated from Penn National amid investor concern that it hasn’t completed any major transactions.

‘Better Transaction’

Pinnacle hasn’t offered specifics on its proposed separation, including when it might happen, how much leverage would be needed or what dilution equity holders may expect, Peter Carlino, chief executive officer and chairman of Gaming and Leisure, said in the statement.

“Our proposal starts with Pinnacle’s fundamental decision to separate into two companies and enhances that approach with a better transaction offering certain and superior value to Pinnacle shareholders and doing so much sooner,” Carlino said.

Gaming and Leisure delivered its first written acquisition proposal to Pinnacle’s board on Jan. 16 and has “repeatedly tried to engage Pinnacle in a constructive manner,” Carlino said. “We are disappointed that they have refused to explore our proposal in any meaningful way.”

Under the proposal, Pinnacle’s operating business would become a separate publicly traded company and be run by its current board. The real estate assets would be merged into Gaming and Leisure. Pinnacle shareholders would receive one share of the operating company and 0.5517 of a share of Gaming and Leisure for each Pinnacle share they own, according to the statement. Gaming and Leisure said the transaction could be completed before the end of the year.

-By Oshrat Carmiel & Christopher Palmeri

http://www.bloomberg.com/news/articles/2015-03-09/gaming-and-leisure-offers-to-buy-pinnacle-s-real-estate


Simon Offers to Buy Macerich in $22.4 Billion Deal

Source: Bloomberg

(Bloomberg) -- Simon Property Group Inc. made a $22.4 billion unsolicited bid for for Macerich Co., a deal that would combine two of the largest U.S. shopping-mall owners.

Simon, the No. 1 mall owner, went public with its bid on Monday after being rebuffed by Macerich during private discussions late last year and in February. The offer, in cash, stock and assumed debt, may be the opening salvo in a protracted takeover battle for the real estate investment trust, analysts said.

The deal would unite companies that together own or have interests in some of the best regional shopping malls across the U.S. and strengthen Simon’s ability to negotiate with tenants. While some traditional shopping malls across the country are fading, those with luxury retailers in larger cities are thriving.

“This is their first shot across the bow,” David Auerbach, an institutional REIT trader at Esposito Securities LLC in Dallas, said of Simon’s offer. “I don’t think this is the best bid Simon could put in front of them.”

In its own statement Monday, Macerich confirmed it received Simon’s unsolicited offer and said its board will review the proposal with its financial and legal advisers.

Macerich shareholders would receive the equivalent of $91 a share as 50 percent cash and 50 percent Simon stock under the deal, Indianapolis-based Simon, the largest U.S. mall landlord, said in a statement. The transaction would include the assumption of about $6.4 billion of debt.

‘Compelling Offer’

The offer represents a 30 percent premium to Macerich’s closing price on Nov. 18, the day before Simon disclosed a 3.6 percent stake in the Santa Monica, California-based landlord, sparking speculation of takeover plans. Simon said it has made multiple attempts to discuss its interest, and the company has so far refused to engage in talks.

“This is a very compelling offer that will enable Macerich stockholders to realize a substantial and immediate cash return while building long-term value through ownership of Simon shares,” Chairman and Chief Executive Officer David Simon said in a letter to Macerich Chairman and CEO Art Coppola, included in the statement.

Also on Monday, Simon said said it has reached an agreement to sell certain Macerich assets to Chicago-based General Growth Properties Inc., the No. 2 U.S. mall landlord, in connection with completion of the deal.

The properties Simon agreed to sell to General Growth represent close to 20 percent of the deal value, or about $4 billion, two people with knowledge of the matter said. The proceeds of the sale will be used to pay down debt, the people said, asking not to be identified discussing private information.

David Keating, a spokesman for General Growth, didn’t return a voicemail seeking comment.

“We urge Macerich to forgo entrenching defensive tactics that obstruct the will of its shareholders and instead engage in serious discussions with us,” Simon said in the statement. “It is our strong preference to work with Macerich to reach a mutually beneficial agreement, and we are available immediately to meet with Macerich and its advisers.”

‘Attractive Addition’

Takeovers of companies are one of the few ways large U.S. mall owners can grow because high-quality properties rarely come up for sale. Simon has been developing outlet malls around the world while refurbishing and expanding some of its biggest U.S. malls to boost returns.

Simon “hasn’t made a secret of its desire to grow” and Macerich’s “portfolio makes an attractive addition,” Nathan Isbee, an analyst at Stifel Nicolaus & Co., wrote in a note to clients Monday.

While some retailers have contracted, malls with higher sales have maintained elevated occupancies and generated better growth in same-store net operating income, Jeffrey Langbaum, a REIT analyst with Bloomberg Intelligence, wrote in a report on March 5.

After spinning off its lower-tier shopping centers last year, Simon’s portfolio had average tenant sales of $619 a square foot in the fourth quarter, above the mall REIT average, with Macerich’s $587 average only slightly lower, according to Langbaum.

The deal between Simon and General Growth “may signal that General Growth isn’t interested in bidding for the entire company,” Langbaum wrote in a report Monday. “As the second-largest mall REIT, General Growth would be a potential bidder for Macerich in an effort to compete with Simon, and perhaps the only REIT besides Simon that could absorb Macerich.”

Shares Rise

Macerich climbed 7 percent to $92.76 on Monday. The stock has gained 33 percent since Simon first disclosed it bought a stake in the company. Simon shares were little changed Monday at $180.44. General Growth rose 1.8 percent to $28.70.

Simon said in November that it had accumulated a 3.6 percent share of Macerich and may try to buy more. Simon said at the time it may seek to have the REIT waive a provision that restricts ownership to 5 percent.

Before Simon’s disclosure, Macerich said it bought the share of five U.S. shopping malls it didn’t already own from a subsidiary of the Ontario Teachers’ Pension Plan Board for $1.89 billion, including the assumption of debt. The purchase price included $1.22 billion of stock issued to the pension plan, or an ownership of almost 11 percent, at $71 a share.

Simon has also been active in transactions outside the U.S. In 2012, the company acquired an interest in European mall owner Klepierre, based in Paris.

The REIT hasn’t always been successful in trying to complete deals. Simon failed in an effort to take over General Growth after its smaller rival filed for bankruptcy in 2009. General Growth exited bankruptcy in November 2010.

-By Brian Louis

http://www.bloomberg.com/news/articles/2015-03-09/simon-offers-to-buy-macerich-in-22-4-billion-deal


Additional Articles of Interests - Local & Overseas Real Estate

 

Local & Overseas Real Estate - Full Article

http://www.stproperty.sg/articles-property/singapore-property-news/c/11

http://business.asiaone.com/property/news

http://www.propertyguru.com.sg/market-news

http://www.btinvest.com.sg/property

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