Pacifica Partners may gain up to 36% stake in fund set up by Accor and InterGlobe

(SINGAPORE) Pacifica Partners, a hotel investment firm linked to the Government of Singapore Investment Corp (GIC), will buy a stake in a hotel fund with assets valued at US$325 million.

Pacifica Partners’ equity interest could go up to 36 per cent, subject to regulatory approvals.

The hotel fund is being set up by hospitality group Accor and travel corporation InterGlobe Enterprises, each of which will hold a 32 per cent equity stake. The fund’s portfolio will comprise seven hotels with a total of 1,750 rooms in the Indian cities of Delhi, Bangalore and Chennai. These are at various stages of construction and will open their doors from next year to 2013.

Accor will manage the hotels under its brands. They include Novotel Delhi International Airport (400 rooms), Pullman Delhi International Airport (270 rooms), Novotel Bangalore Outer Ring Road (220 rooms) and Ibis Bangalore Outer Ring Road (330 rooms). The fund may acquire more assets down the track, and will focus on the upper mid-end and high-end hotel segments.

‘The investment of Pacifica in this fund provides a platform for further growth in the strategic market of India where Accor and InterGlobe have already created an extensive development pipeline,’ said Accor chairman and CEO Gilles Pelisson.

Accor, joining hands with InterGlobe, has been in India for five years and has opened eight hotels. Another 43 will be coming up in the country.

‘India, at this time, is one of the most attractive lodging growth opportunities in the world,’ said Pacifica Partners managing director Peter Meyer. The firm ‘views this fund as an excellent vehicle to take advantage of this compelling market by teaming up with Accor and InterGlobe’.

Pacifica Partners is a joint venture between GIC and Host Hotels & Resorts. The latter owns luxury and high-end hotels worldwide, under brands such as Marriott and Ritz-Carlton, and is listed on the New York Stock Exchange.

The tie-up will seek investments in the Asia-Pacific, either existing hotels and resorts, or development projects

Source: Business Times, 22 Jul 2010

Buyers unable to gauge how far prices have fallen during 2-year slump

(DUBAI) A dearth of Dubai home sales and foreclosure auctions is stalling a recovery because buyers aren’t able to gauge how far prices have fallen during the market’s two-year slump.

‘There are very few transactions at the moment,’ said Craig Plumb, head of Middle East research at broker Jones Lang LaSalle Inc. ‘We are not going to see the bottom of the market until we see transactions through the foreclosure process.’

Home prices in the sheikhdom have dropped about 50 per cent from their peak two years ago and Credit Suisse estimates a further decline of as much as 20 per cent. Though at least 70 foreclosure cases have been filed under Dubai’s 2008 mortgage law, none has resulted in the sheikhdom’s first auction, said Jody Waugh, a partner at law firm Al Tamimi & Co.

‘People are only going to buy if they believe the price is realistic,’ Mr Plumb said.

Data provided by the Dubai Land Department is too incomplete to provide a valuable guide to selling prices, he said. The credit crunch prompted some Dubai property buyers to abandon investments and leave the country while others tried to renegotiate contracts after finding that they owed more than their property was worth.

Purchases fell about 80 per cent last year from the previous year, said Jesse Downs, director of research at Dubai-based Landmark Advisory. They increased 24 per cent in the first half of this year from a year earlier.

A dozen banks have filed foreclosures, mostly involving residential properties, since London-based Barclays plc won the first judgment at the end of last year, Ms Waugh said. His firm has secured about 12 rulings under the emirate’s 2008 mortgage law and the same number involving Islamic mortgages.

The first auction is unlikely to take place before the end of the year, following a ‘quiet’ summer and the holy month of Ramadan set to start in mid-August, according to Deepak Tolani, an analyst at Al Mal Capital.

Auctions ‘might help us get to the bottom faster since prices are likely to be considerably less than asking prices in the market now’, said JP Grobbelaar, director of research and advisory at property consultant Colliers International. ‘But I don’t believe prices won’t drop below what is achieved at auctions.’

Credit Suisse’s estimate of a 20 per cent decline would take average prices to about 837 dirhams (S$313) a square foot, based on its June estimate of 1,046 dirhams. Deutsche Bank AG analyst Nabil Ahmed predicted a price of 850 dirhams by the end of this year. UBS AG analyst Saud Masud sees a drop to about 600 dirhams.

Colliers estimated in a May 9 report that 41,000 new homes would be put on the market by the end of this year. That will lead to ‘significant oversupply’ and downward pressure on prices, regional director Ian Albert said in the report.

Banks that have seized real estate outside of the foreclosure process have been reluctant to put properties up for auction, said Mohammed Sultan Thani, assistant director-general at the Land Department. Developers have preferred renegotiating repayment terms with customers to foreclosures.

‘The majority of banks are not eager to sell properties through auctions because the prices fetched may drag the market down,’ Mr Thani said. ‘Many prefer to reach deals allowing them to rent the properties for a few years.’

Barclays’s foreclosure case hasn’t been implemented, Dubai- based Faisal Iqbal, head of secured lending for the bank in the United Arab Emirates, said by e-mail. The Land Department ‘is in control of the sales process on the instructions of the Dubai courts’, he said.

Foreclosure sales will only provide a reliable guide if prices are set at a realistic level, said Mr Tolani. In Dubai’s last auction, which didn’t involve foreclosures, only one of four properties listed was sold, according to Mr Thani. Minimum prices at auctions are usually set by the courts in consultation with the land department, which conducts the sales.

If a property doesn’t sell, the court can reduce the minimum price over subsequent auctions, said Ms Waugh. However, by the time a new auction is scheduled, the market may have slipped further and the decreased price may still be too high to attract a buyer.

‘You’re constantly trailing a market that is declining and that most likely won’t result in transactions for a while,’ Ms Downs said. Dubai developers have renegotiated thousands of mortgages and extended payment schedules rather than face defaults that would cut off their cash flow. Though that slowed the decline in prices by limiting distress sales, it has prevented the market from reaching its natural bottom.

‘People are holding on as much as they can, refusing to adjust to market realities,’ Ms Downs said. ‘It’s delaying the inevitable. If people accept the reality faster, prices will come down faster and in a way recover faster as well.’ – Bloomberg

Source: Business Times, 22 Jul 2010

Hong Kong the most expensive in Asia-Pacific: survey

(SINGAPORE) Parking a car in Singapore’s central business district (CBD) may seem expensive, but it still costs substantially less compared to other cities such as London and Hong Kong.

Colliers International tracked parking rates across the CBDs of 145 cities in June and found those in London to be the highest.

It would cost US$932.99 a month to park a car in the city of London.

In local currency terms, the rate had risen 2.1 per cent in the last 12 months, ‘highlighting the bounce-back in a number of financial centres’, Colliers said.

London’s West End took second place with a parking rate of US$873.50 a month.

Hong Kong was third with a CBD parking rate of US$744.72 a month.

This also made it the most expensive Asia-Pacific city for parking.

Other Asia-Pacific cities on the top ten list are Tokyo (fourth), Sydney (sixth) and Perth (seventh).

Singapore ranked low in Colliers’ survey with a monthly parking rate of US$192.89 in the CBD. In local currency terms, that increased by around 4.3 per cent year-on-year.

Colliers’ research and advisory director Tay Huey Ying believes there will be upward pressure on parking rates in Singapore.

With more offices, hotels and shopping areas coming up in the CBD, demand for parking space can be expected to increase, she said.

But the demand can be price sensitive and carpark operators and landlords should take note of that, she added.

Source: Business Times, 22 Jul 2010

Authorities fail to agree on whether to ease curbs on mortgage lending

(SEOUL) South Korea yesterday put on hold a plan to announce measures aimed at boosting the property market, as policymakers were unable to reach an agreement on whether to ease mortgage lending restrictions.

The cautious attitude comes in the face of widespread concern that eased mortgage lending rules could spark a property price bubble and sharply lift already heavy household debt.

The Land Ministry said on Monday that it would announce today ways to boost home transactions, which have been sluggish as household income has been slow to recover despite a fast pick-up in economic growth.

‘We agreed to reach a conclusion on the measures after continuing discussions,’ Land, Transport and Maritime Affairs Minister Chung Jong-hwan told reporters after a meeting with other economic and financial policymakers.

He did not say when the measures would be announced.

Housing prices have risen from a year earlier but sale transactions have been shrinking, partly because of strict restrictions on mortgage borrowing imposed in recent years.

The presidential office said in a statement that ministers would continue discussions without binding themselves to a specific date for an announcement, indicating President Lee Myung-bak wanted the government to give the matter more thorough consideration.

The government is seeking a way to prevent the property market from cooling and denting the still- nascent recovery in consumer spending without sparking a housing price bubble and mortgage borrowing frenzy.

Citing government sources, state-run KBS television reported that the ministry wanted regulations on mortgage lending eased while the Finance Ministry and the Financial Services Commission were opposed.

Analysts said the delayed announcement would not seriously hurt the government’s credibility because there was a broad consensus among South Koreans that the government could not be overly careful in handling property policy.

‘It’s true that the government appears very careful in deciding on key measures, but it is not fair to link the delay directly to the government’s credibility,’ said Kwon Soon-woo, chief economist at Samsung Economic Research Institute.

South Korean households have debt totalling two-thirds of the country’s annual gross domestic product and the financial authorities are concerned because the debt has continued to expand faster than income growth. — Reuters

Source: Business Times, 22 Jul 2010

THE unusual urgency with which a housing bill was expedited through Parliament this week was well warranted and welcome – even (or perhaps especially) if it sounds the death knell for a small but insidious industry.

In going for the roof over the borrower’s head, Singapore’s moneylenders have been no less pernicious than latter-day Shylocks – indeed, every bit as artful and exploitative as the notorious Shakespearean character who coolly sought, as loan collateral, a pound of flesh. With the law amended to close an unfortunate loophole, Singapore’s moneylenders – or legalised loan sharks, as it were – can no longer avail themselves of the sales proceeds when desperate HDB flat owners resort to cashing out their homes for quick funds.

For the lenders, this is a sudden turn of events leaving them lamenting their fate, with nary a trace of guilt nor any sense of wrongdoing. And this is an industry officially represented by an association – the Moneylender’s (sic) Association of Singapore – that states, among its five objectives, a desire not only ‘to project moneylending as an important and integral part of the business of financing individuals and businesses’ but also ‘to advocate ethical practice in the moneylending industry’.

No doubt, moneylending (legal and illegal) plays a key role in consumer financing, and indeed in small business financing as well. The average person sometimes finds it hard to get a bank loan to pay off urgent bills or debts, especially if he or she is unemployed or a low-income earner. But, while the moneylending association has a self-declared aim of advocating ethical practices, its president felt free to explain, in a newspaper report in January, why his members were targeting HDB sellers in need of quick cash. Indeed, ads by moneylenders were essentially saying: ‘Only HDB sellers need apply’.

David Poh, the association’s president, was reported to have said: ‘If they take a personal loan which is based on their income, they may lose their job at any time, so it’s not so secure for us.’ Liquidating a HDB flat, on the other hand, virtually guarantees repayment, as the moneylenders – who would have lodged a caveat on the flat – get the first bite of the sales proceeds. The number of HDB resale applications with caveats lodged by moneylenders in just the first six months of 2010 has already exceeded the 2009 total of 546. The lenders might have insisted there was nothing unethical about this – indeed, it was entirely legal, until this week – but there was also collusion with housing agents who, for a fee, would refer flat sellers to lenders.

New rules in May ended the lucrative careers of lenders moonlighting as housing agents and vice versa, and a welcome new bill to regulate housing agents is on the cards. It remains to be seen how many of the several hundred moneylenders in town will actually close shop. If those weeded out are the firms that cannot thrive ethically, it would be no loss at all. And if the culling makes room for ethical, institutional microfinance to take root here and displace loan sharks, all the better.

Source: Business Times, 22 Jul 2010

THE recovery in the prime office sector of Singapore is faster than expected, say Credit Suisse analysts. In a July 20 research report on the Singapore property sector, they said that stocks that are ‘prime office plays’ have year- to-date outperformed the Straits Times Index (STI) by 13 per cent and stocks of residential developers by 23 per cent.

Citing this as a reason, the analysts say that stocks of residential developers and older office/commercial landlords now look attractive.

Taking a contrarian view, the Credit Suisse analysts recommend a switch to the laggard stock of City Developments (CDL) from Keppel Land as the latter, a prime office proxy, has already outperformed the indices by 14-18 per cent year-to-date.

Reasons that the analysts cited in favour of CDL are: potential rerating of its large yet older office/commercial portfolio and its South Beach project; its largest low-cost residential land bank; and its 54 per cent stake in its global hotel arm, M&C, which they see as a prime beneficiary of the strong growth in the Asian hospitality markets.

Other factors cited in support of residential developers are receding policy risks, ‘given the moderate price increases’. The analysts expect investment sentiment to stay firm, given strong economic growth, low interest rates, continued population growth and residential developers’ stocks lagging the physical market.

The research report, which sees CDL as a bellwether all-round play, downgraded Keppel Land to ‘neutral’ from ‘outperform’ with a target price of $4.13, and upgraded CDL to ‘outperform’ from ‘neutral’ with a target price of $13.18.

Other property stocks on which the analysts have an ‘outperform’ call are CapitaLand, Allgreen and Wing Tai. They maintain their ‘outperform’ call on CapitaLand for its attractive valuations and believe that the concerns over its China exposure have been overdone. Allgreen and Wing Tai are favoured for their attractive land bank and big discounts to revised net asset values (RNAVs).

The analysts said that the uptake and rents of new prime office have recovered earlier than expected, driven by expansion of financial institutions (FIs) and professional services on the back of economic recovery, FIs’ flight to quality and their willingness to pay a premium, competitive rents (49 per cent discount to Hong Kong Central) and old office space conversions to residential use. As half of the new space is already pre-committed well ahead of completions, the analysts believe that average prime Grade-A rents had bottomed at $7.50-8/sq ft in 1Q10.

Source: Business Times, 22 Jul 2010

MR W. H. Wong, 36, a manager, has been living apart from his wife and two young children for six months and sees no end to their plight in sight.

He sold his four-room flat last August to upgrade to a maisonette but while trying to secure a housing loan, HDB’s loan policy changed and he now faces a cash shortfall for his next purchase.

He still hopes to buy a maisonette, so his parents can move in with him.

For now, his wife and their two children, aged six and four, stay with her parents in Serangoon, while he is with his parents in Chua Chu Kang.

Every evening, he drives to Serangoon to see his family, then heads back to his parents’ four-room flat, which is too small to accommodate his family.

He is frustrated at the situation because, unlike some others, he did not sell his flat for easy cash but to upgrade to a bigger home.

When he sold his flat last August, he received cash proceeds of $57,000. Now, HDB has asked him to fork out half of that sum for his next purchase. HDB has also reduced the size of the loan it will grant him by that amount.

‘The housing loan is now smaller, and the cash-over-valuation for flats is rising. With this new rule, HDB has reduced the amount of cash I have that I could have used to pay for the COV of the new flat,’ he said.

A buoyant market has sent the COV – cash premiums for HDB flats – soaring.

Mr Wong has tried looking for flats with lower COV but to no avail. He also sought the help of his MP Cynthia Phua.

His query: ‘I sold my flat before the policy was implemented. Why does it apply to me?’

In November last year, he applied for an HDB loan to finance the purchase of his second flat.

The board rejected the application as the couple’s combined monthly income exceeded the cap of $8,000.

He re-applied. HDB finally gave him a loan in April. By then, his wife had left her job and the family income was below $8,000.

Now, the problem is that he does not have enough cash to buy a flat of the size he wants.

‘Every maisonette seller is now asking for at least $50,000 in COV. If I give HDB half of my cash proceeds, where do I find the cash to pay for the COV?’ he asked.

‘It’s all wrong timing,’ he lamented.

Source: Straits Times, 22 Jul 2010

Half of gains must go towards next flat but they have spent money

A SMALL number of HDB buyers now face a cash shortfall and cannot buy replacement homes of their choice, due to changes to the HDB loan policy in March.

These buyers sold their flats before a new rule stated that buyers must use 50 per cent of their cash proceeds to finance their next flat. They are now stuck because they have spent the cash.

A Straits Times check with 16 MPs found that a small number of such buyers have showed up at their Meet-the-People sessions.

Aljunied GRC MP Cynthia Phua has five constituents caught out by the policy change; Dr Lim Wee Kiak, an MP for Sembawang GRC, has seven; Mr Yeo Guat Kwang, also of Aljunied GRC, has two and Madam Ho Geok Choo of West Coast GRC has 10.

These buyers are divided into two groups: downgraders who sold their flats and used the cash proceeds to settle debts, or genuine upgraders who need a bigger flat for their families.

Among those who sought Madam Phua’s help were a couple who sold their flat in 2006. When they tried to buy a flat this year, they were surprised that the loan amount granted by HDB was reduced by half the cash proceeds from the first sale.

HDB changed its loan policy in March to make second concessionary loans available to downgraders. Such loans were previously given only to upgraders. HDB also laid down a new rule – loan applicants must use the full CPF proceeds and half the cash proceeds from the sale of the previous flat or $25,000, whichever is less, to finance their next home. The change was to encourage financial prudence.

While Madam Phua supports the move to prevent home owners from cashing out on their flats, she does not think it is fair for those who sold their flats before the policy change in March to be subject to the new requirement.

‘HDB will now give a loan only less half of the cash proceeds amount, but that’s not enough money to buy a new home and most of them have already spent their cash proceeds,’ she said.

During Monday’s Parliament sitting, Madam Phua appealed to National Development Minister Mah Bow Tan on behalf of her constituent who sold his flat in 2006.

Mr Mah said in reply that the HDB gave home buyers a second subsidised loan so they could buy something they really needed. ‘If you have already made a lot of money, then I think it is only fair that the HDB takes that into account, irrespective of when you have sold a flat,’ he said.

He also felt that home buyers like the one Madam Phua cited were ‘rare’, as most bought a second flat soon after they sold their first. Still, he promised to review appeals on a case-by-case basis.

The HDB also provided figures to show that the policy change benefited large numbers of downgraders.

Between March and May 31 this year, HDB approved 2,439 applications for a second concessionary loan. Of these, more than half were downsizing or moving to a flat of the same size. These buyers would not have qualified for a second subsidised loan if the policy had not been changed.

On Monday, Mr Mah stressed that the size of the second loan could not be independent of the proceeds from the sale of the previous flat. If it were, that would create a ‘perverse incentive’ for people to upgrade and downgrade ‘to automatically get a larger HDB loan’.

PropNex chief executive Mohamed Ismail said the policy change has helped many flat owners who faced financial hardship and needed to downgrade to a smaller flat. Before the change, they could not apply for a second HDB loan. Many were also unable to secure a bank loan because of their bad credit history, he said.

The new rule has made some more cautious. Mr Jerry Lee, 31, a property agent with HSR Property, has had five clients change their minds about selling since March. ‘Many of them wanted to cash in on their property, but the policy change has made them think twice before selling.’

Source: Straits Times, 22 Jul 2010