Complete Property Market Updates of Singapore

June 24, 2008

Parkway Life to acquire nursing homes in Japan

Filed under: General,Japan — Propertymarketupdates @ 3:15 am

A MONTH after making its maiden foray in Japan, Parkway Life Reit has agreed to buy another two properties there for a total of 2.62 billion yen (S$34.3 million).

The target acquisitions are a nursing home in Yokohama City and another in Osaka’s Ibaraki City. Both are owned by vendor ZECS Community Co, which has agreed to lease them back for 15 years with an option for a further five years. Its parent company Zecs Co will guarantee the leases.

At a price of 1.44 billion yen, the Yokohama facility has a net operating income yield of 6.1 per cent. The freehold, five-storey building is next to a scenic canal. It has 74 lettable units spread over a gross floor area of 3,273 sq m.

The Ibaraki nursing home is in a four-storey, 50-year leasehold property beside the University of Osaka and Ibaraki Country Club. It has a lettable area of 3,706 sq m and 94 units. At 1.18 billion yen, its net operating income yield is 6.7 per cent.

Explaining the acquisitions, Justine Wingrove, CEO of the Reit’s manager Parkway Trust Management, said demand for quality nursing homes in Japan will grow with the ageing population. ‘By 2050, it is estimated that one in three Japanese will be over 65,’ she noted.

Rents at both properties are index-linked to Japan’s inflation rate on an upward-only basis. Rents may also be revised by mutual agreement at five-year intervals.

Expected to be completed this month, the investments will be made through special purpose vehicle Parkway Life Japan2, a wholly owned subsidiary of Parkway Life Reit. They will be funded by debt, raising the Reit’s gearing to 11 per cent from 8 per cent.

ZECS Community operates 30 nursing homes in Japan under the Bon Sejour brand. The leases are also protected by a back-up agreement with Japan Care Service Co, another operator of nursing homes.

Parkway Trust Management did not say how much the acquisitions will add to the Reit’s distribution per unit (DPU). ‘As the deal size is only $35 million, the increase to DPU is not significant,’ said Ms Wingrove.

Last month, the Reit made its first investment in Japan – a pharmaceutical warehousing and distribution facility in Chiba that cost 2.59 billion yen.

Following yesterday’s announcement, Parkway Life Reit ended one cent higher at $1.23.

Source : Business Times – 28 May 2008

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December 31, 2007

Going abroad to shop

Filed under: Hong Kong,Japan,Market Watch,Singapore Economy — Propertymarketupdates @ 11:42 pm

If you’ve been priced out of the Singapore property market, don’t despair. You can find good value for money abroad, even in upscale markets like Japan. Jessica Cheam

THERE is no denying that the boom in Singapore’s property market, which has risen to frantic heights during the past six months, is taking a bit of a breather.

But for those whose appetite for properties has been whetted in the recent months, don’t fret, there is a veritable ocean of real estate out there and plenty that can give you a bigger bang for your buck.

Global statistics show that Asia-Pacific markets are leading the boom in housing prices worldwide. In contrast, prices in Europe are growing at only a moderate pace.

Singapore, Hong Kong and Japan

ALL three of these markets have enjoyed strong surges in property prices.

Online research house Global Property Guide said home prices in Singapore shot up 21.05 per cent for the 12 months to June, up from 6.08 per cent in the previous year.

In Hong Kong, they rose 8.78 per cent during the same period, after suffering a decline of 0.65 per cent in the year before.

Land prices in Japan’s six major cities increased by 7.75 per cent over the period.

In fact, prices have hit record highs in all three markets.

Condos have been sold in Singapore for $5,000 per sq ft (psf) while Tokyo units average around $3,400 psf. Hong Kong’s luxury apartments average $3,100 psf, although those at the very top of the range have fetched more than $7,800 psf.

To track down investment homes that are easier on the pocket, investors have been flocking to emerging markets such as Malaysia, Thailand and Vietnam.

Opportunities even in developed markets

EMERGING markets might seem like an obvious choice for home-seekers, but even in developed markets, there are investment opportunities.

As Mr Tim Murphy, the managing director of Hong Kong-based investment firm Intellectual Property, puts it: “Some markets will give you growth because they are emerging. Others will give you growth because of where they are in their property cycles.”

He points to Japan, generally considered a mature market with not much price growth. Recently, prices have swelled, especially outside Tokyo. On the outskirts of the city, it is possible to find good properties that are likely to appreciate in value.

Australia, in contrast, has enjoyed several years of solid appreciation.

Homes in Melbourne and Sydney have become very expensive and rental yields have dropped.

The market in Perth in Western Australia has been even more frenetic, with prices climbing 30 per cent on average over the past 12 months.

Thus, even though analysts expect further price increases, growth might moderate, with less potential for upside.

For foreigners, who are allowed to buy only new developments from developers, the relatively high interest rates and rising Australian dollar will make Australian homes more costly.

“Whichever market you’re interested in, look for cheap interest rates and high rental yields,” advised Mr Murphy, whose company has transacted properties worth more than US$85 million (S$123.5 million).

Tips for overseas homebuyers

IF YOU are keen to invest in foreign properties, note the following points:

– Do your research, understand the market and do not jump on the bandwagon to follow current trends as these might change.

– Remember these key words when researching a market: legals, borrowing, liquidity, yields, tax and currency.

– Buy homes from established developers with good track records.

– Look for properties that the local people will want to rent as these will offer higher rental yields.

– Always look through all legal documents and hire a trustworthy lawyer.

– Be an early bird. Invest early if you can, to take advantage of launch prices, which are typically lower.

Source : Sunday Times – 18 Nov 2007

November 20, 2007

Obayashi plans to invest 200b yen in real estate

Filed under: Japan — Propertymarketupdates @ 4:59 pm

Obayashi Corp, Japan’s second-largest construction company by market value, plans to invest 200 billion yen (S$2.6 billion) in property to take advantage of rising values and reduce its dependence on the building business.

The company’s construction operations have suffered from soaring raw material prices and intensified competition, said Yasuo Kodera, a finance manager at Obayashi, in an interview. The builder announced its five-year investment plan on Tuesday.

‘This is our first time to set an investment target for our real estate business,’ said Mr Kodera. ‘While construction and civil engineering will continue to be our core businesses, we would like to expand real estate operations, such as leasing, which will provide stable income.’

Public works spending was cut by 3.5 per cent this fiscal year, the sixth year of cuts. That’s increased competition among builders that have also been hurt by rising materials costs and public sanctions for bid rigging.

The Topix Construction Index is at the lowest level in three years.

Obayashi is seeking to profit from a rebound in real estate as Tokyo office rents stand at a 13-year high and nationwide commercial land prices rose this year for the first time since 1991.

Real estate operations accounted for a quarter of operating profit, or sales minus the cost of goods sold and administrative expenses, last year from 18 per cent a year earlier.

Obayashi’s operating profit from construction fell to 695 million yen in the six months ended Sept 30, from 7.98 billion yen a year earlier.

The Tokyo-based company expects net income for the year ending March to be 23 billion yen, a 43 per cent decline from last year.

Half of the company’s real estate investment in the next five years will be spent on property to be leased out, while the other half will go to buy land with the aim of reselling it at a higher price, the company said.

Shares of Obayashi, have fallen 33 per cent in the past six months. — Bloomberg

Source : Business Times – 15 Nov 2007

May 30, 2007

Cheap property stocks lure value investors

Filed under: Japan,REIT — Propertymarketupdates @ 8:03 pm

Investors seeking the cheapest property stocks are buying in Japan, Germany and China after a two-year tumble in shares of US homebuilders.

Japanese land prices are rising for the first time in 16 years, yet shares of developers trade at less than a third the global average, according to UBS AG. The start of real-estate investment trusts (Reits) in Germany is spurring demand for housing stocks valued at about half the worldwide mean. China’s new laws protecting homeowners and Brazil’s record-low mortgage rates are attracting money managers looking for the fastest growth.

Third Avenue Management LLC, ABN Amro Holding NV and Alpine Mutual Funds, which together oversee US$20 billion in real-estate stocks, bought shares of Mitsubishi Estate Co in Japan, Germany’s IVG Immobilien AG and Cyrela Brazil Realty SA Empreendimentos e Participacoes for returns of as much as 22 per cent this year. In the United States, real estate and homebuilder indexes dropped at least 4.7 per cent on forecasts housing prices will fall for the first time in 16 years.

‘We’re past the period of time where the rising tide has lifted all boats,’ said Sam Lieber, who oversees the US$1.75 billion Alpine International Real Estate Equity Fund from Purchase, New York, which has beaten 98 per cent of similar funds in the past three years. ‘Clearly we see better opportunities abroad,’ he added.

Almost 90 per cent of the fund’s investments are outside the US, with the largest single country allocation in

Japan. Mr Lieber also has been adding to holdings in Brazil.

Investors seeking returns with a moderate amount of risk should put 33.5 per cent of their real-estate stock holdings in Europe and 14.6 per cent in Asia, a study released yesterday by the National Association of Real Estate Investment Trusts in Washington and Chicago-based Ibbotson Associates Inc showed.

A model portfolio from 1990 to 2005 would have recommended 8.1 per cent in Europe and 4.1 per cent in Asia, the study said.The Standard & Poor’s 500 Real Estate Index in the US has slid 16 per cent from a record on Feb 7, while a gauge of 16 homebuilders in S&P indexes lost 44 per cent since July 20, 2005. The National Association of Realtors said this month that the median prices of new US homes will drop this year for the first time since 1991.

Japanese and Hong Kong property developers will offer the highest returns over the next 12 months, at an estimated 19 per cent and 16.6 per cent, respectively, according to Zurich-based UBS, the biggest money manager for wealthy investors.

Japan’s property values are recovering from the collapse at the start of the 1990s. Nationwide land prices rose an average 0.4 per cent last year, a government report on March 22 showed. Prices for commercial real estate in Tokyo, Osaka and Nagoya climbed 8.9 per cent, the biggest jump since 1989, while residential prices in the cities ended a 16-year slide.

The longest economic expansion since the end of World War II drove Tokyo office vacancies down to 2.72 per cent last month, the lowest in at least six years, according to Tokyo-based office broker Miki Shoji Co. Average monthly rent for prime office space in Tokyo jumped 25 per cent to 56,750 yen (S$713) per tsubo, equal to US$13.51 per square foot, in the first quarter, according to Los Angeles-based CB Richard Ellis Group Inc, the world’s largest commercial real-estate brokerage.

A measure of real-estate stocks in Japan’s Topix index jumped 18 per cent this year, exceeding a gain of 0.9 per cent for the broader market. Tokyo-based Mitsubishi Estate, the world’s largest publicly traded property company, jumped 22 per cent this year, while Daibiru Corp, in Osaka, rose 36 per cent.

‘The story in Japan is the property there has been very weak for many years and in the last 18 months, it appears to have clearly turned the corner,’ said Gregor Logan, who oversees US$41 billion as joint chief investment officer at the London-based firm.

ABN Amro’s Nancy Holland says the biggest bargains are in Europe. She added to holdings of Bonn-based IVG in the first quarter as demand in the world’s third-largest economy picks up.

Reits, property companies that can avoid paying taxes by distributing almost all of their net income as dividends, may help boost the German property market after prices stagnated following reunification in 1990. Commercial real-estate returns rose in 2006 for the first time in five years as prices fell at a slower pace, London-based researcher Investment Property Databank Ltd. said last month.

‘We’re finally starting to see positive rental movement,’ said Ms Holland, who helps oversee US$7.3 billion of property stocks at ABN Amro Asset Management in Chicago. ‘Occupancies are also starting to tighten up, so this tells us that this is a market that is poised for growth.’

German property companies trade at an 11.7 per cent premium to net asset value, according to UBS. That compares with the global average of 20.1 per cent.

Deutsche Asset Management fund manager Daniel Ekins is entering China’s real-estate market by buying developers traded in Hong Kong, such as Kerry Properties Ltd and Guangzhou R&F Properties Co.

Hong Kong property companies are valued at a 2.7 per cent premium to net asset value on average, the smallest in Asia, UBS data shows.

‘The China growth story is one of the reasons we like Asian property,’ said Mr Ekins, who helps oversee US$3 billion in property stocks at Deutsche Asset in Singapore. Urbanisation will create ’strong demand for office, retail and industrial space’.

Source: The Business Times, 22 May 2007

Japan may monitor private property funds

Filed under: Japan — Propertymarketupdates @ 7:39 pm

Japan’s property market could become more transparent if the Financial Services Agency decides to monitor private property funds in addition to listed Reits as expected, analysts said yesterday.

The country’s property market has drawn gobs of money, prompting regulators to seek more disclosure and closer monitoring of private funds in the sector.

Japan is set to introduce a financial products exchange law in September, bringing private funds under scrutiny to see if the prices they pay in real estate transactions and their assessments of future rental income are appropriate.

Funds with 50 or more investors will also be required to register with the agency, while those with less than 50 will have to file reports to it. Some other steps were outlined in a report released by the FSA last month.

‘The FSA’s reasoning is to eliminate erring entities, and that should be good. There will also be little impact on those already in the market,’ said Go Saito, analyst at JP Morgan.

Investment vehicles such as special purpose companies and private funds are frequently used by property investors to keep their balance sheets from expanding and to ease their tax burden.

The market for private property funds expanded to 6.1 trillion yen (S$77 billion) as of the end of December, up 38 per cent from a year earlier, according to STB Research Institute Co Ltd. During the same time, the Japan Reit market expanded to 5.4 trillion yen, up 59 per cent.

‘It seems that the market has turned a bit overheated. Still, there are investors who think the Japanese property market has upside potential and money keeps coming in,’ said Yasuo Ide, independent analyst at Ide Financial Real Estate Research.

Mr Ide said some players who cannot afford to have qualified staff and set up a system to meet all the new requirements will likely withdraw from the market. ‘Those that have not much financial backing and lack know-how will be eliminated,’ he added.

The steps could also force some smaller players to exit the market, which may help a little in keeping returns on property investments from falling further, said Machio Honda, analyst at Deutsche Securities Inc.

‘This could mean that some property assets would come up for grabs and that should help Reit funds that have had a hard time buying properties in the competitive market,’ he said.

On the other hand, Japan also needs some more deregulation steps to make the Reit market more attractive, Mr Ide said. ‘It’s only Japan where the government does such screening of property entities. Some people would question the move.’

Source: The Business Times, 18 May 2007

Tokyo office vacancies to drop by 2009: survey

Filed under: Japan — Propertymarketupdates @ 7:37 pm

Tokyo office vacancies will drop by 2009 to half of last year’s level as existing buildings are redeveloped, Mori Building Co, Japan’s largest private real estate developer, said in a report.

Office supply in Tokyo’s 23 wards will decline by an estimated 46 per cent to 0.64 million square metres in 2008, from a forecast of 1.19 million sq m this year, according to a survey by Mori. That will push vacancy rates down to 1.4 per cent in 2009, from 2.8 per cent in 2006, as demand grows because corporations are expected to hire more staff, Mori said.

‘Rents are rising and will likely rise further,’ said Takeshi Fujita, a Tokyo-based analyst at Deutsche Securities. ‘Earnings at large developers will continue to improve, I think.’

Mori estimates that 35 per cent of the space that will become available between this year and 2011 will be existing buildings remodelled to meet demand for modern, earthquake-resistant office blocks. Demand for large office buildings in Japan’s capital was 1.57 million sq m in 2006, exceeding the supply of 1.54 million sq m. That caused the vacancy rate to drop from the 2005 level of 3.2 per cent, the fourth consecutive year of declines, Mori said.

The vacancy rate is expected to fall to an estimated 1.9 per cent in 2008, says the survey. The survey targets sites with more than 10,000 sq m of space among buildings built after 1986.

Source: The Business Times, 18 May 2007

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