World Real Estate News

SM Investments Corp. (SM) and its property units sought a trading halt at the Philippine Stock Exchange, fueling speculation that the group will announce a merger of its real estate assets that will create the country’s largest developer.
SM executives including SM Investments Vice Chairwoman Teresita Sy-Coson have said previously a decision to merge will be known this year. The voluntary trading suspension is most likely about the group’s decision to combine its property assets, said Rico Gomez, fund manager at Rizal Commercial Banking Corp., and James Lago, analyst at PCCI Securities Brokers Corp.
Sy-Coson couldn’t immediately be reached for a comment at her Manila office. SM Prime Holdings Inc., the company’s mall developer, said in an e-mail invitation a briefing will be held today at 1 p.m., local time. No details of the event were given.
“Based on preliminary talks and initial sound-off by the group, consolidating the property assets under one umbrella is beneficial as it enhances the value and strength of these ventures,” said Gomez, who helps manage $2.8 billion at Rizal Banking in Manila. “This has to be confirmed once details of the merger are finalized.”
Manila-based SM Investments, the holding company of Philippine billionaire Henry Sy, owns the nation’s largest shopping mall operator SM Prime and residential tower builder SM Development (SMDC) Corp. SM Prime and SM Development are two of Sy’s four publicly-traded developers, with a combined market value of 484.4 billion pesos ($11 billion), more than Ayala Land Inc. (ALI)’s 464.2 billion peso capitalization.

Rationalizing Business

SM Investments fell 4.4 percent to 1,119 pesos yesterday, while SM Prime sank 2.5 percent and SM Development lost 4.2 percent.
SM Investments’ other listed property companies include Highlands Prime Inc., a builder of a mountain resort south of Manila, and Belle Corp., which is building a Manila casino resort complex with Melco Crown Entertainment Ltd. The company’s property assets include hotel resorts, offices, convention centers, a 16,000-seat sports arena and a 6,000-hectare beach and mountain resort in Batangas, a province south of Manila.
Belle, which wasn’t suspended from trading, fell 0.6 percent to 6.24 pesos as of 11:24 a.m. in Manila trading.
“This consolidation is clearly intended to rationalize the group’s property business ,” said Lago, head of research at Manila-based PCCI Securities. “On the one hand, you have property sales that are explosive and volatile and rental income, at the other, which is steady and predictable.”
Sy, who migrated from China in 1936, has an estimated net worth of $16.3 billion as of yesterday, according to the Bloomberg Billionaires Index. He ranks 45 in the list.

Almost half of the U.K.'s £198 billion ($303 billion) in commercial property loans can't be refinanced due to declining property values and the struggling economy, a new study concludes.

Based on terms available in today's lending market, about £92 billion of bank loans would likely not meet standards for refinanced, according to a survey of 78 lenders conducted by De Montfort University.

The weakening economy and declining capital values are making lenders more cautious, said Bill Maxted, who wrote the report with Trudi Porter, said in a statement. "The situation with many existing problem loans was deteriorating." 

With almost a quarter of all property loans in "severe distress," lenders cut U.K. commercial property lending by 7.7 percent last year, according to Bloomberg. 

As the U.K. suffers from a weakening economy, many analysts are studying the performance of the property market.

For more than half of the loans issued during 2007 and 2008--when property prices were at a peak--lenders may have to adjust loans to reflect current property values, Bloomberg reports. At the same time, competition from German and U.S. lenders such as Wells Fargo and Morgan Stanley are forcing lenders to lower their rates.  

The survey found almost £45.5 billion of loans have to be repaid this year and more than 70 percent of all commercial property loans will be due in the next five years, according to the study.  

This was the second consecutive year when no lender was willing to finance developments without companies pre-committed to lease space, according to the survey's authors.

South Korea's Mirae Asset Global Investments has purchased a 31-story office tower in Chicago, marking its first investment in the city.

The fund paid $218 million for the tower at 225 W. Wacker, which is located in Chicago's West Loop. The seller was 225 West Wacker Acquisition Company.

Jones Lang LaSalle, which managed the deal, also arranged $115 million in acquisition financing through Principal Real Estate Investors and Allianz Real Estate of America, who provided the 5-year loan.

The building was built in 1989 and has undergone $8 million capital improvements program "including lobby upgrades, elevator modernization, restroom and corridor renovations and an amenity floor that rivals new construction," JLL said. The 650,812-square-foot property is currently 91 percent leased to tenants including Edwards Wildman Palmer, PPM America, Merrill Lynch, CBIZ, Booz & Co., True Partners Consulting and Apple.

International investors seeking higher yields are setting their sights on Chicago, as core office assets in coastal markets are becoming more scarce and expensive," said Jones Lang LaSalle's international director Bruce Miller. "Chicago is starting to see the resurgence of cross-border investment, as evidenced by this transaction.

Headquartered in Seoul, Mirae Asset manages "$58 billion in assets globally through a diversified platform to offer market-leading franchises in traditional equity and fixed income products, ETFs and alternative strategies, such as real estate, private equity and hedge funds."

The Dubai government is imposing new earthquake standards for buildings taller than 10 stories, which could add delays and construction costs to buildings.

The regulations require that buildings be able to withstand earthquakes of up to 5.9 on the Richter scale. The new codes are effective immediately for buildings under construction and buildings that do not yet have a permit, according to a statement from the official government news service, WAM.

The new earthquake standards will add a new twist for project designers, particularly for projects already in development in Dubai, one of the world centers for tall buildings.

"These new rules will be of great concern to all those people designing and working on tall buildings in Dubai at the moment, especially those already under construction," Mark Lavery, associate director for tall buildings at the engineering consultancy Buro Happold, told the National.

"The biggest problem is likely to be the delays. It could take two or three months to re-analyze and produce the design documentation to suit the new rules, and then get a new permit from the municipality."

The announcement of the new codes follow two tremors in Iran last month that prompted evacuations of buildings in the UAE.

It is unclear how the Dubai municipality will handle address projects already under construction.

"Any delay will have clear cost implications for developers," Chris Seymour, head of property and social infrastructure at EC Harris, told the National.

The Municipality is also expected to release new codes for wind standards for tall building in the next few months.

With a rapidly ageing population, China is facing a dramatic demographic shift that is attracting overseas hospital operators and developers to the senior living industry. But despite attractive raw statistics, the industry is difficult to develop, and both overseas and local companies have struggled to find a way to make the numbers work in their favor.

There's no doubt that the figures are compelling. In 2000, only 7 percent of China's population was over 65, or 88 million people. Now, the figure has risen to 170 million, or 14 percent of the population. And research shows that by 2020 that the tally will grow to 265 million.

Only around 10 million of the senior population have an annual salary of 1.5 million or more, the level that would allow them to afford Western-style senior care facilities, estimates consultant, Bromme Cole, who specializes in senior care in China with his company Hampton/Hoerter.

After an initial surge in development from companies looking to address the demographics, it feels like "the morning after the big party," Mr. Cole told World Property Channel. "You don't feel so good, and the girl that you wake up with doesn't look so good. That's the reality of senior living now."

Several partnerships have floundered, while some promising developments, such as the General's Garden in Beijing, have struggled to attract residents. While that project's high-acuity facilities have fared very well, the rest of the development was a "lifestyle" project, and failed to draw customers. The partnership team that put it together has now fallen apart.

"The four horsemen of senior living are the cost of land, no zoning, the fact that the age group that are over 65 are children of the revolution and taught to be very thrifty, and the lack of a payer," Cole said. Many Chinese people feel their Communist government should provide senior care for free.

Overseas operators admit they've had a steep learning curve. Seattle-based Columbia Pacific struck a deal in late April to develop senior living facilities in Beijing with Beijing-based, Hong Kong listed developer Sino-Ocean Land. Columbia's Chinese subsidiary, Cascade Healthcare, is building a 110-bed facility with the developer.

"One of the things we have tried to do is to augment our skill set, which is in senior care and assisted housing," Nate McLemore, Columbia Pacific's managing director, said. "The way the market evolved in the United States, which began around skilled nursing facilities, may or may not be the way it evolves in China."

While many developers initially built huge, 1,000-bed facilities, Columbia Pacific has started small. Its first facility in Shanghai, launched in October 2012, has 100 beds over five floors. It is now targeting a second project in Shanghai.

"We're learning, and I think the market is learning and maturing as well," McLemore said. "Even in the U.S. with all our experience people think about it differently and package it differently."