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Q1 17 - . With rents expected ... the high land price of Murray Road commercial land. Major deals to highlight ... STEVE ATHERTON No major investment transactions were

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Text of Q1 17 - . With rents expected ... the high land price of Murray Road commercial land. Major deals...

  • ASIA MARKET SNAPSHOT Q 1 1 7CAPITAL MARKETS & INVESTMENT SERVICES

  • ASIA MARKET SNAPSHOT Q1 2017 | 3 CAPITAL MARKETS & INVESTMENT SERVICES

    JEROME WRIGHT

    SINGAPOREQ1 2017 was off to a roaring start with transactions totalling SGD5.8 billion (USD4.1 billion), reflecting a year-on-year increase of 116%. The transaction market was driven by both the residential and commercial sector for this quarter. With the much talked about mega transactions of Jurong Point mall and Asia Square Tower 2 likely to complete later in the year The commercial sector continues to shine with investor sentiment remaining strong especially from overseas investors.

    The transactions of PwC Building, GSH Plaza and Tripleone Somerset (70% stake) contributed 81% of the total commercial transactions of SGD 2.7 billion (USD1.9 billion) for this quarter. The purchasers of these commercial assets were all overseas companies; with Manulife (Canada), Fullshare (China) and Shun Tak Holdings (Hong Kong) acquiring the respective assets.

    The surge in transactions for the residential sector was attributed to a race to the finish line for several bulk deals as the Singapore government introduced the Additional Conveyance Duties (ACD) for residential property transactions. The bulk transactions for TwentyOne Angullia Park, CityVista Residence and Robin Residences went through at the eleventh hour prior to the implementation of ACD. Separately, CapitaLand managed to divest 45 units of The Nassim earlier in the quarter. With the implementation of ACD resulting in new stamp duties payable, moving forward with the institutional investors focusing their efforts on other asset classes. Nevertheless, developers issued with a Qualifying Certificate (QC) will have to find ways of clearing unsold units or face paying QC penalties.

    Moving forward, we expect the commercial

    transaction market to remain robust considering the impending deals for the purchase of Jurong Point Mall by Mercatus Co-operative, a subsidiary of NTUC; as well as the reports on CapitaLands interest in acquiring Asia Square Tower 2 from BlackRock. With rents expected to bottom at the end of the year the office asset prices are already trending upwards. Whilst the oversupply has dominated the media the strong take in the new projects of Guoco Tower Duo and Marina One points to a recovery in the office market.

    MAJOR MOVER Q1 2017

    CommercialResidential

    COMBINED VALUE

    USD$4.1B

    SECTOR TO WATCH Q2 2017

    Commercial

    BIGGEST DEAL

    Tripleone Somerset | Commercial

    USD626M

  • 4 | ASIA MARKET SNAPSHOT Q1 2017 CAPITAL MARKETS & INVESTMENT SERVICES

    In Q1 2017, Chengdu investment market remained active with 5 transactions announced.The overall market sentiment remains high for Q1 2017. Two residential deals were completed. In addition, strata title properties, decentralized R&D offices and development land continue to be sought-after by investors.

    LI JIE JACKY TSAI

    CHENGDUBEIJING

    In February, Natural Apex acquired 60 rooms (6,660.70 sq m) of Sanquan Apartment from Kyu Eikan Group for RMB642.5 million (US$93.2 million). The project is in Chaoyang District, close to Lufthansa and Liangmahe business area, surrounded by embassies, five-star hotels, shopping malls and entertainment venues.

    In March, China Aoyuan Property Group spent RMB658 million (US$95.3 million) to purchase Jia Nan Building (15,994.88 sq m), a residential property of Beijing Hande culture development Co., Ltd.

    Investors showed interest in the residential market with two deals completed in Q1. Nevertheless, Beijing has once again launched new regulations to cool the real estate market down, which had an immediate impact on certain property categories, notably in the residential sector. Investors will be more cautious when looking at residential projects, however, self-use buyers are not affected.

    Meanwhile, the strata title properties, decentralised R&D offices and land development continue to be the most sought-after sectors.

    Investors interests on strata title properties, decentralised R&D offices and land development

    Since last Q2 2016, residential sales have been constantly increasing. All 5 transactions were second-hand development site.

    China Construction Third Engineering Bureau Co. Ltd. acquired a 228,000 sq m Zizhou Avenue development site with accommodation at an approximative value of RMB5,000 per sq m, for a total value of RMB4.5 billion.

    SUNAC acquired a 95,626 sq m site and LANDSEA acquired a 30,054 sq m site. POLY acquired two projects in Wuhou and Pidu district, respectively.

    Due to the high price of land and the lack of resources, developers continue to show a strong interest in second-hand development sites. In addition, with the city development plan and the support of the government policy, domestic institutional investors and end-users are still looking for high-quality assets, mainly in CBD area and high-tech zone.

    We expect the market to remain stable with steady rise in Q2 2017.

    will remain stable in Q2 2017. Benefiting from the citys master planning, areas such as Wangjing, Tongzhou and Daxing have drawn investors attention.

    Domestic investors will continue to be main players in the market. Newly established mid-to-small size funds will potentially offer higher price to close deals.

    EN-BLOC TRANSACTIONS / COMBINED VALUE

    2 transactions / US$190M

    EN-BLOC TRANSACTIONS

    5 transactions

    SECTOR TO WATCH Q2 2017

    Residential Strata Title Properties Decentralized R&D Offices

    LandBIGGEST DEAL

    Jia Nan Building | Residential

    US$95.3BYields are not available for strata title properties.

    BIGGEST DEAL

    Zizhou Avenue | Development Site

    US$650M

    MAJOR MOVER Q1 2017

    Development Site

  • ASIA MARKET SNAPSHOT Q1 2017 | 5 CAPITAL MARKETS & INVESTMENT SERVICES

    ANTONIO WU

    HONG KONGThe Hong Kong investment market was bullish in Q1 2017, across all sectors and office properties having the best momentum. Large floor plate retail properties, industrial properties and hotel properties which were relatively sluggish in 2016 also attracted good buying interests in 2017 with many high value deals being closed.

    We have seen an marked increase in last mile funding activities, as developers look to ensure timely execution and handover of their ongoing projects to align with regulations under the impending Real Estate Regulatory Authority Act,. The appetite of private equity (PE) players continues to remain unabated for marquee commercial assets as they continue to bolster their rent-yielding real estate portfolios.

    SURESH CASTELLINO / GAGAN RANDEV

    INDIA

    The office sector was the most prominent in Hong Kong Market. Murray Road car parking lot tender will be closed on 23th May 2017, and market participants expect the capital value of prime office properties near Wan Chai / Admiralty and Central to grow further, driven by the high land price of Murray Road commercial land.

    Major deals to highlight

    Retail podium Po Ming Building was sold for HKD468 million

    Jing Wah Industrial Building in San Po Kong was sold for HKD398 million (USD60.2 million)

    Pricerite Group Centre was sold for HKD365 million (USD47 million)

    Four Seas Food Centre, 2 Hong Ting Road and Four Seas Group Centre, 1 Hong Ting Road was sold for a total consideration price of HKD588 million (USD75.7 million)

    Patina, 18 Junction Road was sold for HK$1.3 billion (US$170M) and Bay Bridge, 123 Castle Peak Road was sold for HKD1.68 billion (US$220 million)

    Office sector was the most promising sector in

    Q1 2017. With the election of the newly Chief Executive Ms. Carrie Lam Cheng Yuet Ngor, it will be interesting to see whether there will be a revival of the Revitalization and Conversion of Industrial Building (RCIB) policy. We believe industrial properties are the sector to watch in the next quarter in 2017.

    EN-BLOC TRANSACTIONS / COMBINED VALUE

    7 transactions / US$610M

    SECTOR TO WATCH Q2 2017

    Office

    BIGGEST DEAL

    The Bay Bridge | Hotel

    US$220M

    OfficeMAJOR MOVER Q1 2017

    Green shoots of recovery appeared particularly in the form of last mile funding and inventory sale opportunities. Demand for affordable segment investments has also been on an upswing, while demand for commercial space remained strong, fueled by institutional players acquiring well-leased commercial assets across prime locations.

    Major deals to highlight

    GIC is looking at buying 40% stake in DLF Cyber City Developers Ltd. from DLF for approx. USD1.71.85 billion

    Piramal Fund Management has invested USD 68 Million against Wadhwa Groups commercial property in Bandra Kurla Complex, a central business district in Mumbai, through a flexible lease rental discounting transaction structure

    Altico Capital has invested about USD57 million in Sheth Corporation, a Mumbai based developer

    Altico Capital and KKR to fund SARE Homes for approx. USD63.5 million

    In Q2 2017, the strong commercial investments are expected in the short to medium term while the residential market (largely constituted

    SECTOR TO WATCH Q2 2017

    Commercial Affordable Housing Warehousing Hospitality

    BIGGEST DEAL

    GIC DLF is expected to be concluded at

    7.5% Cap Rate

    by affordable housing) is expected to pick up steam. Furthermore, robust investment activity is forecasted for` the warehousing and logistics segment, largely driven by increasing appetite by institutional players to acquire limited investment-grade warehousing supply in the region.

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