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Archive for December 25th, 2008

Manhattan’s Q4 vacancy rate highest in two years

Posted by luxuryasiahome on December 25, 2008

The Manhattan office vacancy rate hit a two-year high as financial services companies and law firms dumped space back onto the market, according to a report released on Tuesday by a real estate services firm.

The overall vacancy rate rose to 10.9 per cent in the fourth quarter, the highest level in two years and more than three percentage points greater than a year ago, according to the report released by FirstService Williams.

Space available directly from a landlord registered an 8.1 per cent vacancy rate in the fourth quarter, while sublease space weighed in at 2.8 per cent – the highest rate in more than three years.

Almost 2.4 million square feet of sublease space entered the market over the last three months, larger than the quarterly increase of 1.8 million square feet in directly available space.

‘With leasing activity languishing and tenant space choices growing exponentially, it is not surprising that the overall asking rent for Manhattan dropped by 4 per cent from the previous quarter,’ Mark Jaccom, FirstService Williams chief executive, said in a statement.

The increased availability of space helped drive down asking rent – rent before concessions – by 2.7 per cent to US$74.49 per square foot from a year earlier.

Law firms and financial services companies had been the greatest driver of space demand over the past few years, fuelling record-high rents.

But financial services firms, including Citigroup Inc, Credit Suisse Group AG, Credit Lyonnais, Alliance Bernstein, UBS AG, MetLife Inc, Bear Stearns, and National Financial Partners Corp, placed almost 1.2 million square feet of sublease space on the market in the fourth quarter.

Legal services firms such as Reed Elsevier; Cadwalader, Wickersham & Taft; and Thacher, Proffitt & Wood contributed 230,000 square feet of sublease space.

Other law firms, including Orrick, Herrington & Sutcliffe and Thelen Reid Brown vacated almost 450,000 square feet of direct space.

Source : Business Times – 25 Dec 2008

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Aussie bank to buy A$4b of home loans

Posted by luxuryasiahome on December 25, 2008

Commonwealth Bank of Australia, which last week scaled back a share sale after saying that bad debts were rising, will buy up to A$4 billion (S$3.93 billion) of loans from a General Electric Co unit to extend its lead in the nation’s mortgage market.

Sydney-based Commonwealth Bank will get loans that are 100 per cent insured, the lender said yesterday.

Aussie Home Loans, a mortgage provider 33 per cent owned by Commonwealth Bank, will buy the brand and distribution network of Wizard Mortgage Corp, the GE division.

Commonwealth Bank beat back a challenge from National Australia Bank Ltd, which last week said that it was in talks to buy loans and assets from Wizard. Aussie, which sold a third of itself to Commonwealth Bank in August, gets 160 Wizard branches across Australia, where home prices have bucked a global slump.

‘Commonwealth gets to broaden its customer base without putting too much strain on its balance sheet,’ said Paul Xiradis, who manages the equivalent of US$8 billion as chief executive officer of Ausbil Dexia Ltd in Sydney.

‘Aussie effectively have direct access back to Commonwealth, and this allows them to be competitive while offering products they don’t have to fund.’

Commonwealth Bank said that it would acquire A$2 billion of Wizard loans at the end of February, and is discussing the purchase of a further A$2 billion. The bank last week sold A$2 billion in shares and said that bad debts would rise.

Aussie executive chairman and founder John Symond is increasing his loan distribution network in a property market that has so far weathered the global credit crisis.

While the US property market suffers its worst slump since the Great Depression, home prices in Australia rose 2.8 per cent from a year ago in the third quarter.

Meanwhile, the tie-up with Commonwealth Bank, the nation’s biggest provider of home loans, has improved Mr Symond’s access to wholesale funding at a time when non-bank lenders, which don’t have a deposit base to fall back on, have struggled as the global credit crisis forces up funding costs.

‘The acquisition of Wizard accelerates Aussie’s growth initiatives, adding a significant retail channel and distribution capability to our existing operations,’ Mr Symond said in a statement posted on the closely held company’s website.

Aussie, with a loan book of A$24 billion at the time of Commonwealth Bank’s stake purchase, didn’t say how much it had paid for the Wizard assets.

Credit markets seized after Lehman Brothers Holdings Inc collapsed on Sept 15 and remain blocked amid US$1 trillion in losses and writedowns at the world’s biggest financial companies.

Fairfield, Connecticut-based General Electric is selling assets and exiting underperforming businesses to bolster profit growth. Its GE Money unit has withdrawn from vehicle financing in Australia and said that it may close its Wizard home loans unit in New Zealand.

GE, which bought Sydney-based Wizard in 2004, hired Citigroup Inc and JPMorgan Chase & Co in June to advise on the sale of Wizard.

Aussie will retain Wizard’s chairman, Mark Bouris, as an adviser, Mr Symond said in the statement.

To boost access to loans, the government in September said that it would spend A$4 billion buying residential mortgage-backed securities to revive a debt market frozen by the credit crunch.

Commonwealth Bank yesterday said that the loans purchase would have little impact on its Tier 1 capital ratio or 2009 funding plans. Last week, the bank raised A$2 billion in a share sale arranged by UBS AG and said that provisions for bad loans would increase.

Source : Business Times – 25 Dec 2008

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Spain escapes US sub-prime mess but faces its own crisis

Posted by luxuryasiahome on December 25, 2008

Defaults for real estate, construction firms make up half of corporate credit

Spain escaped exposure to US sub-prime assets but risks its own property debt crisis in 2009 as defaults soar among real estate and construction firms that hold half of all Spanish corporate credit.

Over 1,000 Spanish property and building firms will have filed for bankruptcy protection in 2008 and more than 1,300 could follow suit next year as they struggle to repay over 470 billion euros (S$950.14 billion) in debt, according to PricewaterhouseCoopers.

The collapse of Spain’s decade-long housing boom will send non-performing loans to 9 per cent by 2010, from 3.5 per cent at present, threatening the solvency of savings banks that hold over half of all property debt, according to Credit Suisse.

Prime Minister Jose Luis Rodriguez Zapatero is ready to launch Spain’s first bank bailouts to avoid capital problems and the Bank of Spain expects a wave of forced mergers among small regional savings banks or cajas.

‘It’s the main risk to the whole banking sector,’ said Antonio Ramirez, a banking analyst at London broker Keefe, Bruyette & Woods. ‘I think the peak on defaults is quite close – probably mid-2009 – not because things are getting better, but because things are getting bad so quickly.’

Starved of easy foreign financing, Spain’s housing sector has collapsed under its own weight of over production.

Up to 1.5 million unsold new homes stand empty in Spain, equivalent to five years of sales at current depressed rates.

Demand is unlikely to recover until house prices hit bottom, and Standard and Poor’s says that may not happen before 2010, with a 30 per cent fall from a 2007 peak.

Spain is more dependent on housing than any European Union economy, bar Ireland. That has made real estate the Achilles’ heal of a banking sector which stayed out of US sub-prime debt due to Bank of Spain regulations and strong domestic business.

‘The Spanish central bank didn’t allow our banks to take American crap because they had their own crap . . . they were extremely exposed to the Spanish housing market,’ said economist Luis Garicano of the London School of Economics. ‘This famous 315 billion euros in developer loans and 160 billion in builder loans, that’s not going to be paid.’

This year alone, Spanish banks have been dumped with 15 billion euros of bad loans from builders, paid firms five billion euros for assets to stave off bankruptcies, and another five billion in debt-for-equity deals, Spain’s El Mundo newspaper reports.

Bad loans at larger, publicly traded banks such as Santander and BBVA, should remain at manageable levels around 4 per cent, according to Credit Suisse.

Some regional savings banks, that have higher property exposure, could see rates of 12 or 13 per cent in two years and face capital shortages, the investment bank estimates.

The biggest real estate victims so far are Martinsa Fadesa, which suffered Spain’s biggest ever corporate default with debts of 5.4 billion euros, and Habitat, 20 per cent owned by Heathrow owner Ferrovial, with 2.3 billion euros of debt.

The failure of giants such as Martinsa is the most visible sign of stress felt by an industry in which 95 per cent of home building is by small, unlisted firms.

Building sites that long fringed Spanish towns and villages are disappearing as firms finish off projects started before the credit crisis, then shut down.

The government has offered subsidised housing contracts and eight billion euros in public works spending, but the aid may only aggravate existing oversupply and construction dependency.

‘Time is the only thing that’s going to solve this one with the size of the stock, whether that’s two, three or five years,’ said Roger Cooke at real estate consultants Cushman & Wakefield.

Source : Business Times – 25 Dec 2008

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UK commercial property lending falls: study

Posted by luxuryasiahome on December 25, 2008

The total value of new loans secured by UK commercial property buyers shrunk to £24.6 billion (S$52.68 billion) in the first half of 2008 – less than one third of the total loans issued in 2007, research last Wednesday showed.

De Montfort University’s Commercial Property Lending Review, broadly seen as a key study of UK commercial mortgage markets, showed a sharp contraction in the number of active lenders as the second year of the credit crunch unfolds.

The report, which covers a £226.7 billion total UK property (commercial and social housing) loan book, showed that just over a quarter of the 58 banks surveyed completed no loan originations in the first half of 2008, while 12 banks undertook 74 per cent of all lending in the period.

The report also showed that appetite to lend to commercial property buyers had weakened yet again by mid-2008 as the value of loans in breach of financial covenants hit 3.3 per cent of the total aggregated loan book, more than treble the proportion reported at the end of 2007.

Some 38 per cent of organisations said that they intended to increase loan originations compared with 55 per cent who expressed their intention to do so at the end of 2007.

The average loan book allocation for commercial property fell to 9.5 per cent at June 2008, a 1.5 percentage point fall on year-end 2007 figure.

This figure could fall even further as the recession amplifies a commercial property correction and a squeeze on inter- bank lending persists, the report suggested.

‘A weakening economy resulting in the failure of an increasing number of business tenants, further declines in capital values . . . will make it far more difficult for lending organisations to maintain or refinance existing loan portfolios,’ the report said.

‘It is expected that liquidity will remain scarce and may have even been further eroded by the events in the banking industry subsequent to mid-year 2008,’ the report added.

Forty-three per cent of organisations reported having put loans into administration in the first half of 2008, compared with 33 per cent of banks which were forced to do so during the whole of 2007.

During the first six months of 2008, interest rate margins for loans to all property types spiked by an average 27.7 basis points versus year-end 2007.

Maximum loan-to-value ratios also fell over the period, highlighting stronger bank demands for bigger sums of equity in leveraged property deals.

The average typical maximum loan-to-value ratio applied to loans secured by prime office property was 72 per cent as at the end of June 2008 compared with 75.6 per cent at year-end 2007.

Source : Business Times – 25 Dec 2008

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Architecture book spotlights 1,037 notable buildings

Posted by luxuryasiahome on December 25, 2008

The large-format Phaidon Atlas of 21st Century World Architecture (Phaidon Press, 800 pages, US$195) spotlights 1,037 notable buildings completed worldwide by superstar architects and regional talents since January 2000. Innovative projects in Asia, Africa, Europe, North America, South America and Oceania are shown in 4,600 colour photos, 2,100 line drawings and concise textual summaries.

The structures include expensive single homes in exotic locales and high-rise offices and apartments in major cities. Airports, stadiums, hotels, railway stations, embassies, museums, galleries, libraries and schools are also depicted. Unusual profiles, ingenious engineering and high functionality are much in evidence.

More than 60 maps and statistical charts from the London School of Economics summarise global trends in architecture, and easy-to-read indexes on the projects and architects are helpful in navigating the wealth of material.

Hefty at 6.6 kg, the atlas comes with a plastic carrier to aid portability.

How were projects chosen? In the two-year compilation, 10,000 new millennium buildings worldwide were proposed by regional teams of curators, writers, teachers and architects, who could endorse their own work. Then, an unnamed ‘panel of expert advisers’ guided the London publisher’s final selections.

Almost half the projects – 476 buildings – are located in Europe, including 52 in the United Kingdom, 45 in Switzerland, 39 in Spain and 38 in Germany.

Two European firms – Foster & Partners of London and Herzog & de Meuron of Basel, Switzerland – have the most buildings in the atlas, 10 apiece. London alone has 22 projects, including Foster’s US$1.7 billion Wembley Stadium.

Regional bias in the book’s selections? Not according to Phaidon editorial director Emilia Terragni, who said that it accurately reflects where the most variety and innovation are occurring in global architecture. One in six projects in the atlas were executed by an architect foreign to the site, the book notes.

The United States has the most projects with 95. These include the groundbreaking Seattle Central Library, by the Rem Koolhaas-led Office of Metropolitan Architecture in Rotterdam and New York’s REX firm; 14 flat-roofed units of affordable housing in Aspen, Colorado, by Peter Gluck of New York; the industrial-influenced Guthrie Theater in Minneapolis by France’s Jean Nouvel; and The New York Times skyscraper in Manhattan by Italy’s Renzo Piano.

Japan has 91 buildings represented, from the low-slung Fuji kindergarten and the Mikimoto Ginza 2 Retail space in Tokyo to the glass-walled Ring House in Nagano Prefecture.

China’s 41 projects include the Bird’s Nest National Stadium and the Watercube National Swimming Center built for the 2008 Olympics. Australia’s 40 projects include the Southern Cross Station with its undulating roof in Melbourne and an array of modernistic villas perched on seaside cliffs.

The contrasts are striking. Diebedo Francis Kere, the first from his African village to study abroad, returned to Burkina Faso to design a US$46,437 brick primary school with an elevated roof that allows cooling air to flow across classroom ceilings.

At the high end is Santiago Calatrava’s 54-storey Turning Torso Tower in Malmo, Sweden, 147 apartments above 10 floors of offices in a graceful spiral landmark overlooking the harbour.

Source : Business Times – 25 Dec 2008

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It was fun till the money ran out

Posted by luxuryasiahome on December 25, 2008

The abrupt end to what had promised to be an era of architectural renaissance may not be all bad, says NICOLAI OUROUSSOFF

WHO knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What’s more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?

Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects such as Rem Koolhaas, Zaha Hadid, Frank Gehry and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.

Firms such as Forest City Ratner and the Related Cos, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect’s prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects such as, say, Gehry’s Atlantic Yards in Brooklyn, New York.

But somewhere along the way, that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities such as London, Tokyo and Dubai, more socially conscious projects rarely materialised.

Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich, like private jets and spa treatments.

Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.

Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron’s 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.

Together, these projects threatened to transform the city’s skyline into a tapestry of individual greed.

Wake up call

Now that the high-end bubble has popped – and it is unlikely to return anytime soon – Jean Nouvel’s 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects.

Even if the economy turns around, the public’s tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.

This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel’s MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.

And it would be a shame if the recession derailed promising cultural projects such as Renzo Piano’s new Whitney Museum of American Art in the meatpacking district or Foster’s interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.

Architecture firms, meanwhile, are suffering like everyone else.

With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programmes are likely to move on to more secure professions, which could spell a smaller talent pool in the future.

Still, if the recession doesn’t kill the profession, it may have some long-term positive effects for US architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand.

If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That’s my dream, anyway.

Source : Business Times – 25 Dec 2008

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Celebrated architect taps deep into ecology

Posted by luxuryasiahome on December 25, 2008

Environmental protection, far from being a constraint, should be a source of inspiration, in the view of celebrated Italian architect Renzo Piano.

Rooftop garden: The San Francisco Academy of Sciences’ ‘living roof’, which gives off oxygen instead of absorbing heat, is a landscape of rolling green hills

‘Ecology can be a lovely source of inspiration and an enormous opportunity,’ the 71-year-old architect said in an interview at his workshop in Genoa, north-west Italy.

‘Environmental constraints should not be seen as an assault on freedom. You find that the planet is vulnerable. Does this have to be a crisis?’ Mr Piano asked.

‘Architects should be able to interpret the changes of their times and live with their times,’ said Mr Piano, who was awarded the Pritzker Prize, considered the ‘Nobel’ of architecture, in 1998.

His latest work, the Academy of Sciences in San Francisco, received top marks from the Green Building Council, which encourages environmentally friendly architecture.

‘The San Francisco museum is an interpretation of the green revolution on the march,’ said Mr Piano.

The building, inaugurated in September, is bursting with ecological innovations.

Old blue jeans insulate the structure, whose roof is dotted with skylights and rimmed with solar panels that provide up to 10 per cent of the site’s energy needs.

The museum’s ‘living roof’, which gives off oxygen instead of absorbing heat, is a landscape of rolling green hills.

‘Our duty is to translate the codes of this ecological language in a poetic way, to marry beauty with respect for the environment,’ said the slim architect, who sports a salt-and-pepper beard.

‘I believe in the poetic benefits of lightness and transparency,’ he added.

Mr Piano’s workshop in Genoa, built about 15 years ago on a cliff overlooking the sea, has a glass roof that lets in sunlight for heat and light.

‘It’s December and there’s no need for heating,’ enthused Mr Piano, whose most famous projects include the Pompidou Centre in Paris, Kansai International Airport in Osaka, Japan, and the Menil Collection in Houston, Texas.

Mr Piano divides his time between Genoa, Paris and New York, where he has just opened an office to coordinate his many projects in the United States.

Among these are an extension of the campus of New York’s Columbia University and a museum at Harvard University in Boston.

‘The architect should feel responsible towards the environment, all the more so since he will need to continue to look after his work all through his life,’ Mr Piano said.

‘I myself spend a good part of my life travelling to visit my creations scattered around the world,’ he said, referring to them as his ‘children’.

‘I give birth to buildings, after which they have to lead their own lives,’ he said, adding: ‘When I finish a work, I always wonder, is it going to be happy?’

Source : Business Times – 25 Dec 2008

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