Optimistic about the residential real estate market in the Western United States, San Diego-based Presidio Residential Capital has funded $64.3 million on 23 projects so far in 2013.
The private equity fund, which has provided more than $500 million in joint-venture equity and loans to residential homebuilders since 2000, has committed another $40 million to option entitlement deals.
“We see the next two to three years as a good, consistent time frame for the residential housing market,” said Presidio Principal Don Faye, a 30-year veteran in the real estate finance industry. “We are looking for top developers in solid markets from the Rockies west, including Seattle, San Diego, Houston, Denver and Boise.”
Presidio is funding local developers and builders in markets where the housing supply is tight and capital is relatively scarce.
“We have a single source of funding,” Faye said. “Our money is in the bank. We simply have to approve a project and then we can fund it. If we say we're going to do it, we perform.”
During the first half of this year, Presidio has funded six construction loans and is the process of providing equity on numerous projects in San Diego County and beyond.
Wells Fargo optimistic
(Bloomberg) -- Rising mortgage rates probably won't slow the housing recovery because new families are being created and homes are still affordable, said Tim Sloan, Wells Fargo & Co. (NYSE: WFC) chief financial officer.
“We don't believe that the recent increases in mortgage rates are going to in any way, shape or form snuff out the housing recovery,” Sloan said Monday.
“When you look at any sort of statistics in the demographics in terms of household creation as well as household affordability, they are still very attractive and should drive a continued recovery in the housing business.”
However, the increase in mortgage rates has slowed refinancing, and the bank may originate about $80 billion in home loans in the third quarter, down 29 percent from the three-month period ended June 30, Sloan said.
The San Francisco-based lender's gain-on-sale margin, what it gets from selling loans to be packaged into securities and sold to investors, will fall to about 1.5 percent from 2.21 percent in the second quarter, he said.
The bank has already announced a reduction of 3,000 full-time jobs, Sloan said, and Wells will continue to “manage our capacity.”
Wells Fargo is the largest U.S. mortgage lender, originating about 1 in 4 home loans in the first half, according to Inside Mortgage Finance, a trade publication.
The average rate on a 30-year fixed-rate mortgage has risen more than 1.2 percentage points since hitting a low of 3.35 percent in May, according to Freddie Mac data.
That hasn't slowed U.S. home prices, which rose 7.7 percent this year through June, according to an August report from the Federal Housing Finance Agency, Freddie Mac’s and Fannie Mae’s overseer.
JPMorgan Chase settlement
(Bloomberg) -- JPMorgan Chase & Co. and insurers reached a $300 million settlement with property owners who accused the companies of overcharging for hazard insurance.
JPMorgan (NYSE: JPM), Assurant Inc. (NYSE: AIZ) and other insurers will pay refunds valued at 12.5 percent of annual premium costs to homeowners who had the policies placed on their properties by the bank starting in January 2008, according to documents filed Sept. 6 in federal court in Miami.
Homeowners covered by the case stand “to recover hundreds, if not thousands, of dollars as a result of the settlement,” lawyers for the plaintiffs said.
JPMorgan, based in New York, was accused of placing mortgage borrowers' required hazard and wind coverage with Assurant and other insurers at inflated rates, covering costs of kickbacks to a JPMorgan unit.
The case is Saccoccio v. JPMorgan Chase Bank NA, 13- cv-21107, U.S. District Court, Southern District of Florida (Miami).
(Bloomberg) -- Arkansas, which defaulted on road bonds during the Depression and became the only state to cost investors since 1900, will sell $495 million of general obligations this week to finance highway construction.
After the 1933 debacle and a 1951 issue, Arkansas didn't return to the tax-exempt market to finance highways until 2000. This week’s sale will be the state’s biggest municipal offering since at least 1990.
“We have eased our way back into bond financing for highway projects,” said Randy Ort, a state highway department spokesman in Little Rock, the capital. “By doing relatively restricted projects for relatively short durations, we're obviously winning the people’s trust back.”
The offering will kick off Arkansas's $1.8 billion plan to expand and add highways in 19 areas, Ort said.
Voters in November approved a temporary 0.5 percentage point increase in the state sales tax, to 6.5 percent, to help fund the 10-year initiative. The extra levy expires in 2023.
Norway in NYC
(Bloomberg) -- Norway's sovereign wealth fund agreed to buy a 45 percent stake in a Manhattan office building from Boston Properties Inc. for $684 million, expanding its real estate holdings in the world’s largest economy.
Boston Properties (NYSE: BXP), the biggest U.S. office real estate investment trust, will keep a 55 percent stake in the Times Square Tower and manage the building on behalf of the joint venture, the Oslo-based fund said.
The $760 billion fund is seeking to increase the proportion of its holdings in real estate to about 5 percent and made its first U.S. property investment this year.
Boston Properties put the tower -- located between 41st and 42nd streets and Broadway and Seventh Avenue -- up for sale in June.
Norway's Government Pension Fund - Global, the world’s largest sovereign wealth fund, is managed by Norges Bank Investment Management.
The fund made its first U.S. real estate deal in February with the purchase of stakes in five office buildings, two of them in New York, from TIAA-CREF.
The fund has also purchased commercial properties in London, Paris, Frankfurt, Berlin and Zurich, as well as Sheffield, England. It held 0.9 percent of its total portfolio in real estate at the end of the second quarter.
(Bloomberg) -- Japan's property stocks, including Mitsubishi Estate Co., had the biggest gain in more than two months after Tokyo was selected to host the 2020 Olympic Games.
The 45-member Topix Real Estate Index jumped 5.3 percent at the close of trading in Tokyo, the biggest gain since June 28.
The index, which closed at the highest since May 20, was the best performer among 33 groups that make up the benchmark Topix.
Mitsubishi Estate, Japan's second-largest developer, and Sumitomo Realty & Development Co. both rose 4.7 percent, while Mitsui Fudosan Co., the largest developer, surged 6.4 percent.
The economic effect of the games for the construction industry is about 475 billion yen ($4.8 billion), while the game will probably bring 152 billion yen to the property sector, according to International Olympic Committee estimates.
Investments in road, bridges, stadiums and parks will benefit construction companies and developers while boosting property values in Harumi area near Tokyo Bay, where the majority of stadiums will be located, Deutsche Bank AG (NYSE: DB) said.
“Olympics is one of the catalysts to make more investment in both private and public segment,” said Yoji Otani, an analyst at Deutsche Securities Inc. in Tokyo. “Sumitomo Realty and Mitsui Fudosan own the most land near Tokyo Bay area among developers, so they are set to benefit the most.”
The economic effect from the Olympic Games would be approximately 3 trillion yen for Japan, according to the Tokyo 2020 Bid Committee's website.
Canadian permits jump
(Bloomberg) -- Canadian building permits rose to a record in July as the value of projects such as shopping malls and office buildings almost doubled, government figures showed.
The value of municipal permits rose 20.7 percent to C$7.99 billion ($7.7 billion), Statistics Canada said Monday.
Permits for non-residential construction rose 45.5 percent to a record C$3.86 billion, including an 89.2 percent jump in commercial buildings to C$2.56 billion.
The building permits figures have been volatile, with a gain of as much as 29 percent and a decline of 23 percent reported since the start of 2011.
Statistics Canada said Monday that the value of residential building permits rose 4.1 percent in July to C$4.14 billion.
Single-family housing permits also rose by 4.1 percent, to C$2.24 billion, while multiple-unit projects such as apartments and condominiums increased 4.2 percent to C$1.89 billion.
The value of permits in July was 17.2 percent higher than 12 months earlier, Statistics Canada said.
The agency also revised its estimate of June's decrease to 10.6 percent from 10.3 percent.
UK lenders payout
(Bloomberg) -- Lenders may have to pay as much as 10 billion pounds ($15.6 billion) to settle claims they wrongly sold U.K. interest-rate contracts linked to commercial real estate.
Borrowers may receive compensation or preferential loan conditions valued at 5 billion pounds to 10 billion pounds from lenders after the cost of breaking the swaps spiraled when the Bank of England cut its benchmark rate, broker DTZ said Monday in a report.
“Swaps have become one of the biggest impediments for investors to constructively refinance or restructure their legacy loans,” Hans Vrensen, DTZ's global head of research, wrote in the report.
When property values fell, the real estate wasn't worth enough to pay both the swap and the mortgage, meaning borrowers couldn’t refinance or restructure their borrowings, according to the report.
U.K. borrowers used swap contracts to manage the risk of interest-rate increases on the floating-rate market.
Before the U.K. real estate crash in 2007, borrowers took out swap contracts of as much as 30 years with five-year commercial property loans.
When the Bank of England cut its benchmark rate to 0.5 percent from 4.75 percent, the penalty for breaking the swaps jumped.
Under the contracts, when rates fall, customers may have to pay higher costs to keep payments within the agreed upon range.
Borrowers that exit contracts through default or loan repayment are liable for costs running the length of the agreement.
Singapore condo defects
(Bloomberg) -- Owners occupying almost half the units at a luxury apartment building on Singapore's resort island of Sentosa sued the developer over alleged defects.
Ho Bee Investment Ltd. failed to fix termite-infested pool decking and flooded staircases in the common areas at the 249-unit The Coast at Sentosa Cove, 108 of the owners claimed in a lawsuit filed on their behalf by the property managers in the Singapore High Court. The owners also sued three contractors.
Ho Bee was the first condominium developer in Singapore's Sentosa Cove, an estate carved out by the government as the only place foreigners are allowed to buy houses.
The area is located on the eastern part of Sentosa, a resort island that's home to Genting Singapore Plc’s casino and a Universal Studios theme park.
Ho Bee denied the allegations in Aug. 27 court filings, blaming the defects on the management corporation's negligence.
Responsibility for maintenance of the complex, completed in April 2009, was handed to the management committee in December 2010, the developer said.
The Coast is among five developments Ho Bee has completed on Sentosa Cove, according to its website.
It's selling homes of two projects and has another in the pipeline for future sales, it said.
The case is The Management Corporation Strata Title Plan No. 3493 v Ho Bee Cove Pte, S688/2013. Singapore High Court.
Global prices rise
(Bloomberg) -- Global house prices rose by an average of 2.4 percent in the second quarter, the biggest increase in three years, as Dubai and Asian markets including Hong Kong and mainland China rallied, Knight Frank LLP said.
Dubai had the largest increase, with prices surging 21.7 percent from a year earlier, the London-based property broker said Monday in a report.
Taiwan recorded the biggest jump compared with the previous quarter, with a 7.4 percent gain.
Turkey, Europe's strongest performer, saw prices rise 12.2 percent from last year, while Greece was the continent’s weakest with an 11.5 percent drop in values.
Home prices in the United States increased 7.1 percent in the second quarter from the previous three months, the second consecutive quarterly rise.
Prices in the United Kingdom advanced 2.6 percent in the period.
Hong Kong climbed 19.1 percent and China gained 14.8 percent in the last 12 months.
Though the annual growth was among the world's highest, China’s prices were unchanged in the second quarter from the first and Hong Kong rose 1.2 percent.
Singapore hotel REIT
(Bloomberg) -- Amara Holdings Ltd., a Singapore- based hotel operator, may sell hospitality assets as a real estate investment trust.
A “REIT has always been one of the options that one can consider to go asset-light,” the company said. “There are no concrete plans at the moment and we are continuously evaluating all options including the feasibility of launching a hospitality REIT.”
Amara, led by Chief Executive Officer Albert Teo, is considering putting its 27-year-old Amara Singapore Hotel, along with the adjacent 100 AM shopping mall and Amara Sanctuary Resort Sentosa into a REIT and selling the assets in an initial public offering, according to a person with knowledge of the matter.
The company listed S$426 million of assets at the division as of Dec. 31.
Undervalued in Brazil
(Bloomberg) -- MRV Engenharia e Participacoes SA led a rally among Brazilian homebuilders amid speculation this year's drop left the stocks undervalued.
The BM&FBovespa Real Estate index trades at 12.2 times estimated earnings for the next 12 months, up from a one-year low of 10.2 on July 10.
The index's 19 percent drop this year is excessive compared with the 11 percent decline for Brazil’s Ibovespa benchmark, according to Wesley Bernabe, an analyst at Banco do Brasil SA in Sao Paulo.
“After disappointing results in the first and second quarters, investors oversold these stocks,” Bernabe said. “The job market and income levels in Brazil remain strong despite the slow growth of the economy.”
Some homebuilders are revamping strategies to lessen their dependence on homes for lower-income Brazilians, and leaving regions where demand is weak after overestimating the profitability of government-subsidized projects aimed at building 3 million houses for families earning less than 5,000 reais a month.