Enter the Dragon, exit Meta

AS WE welcome the Year of the Dragon with wishes for peace and prosperity, some lingering troubles from the past year are clinging to the dragon’s tail. 

Tech giant Meta told its Singapore landlord in June last year that it would not renew its lease for seven floors of prime office space at South Beach Tower, Kalpana Rashiwala reports. The 115,000 square feet of space that Meta occupied is roughly 22 per cent of the building’s total office space. The landlord is negotiating with a replacement tenant for two floors, while the rest of the space is reworked. Meta has moved staff into its offices at Marina One, where it is said to be leasing 500,000 sq ft of space.  

Is Meta’s exit from a grade A office building in downtown Singapore a foreshadowing of more vacancies to come? Granted, the social media giant’s cutback came out of earlier announced news - it rolled out a second round of job cuts in March last year. But 2023 closed with a fresh round of sobering disclosures of mass global layoffs in many industries, from tech to banks to consumer businesses. The spectre of shadow space in Singapore’s office sector may be looming again. 

Last week, the Urban Redevelopment Authority announced that a state land tender for a site at Marina Gardens Crescent would not be awarded as the sole bid was “too low”. The action is not without precedent, and certainly not unexpected. But rejecting the bid for the Marina Gardens Crescent site is a decision that risks missing the big picture, writes Leslie Yee. 

For one, a single bid at a lower-than-expected price, for a tender that developers had over six months to mull over, should be taken as an accurate reading of market appetite and sentiment. There is also the opportunity cost. The S$770.5 million would have accrued to the government’s reserves to be invested, and jobs and business would have been generated when the development of the Marina South precinct starts rolling. Leslie raises several other points in his commentary: read it here.

Proceeds from state land sales totalled S$8.15 billion so far, in the government’s current fiscal year ending March 31, 2024, Jessie Lim reports. The FY2023 tally is the highest recorded from government land sales since FY2017, when S$8.4 billion worth of land was sold, and slightly more than double the amount transacted in the previous fiscal year. Last year saw many more plots of land put up for sale, in line with the government’s plan to increase housing supply as part of its larger strategy to cool prices. 

Some real estate assets in Singapore have ended up as homes for dirty money. Several shophouses acquired by entities associated with a Fujian ring of money launderers recently surfaced on the market, put up for sale by receivers. Police have confirmed that, six months after the pre-dawn bust, the authorities have started the ball rolling for prohibition orders on assets to be lifted so that proceeds may be recovered. Jessie Lim has the details. It remains to be seen what other properties, and the banks they are mortgaged to, will also emerge in the recovery process, and what other issues of accountability might surface in court. 

Businesses are waiting to see what Finance Minister Lawrence Wong will deliver in his Budget statement this Friday. Property portal PropertyGuru has three proposals on its wishlist for the real estate market: cut the 15-month waiting period for “downgraders”, tweak ABSD to allow Singaporean families to buy a second residential property without incurring the Additional Buyer’s Stamp Duty upfront, and bring back estate tax. Here’s why. 

You may also have noticed that your property tax bill has gone up this year - and by quite a lot in many cases. Both tax rates and annual values used to calculate tax payable have risen. 

A PwC Singapore tax leader points out that replacing the revenue generated through property taxes with higher corporate and individual tax rates would hurt Singapore’s attractiveness. This will ultimately eat into the capital appreciation of our properties. But while higher property taxes seem fair as de facto wealth taxation, certainty around tax rates is key. PwC asks for “greater stability in the system such that no further significant increases are imposed until the dust settles”. What’s on your Budget wishlist? 

The late Wee Cho Yaw, hailed as a titan of Singapore banking, left an indelible mark at UOB. Among Wee’s key businesses, property might be the most suited for the family to continue owning and managing for generations to come. His business legacy may live on longest in the property realm, writes Leslie Yee in The Level Ground.

China watch

Overseas assets snapped up by Chinese companies in a decade-long shopping spree are starting to hit the market. Distressed Chinese developer Guangzhou R&F Properties is giving up a London property project in exchange for some of its dollar bonds and HK$1 (S$0.17) of cash.

On the mainland, more distressed deals are emerging. The Abu Dhabi Investment Authority (Adia) is looking at a minority stake in troubled Dalian Wanda Group’s mall operator, Zhuhai Wanda Commercial Management Group.

Running on empty

Stress levels are ratcheting up in commercial real estate in the US. Across major American hub cities, office towers face record vacancy rates, with some buildings sitting almost empty. “Zombie offices” spell trouble for US banks, and smaller regional banks will be particularly vulnerable.  

Testifying before Congress on Feb 6, US Treasury Secretary Janet Yellen said regulators are working to ensure that loan-loss reserves and liquidity levels in the financial system are adequate. “Commercial real estate is an area that we’ve long been aware could create financial stability risks or losses in the banking system,” Yellen said. 

Some US$929 billion – nearly 20 per cent of outstanding debt on US commercial and multifamily real estate – will mature this year and require refinancing or property sales. The tide of loans coming due is 40 per cent higher than an earlier estimate by the Mortgage Bankers Association (MBA), which it attributed to loan extensions and other delays rather than new transactions.  

Exposure is spreading to banks in Europe. Germany’s Deutsche Pfandbriefbank on Feb 7 said it increased provisions because of the “persistent weakness of the real estate markets”, as what is being described as “value destruction” continues. Deutsche Bank, too, recorded sharply higher provisions for real estate losses and said refinancing posed significant risks for the sector as asset values suffer. Switzerland’s Julius Baer Group said it would write down huge loans made to bankrupt property company Signa.

Meanwhile, back at the Hall of Flex Space, WeWork founder Adam Neumann is trying to buy back the company after it filed for bankruptcy in November. This comes after WeWork said the company may be forced to take a new bankruptcy loan to make up for slower-than-expected progress on its rent negotiations. Let’s see how things work out for him.