Thursday, July 28, 2011
Wednesday, July 27, 2011
The Small Bank Problem: Why We Are 40,000 Properties Away From Recovery
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Friday, July 22, 2011
Strong franc gnaws deeper into Swiss economy
Image Caption: The franc's clout is hitting domestic industries (Keystone)by Matthew Allen, swissinfo.ch The value of the dollar sank below the franc some time ago, and there are no signs of the trend reversing with the Swiss economy performing so robustly compared to debt-laden European countries and the United States.
“It seems prophetic, and almost tragic, to say so now, but the Swiss economy has been the victim of its own success in surviving the financial crisis over the last couple of years,” Janwillen Ackett, chief economist at Julius Bär bank, told swissinfo.ch.
“Something dramatic has taken place since the start of the year and our outlook is now a more sober one. We will really feel the pain of the over-valued franc in the coming months.”
Acket has downgraded his predictions for Swiss gross domestic product (GDP) growth for this year to 1.4 per cent, compared to a 2.2 per cent forecast in January and 2.6 per cent made last year.
Joseph Jiminez, chief executive of Novartis warned on Tuesday that the drug maker would have to “reduce the total cost we have in Swiss francs” while referring to the damage caused by the strong currency.
Also on Tuesday cabinet ministers interrupted their holidays to discuss via teleconference the strong franc. However, no measures were taken.
This week, the franc recorded more gains against the euro – with one unit of the European currency costing SFr1.14 compared with SFr1.50 at the end of 2009. Many companies would go to the wall if the franc reaches parity with the euro, Peter Widmer, president of the Swiss export association, told the Blick newspaper in May.
“If that really happens then thousands of companies would face bankruptcy,” he said.
And it is not just engineering companies that face problems. The textiles industry has appealed to the government to provide bridging loans to stave off a looming crisis in that sector.
There are also reports of traditional, small cheese makers failing as exports melted by 3.5 per cent in the first quarter of this year. Imports of foreign cheeses rose by 7.4 per cent in the same period, according to the cheese marketing board.
Other milk products also face a currency squeeze. Milk products producer Emmi reported that a SFr100 million hole has been blown through its turnover in the last three years as a result of the strong franc.
Private bankers, thought to be the main beneficiaries of the strong franc as investors flock to Switzerland, insist that they are not as well off as believed because new assets are denominated in euros, while their cost base remains in francs.
The tourism sector has also suffered from the effects of the strong franc. The NZZ am Sonntag newspaper reported on Sunday that a thousand Swiss hotels were threatened with extinction as fewer tourists visited high price Switzerland.
The head of the Swiss tourist board, Jürg Schmid, appealed to the patriotism of Swiss holidaymakers in a SonntagsBlick article on Sunday, urging them to stay at home and spend their money in the domestic market.
Hansueli Loosli, chief executive of supermarket chain Coop, has also being banging the patriotic drum, accusing Swiss consumers that drive over the borders to buy cheaper euro products of costing homegrown retailers some SFr2 billion a year in lost sales.
On the other side of the coin, the Swiss price watchdog has leveled an accusing finger at retailers, saying they are doing too little to pass on the reduced cost of imports to consumers.
Swiss consumers typically pay some 20 to 30 per cent more than European counterparts for the same goods, but official statistics showed that the high street cost of goods and services imported from the euro-zone have hardly dropped despite being cheaper to buy with the Swiss franc.
The franc has gained 25 per cent in value against the euro and the dollar over the past four years.
The Swiss National Bank has emphasised that it does not pursue an exchange rate target, but consistently bases its monetary policy on its legal mandate.
This mandate stipulates that “the SNB is required to ensure price stability, while taking due account of economic developments”.
Starting in March 2009 the SNB intervened in currency markets. But after pumping in 15 per cent of GDP in May 2010 to little effect as the Swiss franc surged during the first round of the Greek debt crisis, it dropped them in June 2010.
These forays led it to a loss of SFr21 billion last year, its biggest ever, and its chairman, Philipp Hildebrand, has faced calls to resign.
Land Securities continues to power ahead
Land Securities today produced a strong first quarter interim management statement, as the UK’s largest property company continued its stellar performance since the market downturn.
The FTSE 100-listed REIT said that it had sold £177m of assets in the three months from 31 March to 30 June, at an average of 8% ahead of book value. Its sale of London office assets proved particularly profitable.
The sale of its development at 110 Cannon Street netted £52m, which LandSecs said accounted for all of its expected development profit.
It is also going full steam ahead with its strategy of undertaking development to maximise profit. As well as beginning City office developments such as the 20 Fenchurch Street “Walkie-Talkie” tower and 375,000 sq ft of office at 30 Old Bailey and 60 Ludgate Hill, it has also earmarked a £275m pipeline of smaller retail developments which it will now commence.
These developments will be anchored by fashion or food retailers, and total 1m sq ft.
Residential development has also proved profitable for the company. At Wellington House, SW1, sales have been agreed on three of the five remaining penthouses at prices which are slightly ahead of the company’s forecast of £2,000 per sq ft. Following the sales only 6% by floor area will remain unsold. Completion of the scheme remains on schedule for July 2012.
And as revealed by Property Week (finance, 24.6.11), it is now looking for a housebuilder to partner with on its huge residential development at Ebbsfleet in Kent.
Land Securities chief executive Francis Salway said: “While the quarter has seen a period of uncertainty in the wider economy, our activities show that our plan continues to deliver opportunities for value creation. The outlook for development in London remains attractive and, despite the mixed messages in the retail sector, our leasing activity demonstrates that the stronger retailers are looking to take new space.
“This retail demand has meant we have over the last few months also begun to step up our activity in retail development predominantly in edge of town locations and we now have a £275m, 1m sq ft, pipeline of opportunities to meet the growing demand from food and fashion retailers for space. Once again, we will look to marry our development expertise with retailer commitment to a scheme before we take these opportunities forward.
“We entered the financial year with a clear plan, and the letting and sales activity we have undertaken in the first quarter underpins our confidence in this plan.”
Thursday, July 21, 2011
Telemetry signs with Segro
Telemetry, communications and energy solutions specialists, Stirling Technical Engineering Limited have signed a 10 year lease for 9,400 sq ft at SEGRO’s Kings Norton Business Centre in Birmingham.
Stirling Technical has taken the decision to consolidate three locations into one secure base at Kings Norton Business Centre. The business has been based at KNBC for the past seven years, with two units on site and a further unit nearby in Kidderminster.
Steve White, operations director at Stirling Technical, said: “We have been very pleased with the site management and security at Kings Norton so it was an easy decision to bring all our l operations under one roof. Our business is growing and these new premises will enable us to increase production, whilst still offering the same high levels of service as before.”
Stirling Technical’s client portfolio includes Severn Trent Water, Wessex Water, Thames Water, South West Water and Schneider Electric.
Two JLL retail directors quit for Legal & General and Standard Life
Jones Lang LaSalle has lost two retail directors to Legal & General and Standard Life.
Mark Harvey, a director in the retail agency team, has quit Jones Lang LaSalle to join Legal & General, while Niall Macdonald, director in the Edinburgh retail team, will join Standard Life.
Harvey, who joined Jones Lang LaSalle through the purchase of Churston Heard, will now join Legal & General as a senior retail asset manager and will head the asset management of the retail and leisure assets in Legal & General Property’s Managed Property Fund.
Guy Grainger, head of UK retail, said: “We wish both Mark and Niall all the best for the future and thank them for their valuable contribution to Jones Lang LaSalle’s growing retail team over the years. We look forward to working with them as clients”.
Tuesday, July 19, 2011
Friday Bulletin: Olympics 2012 Extravaganza
15 July 2011 | By Giles Barrie., Samantha Warrington, David Doyle.
Property Week’s editor-in-chief Giles Barrie and group production director Samantha Warrington guide you through the Olympics 2012 special being launched today.
Our Olympics coverage is spread over three media - the magazine, an interactive magazine to read on your desktop, and an iPad app.
To read the interactive magazine click here and download the iPad app from the iPad app store.
window.fbAsyncInit = function() { FB.init({appId: '149025241799301', status: true, cookie: true, xfbml: true}); }; (function() { var e = document.createElement('script'); e.async = true; e.src = document.location.protocol + '//connect.facebook.net/en_US/all.js'; document.getElementById('fb-root').appendChild(e); }());Plans for £65m Eastbourne Arndale Centre extension unveiled
Legal & General Property and Strathclyde Pension Fund have unveiled plans for their £65m extension of the Eastbourne Arndale Centre.
The plans by the Performance Retail Limited Partnership include a 150,000 sq ft extension comprising 15-20 new shops, as part of a complete redesign of the centre’s western wing.
A planning application is expected to be submitted early next year, and if granted the extension could be open by 2015.
Simon Russian, senior fund manager at Legal & General Property, said: “There is a strong demand for new retail space in Eastbourne and the expansion of the Arndale will act as a catalyst to attract more regeneration and investment in the town centre.”
Lunson Mitchenall and DTZ are the letting agents and the scheme will be designed by TP Bennett.
Monday, July 18, 2011
Colliers wins £35m Stratford-upon-Avon mandate
The Birmingham office of consultancy Colliers International has won the brief to manage Stratford-upon-Avon Town Trust’s £35m property portfolio, TheBusinessDesk.com revealed today.
The charitable organisation was set up in the 16th century and granted a Royal Charter by Edward VI, nine days before his death in 1553.
Its portfolio contains more than 100 properties, all of which are in Stratford, such as Judith Shakespeare’s home at 1 High Street and Mason’s Court, Shrieves House, said to be England’s most haunted site.
There is also the Boathouse on the River Avon, land adjacent to Anne Hathaway’s cottage and Stratford’s oldest public house, the timber-framed Garrick Inn.
Income generated from the portfolio is returned to the community in the form of grants and 1,000 grants have been awarded to local schools, community groups, arts organisations and individuals since 2001.
Colliers International advised the trust for six years but faced competition from 18 other property consultants when the brief was re-tendered under Charity Commission guidelines.
The firm will advise on acquisitions and disposals, development, investment management and tenant relations among others.
Colliers’ investment property management team, headed by Martyn Edwards, and commercial lease consultancy team, led by Tarquin Murray-Holgate, will lead the work.
Credit Suisse in sights of US tax probe
Image Caption: US tax investigators are trying to prove Credit Suisse helped clients hide $3 billion in assets from the IRS (Keystone)by Matthew Allen, swissinfo.ch Investigators have now escalated the probe and are attempting to implicate the bank in hiding some $3 billion (SFr2.46 billion) of client assets from the Internal Revenue Service (IRS).
They must prove that the bank’s hierarchy sanctioned staff actions before client data can be demanded in a re-run of the UBS case two years ago. But unlike UBS, no known whistle-blower has come forward.
The change of tack by the US Department of Justice (DoJ) is a worrying development for Credit Suisse that places the bank in the spotlight, rather than “rogue staff”.
In February, one current and three former employees were indicted in the US for aiding tax cheats. Credit Suisse argued then that the accusations were made against individuals and not the organisation.
“Subject to our Swiss legal obligations, we will continue to cooperate with the US authorities in an effort to resolve these matters,” the bank said in a statement.
Credit Suisse has an obligation to protect the confidentiality of its clients, but this Swiss law was weakened after UBS admitted to systematically helping US clients evade taxes in 2009.
After months of intense diplomatic negotiations, the Swiss parliament rubber-stamped a deal last year to hand over the data of 4,450 UBS clients to the US.
The deal came with some small print that committed Switzerland to “review and process additional requests for information … if they are based on the pattern and facts and circumstances that are equivalent to those of the UBS case.”
That clause could come back to haunt Switzerland, according to financial legal expert Peter V. Kunz of Bern University.
“This small footnote is a very dangerous area, but nobody was talking about it much at the time,” he told swissinfo.ch. “It allowed the US authorities to keep one foot in the room that could allow them to make the same claim [for Swiss banking data] again.”
The SonntagsZeitung newspaper published a story last week claiming to have uncovered confidential correspondence between the bank and a legal advisor. The advice was that Credit Suisse could release client data without the need for another parliamentary decision.
Kunz admitted that the footnote in the UBS client data deal presented a “grey area that might be at the centre of future disputes.” But he did not believe the UBS deal set a precedent that other banks were obliged to follow.
“I cannot see a way that Credit Suisse could release client data without first receiving parliamentary approval,” he told swissinfo.ch.
The IRS has received evidence of thousands of UBS account holders and at least two tax cheats testified in court to hiding money in Credit Suisse vaults. Other Swiss banks have also been named as UBS clients shifted their hidden assets to other financial institutions.
The missing piece in the DoJ jigsaw is an insider, like UBS whistle-blower Bradley Birkenfeld, who could link the pattern of tax evasion to Credit Suisse policy or at least show that managers turned a blind eye.
The four bankers connected to Credit Suisse that were charged earlier this year are not in US custody. Another Credit Suisse banker, who was arrested in January for alleged tax evasion offences while working for UBS in a previous job, has declined US overtures to turn whistle-blower.
This could have had something to do with Bradley Birkenfeld being imprisoned for more than three years in January 2010 despite toppling UBS with his testimony, according to Michael Kohn, president of the National Whistleblowers Center in the US.
“There is now a sizeable roadblock in the way of people who have engaged in wrongful activity but who now want to reach out to correct those wrongs,” Kohn told swissinfo.ch.
“The result is that it will be more difficult for the authorities to achieve the same kind of successful prosecution against other banks that they gained against UBS.”
The Swiss authorities, keen to avoid another UBS-style fiasco, have been working behind the scenes to negotiate a blanket deal with the US that would allow banks to come clean about tax evasion offences without being prosecuted.
The exact details of the proposed deal, that would also include other European banks, have not been made public. But the success of such a scheme would appear to hinge on whether the US demands the transfer of more client data – something Switzerland is desperate to avoid.
The OECD placed Switzerland on a “grey list” of uncooperative tax havens in April 2009.
The Swiss were removed from the list six months later after renegotiating several double taxation treaties.
The most damaging tax evasion case involved the activities of UBS bank in the US. In February 2009, UBS was fined $780 million after admitting helping US citizens dodge taxes. It also handed over data of 285 account holders.
Last year the Swiss parliament ratified a 2009 deal to transfer 4,450 UBS client files to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS.
Last year, Switzerland agreed to negotiate deals with Germany and Britain that would compel banks to pay withholding tax on offshore Swiss accounts.
Several other Swiss and international banks have also been identified as attracting the attention of US tax evasion investigators.In Switzerland, beside UBS and Credit Suisse, Julius Bär, Wegelin, Basler Cantonal Bank and Neue Zürcher Bank have also come under scrutiny.
The Swiss branches of HSBC, Bank Leumi and Bank Hapoalim have also been mentioned in dispatches.
Aegis's 600-person Manchester call centre "just the start"
Aparup Sengupta, the global chief executive of the company, who flew in from Mumbai to attend the announcement of the company’s investment in the city, told TheBusinessDesk.com that 600 was ’just the beginning’.
“Within 18 to 24 months what we call our experience centre will be up and running and customers will be able to come and see for themselves what we can do for them in terms of customer service and then we expect a snowball effect and we will see the growth momentum picking up.”
Mr Sengupta said he had been “hugely impressed” by the welcome he had received on this, his first visit to the city.
“My colleagues who have run the project have been delighted with the approach to doing business by the people in Manchester with MIDAS and Bruntwood.”
He said Manchester had seen off competition from five other cities in the UK and Ireland to win the investment from the firm, which is will turnover $1bn for the first time this year, and is looking to expand into Europe.
Mr Sengupta said the talent pool and connectivity in Manchester were a key factor, along with the city’s ability to act quickly to its requirements.
“Our people are our biggest asset and we have a policy of locating our people, where possible, in city centres near infrastructure and the railway station so City Tower is great.
“We did not want to be in the middle of nowhere where our people would find it difficult to get to work.”
Manchester city council leader Sir Richard Leese said the investment from Aegis - part of the $16bn Essar conglomerate - was sends out a message that the city is a great place to invest.
“In the past week we have seen Etihad, Ryanair and now Aegis announce major projects which will create jobs and grow our economy. This shows were are competing, and winning on quality.”
Chris Oglesby, chief executive of Bruntwood, which has let 40,000 sq ft at City Tower to Aegis, said: “In the four months we have been working on this project Aegis have proved to be great partners, and I am sure they will fit in and thrive in Manchester.
“It is a entrepreneurial company which puts providing excellent customer service at the heart of its business, which is what we strive to do at Bruntwood.”
Oglesby said Bruntowood was seeing positive levels of interest and has a number of deals in the pipeline.
“We’re having to work harder for deals, but there is clearly significant levels of interest in Manchester from outside the city, which is good news.”
He said the way Bruntwood, MIDAS and UKTI has worked together on the Aegis deal was a “great example” of the public and private sectors working together to drive economic growth.
Saturday, July 16, 2011
Maradia Properties makes new Investment into Swiss Commercial Real Estate
Maradia Properties today anounced a new investment into a Swiss Commercial Property as follows:
PROJECT SUMMARY
Project Name: SC VCX, LLC
Project Type: Net Leased, Two-Tenant Commercial Building
Location: Max-Schmidheinystrasse
CH-9435 – Heerbrugg
Canton of St. Gallen, Switzerland
Site Area: 117,230 current building space on 83,259 square feet of land
Parking: 112 outside parking spaces, and 34 underground parking spaces
Tenants: Vectronix AG (90%)/APM Technica AG (10%)
Lease Term/Options: Until 6/30/2021 with one 10 Year Option to extend until 6/2031
Owner Responsibilities: Roof & Structure, Property Taxes & Insurance
Management: LLC: Sonnenschein Capital, LLC; Evanston, Illinois USA (1.5% of annual rent)
Property: EIKO Immobilien AG; Zug, Switzerland (2.0% of annual rent)
Rent: Gross Annual Rent Initial (The Property) of CHF 2,047,782
Gross Annual Rent of Expansion upon completion (estimated) of CHF 225,000
Total Projected Rent in 2012 (upon completion of Expansion) of CHF 2,297,367
Annual Escalation: 100% of Swiss CPI on an annual basis (estimated in the Cash Flow Model to be 1.25% per year vs. the 20 year average of 1.725%).
Pro Forma Returns: Returns are based in local currency and will vary based on the fluctuation in the U.S. dollar vs. the Swiss franc (“CHF”) and the escalation of Swiss CPI.
10 Year (1st Yr) Projected : Cash-on-Cash Returns/Quarterly Distributions (“COC”) are projected to be 7.0% on amount invested in the 1st year: and 8.0% annual average COC over 10 years.* These figures are based on Net Returns after all debt, projected Swiss GmbH & US LLC accounting costs, all property & LLC management fees, Cap-Ex, property taxes & insurance, currency fluctuations, but before any income taxes*. Based upon actual experience on other Swiss Sonnenschein deals structured the same way, income taxes should be minimal. There are no adverse tax consequences to an investment made by a U.S. investor into a Swiss real estate investment on an in-direct basis. A U.S./Swiss Tax Treaty exists.
10 Year (1st Yr) Projected: Return-on-Equity (“ROE”) to investor Members is projected to be 10.1% in the 1st year & an average annual ROE of 11.1% over 10 years. This estimate does not include any increase in the original purchase price that may occur upon the ultimate sale of the Property. Projections are based on Net Returns after all annual fees & expenses (*Note: projection based on an estimated USD/CHF conversion of 1:1).
Transaction Terms (Total – Including Expansion):
Gross Transaction Price: CHF 39,673,000 million (Total of all fees & expenses)
Loan Amount (in Swiss Francs): CHF 25,305,000 (67% LTV)
Loan Terms: 5.5 years of fixed rate loan @ 2.66% (Estimated Refinance at 2.75%
in years 7-10)
Flat/fixed amortization of 1.8% of the Initial Loan Principal balanc
per year
Blackstone and Catalyst retail spending spree
15 July 2011 | By Kat Baker Joint venture to invest in booming market for secondary shopping centresYou have reached this page because you have viewed your 30-day allowance of 3 free article without registration. utmx_section("Registration")
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Wednesday, July 6, 2011
Retail collapses could cost landlords £393m
Retail landlords could lose £393m in rent payments following therecent spate of administrations on the UK high street, according to the Investment Property Databank.
The current annual rent payments from retailers including TJ Hughes, Jane Norman, Habitat, Focus DIY, Homeform and Oddbins is £35.8m,representing 0.5% of the £7.2bn annual income stream.
These retailers have lease commitments of between 5 and 12.5 years, and average 10.8 years across all of the IPD quarterly dataset.
Focus DIY and TJ Hughes represent the biggest hit for landlords, comprising 0.26% and 0.11% of their income streams respectively.
Malcolm Hunt,director and head ofUK and Ireland Client Services at IPD, said: “The total annual cost to landlords of these administrations could be as high as £35.8m based on IPD data. Obviously some of these costs can be mitigated through reletting, as was found following the demise of Woolworths and MFI.
“Only 16% of property funds could lose more than 1% of their income stream as a result of these corporate failures. The two most important retailers affected are Focus DIY and TJ Hughes with potential total impacts over the lifetime of their leases of up to £231m and £94m respectively.”
The annual rent bills for retailers undergoing restructurings, including Carpetright, HMV, JJB Sports, Thorntons and Mothercare, are £153m, with an average lease commitment of 9.2 years.
Louis Vuitton boss made offer for £200m Bond Street store
The boss of the Louis Vuitton fashion house made an offer to buy back the company’s flagship store on Bond Street from its indebted Irish owner, an Irish court heard yesterday.
David Daly, the Irish developer that owns the 20,000 sq ft Louis Vuitton store 17-20 New Bond Street as well as the Mulberry store at 40-42 New Bond Street , told the Irish court that following the publicity over his battle with the Irish National Asset Management Agency, Bernaud Arnault had made an offer to buy his British property assets at a significant discount.
Daly said that 17-20 New Bond Street had been recently valued by Savills at around £190m, and that 40-42 New Bond Street had been valued at around £65m.
Propertyweek.com revealed two weeks ago that Nama had given Daly until the close of play on Thursday 23 June to pay back €450m of debt secured against his personal assets in the UK and Ireland, or administrators would be appointed.
BDO has now been brought in as administrator, but Daly is fighting this appointment. A full hearing of the case in the commercial court will take place over four to five days beginning on 13 July.
Tuesday, July 5, 2011
Norwegian sovereign wealth fund completes second deal
The Norwegian sovereign wealth fund has completed its second deal in a £15bn investment drive, with the purchase of 50% of a €1.4bn Parisian portfolio from Axa.
Norges Bank Investment Management and Axa Real Estate Investment Management have set up a 50:50 joint venture which will see Norges buy a stake in a portfolio of Parisian offices valued at €1.4bn.
NBIM manages the Norwegian Government Pension Fund Global, the sovereign wealth fund backed by Norway’s oil and natural resources income. It is currently making its first push into property investment, and wants to transfer 5% of its holdings into real estate, which will amount to an investment of £15bn over the next 4-7 years.
Its first investment was a 25% stake in Regent Street, bought last year from the Crown Estate for £492m, and it had previously said it would target London and Paris for its first investments.
The joint venture portfolio will comprise the following assets: 12-14 Rond Point des Champs-Elysées; 1-3 / 2 rue des Italiens; 16 avenue Matignon; 24-26 rue Le Peletier; Meudon Campus, 92 Meudon; OPUS 12, 92 La Défense (pictured); and 31-33 rue de Verdun, 92 Suresnes.
Karsten Kallevig, chief investment officer real estate of Norges Bank Investment Management, said: “This acquisition enables us to gain a significant exposure to the Paris office market, one of our key European target markets. We look forward to a long and beneficial partnership with the AXA Group.”
Pierre Vaquier, Chief Executive of AXA Real Estate, added: “The Joint Venture will allow AXA France Insurance Companies to reallocate capital and diversify into other European markets, especially the UK and Germany, while maintaining exposure to this important market by retaining a significant stake in the Joint Venture. We will continue to manage the portfolio.”
London market takes long pause
Take up in the Central London leasing market showed a second consecutive quarter of low activity, according to new data from Capita Symonds.
Central London office take-up in Q2 2011 was below the historic quarterly average of 3m sq ft for the second consecutive quarter. Take-up in the City was revealed to be down by 22% over the previous quarter to 605,000 sq ft and down 36% on the 949,000 sq ft in same quarter last year.
The West End’s take-up fared better, but was down on the previous quarter by 9% to 722,000 sq ft and reflected a 35% reduction from the level achieved in the same quarter in 2010.
“Although it is too early for this to be called a trend, it is evident that businesses are staying put and the office market is biding its time,” Alan Dornford, director-markets at Capita Symonds, said. Dornford also explained that London “inevitably reflects what is happening in the wider world and there is increasing evidence of a slowing world economy.”
He also said that the impact of high oil prices and the Eurozones crisis on top of this causes caution in boardroom, which translates into reluctance within buildings to move, invest, or take on new staff.
The figures come after two years of high activity driven by business upgrading space and capitalizing on inducements on offer from landlords. As supply has shrunk and landlords have adjusted their pricing, the options for businesses looking to move have reduced and the financial case isn’t necessarily as compelling as it once was. The market is therefore now much more dependent on growth in the economy which includes new businesses coming into London and existing businesses adding more staff.
Rents in the city are currently in the region of £55 per sq ft, up 4% since the beginning of the year. In the West End, higher rents are being achieved, but very few have been achieved above £70 per sq ft.
British Land to buy £175m Virgin Active portfolio
British Land is in advanced talks to buy a portfolio of Virgin Active health and racquet clubs from Société Générale for around £175m.
British Land is looking to buy the 17 long leaseholds and freeholds for clubs including Brighton, Cardiff and Oxfordshire.
The former Esporta gyms were put up for sale by Société Générale last year in a £200m sale-and-leaseback. Virgin Active acquired the operating company, which included 55 sites, in April for £77.6m.
Savills is acting for British Land. All parties declined to comment.
New UBS chairman faces tough decisions
Image Caption: Axel Weber's appointment has been widely praised (Keystone)by Matthew Allen, swissinfo.ch Subject to shareholder approval, Weber will start as understudy to current chairman Kaspar Villiger next year as vice-chairman before replacing the former Swiss finance minister in 2013.
The appointment of Weber – who until April was President of the German central bank (Deutsche Bundesbank) – has been widely praised, particularly as he was snatched from under the nose of Deutsche Bank, which was eyeing him up for a prominent leadership role.
“It is a very positive move given Weber’s political experience from his role at the Bundesbank,” Bank Sarasin analyst Rainer Skierka told swissinfo.ch. “His regulatory knowledge is also a good asset for UBS to have gained.”
Such detailed understanding of regulatory issues is seen as a major advantage for UBS as it plots a course to compete in the international markets despite having tougher capital requirements foisted on it by the Swiss authorities.
UBS’s gain is certainly seen as Germany’s loss as, until April, Weber was tipped as a candidate to succeed Jean-Claude Trichet as President of the European Central Bank.
Weber’s surprise resignation from Germany’s central bank, six months before his term was due to expire, caused political shockwaves earlier this year. It is also reported that Deutsche Bank’s inability to recruit Weber has caused friction between the executive and the board.
The Swiss media, by contrast, has been impressed by the speed at which UBS managed to persuade Weber to join its ranks. He is seen as a perfect replacement for Villiger, who joined UBS in 2009 with a brief to help resolve the bank’s tax evasion crisis in the United States.
Weber’s appointment, however, comes at a higher financial cost to the bank than Villiger, who restricted his base salary to SFr850,000 ($1 million) when he came to office.
Weber will receive a “golden hello” of SFr2 million in cash and 200,000 shares that could boost his package to some SFr5 million when he is able to sell them.
Villiger justified the package by telling the SonntagsZeitung newspaper that UBS had to “adapt to the global market.” Dominique Biedermann, head of the sustainable investment fund Ethos Foundation, rejected that argument, stating: “This announcement sends out the wrong political and economic signals.”
Weber will have to work hard for his money, according to observers. It is widely expected that UBS chief executive, Oswald Grübel – who was brought out of retirement to stabilise the bank in 2009 – will follow Villiger through the exit door in the next couple of years.
Grübel has been credited with bringing UBS back into the black after years of hardship, and finding the right replacement is a crucial task.
UBS has also criticised the Swiss financial regulator for imposing harsh capital requirements on the bank, as it has on Credit Suisse. Grübel has gone so far as to hint that some businesses, most likely investment banking, could be relocated to more favourable regulatory regimes.
The arrival of Weber, who has helped to shape Germany’s regulatory response to the financial crisis, would add an interesting new ingredient to how UBS deals with the “Swiss Finish” rules – due to be voted on by parliament this year.
Much speculation has also centred on UBS’s investment banking business for other reasons. Like many other rivals, investment banking has failed to spark in recent months at UBS as the risk adverse climate among clients continues.
“This is not a phenomena that is restricted to UBS,” Skierka said, “Investment banking is having a hard time in other countries, particularly in the face of increased capital requirements.”
“With a lack of client activity and the strong Swiss franc, investment banking is not a fun environment at the moment.”
In order to increase profitability, UBS needs to work out what services to retain and what to kick out, according to Skierka.
“It is clear that UBS, with its strong wealth management tradition, needs to offer clients merger and acquisition, share and bond trading services, for example,” he said. “Trading high risk products [such as mortgage backed securities] is no longer profitable.”
The 54-year-old was a member of the German Council of Economic Experts from 2002 to 2004, prior to becoming President of Germany’s central bank.
In his role at the Deutsche Bundesbank he served as a member of the governing council of the European Central Bank (ECB) and was on the board of directors at the Bank for International Settlements.
In addition, he held the concurrent positions of German governor of the International Monetary Fund and was a member of the Steering Committees of the European Systemic Risk Board and the Financial Stability Board.
Weber was expected to see out his eight year term as Bundesbank president until the end of October this year and was then widely tipped to as a candidate for the presidency of the ECB.
His surprise resignation from the Bundesbank in April led to overtures from Deutsche Bank to take over as chief executive.
But the German national opted for a new career at Switzerland’s UBS bank. Shareholders have been recommended to accept Weber as vice-chairman in May of next year before succeeding chairman Kaspar Villiger in 2013.
Monday, July 4, 2011
“Sober” Swiss franc strategy praised
Image Caption: Switzerland has to consider its franc policy carefully. (Keystone)by Renat Kuenzi, swissinfo.ch Resorting to a proactive strategy would be counter-productive, he tells swissinfo.ch.
The Swiss franc has gained 25 per cent in value against the euro and the dollar over the past four years. The cabinet is currently considering measures to offset the negative impact of the continuing strong Swiss franc on the country’s industry.
Thomas Straubhaar: At first sight this seems quite logical. But I would urge caution as this kind of state aid is always a precarious balancing act. Direct assistance can also have side effects. It’s also hard to agree upon which businesses need help and which don’t.
Switzerland has an import industry, which benefits from the strong franc, as well as an export one. Trade associations’ comments that the strong franc is a problem for the whole of the Swiss economy is just not true.
Industry and the hotel sector both benefit, as imported goods such as energy, raw materials or luxury items have become cheaper compared with abroad. Swiss tourism also strongly targets high-spending guests, who are less affected by the exchange rates.
The second benefit of a strong franc for Switzerland is that the country has the lowest capital costs in the world. The interest rate is low and risk premiums are extremely low. A Swiss hotel owner who is modernising his business is able to secure much cheaper capital than his competitors in the rest of Europe.
As capital is so cheap Swiss firms operate in a capital-intensive manner. Productivity is therefore extremely high in Switzerland and industry is more efficient and competitive.
Professor Thomas Straubhaar (HWWI)T.S.: Not at all. Staying calm is the right strategy. It would be extremely perilous to intervene in the short term in the complex exchange rate mechanisms. The problem would be how to ensure accuracy and longevity, as by the time measures take effect the exchange rates could look completely different.
The tourist sector and exporters, who ask high prices for high-quality services, have to maybe accept lower margins but not necessarily a drop in turnover or demand.
T.S.: Diversification is a smart strategy. In Southeast Asia, eastern Europe and Latin America markets are growing at a tremendous rate and the public’s purchasing power is rising fast.
The countries to watch are not just China and India, but also Malaysia, Indonesia, the Philippines and Vietnam, and in Europe the eastern European countries, and especially Turkey.
The Swiss franc has risen not only against the euro, but also against the dollar and the currencies in all these countries.
Swiss businesses have recently been offering not only individual products, but also services that make up the whole value chain including taxation, finance and insurance.
The most popular example of this is the Olympic Stadium in Beijing. The Chinese implemented the project but the Swiss architects Herzog & de Meuron oversaw the whole process in a very economical way.
T.S.: The situation for central banks is incredibly difficult; that of the SNB is slightly easier than that of the European Central Bank (ECB). There have already been new financial bubbles as witnessed by rising prices on stock markets and for raw materials, property and financial assets. Meanwhile the worst is still not over for many countries’ economies.
Central banks have had to raise interest rates due to these bubbles. If the SNB followed suit the Swiss franc would become more attractive and this would lead to a new re-evaluation pressure on the franc.
Compared with the SNB, the situation for the ECB is much tougher. If you look at Germany it should raise interest rates as their economy is booming and the inflation rate already clearly lies above the two per cent mark and this is continuing.
Fellow eurozone states like Greece, Ireland, Portugal and Spain are on the edge of an economic depression. If interest rates rise that would cause interest charges to explode. The restructuring of national budgets and economic recoveries would be delayed or hindered.
Central banks therefore face a terrible dilemma. The creation of bubbles is obvious, the economies are only again operating at capacity in a few countries, and there are still too many market risks. If interest rates are raised too quickly, it cannot be ruled out that the economy again falters.
T.S.: I don’t really think so. Last winter the SNB tried to influence exchange rate policy. It bought euros in order to weaken the franc. Now it has the problem of sitting on higher euro assets and has to write them down.
Tying the franc to the euro would simply mean the SNB would have to buy euros on a daily basis to keep the Swiss franc artificially devalued. Switzerland would end up feeling like a tiny actor in the middle of the huge eurozone with very little clout.
(Adapted from German by Simon Bradley)The Swiss franc is a so-called “safe haven” currency, which means that investors and speculators buy it when other currencies, including the euro and the US dollar, are under pressure.
The increasing value of the Swiss franc is a source of great frustration for exporters because their goods are more expensive to sell outside Switzerland, particularly in the eurozone.
It costs around SFr1.22 to buy a euro at present. A year ago, it would have cost SFr1.48. The increase in the value of the franc over the 12 months is about 17%.
The franc has also gained inexorably in value against US dollar, that has been weighed down by slow economic growth and – above all – an increasing mountain of debt.
The dollar has been below parity against the franc for some time. A single dollar can now be bought for around 85 Swiss cents.
The Swiss National Bank has emphasised that it does not pursue an exchange rate target, but consistently bases its monetary policy on its legal mandate.
This mandate stipulates that “the SNB is required to ensure price stability, while taking due account of economic developments”.In the last 20 years Switzerland has become a major exporting country, according to a study by the Swiss bank Credit Suisse published in May 2011.
Exports of goods and services accounted for only one third of gross domestic product in 1990; by last year this had risen to 57%.
The reason for this rapid increase is globalisation.
In comparison with many other countries, the Swiss export industry emerged relatively unscathed from the 2008-2009 international economic crisis, and recovered more quickly.
One reason for this is the fact that the pharmaceuticals industry, which is relatively stable, accounts for almost one third of exports, the report says.
Saturday, July 2, 2011
Blackstone to take on £1.6bn of property loans from RBS
Royal Bank of Scotland has agreed to sell a £1.6bn portfolio of property loans to a company managed by Blackstone in a key deal for the property and banking markets.
RBS has picked Blackstone for the loan portfolio, in a process codenamed Project Isobel, ahead of Lone Star, Starwood Capital and Westbrook Partners.
If a purchase reaches completion without a hitch, it could form a prospective template for similar sales of loans by banks, and thus help lenders rid themselves of problem legacy loans and allow them to lend again.
The portfolio comprises whole loans and portions of syndicated loans with a face value of £1.6bn that are both performing and non-performing. It is thought that the price set to be paid for the loans is around £1.1bn – a discount of around 30%.
The sale of this portfolio will not net the winning party stratospheric returns but will open the door to other deals with RBS
Part of the reason why the sale has taken so long to come to a conclusion is because RBS and its advisers, Lazard and Berwin Leighton Paisner, have been fine-tuning the structure to ensure the bank takes the smallest possible writedown.
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