NEW DELHI, Dec 2 (Reuters) – If India needed any more proof that it was in the midst of a huge housing boom, it got in this week’s GDP data, heightening expectations that the industry will continue to power the economy for years to come.
The construction sector grew 13.3% in July-September from a year earlier, up from 7.9% in the previous quarter and its best performance in five quarters, the data released on Thursday showed.
That helped India expand at a forecast-beating 7.6%, making it one of the world’s fastest-growing major economies. In contrast, Western economies have been squeezed by high interest rates and energy prices, while China has been hobbled by a debt crisis in its property sector.
The long-awaited boom – which has created millions of jobs – comes after about six years of debt and pandemic-induced downturn before the construction sector began improving last year and hitting its stride this year. It has been driven by rising incomes for many Indians, a severe housing shortage in big cities and strong population growth.
The world’s most populous nation had an urban housing shortage of around 19 million units last year – and that is expected to double by 2030, according to government estimates.
“The robust growth in construction has significantly contributed to the economic growth – and is likely to play the same role in next couple of quarters,” said Sunil Sinha, an economist at India Ratings and Research, an arm of rating agency Fitch.
Builders are bullish long-term with many saying the boom could last two to three years and some even more optimistic.
“The housing market could continue to perform well for another three to four years,” Sanjeev Jain, managing director at Parsvnath Developers, a leading real estate company, noting that India is in the initial stages of a housing growth cycle.
Home sales in India’s seven largest cities, including Mumbai, New Delhi and Bangalore, rocketed 36% in the July-September quarter from a year earlier to more than 112,000 units, despite an 8%-18% increase in prices, according to real estate consultancy Anarock.
There was also a 24% increase in new residential projects being launched, data from the consultancy showed.
“The home sales are driven by first-time buyers, and nearly 80% of the houses have been bought by end users,” said Prashant Thakur, head of research at Anarock, adding that there was also strong demand from existing home owners to move to more spacious apartments.
In Mumbai, for example, demand has been strong despite an increase in interest rates of about two percentage points, according to Jayesh Rathod, director of Mumbai-based Guardian Real Estate Advisory.
His company has sold over 5,500 flats in Mumbai and on its outskirts in Thane so far this year, a jump of more than 50% compared to the same period a year ago, he said.
Underpinning demand has been salary hikes for workers in big cities. Average hikes for sectors such as e-commerce, healthcare, retail and logistics have remained above 10% for a second straight year, according to EY estimates.
Home prices in India are expected to rise faster than consumer inflation next year, according to a Reuters poll, with property analysts saying growth will be driven by higher earners snapping up newly built luxury residences in cities.
Housing demand has also picked up significantly in smaller cities in the southern states of Tamil Nadu, Karnataka and Prime Minister Narendra Modi’s home state of Gujarat, according to construction companies who say demand has been spurred by increases in incomes and the migration of workers from rural areas.
The government is also trying to boost the availability of affordable housing by providing subsidies, which is encouraging construction in India’s smaller towns and cities.
Shares in property companies have naturally surged.
The Nifty realty index (.NIFTYREAL) is up some 67% for the year to date compared with a 12% gain for the blue-chip Nifty 50 index.
Notable gainers include Prestige Estates Projects (PREG.NS) which has jumped some 120%, DLF (DLF.NS) which has climbed 67% and Godrej Properties (GODR.NS) which is up 52%.
($1 = 83.3143 Indian rupees)
Reporting by Manoj Kumar, Additional reporting by Nigam Prusty; Editing by Ira Dugal and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song/File Photo Acquire Licensing Rights
HONG KONG, Nov 30 (Reuters) – China Evergrande Group (3333.HK), the world’s most indebted property developer, is seeking to avert a potentially imminent liquidation with a last-minute debt restructuring proposal, three people with direct knowledge of the matter said.
The defaulted company has until a Hong Kong court hearing on Monday to present a “concrete” revised debt restructuring proposal for offshore creditors, a judge said last month after its original plan had lapsed.
But the sources, who declined to be named as the talks are private, told Reuters that creditors were unlikely to accept Evergrande’s new proposal given low recovery prospects and growing concerns about the developer’s future.
With more than $300 billion in liabilities, Evergrande exemplifies a crisis in China’s property sector, which makes up one-quarter of the world’s second-biggest economy. The authorities have scrambled to support the sector as the troubles of embattled developers roiled global markets.
Guangzhou-based Evergrande, which defaulted on its offshore debt in late 2021, did not respond to a request for comment.
Ahead of the hearing when the Hong Kong High Court will rule on a liquidation petition, Evergrande this week offered to swap some debt held by offshore creditors into equity in the company and two Hong Kong-listed units, and repay the rest with non-tradeable “certificates” backed by offshore assets, two sources said.
The offshore assets include the developer’s minority stakes in other companies and its receivables, one of the two sources said, and the certificates would be redeemed by Evergrande when it successfully disposes of the assets. The plan is not expected to require regulatory approval, as Chinese regulators have banned the developer from issuing new bonds, he added.
The new proposal also offers creditors a 17.8% stake in Evergrande, in addition to an October offer, previously reported by Reuters, of 30% stakes in each of its two Hong Kong units – Evergrande Property Services Group (6666.HK) and Evergrande New Energy Vehicle Group (0708.HK) – the person said.
Many creditors were dissatisfied with the October terms as they implied a major haircut on investments, sources have said, forcing Evergrande to scramble to sweeten the deal in what could be its final attempt to avoid liquidation.
LIQUIDATION CHALLENGES
The spectre of a messy collapse of Evergrande has been a major concern for global investors as the Chinese economy sputters, with property sales slowing and hundreds of thousands of unfinished homes across the country.
Chinese authorities have announced a string of measures to revive the sector destabilised by the debt woes of giants like Evergrande and Country Garden (2007.HK).
Evergrande’s debt revamp hopes were derailed in late September when the company said billionaire founder Hui Ka Yan was under investigation for unspecified “illegal crimes”.
The developer was banned from issuing dollar bonds, a key part of the restructuring plan, and its flagship mainland unit was put under investigation by regulators.
If the Hong Kong court orders Evergrande’s liquidation, a provisional liquidator and then an official liquidator would be appointed to take control and arrange to sell the company’s assets to repay its debts.
In addition to shares of its two Hong Kong-listed units, this would include selling its onshore assets, which could face significant challenges, restructuring experts say.
A lawyer for an ad hoc group of key offshore bondholders told the Hong Kong court last month that the restructuring plan could have a higher recovery rate for creditors than liquidation, in which they would get back less than 3%.
Still, the group has nominated consultancy Alvarez & Marsal as its preferred liquidator, two other sources said, as creditors anticipate a potential liquidation of Evergrande, whose liabilities and assets are largely in mainland China.
Alvarez & Marsal did not immediately respond to request for comment.
Top Shine, an investor in Evergrande unit Fangchebao, filed the liquidation petition in June 2022 after it said the developer failed to honour an agreement to repurchase shares the investor had bought in the subsidiary.
Reporting by Clare Jim and Xie Yu in Hong Kong, Scott Murdoch in Sydney; Editing by Sumeet Chatterjee and William Mallard
Our Standards: The Thomson Reuters Trust Principles.
Yaskawa Electric robots are pictured at a trade show in Tokyo, Japan, November 29, 2023. REUTERS/Sam Nussey Acquire Licensing Rights
TOKYO, Nov 30 (Reuters) – Japanese robot maker Yaskawa Electric (6506.T) is considering investing around $200 million in the United States, its president said, with an eye to making its industrial robots there for the first time.
The investment would follow other manufacturers from allied nations moving to build capacity in the U.S. as Washington tries to boost high-end manufacturing and strengthen its control over supply chains amid trade tension with China.
While Japanese rival Fanuc (6954.T) is a leading maker of factory robots for the automotive industry in the U.S., Yaskawa hopes to ride a wave of automation in other sectors.
Manufacturing locally “gives our customers a sense of security and reliability,” President Masahiro Ogawa said in an interview.
The more than 100-year-old company has previously said it is looking to invest more in the U.S. The potential scope of the expansion is reported here for the first time.
Yaskawa is the world’s top maker of servo motors, a type of high-precision motor that is widely used in chipmaking tools.
The company, which already makes components in Illinois, Wisconsin and Ohio, is considering expanding U.S. production to modules which incorporate its motors, Ogawa said.
The U.S. views securing access to cutting-edge semiconductors as a priority, with its leading chip equipment makers including Applied Materials (AMAT.O) and Lam Research (LRCX.O).
Foreign manufacturers building out capacity in the U.S. include automaker Toyota Motor (7203.T) and chipmakers TSMC (2330.TW) and Samsung Electronics (005930.KS).
Yaskawa, whose shares have risen by about a third year-to-date giving it a market capitalisation of around $10 billion, is looking at possible subsidies to fund some of the cost of the expansion, Ogawa said.
Reporting by Sam Nussey; Editing by Christopher Cushing
Our Standards: The Thomson Reuters Trust Principles.
The Danish central bank, also known as Danish Nationalbank, is seen in Copenhagen, January 22, 2015. REUTERS/Fabian Bimmer/File Photo Acquire Licensing Rights
COPENHAGEN, Nov 28 (Reuters) – Denmark’s central bank said on Tuesday that the risk of further price drops in the commercial property market could be accelerated by Swedish real estate firms selling out of their Danish portfolios, which could hurt banks.
Swedish property firms struggling to refinance their debt amid rising interest rates have begun selling their portfolios, which could have a spillover effect on the Danish property market by pushing down prices, the central bank said.
“Due to the low level of transactions, a price correction related to divestment by the Swedish firms at this point in time would have a relatively great effect,” the central bank said in a financial stability report on Tuesday, adding that the largest Swedish firms have properties in Denmark worth 99 billion Danish crowns ($14.5 billion).
Any heavy divestment by Swedish firms would come amid a sharp drop in the number of commercial real estate deals in Denmark this year, which according to the central bank indicates that prices have not yet adjusted to the new interest rate level.
The central bank warned that as commercial real estate prices fall, the collateral pledged by property firms for loans may not be sufficient to cover their full exposure to banks.
“This may lead to losses for the institutions in the case of default of the loans,” the bank said.
Lending by Danish credit institutions to real estate firms has increased in recent years, amounting to 537 billion crowns or around 38% of their exposure to companies.
The central bank also said Danish real estate firms do not face the same refinancing risks as their Swedish counterparts, because they mostly are financed by mortgage loans with long maturities.
($1 = 6.8090 Danish crowns)
Reporting by Louise Rasmussen and Anna Ringstrom, editing by Louise Rasmussen and Kim Coghill
Our Standards: The Thomson Reuters Trust Principles.
Nov 27 (Reuters) – Activist investor Elliott Investment Management on Monday said it was ready to nominate directors at Crown Castle International and push for the ouster of the wireless tower owner’s executives and board members, whom it blames for years of underperformance.
The hedge fund in a letter released on Monday said the company needs “comprehensive leadership change.” It said it was ready to appeal to other shareholders to make changes to the 12-member board, signaling a possible proxy fight next year.
It also wants the company to review its fiber strategy, including considering a possible sale of the business.
It is the second time the U.S. hedge fund is publicly pressuring the company after it urged management to rethink its fiber infrastructure strategy and criticized the company’s returns in 2020.
Elliott, which said it now owns a $2 billion stake in the real estate investment trust, said operational underperformance and flawed capital allocation contributed to a sagging share price.
“We are prepared and intend to make our case directly to shareholders with a majority slate of alternative directors at the company’s 2024 annual meeting,” Elliott managing partner Jesse Cohn and senior portfolio manager Jason Genrich said in the letter.
Shares of Crown Castle climbed more than 6% in premarket trading.
“Crown Castle suffers from a profound lack of oversight by the Board, which has contributed to its irresponsible stewardship and flawed financial policy,” Elliott said.
The hedge fund criticized Crown Castle for having “disregarded our data-driven analysis” and said “our recommended changes were neither made nor taken seriously.”
“The company’s strategy, led by CEO Jay Brown since 2016, has been a failure, as demonstrated by the breathtaking magnitude of its underperformance,” the letter said.
Crown Castle did not immediately respond to a Reuters request for comment.
Reporting by Svea Herbst-Bayliss in Providence and Samrhitha Arunasalam in Bengaluru; Editing by Pooja Desai and Mark Porter
Our Standards: The Thomson Reuters Trust Principles.
A gas pump selling E15, a gasoline with 15 percent of ethanol, is seen in Mason City, Iowa, United States, May 18, 2015. Over the past few months, privately held retailers Kum & Go and Sheetz have become the first significant chains to announce plans to start selling E15, 50 percent more than the typical U.S. blend. REUTERS/Jim… Acquire Licensing Rights
Nov 24 (Reuters) – The White House is stalling action on requests by Farm Belt states to allow regional sales of gasoline blended with higher volumes of ethanol after oil industry warnings that the move could cause regional supply disruptions and price spikes, according to two sources familiar with the matter.
The decision underscores concerns within President Joe Biden’s administration over fuel prices, as opinion polls show inflation and the economy as key vulnerabilities for his 2024 re-election bid. In an NBC News poll released on Sunday, just 38% of respondents approved of Biden’s handling of the economy.
Governors from eight Midwestern states – Illinois, Iowa, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin – petitioned the Environmental Protection Agency last year to let them sell gasoline blended with 15% ethanol, or E15, all year, arguing it would help them lower pump prices that soared following Russia’s invasion of Ukraine in February 2022.
The EPA last March issued a proposal that would approve the request by the governors. The agency subsequently missed deadlines to finalize the proposal after oil refiners including HF Sinclair Corp (DINO.N) and Phillips 66 (PSX.N) warned that a patchwork approach to approving E15 sales would complicate fuel supply logistics and raise the risk of spot shortages.
U.S. gasoline typically contains 10% ethanol.
The two sources familiar with the administration’s thinking, speaking on condition of anonymity, said the White House decided to delay action on the matter following the oil industry’s warnings in part because of concern that higher pump prices in certain states could hurt Biden’s re-election chances.
White House and EPA officials declined to comment on the matter.
Ethanol, a domestically produced alternative fuel most commonly made from corn, is cheaper by volume than gasoline. Adding more of it to the fuel mix can lower prices by increasing overall supply. But the U.S. government restricts sales of E15 gasoline in summer months due to environmental concerns over smog.
The ethanol industry for years has pushed to lift the restrictions on E15 sales nationwide, arguing the environmental impacts have been overstated.
Nebraska and Iowa sued the EPA in August for missing its statutory deadlines on the request by the governors. In its October response, the EPA did not deny it that missed the deadlines and did not offer an explanation.
The oil and ethanol lobbies have produced dueling studies that show how allowing E15 in some states would impact prices, with predictable results. Oil industry-backed studies showed price increases, while ethanol industry-backed studies showed any price increases offset by utilizing lower-cost ethanol.
University of Houston energy economist Ed Hirs said the average U.S. consumer does not understand oil markets, leaving the White House and Biden’s re-election campaign vulnerable to accusations that approving the requests by the governors caused fuel prices to spike, even if something else was to blame.
“There is an unwritten rule that high gas prices mean the incumbent won’t get re-elected,” Hirs said.
Reporting by Jarrett Renshaw and Stephanie Kelly; Editing by Will Dunham
Our Standards: The Thomson Reuters Trust Principles.
A man works at a computer on a standing desk in an office in the financial district of Canary Wharf in London, Britain, February 8, 2023. REUTERS/Kevin Coombs/File Photo Acquire Licensing Rights
LONDON, Nov 24 (Reuters) – British investment managers have got the go-ahead to develop tokenised funds, in which assets are split into smaller tokens backed by blockchain technology, the industry’s trade body said on Friday.
Tokenisation, or fractionalisation, of funds will enable a fund’s assets to trade more cheaply and transparently and investors to buy into a wider range of assets, industry proponents say.
Funds authorised by Britain’s Financial Conduct Authority can take the first steps towards offering tokenised funds, provided the investments are in mainstream assets and valuation and settlement arrangements don’t change, the Investment Association said in a statement.
“Fund tokenisation has great potential to revolutionise how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios,” said Michelle Scrimgeour, chief executive of Legal & General Investment Management .
Scrimgeour is chair of a working group which is working with the FCA and Britain’s finance ministry to open up opportunities for tokenised funds. Other members of the working group include BlackRock (BLK.N), M&G (MNG.L) and Schroders (SDR.L)
Blockchain is a digital ledger that records ownership of tokens. So far, its main use has been for cryptocurrencies, which remain a relatively small part of the global financial system.
Britain is looking to bolster liquidity in its asset management sector in a revamp of its rules following Brexit.
Investment managers and exchanges in the United States, Europe and Asia have already taken tentative steps in offering tokenised funds.
Reporting by Carolyn Cohn and Elizabeth Howcroft; Editing by Sharon Singleton
Our Standards: The Thomson Reuters Trust Principles.
FILE PHOTO: The logo of SBB is seen at company’s headquarters in Stockholm, Sweden, September 14, 2023. REUTERS/Marie Mannes/File Photo/File Photo Acquire Licensing Rights
COPENHAGEN, Nov 22 (Reuters) – Fitch on Wednesday downgraded Swedish property company SBB’s (SBBb.ST) long-term issuer default rating to CCC+ from B-, and its senior unsecured debt rating to B from B+, driving the group’s bonds deeper into speculative or ‘junk’ territory.
Loss-making SBB is at the centre of a Swedish property crash, having racked up vast debt by buying public real estate, including social housing, government offices, schools and hospitals.
“The downgrades reflect SBB’s third quarter results and its tight liquidity, including insufficient existing liquidity to reduce refinancing risk after the end of the third quarter 2024, and unfavourable real estate and capital market conditions,” Fitch said in a statement.
“SBB continues to undertake asset disposals but execution risk remains high,” the ratings agency added.
SBB did not immediately respond to a request for comment.
Fitch already in May cut the group to below investment grade status for the first time and again downgraded the company in August.
Fitch on Wednesday said SBB was unlikely to have capital market access to refinance its unsecured bonds, adding that without an ability to tap bond markets, the real estate company would have to sell assets to meet debt maturities.
Rival ratings agency S&P on Friday said it had placed SBB on credit watch for a potential downgrade to a selective default over the company’s offer to use proceeds from a property sale to buy back debt for up to $650 million.
If debt is bought at a substantial discount to the original value, this could be considered tantamount to default, S&P said.
($1 = 10.4988 Swedish crowns)
Reporting by Louise Breusch Rasmussen in Copenhagen, Marie Mannes in Stockholm, editing by Anna Ringstrom, Terje Solsvik and Bernadette Baum
Our Standards: The Thomson Reuters Trust Principles.
A telecom antenna of Spain?s telecom infrastructure company Cellnex is seen in Madrid, Spain, April 27, 2022. REUTERS/Susana Vera/File Photo Acquire Licensing Rights
LONDON, Nov 22 (Reuters) – Mobile phone tower operator Cellnex (CLNX.MC) will accelerate asset sales in a bid to get an investment grade credit rating by the middle of next year and is preparing for a wave of consolidation in the sector, CEO Marco Patuano told Reuters.
The Spanish company, which has grown through acquisitions since listing in 2015, changed direction last year when rising interest rates forced it to re-focus on cutting debt by selling non-core assets and simplifying the business.
Patuano said he expected cash generation at the company would accelerate drastically in two or three years, when capital expenditure (capex) commitments reduce and assets are mature enough to generate higher returns.
“Capex is (now) absorbing all the cash generating. 2024, big capex. 2025, big capex, and then there is a cliff. In 2027, you’re generating a lot of cash. You can’t imagine, a lot of cash,” Patuano said.
At that time, Cellnex envisages consolidation among the six largest European tower operators, provided market conditions are favourable.
“(In) Europe (what) will happen is that there are six tower operators today. And tomorrow, I think there will be less than six,” Patuano said.
Patuano raised the possibility of reviving his predecessor’s 2022 bid for Deutsche Telekom’s towers business – now known as GD Towers. “When the time will be mature, (it) could be a very appropriate use of resources,” he said.
CAPITAL MARKETS DAY IN MARCH
In March, Cellnex plans to announce a new strategy to take it through to 2026, incorporating longer-term capital allocation targets.
Since taking the helm in June, Patuano has conducted a review of the company’s portfolio to identify core assets and potential disposals.
“In Ireland and Austria we are considering the possibility of a full disposal,” said Patuano, who already agreed the sale of a minority stake in Cellnex Nordics operations in September.
According to a report published in October by Kepler Cheuvreux, Cellnex’s units in Ireland and Austria have enterprise values of 1.05 billion euros ($1.15 billion) and 1.41 billion euros respectively.
Cellnex aims to reduce its leverage ratio below six times its core earnings in 2024 to try to improve its credit rating.
The Spanish company is also planning to invest about 150 million euros in acquiring the land where its towers sit.
“In the next couple of years, we should improve even more the cash from operations,” said Patuano, adding land acquisition was one of the ways to achieve that.
The company is committed to increasing shareholder remuneration in coming years, through dividend payments and share buybacks.
“If you invest in infrastructure, you’re not looking for growth without yield, you’re looking at yield with a decent growth, which is better than the inflation,” Patuano said.
($1 = 0.9168 euros)
Reporting by Andres Gonzalez and Amy-Jo Crowley
Editing by Anousha Sakoui and Mark Potter
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A person waits for a teller at a Signature Bank branch in New York City, U.S., March 13, 2023. REUTERS/David ‘Dee’ Delgado Acquire Licensing Rights
Nov 19 (Reuters) – Blackstone (BX.N) is the lead to win the $17 billion portfolio of commercial-property loans from the U.S. Federal Deposit Insurance Corp’s (FDIC) sale of Signature Bank debt, Bloomberg News reported on Sunday.
In September, the FDIC was seeking buyers for the $33 billion commercial real estate loan portfolio of failed New York lender Signature Bank.
The bidding process has brought in several finance companies such as Starwood Capital Group and Brookfield Asset Management (BAM.TO), according to the Bloomberg report.
The FDIC hired Newmark Group (NMRK.O) in March to sell about $60 billion of Signature Bank’s loans, after state regulators decided to close the failed lender amid turmoil in regional banks earlier this year.
FDIC declined to comment on the report. “We only comment on sales after they close. The entire portfolio sale has yet to close,” it said.
Blackstone, and Newmark Group did not immediately respond to requests for comment.
Reporting by Chandni Shah in Bengaluru; Editing by Lisa Shumaker and Bill Berkrot
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