REIT firm may buy low-quality properties – or overpay for real estate – to boost the portfolio size and increase management fees; “If you have money to spend and it’s not your money, your decision-making might be different than if it was your own money,”

Lucrative Fees Behind Property Management Spark Fights

CommonWealth REIT (CWH) owns office buildings throughout the U.S., yet employs no one. Cole Credit Property Trust III Inc., which leases about a thousand stores around the country to retailers such as CVS, Lowe’s and Wal- Mart, also had no workers until a recent acquisition. Instead, both real estate investment trusts have been run by outside managers who are paid to choose properties to buy and at what prices, and which ones to sell and when. That has raised criticism from some investors, who say a management company may make decisions for its own benefit — decisions not necessarily right for REIT shareholders. “It’s a good business if you can get it,” said Jim Sullivan, a managing director at Green Street Advisors Inc., a Newport Beach, California-based research company. “The adviser does well if the REIT gets bigger, but the shareholders may not be well-served by the REIT getting bigger.” That conflict has been at the heart of two of the biggest REIT fights this year. CommonWealth, based in Newton, Massachusetts, is battling an attempt by its second-biggest investor to remove its board. Phoenix-based Cole Credit had to fend off a rival’s buyout offer after announcing plans to purchase the firm that oversaw its properties. CommonWealth — and other REITs that share the same external manager — are among the few publicly traded property trusts with the structure, Sullivan said. It’s a common setup among REITs not listed on stock exchanges, such as Cole.

The problem with using an outside manager is that the firm may buy low-quality properties — or overpay for real estate — to boost the REIT’s portfolio size and increase management fees, Sullivan said. The manager may be focused more on its own income than in building the best portfolio for investors, he said. Read more of this post

Hong Kong Overheating Risk Seen by HKMA’s Chan as Debt Rises

Hong Kong Overheating Risk Seen by HKMA’s Chan as Debt Rises

Hong Kong’s economy is at risk of overheating after household debt rose to a record 61 percent of gross domestic product, said Norman Chan, chief executive of the Hong Kong Monetary Authority.

“Hong Kong’s consumption and personal-debt growth have consistently outpaced overall economic growth,” Chan told lawmakers today, citing risks to “macroeconomic stability.”

While the housing market has shown signs of cooling after extra curbs in February, it’s too early to say that it’s in a downward cycle, Chan said. A declining current-account balance is a “warning signal” that consumption and the economy are at risk of overheating, he said.

Hong Kong home prices, the most expensive among major global cities, last month fell the most in three years after the government imposed its harshest measures yet to curb prices and as lenders raised mortgage rates for the first time since 2011. Chan’s comments come amid signs that the global economic recovery is faltering, with industrial and manufacturing data from China, Japan and South Korea less than estimates.

In December, the HKMA said the overheated property market is increasingly disconnected from the rest of the economy. Sanford C. Bernstein H.K. Ltd. said prices could fall as much as 25 percent after the government stepped up measures to curb an asset bubble and banks raised mortgage rates. Read more of this post

Baht’s Rally Seen Throttling Thai Rice Shipments: Southeast Asia

Baht’s Rally Seen Throttling Thai Rice Shipments: Southeast Asia

The Thai baht’s rally to the highest level in 16 years is hindering exports from the world’s biggest rice shipper, curbing the government’s efforts to diminish record state stockpiles and threatening to increase its losses.

Overseas buyers have rejected attempts by the government to boost prices in dollars to offset reduced revenues as the baht has strengthened, according to Commerce Minister Boonsong Teriyapirom. Thai stockpiles are set to double to 11.6 million metric tons in 2012-2013 from two years ago, according to data from the U.S. Department of Agriculture.

Prime Minister Yingluck Shinawatra’s administration began buying rice from farmers at above-market rates in 2011 to boost rural incomes. While benefiting growers, the program has spurred the buildup of the biggest-ever stockpiles. Even as the USDA forecasts Thailand will regain its role as the largest exporter this year, displacing India, the estimated 8 million tons shipped would be about 25 percent less than two years ago.

“If it’s maintained at this level, our sales will definitely be seriously affected,” Boonsong said at his office in Nonthaburi, outside Bangkok on May 1, referring to the baht. “If we cannot sell to exporters, we might have to open bids here in Thailand for the local market.” Read more of this post

Gridlocked Jakarta launches subway project, 20 years late

Gridlocked Jakarta launches subway project, 20 years late

4:42am EDT

JAKARTA (Reuters) – Jakarta’s popular new governor, who threatens to shake up Indonesian crony politics, has launched the first mass transit railway project to help end the gridlock that brings the capital to a near halt during rush hour.

It is also the first major test of Joko Widodo, popularly known as Jokowi, who swept to office seven months ago with the promise to sweep away the corruption and inefficiency that has long been the hallmark of Indonesian politics and the way the world’s 17th-largest city has been run.

The project, announced late on Thursday and which has been delayed for over two decades, would mark a rare bright spot in Indonesia’s growing infrastructure bottleneck which threatens to throttle what have been record levels of investment in Southeast Asia’s biggest economy.

“Jokowi has no choice but to build the MRT (Mass Rapid Transit railway) to satisfy the emerging middle class,” said Marco Kusumawijaya, head of Rujak, a Jakarta-based urban planning think-tank. “But this will not solve the traffic problems of the city in the long run because the backlog of demand for public transport here is so huge. You can’t solve this with one or two inner-city (subway) lines.” Read more of this post

China has the option of selling to the public some assets from its $3.44 trillion foreign-exchange reserves. China could follow practices of the Tracker Fund (2800) of Hong Kong to sell off the “best, the most complete, and the most liquid” assets to investors

China Magazine Floats Idea of Selling Parts of Currency Reserves

China has the option of selling to the public some assets from its $3.44 trillion foreign-exchange reserves, according to an opinion piece in Caixin Century Weekly, a Chinese magazine. The article, “How to Cope With ‘Excessive’ Foreign- Exchange Reserves,” was published in the April 29 issue under the pseudonym Xiao Yi. Caixin said the author is a “senior economist” without elaborating and that a more detailed account of the proposal will be published in a sister magazine, China Reform.

One possibility is that the author is an official involved in management of the reserves, said Zhang Bin, a Beijing-based researcher with the government’s Chinese Academy of Social Sciences. China could follow practices of the Tracker Fund (2800) of Hong Kong to sell off the “best, the most complete, and the most liquid” assets to investors, according to the piece. Read more of this post

‘Abenomics’ Meets Curse of Second 100 Days

‘Abenomics’ Meets Curse of Second 100 Days

Insight: As economy flounders, Vietnam banks on debt cleanup

Insight: As economy flounders, Vietnam banks on debt cleanup

Thu, May 2 2013

By Martin Petty

HANOI (Reuters) – When Nguyen Manh Hung’s furniture company Phuc Luc was bustling, orders flew in from wealthy Vietnamese who sought his hand-crafted beds, cabinets and tables, netting him $25,000 a month after costs and wages for 35 staff. Two years later, hurt by the slump in Vietnam’s economy, business in his Hanoi shop is crumbling. Hung is hemorrhaging about $4,000 a month even after slicing costs to the bone and idling 30 workers he could no longer afford to pay.

“I just need a few customers to stay afloat, but the ones I have, they’ve cancelled orders,” Hung says. “None of the banks will lend to me. I’m finished.” Read more of this post