Hidden loan costs – 10 tips to avoid paying more for your business loans

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Author: Ravi Philemon

You may not be able to avoid hidden loan costs if you don’t read the fine print

By: Phoenix Lee/

Let’s face it: getting approved for a business loan is exciting. But in your excitement, don’t forget to read the fine print.

Many lenders have hidden loan costs, including annual fees, bank charges, closing costs, commissions, and balloon payments. So stay focused and clear-minded during the loan process.

Here are some tips on avoiding hidden loan costs that can save you hundreds, if not thousands of dollars, over the life of your loan.

hidden loan costs1. Do your homework. You’ve probably spent substantial time researching the viability of your business concept; likewise, employ the same careful consideration when looking for a loan. Consult with an independent loan specialists to check for complaints against a particular lender, and ask for recommendations and referrals to reputable lenders from family, friends and colleagues.

2. Ask lots of questions. Borrowing money for your business is a serious decision. Ask as many questions as you need to, to feel comfortable with the loan terms and conditions. Make sure you understand your annual percentage rate, the amount of your monthly payments, and how long you will pay them.

3. Have a lawyer or other expert review your loan documents. This is especially important if you are inexperienced in the loan process. If a lender attempts to talk you out of having someone look over the documents, proceed with extreme caution.

4. Take your time if you want to avoid hidden loan costs. Don’t rush into a loan agreement with the first lender who approves you. Shop around and compare interest rates and costs, just as you would with any other important shopping decision.

5. Read every word in the loan agreement before you sign. During the loan process, consider every piece of paper you sign as a binding contract. Never sign anything that you haven’t read in its entirety and do not, under any circumstances, sign a blank document or a document with empty lines that could be filled in later.

6. Avoid loans with balloon payments. While they may seem reasonable now, loans with balloon payments may come back to haunt you later. Balloon payments may be acceptable in very limited circumstances, but they are usually bad news for small businesses.

7. To avoid hidden loan costs, always choose a loan with positive amortization. If you choose a non-amortizing loan, you will find your loan balance getting bigger each month instead of smaller.

8. Beware of high prepayment penalties. If all goes according to plan, your business will soon be flourishing, and you may have the funds to pay down your loan more quickly. But if your loan agreement contains a prepayment penalty clause, you may end up paying significantly more than the original loan amount. Some lenders will include prepayment penalties to prevent you from refinancing a high-interest loan.

9. Know your complete financial picture and credit score. Before you fill out a loan application, gather your personal financial statements and credit reports from credit reporting agencies. Once you have a solid understanding of your credit risk, you stand a better chance of getting the best interest rate and not becoming prey to abusive lenders who may try to steer you toward a higher-cost loan.

10. Refinance with care. Before you refinance to a lower interest rate, find out exactly what fees and other charges will be assessed. Some unscrupulous lenders offer deceptively low initial rates and hit you with big fees after you sign the loan agreement.

Financial institutions will carefully assess the risk of dealing with you before suggesting refinancing solutions. Before you venture out and choose your lender for refinancing solutions, be sure you clearly understand their expectations.

Any financial institution will want to verify that your company is well managed. Being profitable is one thing, but ensuring that you have the team in place to sustain growth is another. Start by demonstrating that your team members are competent and well-qualified to do the job. Before seeking business refinancing solutions, it would help to prove your successful track record by communicating past achievements and the soundness of your plans.

Before applying for refinancing solutions, you will need to gather key information and required business documents to support your application. The requirements will vary greatly depending on the type and amount of credit, from basic information for a credit card to full financials for a major term loan.

It is important for the business owners to have a clear understanding of their financial situation and objectives – keeping them in mind in order to acquire the best refinancing loan for them. Business owners with good credit can get special deals on their closing costs from various lenders. In these cases, getting the best refinancing loan may make sense as it helps them to achieve lower interest rates.

Achieving better credit scores is another great reason to get the best refinancing loan. If business owner’s credit score has gotten better because mortgage payments have been made on time, the owner may be able to take advantage of that improved credit by refinancing into a loan with lower interest rates decreased payments.

If the owner has paid off a car, inherited a sum of money, or received a bonus at work, if the owner is planning to own their home into retirement, refinancing down from a 25-year loan to a 20 or a 15 year loan may be a good move financially. The payments will rise, but the extra money can be used to cover the difference.

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Mortgage calculator can help you save substantial money

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Author: Ravi Philemon

Most people use a mortgage calculator to estimate the payment on a new mortgage, but it can be used for other purposes, too. Here are some alternative uses for a mortgage calculator.

By: Hitesh Khan/

1. Use a mortgage calculator when you are planning to pay off your mortgage early

By the time a 25-year fixed-rate mortgage is paid off, the typical mortgage holder will have made total interest payments significantly larger than the original principal on the loan. Some mortgage calculators have “Extra payments” functionality which helps you to find out how you can shorten your term and net big savings by paying extra money toward your loan’s principal each month, every year or even just one time.

Some interest rate Sensitivity calculator, for example, helps you to compare the Principal against Yearly Interest Rates and Term of Loan.

mortgage calculator2. Use a mortgage calculator to decide if an ARM is worth the risk

The lower initial interest rate of an adjustable-rate mortgage, or ARM, can be tempting. But while an ARM may be appropriate for some borrowers, others may find that the lower initial interest rate won’t cut their monthly payments as much as they think.

There is also a significant difference between a fixed-rate mortgage and an adjustable rate mortgage. The former allows a borrower to “lock in” a permanent rate, whereas the interest rate on the latter could go up in the future. Always remember to check with your current lender about repricing — your existing relationship could allow you to realize big savings in terms of both time and money.

Housing Payment Calculator for example, allows you to compare the Loan Amount against Yearly Loan Interest Rate, Term of Loan year(s), Annual Property Tax, and Annual Property Insurance.

Worst home loan: How to Find one

3. Use a mortgage calculator to find out how much Additional Buyer Stamp Duty (ABSD) you would have to pay

The property curbs introduced by the Government in July last year saw the Additional Buyer Stamp Duty (ABSD) rates for Singapore Citizens and Singapore Permanent Residents (SPR) purchasing their second and subsequent residential property were raised by 5 per cent for all individuals and 10 per cent for entities. The Loan-To-Value (LTV) limits were also tightened by 5 per cent for all housing loans granted by financial institutions.

Some Additional Buyer Stamp Duty (ABSD) Calculator for example, shows you how much of this tax you have to pay based on your nationality, currently owned properties and property price.

Remember — All Mortgages Are Not Created Equal

Don’t make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:

The term of the mortgage — This describes the amount of time it will take you to pay off the loan’s principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.

The variability of the interest rate — There are two basic types of mortgages: those with “fixed” (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM’s rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates have hovered near historical lows in recent years and are more likely to increase than decrease over time.

Mortgage Broker Singapore – Should I use one?

Finally, before making that home loan decision, keep in mind that your current lender may make it easier and cheaper to reprice than another lender who would require you to refinance. That’s because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application.

But don’t let that be your only consideration. To make a well-informed, confident decision you’ll need to shop around, crunch the numbers, and ask plenty of questions. And to crunch numbers effectively, you would need to use a mortgage calculator.

If you are you seeking new mortgage loans for your refinancing needs, besides a mortgage calculator, mortgage brokers are your best bet, because they can set you up on a path that can get you a home loan in a quick and seamless manner.

Alternatively you can read more about the Best Home Loans in Singapore before deciding.  Most brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs.

Whether you are looking for a new home loan or refinance, mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the loan. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them. Some mortgage brokers can also help you to speak to their trusted panel of property agents.

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Home hunting may become that much easier with loan qualification

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Author: Ravi Philemon

Home loan qualification makes home hunting process that much simpler, especially for first time home buyers.

By: Phoenix Lee/

There’s a lot of talk about home loan qualification by mortgage brokers and real estate agents. There is a difference between loan pre-qualification and pre-approval. Pre-qualification, which in today’s marketplace is usually done by mortgage brokers, means working with the buyer to determine how much they can afford and which loans are the most likely to be available to them.

Home loan qualification can save a buyer time and money, and can even be a bargaining tool with a seller, however, it is not the same as loan “pre-approval”. The mortgage broker can often get the buyer a pre-qualification letter. Pre-approval means that the lender has definitely committed to lending the buyer money once the house itself is approved. Since it is a much stronger pledge, it is a much more valuable negotiating tool.

Only a lender can give pre-approval, but your mortgage broker may be able to push through pre-approval from underwriters with as little as a phone call. So when you hear someone talking about “pre-approval” make sure that it is lender pre-approval.

Mortgage Myths

Surveys indicate that a large number of potential home buyers count themselves out of the market because of widely-held myths about home financing. Some of the most popular myths include:

  • home buyers need large down payments (more than is actually the case);
  • the loan process works against younger people with insufficient upfront capital to be used for down payment;
  • owning a home is more expensive than renting one; and
  • with the higher Additional Buyer’s Stamp Duty (ABSD) and Loan-To-Value (LTV) checks, the chances of getting a mortgage are almost impossible.

Many qualified home hunting people looking for loan qualification, are were unaware of special programs designed especially to make a home affordable to them.

Several surveys have found that many people view the mortgage process as “difficult, stressful, and incomprehensible.” The home loan industry is always looking for new ways to dispel these myths because lenders want more business, not less. The alternatives to traditional 20% down, thirty-year fixed mortgages is astonishing. Mortgage brokers are experienced in explaining today’s financing and debunking the myths.

For those home hunting, if you have found the perfect home in an area that you like, but are finding the perfect financing has become elusive;  If after you completed the application process, your lender has turned you down, and you are upset; Can anything be done to turn around this setback?

It depends on why home hunters were turned down and why they are not approved for home loan qualification.

Mortgage Broker Singapore – Should I use one?

For those home hunting, if your income is too low to satisfy one mortgage company, there might be another company with more liberal qualifying guidelines. If you have had credit problems, some lenders may be more willing than others to help you clear them up in a manner that satisfies their underwriters.

If your loan runs into problems, sit down with a mortgage broker to investigate the possibility of using a different lender. The first company may be able to “assign” the package to a competitor, enabling you to use your same credit report and appraisal. You will need the cooperation of your sellers, too. While loan rejections are disappointing, they can have happy endings.

home hunting

A quick view of how a mortgage broker can help you save money.

When shopping for home loan qualification, there is no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan, and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs.

Mortgage refinance online applications, does it trump in-person submissions?

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate.

This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less-favorable rate. If that happens, try to negotiate a compromise with the lender or broker.

Everyone home hunting should look for good mortgage brokers because if you are ensure of funds availability for purchase, the mortgage consultants can set you up on a path that can get you a home loan in a quick and seamless manner.

Good mortgage brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home or commercial purchase needs.

Whether you are looking for a new home loan or to refinance your existing one, a mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all their services are free of charge.

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First-timer BTO flat applicants will not get additional ballot chances

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Author: Ravi Philemon

First-timer BTO flat applicants will not get additional ballot chances confirmed the Minister for National Development in Parliament on Nov 4. He was responding to an MP who asked:

“How effective has the current grant of an additional ballot chance for each failed attempt by a first-timer in securing a BTO flat been; and whether HDB will review and consider alternatives such as the improvement of chances by multiples of 20% for each attempt so that the applicants will have almost guaranteed success after more than three attempts.”

In responding to the question, the Minister said that first-timer BTO flat applicants are given two ballot chances when HDB shortlists flat applicants to book a flat. first-timer BTO flat applicants who have been unsuccessful in two attempts for BTO flats in the non-mature estates will be given an additional ballot chance at their subsequent application for a BTO flat in the non-mature estates.

The Minister assured that as a result, in recent years, virtually all first-timer BTO flat applicants have been successful within their first three tries for a BTO flat in the non-mature estates.

The Minister said that his ministry will continue to review and update its policies where necessary to ensure that new HDB flats remain accessible to all first-timer BTO flat applicants.

First-timer BTO flat applicants can look out for this month’s BTO launch provides a number of options for Singaporean homeowners in estates like Tengah, Ang Mo Kio and Tampines. Check out what we think of each of these BTO launches in November 2019 BTO.

First-timer BTO flat applicants should check out our home loan comparison tool here to find the best home loan deal in town.

Ang Mo Kio/Yio Chu Kang BTO: Plenty Of Education Options vs Limited Amenities

First-timer BTO flat applicants

Map 1: Ang Mo Kio BTO, HDB

There are two very distinct points about this BTO launch in Ang Mo Kio.

The first one is that you can hardly find any amenities (i.e. shopping mall) within the area. The closest one is one MRT station away in Ang Mo Kio. Fortunately, there are still coffee shops and market nearby to help you settle your three daily meals. But if you are looking for a supermarket to do your groceries, you might have to travel to Ang Mo Kio to get your daily needs.

The second distinct point about this BTO launch in Ang Mo Kio is that there are many schools in the surrounding area. If you are a parent, you have a plethora of options to send your kids to. With Anderson Serangoon Junior College and Nanyang Polytechnic, you even have schools to the Junior College/tertiary level. If you manage to ballot for a unit in this BTO, it can alleviate your logistical worries of sending your kids to school. After all, the schools are few bus stops away from your house.

Ang Mo Kio/Yio Chu Kang BTO Facts

Nearest MRT Yio Chu Kang MRT, Lentor MRT (u/c)
Nearest shopping mall Ang Mo Kio Hub, Djitsun Mall, Jubilee Plaza
Nearby amenities Yio Chu Kang Stadium, Yio Chu Kang Swimming Complex, Yio Chu Kang Squash & Tennis Court, Ang Mo Kio Library

Thye Hua Kwan Hospital, Health & Medical Card facilities (u/c)

Schools in the area Anderson Primary School, Mayflower Primary School, CHIJ St. Nicholas Girls’ Primary School, Ang Mo Kio Primary School

Presbyterian High School, Yio Chu Kang Secondary School, Anderson Secondary School, CHIJ St. Nicholas Girls’ Secondary School, Mayflower Secondary School, Ang Mo Kio Secondary School

Anderson Serangoon Junior College, Nanyang Polytechnic, ITE College Central

Commute time to City Hall MRT 32 minutes
Commute time to nearest shopping mall 17 minutes (by train)
Types of flats offered 2R Flexi, 3R, 4R
Estimated number of units 450

Table 1: Ang Mo Kio versus Yio chu kang BTO amenities

Tampines BTO: The Dream Place For Easties But Only Apply If You Think You Are Lucky

Tampines BTO

Map 2: Tampines BTO, HDB

 

If you have been living as an Eastie, or plan to become and Eastie, then this Tampines BTO launch is the right one for you. Located just behind Our Tampines Hub, it is a gateway to all kind of amenities that Tampines has to offer. From exercise venues like swimming complex and stadium to shopping malls to the two MRT lines at Tampines, it is a highly liveable area that every Eastie dreams of.

However, there’s a catch. With only 650 units available, you need to be REALLY REALLY lucky (it’s not a typo) to get a good ballot number. Plus, even if you get a ballot number, you might not be able to get the unit type that you want. That’s because 650 units include flats from 2R Flexi to 5R. By the time it reaches your ballot number, the flats offered might have ran out. Don’t say we didn’t warn you that the Tampines BTO will be oversubscribed.

Tampines BTO Facts

Nearest MRT Tampines MRT (East West Line + Downtown Line)
Nearest shopping mall Tampines Mall, Tampines One, Century Square, Our Tampines Hub
Nearby amenities Our Tampines Hub Swimming Complex, Our Tampines Hub Stadium, Our Tampines Hub Libray, Tampines Polyclinic, Tampines Park Connector, Mosque
Schools in the area Poi Ching School, St. Hilda’s Primary School, Junyuan Primary School, Tampines Primary School

Junyuan Secondary School, Springfield Secondary School, St. Hilda’s Secondary School, Tampines Secondary School, Pasir Ris Secondary School,United World College of South East Asia (East Campus)

Temasek Polytechnic

Commute time to City Hall MRT 32 minutes
Commute time to nearest shopping mall 10 minutes (by foot)
Types of flats offered 2R Flexi, 3R, 4R, 5R
Estimated number of units 650

Table 2: Tampines BTO flat amenities

Tengah BTO: Living Among The Lush Greenery vs Distance From CBD

Tengah BTO

Map3: Tengah BTO, HDB

 

Did you know that the most expensive area in New York is actually the area that is right beside the Central Park? That’s because people want to live near to the greenery. But what if, instead of living beside the greenery, you can live within the greenery? That’s precisely what Tengah BTO plans to bring to Singaporeans. Living in Tengah will be like living among the lush greenery, which explains the name ‘Forest Town’. If you are a nature lover, Tengah BTO is definitely THE ONE for you.

There is some downside to living in Tengah though. One of the greatest drawback of living in Tengah is that it is a distance away from the Central Business District (CBD). So, if you are working in the CBD, you can expect to spend 2 hours per day on your daily commute. However, if you are working in the West (think Tuas) or planning to work at the upcoming Jurong Innovation District, you might find the Tengah BTO an ideal living location for you.

Tengah BTO Facts

Nearest MRT Tengah Plantation MRT (proposed), Tengah Park MRT (proposed), Tengah MRT (proposed), Hong Kah MRT (proposed), Lakeside MRT,
Nearest shopping mall Tengah Town Centre (proposed), Sunshine Plaza, Lot One, Boon Lay Shopping Centre
Nearby amenities Proposed Health & Medical Care Centres, Jurong Polyclinic, Blue Cross Thong Kheng Home, Nursing Home (u/c), Boon Lay Place Market/Food Village, Proposed Neighbourhood Centre, Proposed Park, Jurong Innovation District, Bukit Batok Driving Centre, Home Team NS Adventure Centre @ Bukit Batok
Schools in the area Jurong Primary School, Princess Elizabeth Primary School, Shuqun Primary School, Rulang Primary School, Corporation Primary School, St Anthony Primary School, Dazhong Primary School, Choa Chu Kang Primary School, Concord Primary School

Bukit Batok Secondary School, Fuhua Secondary School, Yuhua Secondary School, Hua Yi Secondary School, Dunearn Secondary School

Canadian International School, Dulwich College (Singapore), Millennia Institute, Eden School (Special Education), Grace Orchard School, Proposed School (Special Education), Delta Senior School (Special Education)

Commute time to City Hall MRT 51 minutes (Will be reduced once the MRT line is ready)
Commute time to nearest shopping mall 35 minutes (by bus & train to Lot One)
Types of flats offered 2R Flexi, 3R, 4R, 5R, 3Gen
Estimated number of units 3,460

 

Table 3: Tengah BTO flats amenities

Check out and join the page here to find out how we can help you source for the best home loan deal.

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Equinix and GIC enter US$1b joint venture for European Data Center

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Author: Ravi Philemon

Equinix, Inc, the global interconnection and data center company, on Oct 9 announced the completion of the formation of the greater than US$1.0 billion joint venture in the form of a limited liability partnership with GIC, Singapore’s sovereign wealth fund, to develop and operate xScale™ data centers in Europe. As announced with the signing of the agreement in July, xScale data centers will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world’s largest cloud service providers.

Equinix

Image: Equinix – Equinix LD13x xScale Data Center

The facilities will allow these key enablers of digital transformation to streamline their continued growth, while strengthening Equinix’s leadership position in the cloud ecosystem, as enterprises increasingly embrace hybrid multicloud as the IT architecture of choice.

The initial six facilities in the joint venture will be located in the AmsterdamLondon (two sites), Frankfurt (two sites) and Paris markets, on some of Equinix’s existing International Business Exchange™ (IBX®) data center campuses.

Highlights/Key Facts

  • The Equinix LD10 IBX facility has been sold to the joint venture. The portion of the facility that has been dedicated to hyperscale deployments has been re-named the LD13x xScale data center and will provide 10 megawatts (MW) of capacity for xScale customers. The balance of the facility, which is dedicated to retail colocation deployments, will be leased by Equinix from the JV and will retain the Equinix LD10 IBX name.

  • The former Equinix PA8 IBX in Paris, which has also been sold to the joint venture, has been re-named the PA8x xScale data center. The first phase of the facility opened in Q1 2019, and the second and final phase is expected to open in Q4 2019. At full buildout, PA8x is expected to support 14 MW of capacity for xScale customers.

  • The FR9x xScale data center in Frankfurt will add 10 MW of capacity in Q3 2020 when the initial phase is opened. At full capacity, the facility is expected to support 18 MW of capacity.

  • The LD11x xScale data center in London will add 10 MW of capacity for hyperscale customers in Q1 2021 when the initial phase is opened. At full capacity, the facility is expected to support 19 MW of capacity.

  • xScale data centers provide hyperscale companies a differentiated value proposition from existing wholesale data center operators in two key areas:
    • xScale data centers offer access to Equinix’s comprehensive suite of interconnection and edge services. These services tie into the hyperscale companies’ existing access points at Equinix, thereby increasing the speed of connections to their existing and future enterprise customers.
    • xScale data centers are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments. This enables hyperscale companies to consolidate core and access point deployments into one global provider to streamline and simplify their rapid growth.

  • For years, hyperscale operators, including Alibaba Cloud, Amazon Web Services, Microsoft Azure, Oracle Cloud Infrastructure and Google Cloud, have partnered with Equinix to leverage its global platform of more than 200 IBX data centers to directly connect to their strategic business partners and customers. Today, Platform Equinix® offers the most access points—the “on- and off-ramps to the cloud”—to the top global cloud service providers. In addition to these customer access points, hyperscale companies are investing in large-scale data center deployments to accommodate their rapidly growing core workload needs. With xScale data centers, hyperscale companies can add core deployments at Equinix to their existing access point footprints, enabling their growth on a single platform that spans more than 50 global metros and offers direct interconnection—within a vibrant set of ecosystems—to their customers and strategic business partners.

  • Private connectivity between enterprises, strategic cloud service providers and network services is essential as digital transformation fuels higher demand for localized digital services at the edge. According to the Global Interconnection Index Volume 2, a market study published by Equinix, the capacity for private data exchange between enterprises and cloud and network service providers is forecast to grow nearly 10 times faster than public internet traffic by 2021.

Charles Meyers, President and CEO, Equinix, said: “The formation of our JV with GIC is a strategic milestone for Equinix as we continue to deepen our relationships with the world’s largest cloud and hyperscale companies and help them meet their core workload deployment needs and gain proximity to the thriving business ecosystems available at Equinix.”

“Similarly, as today’s businesses are increasingly moving to implement hybrid multicloud strategies for their digital infrastructure, Equinix serves as a unique on- and off-ramp to execute that strategy. We look forward to launching similar JVs in other operating regions and believe these efforts will continue to further differentiate Equinix as the trusted center of a cloud-first world.”

Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “major corporations like Google, Alibaba Group, Amazon Web Services have all expanded their cloud infrastructure footprint to facilitate their respective expansion plans over the last few years. This momentum is only expected to continue. On this joint venture between Equinix and GIC could prove to be profitable and lucrative.”

One recent report said that the progressive roll out of 5G networks across the world is expected to fuel demand for data centres. A 5G network could be up to 20 times faster than the current 4G networks and would spur massive consumption of data and unlock new capabilities such as self-driving cars, cloud gaming and a thriving ecosystem of smart appliances that require a constant connection. In Asia Pacific, Singapore is one of the early adopters of 5G and is on track to roll out 5G mobile networks by 2020.

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Digital Realty closes $1 billion joint venture transaction with Mapletree

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Author: Ravi Philemon

Digital Realty, a leading global provider of data center, colocation and interconnection solutions, announced today it has closed the previously announced joint venture with Mapletree Investments and Mapletree Industrial Trust (together “Mapletree”) on three existing Turn-Key Flex® data centers located in Ashburn, Virginia.

The transaction values the three fully stabilized hyper-scale facilities at approximately $1.0 billion. The three facilities are fully leased and are expected to generate 2020 cash net operating income of approximately $61 million, representing a 6.0% cap rate. Digital Realty is retaining a 20% ownership interest in the joint venture, and Mapletree has closed on the acquisition of the remaining 80% stake for approximately $811 million. Digital Realty will continue to operate and manage these facilities, and the joint venture transaction will be completely seamless from a customer perspective.

The second tranche of the Mapletree transaction, the outright sale of 10 fully-leased Powered Base Building® properties for $557 million, is expected to close in early 2020.

Citigroup served as lead financial advisor to Digital Realty, along with CBRE and Park Hill who served as co-advisors. Latham & Watkins and Mayer Brown served as Digital Realty’s legal advisors.

About Digital Realty

Digital Realty supports the data center, colocation and interconnection strategies of customers across the Americas, EMEA and APAC, ranging from cloud and information technology services, communications and social networking to financial services, manufacturing, energy, healthcare and consumer products.

About Mapletree Investments Pte Ltd
Mapletree Investments Pte Ltd (“MIPL”) is a leading real estate development, investment, capital and property management company headquartered in Singapore. Its strategic focus is to invest in markets and real estate sectors with good growth potential. By combining its key strengths, MIPL has established a track record of award-winning projects, and delivers consistent and high returns across real estate asset classes.

MIPL currently manages four Singapore-listed REIT and six private equity real estate funds, which hold a diverse portfolio of assets in Asia Pacific, Europe, the United Kingdom and the United States.

As at 31 March 2019, MIPL owns and manages S$55.7 billion of office, retail, logistics, industrial, residential and lodging properties.

MIPL’s assets are located across 12 markets globally, namely Singapore, Australia, China, Europe, Hong Kong SAR, India, Japan, Malaysia, South Korea, the United Kingdom, the United States and Vietnam. To support its global operations, MIPL has established an extensive network of offices in these countries.

About Mapletree Industrial Trust
Mapletree Industrial Trust is a real estate investment trust (“REIT”) listed on the Main Board of Singapore Exchange. Its principal investment strategy is to invest in a diversified portfolio of income-producing real estate used primarily for industrial purposes in Singapore and income-producing real estate used primarily as data centres worldwide beyond Singapore, as well as real estate-related assets.

MIT’s property portfolio comprises 87 industrial properties in Singapore and 14 data centres in the United States (40% interest through the joint venture with Mapletree Investments Pte Ltd). The properties in Singapore include Hi-Tech Buildings, Flatted Factories, Business Park Buildings, Stack-up/Ramp-up Buildings and Light Industrial Buildings. As at 30 September 2019, MIT’s total assets under management was S$4.8 billion.

MIT is managed by Mapletree Industrial Trust Management Ltd. and sponsored by Mapletree Investments Pte Ltd.

Mr Paul Ho, chief mortgage consultant at iCompareLoan, said: “the joint venture agreement for the data centre in the US makes good business sense.  The infrastructure in the US market is fully developed, which poses little challenges for data centre providers.”

A recent research by Cushman & Wakefield (C&W) said that North America is the largest co-location data centre by market size at US$17.2 billion currently but the Asia Pacific region is expected to take over the top position by as early as 2021. The total market size for Asia Pacific co-location data centres is forecast to be around US$28 billion by 2024, 20 per cent higher than the US$23.4 billion market size of North America.

A detailed analysis of success factors across 38 countries and cities globally also shows the strength of Singapore’s data centre market. Singapore is ranked the third most robust data centre growth market, the only data centre market in Southeast Asia to have featured in the global ranking. Its ranking jumped four spots from seventh to third and retained the top spot in the Asia Pacific region since two years ago when the study was conducted.

digital realty

The index identifies the top competitive factors such as connectivity, ease of doing business, political stability, corporate tax rate, natural disaster,  energy and security that are likely to affect the successful operation of a data centre. Countries and cities are assigned scores based on the weightage allocated to each of the factors.

Singapore’s rise in the global index comes on the back of its improved high-speed connectivity, political stability and low risk of natural disasters relative to other countries. Being sheltered from natural disasters and robust infrastructure, many content operators continue to take advantage of Singapore’s prime geographical location to service their regional clients in Malaysia, Indonesia and Thailand. Taking these factors together, Singapore ranks top in the data centre competitive index in the Asia Pacific region.

Singapore has attracted a number of tech companies to set up data centres. Facebook set up its US$1 billion data centre in the city state. It would be its first in Asia, and 15th in the world, a strong testament to Singapore’s continued strength as a global data centre powerhouse. Apart from Facebook, we also saw Equinix, Digital Realty, ST Telemedia and at least two other operators having successfully tendered for land plots from Jurong Town Corporation to build data centres.

Although the rest of the SEA countries such as Malaysia, Indonesia, Thailand and Vietnam rank relatively lower in the risk index, the potential commercial upside for data centre players is significant.

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