Bold bid for conservation

By
/ The Edge Property
|
March 3, 2016 10:00 AM SGT
Dr Lee Seng Teik and members of the liaison committee at Pearl Bank Apartments are mid-way through a six-month extension granted by URA to secure 100% consent among the owners of the 288-unit private condominium. The 100% consent is the prerequisite for the horseshoe-shaped tower to obtain conservation status.
This is the first time a multi-strata-owned residential project has attempted a voluntary conservation, and is therefore seminal if it succeeds. Having secured just over 90% consensus, the committee has hit a deadlock. Among the less than 10% who did not sign, reasons include ill health and differences between co-owners of units.
“To get the remainder is a monumental task,” concedes Lee, chairman of the liaison committee. “We will try our best to get 100%. But even if URA gave us a six-year extension, it’s still unrealistic to achieve 100%.”
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Property consultants agree. “It is virtually impossible to get 100% consensus,” according to a veteran in investment sales, including collective sales, which require 80% consensus among owners.
View of the city from the 28th floor of Pearl Bank Apartments.
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Will there be a breakthrough? The liaison committee has been relentless in its efforts to appeal to URA to have the 100% prerequisite for a voluntary conservation lowered to 80%, putting it on a par with the level required for a collective sale. They are hoping to have a dialogue session with URA.
“Why impose 100% consensus when we’re trying to save a building for Singapore’s heritage when the current barrier for a collective sale is 80%?” laments Lee.
He recalls being saddened by news in 2011 that Pearl Bank Apartments was being put up for collective sale for the third time. Lee commissioned artist Albert Yeo to do a watercolour painting of the building. “If the en bloc was successful and the building torn down, at least I would still have something to look at,” he reasons. Lee has been a resident of his penthouse at Pearl Bank since it was built 40 years ago.
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When Tan Cheng Siong, principal partner of Archurban Architects Planners, won the President’s Design Award in 2012, he had mentioned in several interviews that Pearl Bank remained his favourite building in Singapore. Tan was the original architect of Pearl Bank. Lee, who chaired the management committee at that time, invited Tan to discuss with the committee members how they could add value to the tower and extend its lease.
They had observed how The Arcadia, another ageing 99-year leasehold condo, had secured 100% consent among the owners to preserve the development, and yet had failed in its application for a lease top-up from the Singapore Land Authority (SLA) in 2011. According to SLA, leases could be topped up or extended only if there was land use intensification or urban rejuvenation.
Tan and his partner at Archurban, Daniel Law, approached URA about how it could both secure conservation status and increase the gross floor area of Pearl Bank, which has been maximised at 55,102 sq m (593,118 sq ft) with a plot ratio of 7.2. URA has agreed to increase the GFA by 15% on the condition that the committee secures 100% consent among the owners.
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“We welcome the ground-up initiative by the management committee to conserve Pearl Bank Apartments and are prepared to support some increase in gross floor area, subject to further review of the detailed proposal,” says a URA spokesperson in response to queries from The Edge Singapore.
New ‘green tower’ An increase in GFA by 15% would bring the plot ratio to 8.28, which would allow a new 27-storey “green tower” to be erected on top of the existing five-storey car park podium. The new tower is estimated to have 150 units with an average size of 50 to 55 sq m each, says Archurban’s Law. There will be a rooftop garden, an infinity swimming pool and a bridge linking to the existing tower’s communal facilities on the 28th floor.
The 38-storey Pearl Bank was completed in 1976 and considered Singapore’s first high-rise residential tower built on a government land sales (GLS) site, recounts Knight Frank’s executive director Nicholas Wong. The residential tower was developed by Hock Seng Enterprises.
The 99-year leasehold site dates back to 1970, which means there are only 53 years left on its lease. The committee hopes that, by securing conservation status, the owners will be able to sell the additional 15% GFA to a developer, and have the lease topped up to a fresh 99 years.
Archurban has worked hand in hand with the committee in its bid for voluntary conservation. Law says, “We’re at the early stage where we’re still trying to get 100% consensus so we can proceed to the next stage, which involves finding out from URA the development charge and from SLA the cost of topping up the lease.” Once the costs can be ascertained, the committee can then progress to the next stage, which is to open it up for sale by tender to developers.
In Pearl Bank’s third collective sale attempt in 2011, the price tag for the land was $750 million. If the cost for topping up the lease were included, the development cost for the developer would have been close to $1 billion, says Liew, a member of the liaison committee who has been working actively to secure consent among all the owners in the conservation exercise. “For the owners, this is a very logical step, as there aren’t many other options,” he says. The signatures collected from owners are on consent forms and, while not legally binding, are enough to allow the committee to proceed to the next stage of the conservation process, he adds.
Who benefits? Residents will benefit from the conservation exercise, as the building’s façade will be restored, facilities will be improved and land value enhanced when the lease is topped up, says Lee.
A developer will be purchasing the right to build the new 27-storey tower and set the selling price of the new units. On top of the development cost, the developer will have to pay the development charge, the lease top-up and the estimated $28 million needed to retrofit the existing 38-storey tower to be conserved. The cost includes restoring the façade, upgrading of lifts and common areas.
“The basic premise to our residents is that there will be no out-of-pocket expenses,” emphasises Lee. If a developer is agreeable to purchasing the site and willing to undertake the restoration and lease top-up, part of the proceeds will go towards payment of Archurban’s architectural fees as well as subsequent legal and property consultant’s fees.
Lee adds: “The residents at Pearl Bank are pioneers in coming up with a model in which restoration can occur at minimal cost to them and yet fulfil the criteria of land intensification set out by SLA.”
While most beneficiaries of collective sales can expect a windfall upon completion of the sale, in a conservation exercise such as this, “it’s a delayed windfall”, says Lee. If the voluntary conservation exercise is successful and the existing building is restored, with SLA agreeing to the lease top-up, the owners of Pearl Bank could see “a doubling in value” when they decide to sell in the future, he adds. “They have to put up with the inconvenience of the construction of the new tower, but they will have better facilities, such as an infinity pool on the 28th floor, along with amazing views and a more pleasant living environment.”
For now, units at Pearl Bank are trading below $900 psf. The most recent transaction at Pearl Bank was in November, when a 1,755 sq ft unit on the 16th floor changed hands for $1.48 million ($844 psf), according to URA Realis.
Legislative hurdle Meanwhile, the Pearl Bank committee is still struggling to get through the first legislative hurdle: securing 100% consent among the owners, or for URA to relent on its prerequisite.
As the proposal affects the entire development, “It is therefore necessary for all subsidiary proprietors to agree with the proposed redevelopment works to construct the new units. We are still in discussion with the management committee on this matter.”
As Singapore has limited land for redevelopment, old buildings — both public and private — are shortlisted for conservation on a highly selective basis as part of the planning process, explains a URA spokesperson. Besides criteria such as “historical and architectural significance, rarity and contribution to the physical environment”, URA also assesses each building “in relation to its context and the planning vision for the larger area”, she adds.
“Unlike a collective sale, at this stage, it is between the owners of Pearl Bank and URA,” says Ian Loh, Knight Frank’s executive director and head of investments and capital markets. “The sale comes only after they have achieved voluntary conservation status.”
Incidentally, Knight Frank was the marketing agent for Pearl Bank in two of its three collective sale attempts — in 2008 and 2011. One of the main concerns of prospective buyers then was that the property had no unutilised plot ratio, says Loh.
Challenges ahead After securing conservation status from URA, the next hurdle will be to gain SLA’s approval for a new strata subdivision of units and the topping-up of the lease.
If the new tower is going to be part of the existing Pearl Bank development, it would require all the strata titles to be reissued and share value redistributed. That would mean the existing owners of Pearl Bank would need to be compensated to discharge their existing mortgages and Central Provident Fund before the strata titles can be extinguished and reissued, says a property consultant who requested anonymity.
On the other hand, if the new tower is carved out as a separate development from the existing Pearl Bank tower, then there would have to be two separate developments that are not interlinked. “So, these are additional considerations and steps required in a situation in which the intention is not to have the building redeveloped but added on and refurbished,” explains the property consultant.
Karamjit Singh, JLL’s international director, says: “It will be good to have the benefit of the advice of legal, qualified persons and property consultants early because there could be legal and commercial impediments when dabbling with the merger of two developments and the issuance of new strata titles and share values as well as discharge of encumbrances.” Karamjit was involved in the collective sale of Singapore’s largest en bloc sale, Farrer Court, a 99-year leasehold, privatised HUDC, for $1.3 billion.
Lee and his liaison committee at Pearl Bank are well aware of the challenges ahead. “We’re just at the first stage of at least 10 steps in this complicated process,” he says. “We are prepared to go through the hardship.”
This article appeared in the City & Country of Issue 714 (Feb 08, 2016) of The Edge Singapore.