Collective sale fever heightens

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/ EdgeProp
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October 6, 2017 2:00 PM SGT
Source: CBRE
Cairnhill Mansions will make its fifth collective sale attempt and will be joined this time around by the adjacent bungalow at 67 Cairnhill Road
The Cairnhill neighbourhood in prime district 9 has undergone substantial changes over the past decade and a half, largely owing to collective sales. Further renewal could take place as one of the vestiges of the past, Cairnhill Mansions, makes a fifth collective sale attempt in the coming weeks.
The difference this time around is that the owner of the bungalow next door, at 67 Cairnhill Road, has agreed to put the property for sale at the same time as Cairnhill Mansions. The house is said to belong to Lien Kwang Wah, according to an Inlis search. Lien is said to be the brother of the founder of Overseas Union Bank, Lien Ying Chow.
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The house at 67 Cairnhill Road sits on a 19,800 sq ft plot and has a gross floor area of 55,440 sq ft. Meanwhile, Cairnhill Mansions, built in 1963, comprises a block of 61 units on a 43,103 sq ft freehold site with a GFA of 172,239 sq ft, including a 10% bonus GFA for balconies.
The guide price for Cairnhill Mansions is $362 million, which translates into $2,101 psf per plot ratio (ppr). Subject to URA confirmation, there is no development charge (DC) payable, says Galven Tan, director of capital markets at CBRE, who is handling the sale.
If Cairnhill Mansions is successfully amalgamated with the bungalow site at 67 Cairnhill Road, it will have a total land area of 62,900 sq ft, with potential GFA of close to 228,000 sq ft. The combined site could yield about 190 units, assuming an average size of 1,200 sq ft for the new development.
CBRE has secured more than 80% consensus from the owners of units at Cairnhill Mansions for a collective sale. The development will be launched for public tender in the coming weeks. CBRE has also been appointed exclusive marketing agent for 67 Cairnhill Road, which will also be launched for sale in due course, says Tan.
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Tan: We’ve observed a shift in developer interest in the prime districts, partly because the number of transactions has increased, with good sales registered in new luxury condo projects
Try and try again
Another three condos in the prime districts are in the pipeline for collective sale, with CBRE as the marketing agent. They are the 56-unit Park House on Orchard Boulevard; the 33-unit Riviera Point at the junction of Kim Yam and River Valley Roads; and the 288-unit Pacific Mansion on River Valley Close. It will be the sixth collective sale attempt for Riviera Point and the third for Pacific Mansion.
Jervois Gardens was third time lucky in its collective sale attempt. On Sept 26, the freehold development with two low-rise blocks of 14 maisonettes and three apartments located at 30F and 30G Jervois Road was sold for $72 million, or $1,373 psf ppr to SC Global Developments. The tender for the site drew eight bids, according to Colliers International managing director Tang Wei Leng, who brokered the sale.
Jervois Gardens sits on a freehold site of 34,038 sq ft and has a GFA of 52,419 sq ft, including an additional 10% GFA for balconies. It can be redeveloped into a new project with 50 to 70 units. The return of SC Global to the collective sale market is indicative of a turnaround in the prime residential segment.
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“It is extremely rare to find a centrally located condo site adjacent to a premium GCB area like Bishopsgate, especially freehold land, which remains scarce within the central area,” says Simon Cheong, SC Global CEO. “This exclusive residential enclave is very low density and incredibly tranquil, with lush greenery, offering the perfect natural environment for a luxury development.”
Based on the purchase price of $72 million for Jervois Gardens, the estimated break-even price for the new project is $1,870 psf, with the selling price envisaged to be “above $2,300 psf”, notes Colliers’ Tang. Meanwhile, existing owners of Jervois Gardens are expected to receive proceeds of $3.3 million to $4.5 million, depending on the size of their units.
Good take-up rates at projects such as the freehold 174-unit Gramercy Park, launched in July last year, and the 99-year leasehold, 450-unit Martin Modern, launched this July, have also encouraged developers to relook opportunities in the prime districts. “We’ve observed a shift in developer interest in the prime districts, partly because the number of transactions has increased, with good sales registered in new luxury condo projects,” notes CBRE’s Tan.
Besides Jervois Gardens, another successful collective sale in the prime districts was One Tree Hill Gardens, which was sold to Lum Chang Holdings in May for $65 million ($1,664 psf ppr) in a deal brokered by Knight Frank. It marked the first collective sale of the year.
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However, property groups have also been snapping up prime sites owned by individuals and families. For instance, construction and engineering groups Tiong Seng Holdings and Ocean Sky International purchased the site currently occupied by Sloane Court Hotel for $80.5 million ($2,067 psf based on site area) in August. Prior to that, the pair acquired a 13,420 sq ft freehold land parcel at 38 and 38E Jervois Road for $21 million ($1,656 psf). In June, Malaysian developer Selangor Dredging Bhd purchased 1 Draycott Park for $72 million ($1,797 psf based on land area). Roxy-Pacific, which has been actively acquiring sites both locally and abroad, bought a freehold 28,798 sq ft residential development plot on River Valley Road for $110 million in August.
Source: CBRE
The 33-unit Riviera Point will be making its sixth attempt at a collective sale
The 288-unit Pacific Mansion is readying for a third collective sale attempt
Source: Colliers International
SC Global paid $72 million ($1,373 psf per plot ratio) for Jervois Gardens at the close of the tender on Sept 26
Big boys targeting large-scale sites
Of the three sites in the prime districts up for collective sale, Pacific Mansion is the largest. It sits on a freehold land area of 128,306 sq ft and has the potential to be redeveloped into a 450-unit condo, assuming an average size of 1,200 sq ft, estimates CBRE’s Tan.
The collective sale sites sold in the prime districts so far have been relatively small, fetching $65 million to $72 million. “To attract the big boys, the sites have to be relatively large,” says CBRE’s Tan. “They may be keen to evaluate Cairnhill Mansions and Pacific Mansion.”
A sizeable collective sale site that attracted interest from major developers was Amber Park, whose tender closed on Oct 3. The tender drew eight bids, according to JLL. The winning bid came from City Developments Ltd (CDL) and joint-venture partner Hong Realty (Pte) Ltd, the private real-estate arm of Hong Leong Group. CDL will hold an 80% stake in the JV, with Hong Realty holding the remainder. The price offered was $906.7 million ($1,515 psf ppr). It is considered one of the largest collective sale sites in the exclusive Amber Road enclave in the East Coast area. The deal was brokered by JLL.
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The $906.7 million price tag is 18% above the $768 million reserve price, notes Nicholas Mak, executive director of ZACD Group. “For developers to acquire choice development sites in today’s market, it is necessary for them to pay above the reserve price,” he says.
With a freehold land area of 213,675 sq ft, plot ratio of 2.8 and GFA of 598,290 sq ft, Amber Park can be redeveloped into a luxury condo comprising four 25-storey blocks with close to 800 units and basement car park. Most of the units will have north-south orientation, with many of them having sea views as well.
Incidentally, CDL had developed the original 200-unit Amber Park, which was completed in 1986. “We are intimately familiar with the location, and the environment there offers a great quality of life,” says Sherman Kwek, CDL CEO-designate. “This is one of our most significant investment deals in the Singapore residential market in recent years.”
The site will not incur any DC, notes Tan Hong Boon, JLL regional director. Unit sizes at the existing Amber Park are large, with typical units averaging 1,700 sq ft and penthouses double that. Based on the sale price for the site, owners are expected to receive proceeds of $4.3 million to $8.3 million.
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Amber Park was sold for $906.7 million ($1,515 psf ppr) to a joint venture between City Developments and Hong Realty at the close of the tender on Oct 3
Bullish bids, record price at Amber Road
The sale of Amber Park follows that of two sites on Meyer Road, namely the 11-unit The Albracca, which was sold for $69.1 million ($1,409 psf ppr) in July, and Nanak Mansions, which was jointly sold for $201.1 million ($1,429 psf ppr) to UOL Group and Kheng Leong Co last month. JLL was the marketing agent for both sites.
“Meyer Road is a highly coveted address,” says Liam Wee Sin, UOL Group deputy CEO. “Given its rare location right next to a park, we see the opportunity to develop the site into a luxury project that can be dubbed ‘Nassim Residences of the East’.” Liam is referring to UOL Group’s 100-unit, freehold luxury condo Nassim Park Residences on Nassim Road, which was fully sold and completed in 2011.
Amber Park is the fourth property in the Meyer Road-Amber Road area to be sold this year, notes ZACD’s Mak. The land rate of $1,515 psf ppr for Amber Park is also the highest in the vicinity this year, he adds. Other sites in the prime District 15 East Coast neighbourhood that are readying for collective sale include Hawaii Tower, Casa Meyfort and Parkway Mansion. “Whether they will be sold depends on timing, pricing and the comparative attributes of the sites,” notes Colliers’ Tang.
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Besides Parkway Mansion, Colliers is also the marketing agent for 12 other collective sale sites, including Pearl Bank Apartments on Pearl’s Hill, just off the Outram MRT station; City Towers on Bukit Timah Road; and Tulip Garden at 1 Farrer Road (next to d’Leedon). This recent wave of collective sales originated in the city-fringe areas, before diffusing to the prime districts and mass market. It is said to have started with the collective sale of Shunfu Ville, located off Marymount Road. The project was sold to Qingjian Realty for $638 million ($747 psf ppr) last May. As there were objections from some of the minority owners, the case went to the High Court, and the green light for the collective sale was granted only in February this year.
Positive feedback loop
Mr and Mrs Sim, retirees in their 70s, are beneficiaries of the collective sale at Shunfu Ville. They had purchased their unit 30 years ago when it was an HUDC flat and not privatised yet. They paid just $240,000 for their unit. Following the collective sale, their payout amounted to $1.79 million.
However, even before the High Court ruling, the Sims had started scouting for a replacement property. They purchased a high-floor, fiveroom resale flat in a point block in the Bishan estate for $700,000 in cash. “Those who hung around and waited until the decision was finalised now have to pay $900,000 for that same flat,” says Sim.
For privatised HUDC estates such as Shunfu Ville, Eunosville, Serangoon Ville and Rio Casa that have been successfully sold en bloc this year, the collective sale beneficiaries tend to be retirees. “While some may buy private property, others may choose to downsize by buying HDB resale flats and keeping the rest of the money for their retirement,” notes Desmond Sim, CBRE head of research for Singapore and Southeast Asia.
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Some who buy public housing flats may also use part of their collective sale proceeds to help their adult children with the down payment on their first property purchase. “So, a collective sale beneficiary could spur two to three new purchases in the new and resale markets,” comments Sim.
Derrick Heng, an analyst at Maybank Kim Eng Research, concurs. “A positive feedback loop has been set in motion,” he says in his Sept 22 report. “Displaced households looking for replacement homes will front-load demand and push out supply. While developers are spoilt for choice in the en bloc market, we believe listed players will be more cautious in bidding for larger sites.” This is due to potential penalties under the Qualifying Certificate (QC) rules, adds Heng.
Before the QC charges hit, however, developers of collective sale sites will have to beat the additional buyer’s stamp duty (ABSD) clawback period, which requires them to develop and sell all the units in the new development within five years of acquiring the land. And that is even more punitive, as it is based on 15% of the total land cost, points out CBRE’s Sim.
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However, he feels that the current housing stock situation has emboldened developers to purchase large sites, especially the privatised HUDC estates, which yield more than 1,000 units. “It’s pretty much forward thinking,” says Sim. “It’s about building a landbank with projects ready for launch that can be spaced out over the next three to four years.”
Depleting housing stock
Ching Chiat Kwong, executive chairman and CEO of listed property group Oxley Holdings, agrees with Sim. “We have actually done research on how the existing housing stock has been depleting over the last three years,” he says. “And it has been quite consistent. There has also been a surge in buying activity over the past six months.”
Oxley led a consortium in the purchase of Rio Casa on Hougang Avenue 7 for $783 million, including a differential premium for topping up the lease. The price works out to $669 psf ppr if the 10% bonus balcony space is included. Another Oxley-led consortium purchased Serangoon Ville, a privatised HUDC estate in Serangoon North for $499 million.
“We like to purchase sites in mature estates because of the many amenities there,” says Ching. “These are also areas where young buyers aspire to own homes.”
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Oxley also purchased a residential block at 231 Pasir Panjang Road for $121 million and another block of six apartments called Toho Green at 208 Yio Chu Kang Road for $8.4 million in August.
Thomson View is another privatised HUDC estate that is making a collective sale attempt. It failed in its last attempt in 2013. Knight Frank is now marketing the property. Goodluck Garden on Toh Tuck Road is also gunning for a collective sale, following the bullish bid of $939 psf ppr by listed Malaysian property giant S P Setia for a Government Land Sales (GLS) site nearby. On Rifle Range Road, Mayfair Gardens is also readying itself for a collective sale, with Knight Frank as its marketing agent.
Source: Knight Frank
Thomson View will be making another collective sale attempt
Potential future supply
There are about 30 collective sale sites on the market — either launched for tender or at various stages of preparation for rollout. The existing developments have a total of 7,052 units, according to CBRE Research. If all these collective sales are successfully concluded, they could yield a potential pipeline of 22,000 to 24,000 new housing units.
“The current collective sale market euphoria is not surprising, given the competition for GLS sites,” says CBRE’s Sim. “Owners of collective sale sites are therefore encouraged to get 80% consensus as it’s a small window of opportunity, made even smaller by the revision in DC rates. However, the rates apply only to certain sites that have very high intensification of land use. They don’t apply to every site.”
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Besides Amber Park, Jervois Gardens and Sun Rosier on How Sun Drive, which was sold to SingHaiyi Group for $271 million, will also not incur DC, says JLL’s Tan.
The average hike in DC rates was 13.8%, although they were 29% for areas such as Tampines Road, Hougang, Sengkang and Punggol. “That was higher than expected,” concedes Eric Low, deputy CEO of Oxley Holdings. However, even before buying the site, the developer had factored in a “15% to 20% buffer” for the DC. “The impact is therefore quite minimal,” he says.
This article, written by Cecilia Chow, appeared in EdgeProp Pullout, Issue 800 (Oct 9, 2017)