Normanton Park hit with ‘no-sale licence’ – what it means for the developer

Normanton Park hit with ‘no-sale licence’ – what it means for the developer

With close to 1,900 units, the new development on the former Normanton Park en bloc site was going to be one of the biggest residential projects to be launched in 2019. It would be second only to the 2,203-unit Treasure at Tampines – the biggest private condo in Singapore to date – which was launched last month.  

However, the new launch at Normanton Park is likely to be delayed. In January 2019, the Controller of Housing (COH) slapped the developer Kingsford Huray Development with a no-sale licence “as the company had failed to meet the requirements for a sale licence”, says an Urban Redevelopment Authority (URA) spokesperson in an email response to queries from EdgeProp Singapore.

“In assessing any application for a Housing Developer’s Licence, the Controller of Housing (COH) will consider various factors, including the developer’s track record,” said the URA spokesperson. “Where necessary, the COH may issue a licence with conditions to ensure that the interests of home buyers are duly protected.”

 

The former Normanton Park site, where developer Kingsford Huray Development was issued a no-sale licence by the Comptroller of Housing (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

Developers issued with a no-sale licence can only commence construction but are not allowed to sell any units before Temporary Occupation Permit (TOP) is obtained.

A “sale licence”, on the other hand, allows the developer to sell units in a development once Building Plan Approval is given, says URA on its website.

The former Normanton Park has been approved for the development of 1,863 apartments, 19 strata landed houses and eight commercial units on the site. However, COH stipulated several conditions that Kingsford Huray  has to fulfil under the no-sale licence: strict compliance with the Housing Developers (Control & Licensing) Act and the Housing Developers Rules; the developer is not allowed to sell any units in the development without COH’s “prior approval in writing”; and Kingsford Huray has to obtain Quality Mark certificates for all units in the Normanton Park housing development. The certificates have to be obtained before an application to COH to sell the units can be made.

Kingsford Huray also has to inform COH, in writing, of any changes to persons holding responsible positions in the company; or changes in particulars relating to the developer or the building project, within 14 days of the effective date of change.

The no-sale licence “shall continue in force until the housing developer is notified in writing by the Controller that a licence under the Act is no longer required for the housing project or unless otherwise earlier revoked under the Act”, according to COH in the notice to Kingsford Huray, dated Jan 15, 2019.

COH’s requirement for a developer to obtain Quality Mark certification for a project to be licensed is to assure homebuyers that “their housing units are constructed and finished to a reasonable standard of quality”, says the URA spokesperson. The COH’s no-sale licence is to ensure that the developer is able to meet requirements such as “track record of completing a project satisfactorily”, adds URA. “A no-sale licence allows the developer to commence construction for the housing project but prohibits the sale of units off-plan without approval from the COH.”

 

Previous projects by the developer had been taken into consideration. According to URA, the Building and Construction Authority (BCA) had found that some building works such as windows, barriers and common storey shelter had deviated from requirements under the Building Control Act and Regulations for its Kingsford Waterbay project in Upper Serangoon View. Feedback received from buyers of Kingsford Hillview Peak, another project by the developer, was also taken into consideration.

Kingsford Huray Development’s holding company, the privately-held Kingsford Development, was founded by Chinese entrepreneur Cui Zhengfeng, board chairman of the firm. Originally from Shenyang, Cui had been a civil servant before he became a manufacturer and then a property developer. His property development company in Shenyang, also named Kingsford Development, is managed by his daughter. Meanwhile, Cui is based in Singapore, where he became a citizen in 2014.

Kingsford Development created a stir when Cui submitted the highest of six bids for a residential development site at Hillview Rise in a government land sale (GLS) in 2012. Little-known then, Kingsford Development paid $243.2 million ($638 psf per plot ratio) for the land that has since been developed into the 512-unit Kingsford Hillview Peak. That marked the developer’s maiden project in Singapore, which was completed in 2016.

Cui’s Kingsford Development followed this up by topping seven other developers to win two adjacent 99-year leasehold residential sites at Upper Serangoon View at another GLS in 2013. He paid a total of $460.4 million ($522 psf ppr) for both sites, which were amalgamated and developed into Kingsford Waterbay. The project with 1,157 apartments, six strata terraced houses and two strata semi-detached houses fronting Sungei Serangoon obtained Temporary Occupation Permit (TOP) at the end of November 2018.

In yet another eyebrow-raising deal, Kingsford Huray emerged the buyer of the former Normanton Park with a bid of $830.1 million in October 2017. It was Kingsford Huray’s first en bloc purchase and is considered one of the biggest in Singapore to date.

 

The 488-unit Normanton Park is located just off the Ayer Rajah Expressway and near Science Park as well as the Southern Ridges. On top of the $830.1 million price tag, an estimated $231.1 million has to be paid to top-up the lease to a fresh 99 years. A differential premium of $283.4 million to redevelop the 660,999 sq ft site with a plot ratio of 2.1 was also payable, according to Knight Frank, the marketing agent for Normanton Park, in a press release announcing the en bloc purchase in October 2017.

 

Normanton Park, when it was first put up for en bloc sale in 2015 (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

Based on the gross floor area of 1.39 million sq ft, the land rate for Normanton Park therefore works out to $969 psf ppr. With the inclusion of a 10% bonus balcony and a proposed plot ratio of 2.31, the land price works out to about $923 psf ppr, estimates Knight Frank.

With the no-sale licence, the developer is more likely to be hit by the ABSD clawback at the rate of 15% (the prevailing rate then), as developers have to develop and sell all their residential units within a five-year period in order to comply with their undertaking for ABSD remission, says Lee Liat Yeang, senior partner at Dentons Rodyk Real Estate practice group. Upon clawback of the ABSD, there’s also a 5% interest payment chargeable by Inland Revenue Authority of Singapore (IRAS) on the ABSD amount, from the 15th day after the date of the en bloc sale and purchase agreement until the date of payment.

“This sounds harsh indeed,” acknowledges Lee. “It’s certainly challenging being a developer now.”   

Had the en bloc purchase been completed after the new property cooling measures were introduced on July 6, 2018, the ABSD would have been more punitive – at 25% with a 5% ABSD payable upfront, notes Norman Ho, deputy head of corporate real estate, Rajah & Tann Singapore.

 

The sale and no-sale licence regime has been in place since January 1985 when the Housing Developers (Control & Licensing) Act and Housing Developers’ Rules were first introduced. “Often, a no-sale licence is issued if a developer is new, with no track record or had breached the terms of its previous sale licence, for instance, selling units before getting final approval from COH,” observes Ho.

Kingsford Huray isn’t the first to be asked to stop the sale of units. In December 2012, Chinese developer Hao Yuan Investments was told to halt the sale of units at its 653-unit Forestville executive condo (EC) in Woodlands. This was after 1,201 applicants had balloted for units on the first day of sales. However, the developer had to close its showflat and was not allowed to issue any options to purchase.

This was because Hao Yuan had proceeded to launch the project even though changes to its development plans had not been approved by COH. The developer was only allowed to re-open its showflat and commence sales six months later in June 2013. This was after COH was “satisfied” that necessary approvals for the project’s development plans were given, and that the plans in the sales brochures were in accordance with the approved plans.

At Normanton Park, a check by EdgeProp Singapore shows only a few of the original 13 blocks remain standing as at April 12. The others have been demolished to make way for construction.

 

The real estate agencies are aware that the launch of Normanton Park is pending COH approval. But judging from the online advertisements posted by property agents, many could still be unaware of the no-sale licence and its implications.

“The URA had referred cases relating to the Normanton Park to us,” according to a spokesperson with the Council for Estate Agencies (CEA), the regulatory body for the real estate agency industry. “Investigations are ongoing and CEA will not hesitate to take action against property agencies or agents who do not comply with our regulations.” 

CEA had issued a practice circular in June 2013, regarding advertising of development projects where approval for sale has not been granted by the relevant authorities yet. “Property agencies and agents should not advertise development projects that imply or mislead the public that the projects have been approved for sale when approval has yet to be granted by the relevant authorities,” said CEA. “Agencies and agents should not use words such as ‘new launch’, ‘register for VVIP preview’, and other words with similar meaning in these advertisements as such wording may mislead consumers.” 

According to CEA, property agents and consumers can go to URA’s website to check if a residential development has been approved for sale.

Meanwhile, Kingsford Huray’s Cui could not be reached for comment despite repeated attempts to contact him. The registered address of the company is Cui’s bungalow at Sentosa Cove, a posh waterfront residential neighbourhood on Sentosa Island. It is the bungalow that Cui had paid $33 million for in late 2013 and at 18,794 sq ft, is one of the biggest land plots in Sentosa Cove. The house comes with six bedrooms, a private pool and a direct view of the waterway. From the roof terrace, it commands a 270-degree view of the sea and the Southern Islands. For Cui, his luxury waterfront residence is also his place of business. 

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What will en bloc millionaires buy next?

What will en bloc millionaires buy next?

Retired chartered surveyor and valuer Lim Lian Seng was chairman of the collective sale committee for the third time at the freehold Amber Park condominium when it was sold for $906.7 million ($1,515 psf per plot ratio) in October. The price paid by the top bidder — joint venture partners City Developments and Hong Leong Holdings — at the close of the tender reflected an 18% premium to the reserve price of $768 million.

“We didn’t expect Amber Park to fetch such a premium,” says Lim. Amber Park comprises 200 units, 192 of which are identical 1,744 sq ft, three-bedroom units and eight of which are double-storey, 3,789 sq ft penthouses.

The reserve price was initially set at $3.2 million for the typical units, but there was great reluctance among the owners to sell. To make it more palatable, the reserve price was adjusted twice — to $3.5 million and subsequently $3.7 million — before it obtained the 80% consensus required for a collective sale. JLL was the appointed marketing agent for the Amber Park collective sale, launched at end-August, with the tender closing on Oct 3.

Members of the Amber Park collective sale committee (from left): Eric Ang, Koh Piak Chang, Lim Lian Seng (chairman of the committee), Richard Lee and Haja Mohideen (Credit Photo: Samuel Isaac Chua.EdgeProp Singapore)

 

Beyond expectation

Lim recalls the moment when the collective sale committee members opened the first envelope at the close of the tender: It contained the top bid of $906.7 million. There was a collective gasp. “We couldn’t believe our eyes,” he says.

For the owners of the three-bedroom units, the $906.7 million meant a payout of $4.376 million for each of them, 2.1 times higher than the last transacted price of $2.08 million pri- or to the collective sale. Owners of the eight duplex penthouses will walk away with $8.3 million each.

While Lim is happy with the success of the collective sale, he is feeling a little sad too: Amber Park has been his home for 31 years. “We were the pioneers of this place and among the first residents to move in when the condo was completed in 1986,” he recalls. “I’m sad that we have to relocate but happy that we are getting such a good premium that we can still buy a condo in the Amber Road neighbourhood.”

Lim is considering buying an HDB flat. HDB announced on Dec 15 that it was releas- ing 17,000 new public housing flats under the build-to-order scheme in 2018. “It will depend on the price and the property itself,” he says. “If the price is right, we would even consid- er buying a landed property, but farther out in the east.”

 

‘Asking prices artificially inflated’

Richard Lee, a fellow collective sale committee member at Amber Park, went house hunt- ing soon after Amber Park was sold. He pur- chased a 1,200 sq ft, two-bedroom unit at Vertis, a boutique, freehold 42-unit condo ad- jacent to Amber Park. The asking price of the unit was $1.62 million, but he negotiated for a better price and secured it for $1.6 million.

While Lee feels that the asking price for the unit at Vertis is certainly higher than what he would have paid prior to Amber Park’s collective sale, he feels “it’s not bad”. More importantly, his wife and daughter like the boutique con- do, as it is a newer development, having been completed in 2009. He and his family like the convenience of the Amber Gardens location. Lee says it is well serviced by buses and, by 2023, there will be a new Tanjong Katong MRT station on the Thomson-East Coast Line locat- ed just a short walk from their future home.

Haja Mohideen, another resident and collective sale committee member at Amber Park, has been monitoring asking prices in the vicinity over the past two months. “I wrote down all the asking prices and, compared with two months ago, owners are asking for prices that are $300,000 to $400,000 higher,” he laments. “Asking prices in District 15 are now artificial- ly inflated by 15% and are unrealistic. In Dis- trict 16, asking prices are at least 10% higher.”

Mohideen reckons the real test for these ask- ing prices will come when owners of Amber Park receive the actual payout at the comple- tion of the collective sale.

 

Wealth redistribution

The 488-unit Normanton Park was sold for $830.1 million to Kingsford Development (Credit Photo: Knight Frank)

 

As at Dec 20, a total of 33 en bloc deals had been concluded, with a total sales value of $8.63 billion. “With $8.6 billion in wealth be- ing redistributed, a lot of millionaires are be- ing created across Singapore,” says Desmond Sim, CBRE head of research for Singapore and Southeast Asia.

Owners of projects that have been successful in collective sales see it as “an opportunity to unlock some value”, says Sim. He points out, however, that they might not want to park all that cap- ital back into property. “If they do invest in real estate, it might not even be in Singapore but overseas.”

Most of the prices of collective sales this year were done at premiums of 40% to about 100% to market prices, says Ian Loh, Knight Frank Singapore executive director and head of investments and capital markets. With resale prices rising as well, the collective sale premi- um could be compressed next year, he adds.

Karamjit Singh, CEO of Showsuite and senior consultant at JLL, has been a veteran of the col- lective sale market for more than two decades. In the last collective sale wave of 2005 to 2007, the firm he founded, Credo Real Estate, topped the charts in terms of the number of deals and deal sizes. They included the biggest collective sale deal so far: that of the privatised HUDC es- tate, Farrer Court, for $1.3388 billion. It has since been redeveloped into the 1,715-unit d’Leedon. Credo was acquired by JLL in 2012.

Many firms are hoping to get a slice of the collective sale pie. In this year’s en bloc boom, JLL is in the lead, with seven deals totalling $2.1 billion, followed by Knight Frank Singapore with six deals worth $1.85 billion (see table).

 

 

‘More cautious’

What JLL’s Karamjit has observed in this re- cent collective sale boom is a difference in the general profile and investment behaviour of the beneficiaries versus a decade ago. “I see a bigger percentage looking to downgrade or choosing to make a lateral move rather than upgrade,” he says.

Karamjit also observes greater caution when it comes to reinvesting the newfound wealth. “They are less willing to put everything into one property,” he notes. “There’s a chance that they might split the capital across two proper- ties and make sure they have set aside enough cash for their retirement and their children’s education.”

The recent en bloc wave is a boon for the beneficiaries who are middle-income salaried households, especially those in their 40s and 50s, adds Karamjit. “Economic and job prospects are not very rosy for this group, owing to disruption taking place across different sec- tors,” he says. “Anecdotally, we hear more of such beneficiaries choosing to downgrade rather than plough the capital into a bigger property and taking on a bigger mortgage to finance a higher standard of living.”

The natural tendency for some would be to look at other options to preserve capital and generate recurring income. “That might be the case for some of these en bloc beneficiaries,” says Karamjit.

 

Alternative investment options

Then, there are those who already own more than one property and are therefore in no hurry to buy another. That is certainly the case for Colonel Sukhvinder Singh Chopra.

Chopra (pictured with his family) is chairman of both the Management Corp Strata Title committee and the collective sale committee (Credit Photo: Albert Chua/EdgeProp Singapore)

 

Chopra, 56, is chairman of the collective sale committee at Normanton Park, which is overseeing the sale of the estate to Chinese developer Kingsford Development for $830.1 mil- lion. Chopra says the price offered by Kingsford Development for Normanton Park is “fair”. For owners of the 488-unit development, it translates into a gross payout of $1.68 million to $1.86 million each.

Chopra and his family live in a 144 sq m (1,550 sq ft) apartment and would, therefore, be looking at gross proceeds of $1.86 million from the collective sale. He has no intention of buying another property for now but is instead looking at investing his collective sale proceeds “very conservatively”, hoping to receive an interest of 2.5% to 5.5% a year. “The interest return would be sufficient to rent an- other property,” he says.

The retired colonel with the Singapore Armed Forces (Singapore Navy) is now managing di- rector of Civica Singapore, a global software solutions company, where he has been for the past three years.

Normanton Park was built by the Ministry of Defence in 1977 for Singapore Armed Forces officers. Chopra and his family have been liv- ing there since 1990 and he has been elected chairman of the Management Corp Strata Title (MCST) committee every year since 1995. While it is unusual for the MCST chairman to be collective sale chairman as well, Chopra occupied that position because of owners’ request. “I’ve a very good relationship with the owners, many of whom I’ve known for many years,” he says.

Knight Frank was the marketing agent for Normanton Park in its second and successful collective sale attempt. The first attempt was in October 2015.

 

Shopping for a new home

H K Tan, an entrepreneur in the manufacture of leather goods, is a collective sale beneficiary of the 336-unit privatised HUDC estate, Florence Regency on Hougang Avenue 2. It was sold to Chinese developer Logan Property (Singapore) for $629 million on Oct 20. Each owner will get $1.84 million to $1.89 million each.

Florence Regency was sold to Logan Property in its first collective sale attempt, for $629 million (Credit Photo: Samuel Isaac Chua/EdgeProp Singapore)

 

Tan has been a resident of Florence Regency for the past 18 years, and his home is an apartment of more than 1,700 sq ft. “It’s a good and safe neighbourhood,” he says. “There are good food stalls around the Kovan area, just a 10-minute walk from the condo.”

He is considering reinvesting in property. While he views prime District 15 as “a good bet” because it is highly sought after, Tan is open to considering District 19, such as the Yio Chu Kang area. “My folks are more famil- iar with the area around District 19,” he says.

Although Tan does not consider the collective sale proceeds a windfall, he recognises that “it’s a rare opportunity” to cash out of the leasehold property as the lease recedes. “As such, I welcome it,” he says.

For many owners in ageing 99-year leasehold private condos especially, there is a greater ur- gency to sell, notes CBRE’s Sim. Many of the residents tend to be retirees. “For them, a collective sale would be an opportunity to monetise their single-largest asset,” he says.

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Collective sales to rise through 2018 into 2019: Colliers International

Collective sales to rise through 2018 into 2019: Colliers International

The number of residential collective sales is set to continue rising through 2018, and the trend is likely to last into 2019, says Colliers International in a recent report.

Excluding Changi Garden, which was bought after the report was produced, the current collective sale wave — which began in late 2016 with the sale of Shunfu Ville, Harbour View Gardens and Raintree Gardens and continued this year with 14 more collective sales year-to-date — has netted $6.36 billion in sales.

According to research by Colliers, a surge in collective sale transactions in the residential market typically goes on for eight to 12 quarters. The last collective sale fever lasted for about three years, from 2005 to 2007, with sales totalling $21.8 billion.

 

Tampines Court

Source: Huttons Asia

Tampines Court, sold to Sim Lian Development for $970 mil, making it the largest collective sale in terms of absolute price in 2017

 

Tang Wei Leng, managing director of Colliers International, Singapore, comments: “With the more aggressive land prices achieved in the mass markets, we expect more prime freehold plots to come on the market.”

Despite the surge, Colliers believes that the risk of oversupply is low. Given that the 2006 to 2016 annual average demand for residential units stood at 12,453, the 14,000 units that could be generated from the collective sales so far could be absorbed in slightly more than a year.

Moreover, developers’ pacing of launches over time as well as across different market segments and locations will keep the oversupply risk low, says Colliers.

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Singapore Property Stocks Jump as Big Sales Buoy Sentiment

Singapore Property Stocks Jump as Big Sales Buoy Sentiment

Nanak Mansions

UOL on Sept 28 announced that its 50%-owned associated company – Secure Venture Development (No. 1) – bid $201.08 million for Nanak Mansions (above)

 

Shareholders of Singapore developers have another reason to rejoice: en-bloc sales are at a ten-year high, according to some estimates.

A spate of en-bloc sales last week, or redevelopment deals in which a group of owners band together to sell apartment blocks at a hefty premium, has buoyed market sentiment that the property sector is poised for a rebound. Chinese developer Kingsford Huray Development on Thursday announced the S$830.1 million purchase of Normanton Park, a 488-unit apartment complex, while City Developments Ltd.’s joint venture acquired Amber Park for S$906.7 million. 

Bullish investors pushed shares of UOL Group Ltd. up as much as 4.3 percent to a record high on Friday, making it the best performing stock on Singapore’s benchmark gauge. City Developments Ltd. rose as much as 2.4 percent.

According to OCBC, en-bloc sales have totaled more than S$5 billion this year, which is the highest since 2007. The previous peak saw an annual figure of S$11.5 billion.

“The market recognizes that en-blocs themselves exert powerful trickle-down effects on demand and supply,” Eli Lee, a senior investment analyst at OCBC Investment Research said in an email. The physical stock of homes available for occupancy falls when collective sales take place and those who sold their homes often enter the property market rapidly with new cash and borrowing headroom, he said.

Home prices rose for the first time in four years in the three months ended Sept. 30 from the previous quarter, snapping a record run of declines.

 

The article, written by Livia Yap, first appeared on Bloomberg.

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Kingsford Development pays record price of $969 psf ppr for Normanton Park

Kingsford Development pays record price of $969 psf ppr for Normanton Park

For the owners of the 488-unit Normanton Park, the second attempt at a collective sale was a charm. At the close of the tender on Oct 5, Chinese developer Kingsford Development emerged the successful buyer for the site with a purchase price of $830.1 million.

The price includes the differential premium of $231.1 million for the lease to be topped-up to a fresh 99 years and $283.4 million differential premium to redevelop the site to a gross plot ratio of 2.1. Based on the maximum gross floor area of 1.388 million sq ft, the land price translates to $969 psf per plot ratio (ppr), which is the highest price achieved for a 99-year leasehold collective sale site in 2017.

If a 10% bonus balcony space and proposed plot ratio of 2.31 is approved, the land price will be lowered to $923 psf ppr. According to Ian Loh, Knight Frank head of investment & capital markets, the developer could build a new high-rise residential project with more than 1,200 units, assuming an average unit size of about 1,000 sq ft.

 

Normanton Park

Source: Knight Frank

 

The owners of Normanton Park stand a chance to walk away with $1.68 million to $1.86 million each if the sale is successful.

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Collective sale fever continues

Collective sale fever continues

Updated, Aug 31, 2017, 4:22 p.m., to add 1 Draycott Park to reword successful collective sales to collective sale sites that received bids, and to include 1 Draycott Park in the count

 

Aug 22 saw the launch of collective sale tenders for two former HUDC estates - Florence Regency and Normanton Park - at a reserve price of $600 million and $800 million respectively.

Meanwhile, owners at Park West condominium are attempting a collective sale of the property at $750 million, subject to receiving the required approval of 80% of its homeowners.

So far in 2017, there have been nine collective sales sites that have received bids – including that of Citimac Industrial Building and 1 Draycott Park – worth a total value of approximately $3.5 billion.

The most recent collective sale was that of privatized HUDC estate Tampines Court. On Aug 23, Huttons Asia, the marketing agent for Tampines Court, revealed that the collective sales committee had approved Sim Lian Group’s $970 million bid for the 702,164 sq ft site.

Privatised HUDC estates have been a favourite among developers seeking to replenish their land bank through collective sales this year – Rio Casa was sold to a consortium headed by Oxley Holdings for $575 million; MCL Land bought Eunosville at $765.78 million; Serangoon Ville was acquired by another Oxley-led consortium at $499 million.

 

Florence Regency

Located at Hougang Avenue 2, Florence Regency comprises 336 apartment and maisonette units, and has a reserve price of $600 million. Including differential premiums, currently estimated at $249 million, the land price is about $799 psf ppr. The tender exercise will close on Sept 27.

Florence Regency’s asking price compares favourably to Serangoon Ville, which was sold at $835 psf, and the Serangoon North Avenue 1 GLS site, which went to Keppel Land and Wing Tai at $965 psf ppr, according to marketing agent JLL.

The Florence Regency site is zoned ‘Residential’ with a gross plot ratio of 2.8 under the 2014 Master Plan, according to JLL The 389,236 sq ft site, which has about 71 years remaining on its lease, could potentially yield a total gross floor area (GFA) of over 1.1 million sq ft, or an estimated 1,100 to 1,300 apartment units. The site is located close to Hougang and Kovan MRT stations, Hougang Central Bus Interchange and Hougang Mall.

This is the development owners’ first attempt in a collective sale, with more than 80% of the owners agreeing and signing the agreement in less than 3 weeks. The owners are expecting offers ranging from $615 million to more than $650 million, says Tan Hong Boon, JLL regional director of capital markets.

 

Florence Regency

Source: JLL

 

Normanton Park

Normanton Park, a former HUDC estate named after the road on which it sits has been put up for collective sale at a minimum price of $800 million ($898 psf ppr, including development charges and lease top-up premium), according to marketing agent Knight Frank. The tender exercise will close on Oct 5.

The current 23-storey development, located off Ayer Rajah Expressway, consists of 488 units, and can be redeveloped into a property with a maximum permissible GFA of 1.39 million sq ft. This means developers can transform the site into a project of approximately 1,380 units at 1,000 sq ft each, according to Ian Loh, Knight Frank’s executive director and head of investment and capital markets.

Based on the 2014 Master Plan, the 661,000 sq ft site on which Normanton Park sits is zoned “residential” with a gross plot ratio of 2.1, and has approximately 59 years remaining on its current 99-year lease.

 

Normanton Park

Source: Knight Frank

 

Park West Condominium

At Jalan Lempeng in south-western Singapore, Park West condominium is making its third collective sale attempt, with an expected selling price of $750 million. The current expecting selling price is lower than the asking price of $803 million during its 2011 en bloc tender, which did not receive any bids.  In 2007, the first attempt by Park West owners at a collective sale fell through because it did not hit the required 80% approval among homeowners.

After taking into account an estimated $339 million in differential premium and lease upgrading premium (LUP), the land rate for Park West site works out to be about $818 psf ppr, according to marketing agent Huttons Asia.

Located about 600m from Clementi MRT Station and close to Nan Hua Primary School, the existing development houses 432 apartments and four shop units on a 633,644 sq ft site. The site has about 64 years remaining on its lease and is zoned residential with a gross plot ratio of 2.1 under the 2014 Master Plan.

Gross sale proceeds are estimated to be around a $1.25 million to $2.1 million for apartment unit owners, and around $1.1 million to $1.5 million for shop unit owners, according to Huttons Asia.

 

Park West condominium

Source: Huttons Asia

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Normanton Park condo up for collective sale with reserve price of $800 mil

Normanton Park condo up for collective sale with reserve price of $800 mil

Normanton Park (below), a 23-storey, 488-unit condo located off Ayer Rajah Expressway, has been put up for sale by tender with a reserve price of $800 million. The price translates to $898 psf ppr, including development charges and a lease top-up premium, according to marketing agent Knight Frank.

With about 59 years left on its existing 99-year lease, the 661,000 sq ft site is zoned “residential” under the 2014 Master Plan. Going by the gross plot ratio of 2.1 under the plan, the maximum permissible GFA for the site is 1.39 million sq ft. This translates into 1,380 units of 1,000 sq ft each, says Ian Loh, Knight Frank’s executive director and head of investment and capital markets.

Based on the maximum permissible GFA and development charges payable as at March 1, the buyer is expected to pay a differential premium of $225.3 million for intensification of the site and $220.64 million for lease upgrading, Loh adds.

 

Normanton Park

Source: Knight Frank

 

Normanton Park is situated within a private enclave that is 15 minutes away from the CBD, Knight Frank says. The tender exercise will close on Oct 5.

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Collective sale bet

Collective sale bet

With the property cooling measures in place, a faltering residential market and prices on a downward slide, chances of finding a buyer for a big collective sale site may be slim. However, collective-sale hopefuls remain undaunted and tenders of such sites are expected to continue.

 

Oct 27 marked the closing date for the tender of Shunfu Ville, a privatised HUDC estate on Marymount Road, in the Thomson area. The minimum asking price for the site was $688 million. Although no bids were received, there were two letters of interest. “We are following up with these parties,” says Tan Hong Boon, regional director of capital markets at JLL, the sole marketing agent for the project.

The 358-unit Shunfu Ville sits on a 99-year leasehold site of 408,927 sq ft with a plot ratio of 2.8, and can therefore be redeveloped into a new residential project with at least 1,100 units, based on an average unit size of 1,000 sq ft. Assuming an average size of 754 sq ft, the number of units in the new development will be 1,500.

 

Shunfu Ville's tender closed with no bids, but received two expressions of interest from developers

 

The asking price translates into $791 psf per plot ratio (ppr) on the potential gross floor area (GFA), after taking into consideration the $218 million differential premium payable to the government for topping up the lease to a fresh 99 years and for intensification of use. That would mean a breakeven cost of $1,250 psf for the new project, and an estimated selling price of $1,400 to $1,450 psf. “The asking price for Shunfu Ville is therefore very reason able,” says Tan.

The selling price of the new project will be in line with the indicative average selling price of $1,400 psf at Thomson Impressions, a new 288- unit private condominium off Upper Thomson Road, where sales will start on Oct 31. Thomson Impressions sits on a 99-year leasehold 113,051 sq ft site on Lorong Puntong, off Upper Thomson Road and Sin Ming Avenue, which China-based property developer Nanshan Group had paid $173.6 million or $731 psf ppr for in a government land tender last year.

Also in the neighbourhood of Upper Thomson Road is Thomson Three, a 445-unit private condo by UOL Group and Singapore Land, which was launched in Septem ber 2013 at an average price of $1,350 psf. As at end-September this year, only eight units remain unsold. The site is likewise a 99-year leasehold government land parcel purchased in a tender.

In the vicinity of Upper Thomson Road is also the recently completed 361-unit Thomson Grand by Cheung Kong (Holdings), which was launched in 2011 at an average price of $1,400 psf, and is fully sold to date. Thomson Grand is also situated on a 99-year leasehold government land sale (GLS) site. Developers looking to replenish their land bank in Singapore will continue to focus on government land sites. “With government land sales, developers are just bidding against each other,” says a property consultant who declined to be named. “With collective sales, developers are actually bidding against the owners, especially if their price expectations are high.”

 

ABSD penalty
Another obstacle that developers buying collective sale sites face is the requirement to complete construction and sell all the units in the project within five years of the site acquisition, to qualify for a remission on the additional buyer’s stamp duty of 15%. “Whether the project has five, 500 or 1,500 units, the developer has to complete the development and sell out the units within five years to be entitled to a remission on the ABSD,” says a property consultant who declined to be named. “There’s no extension for the sale period for bigger sites with more units.”

Unlike the collective sale sites, which have had a chequered history with recent failed attempts such as Gilstead Court, Thomson View and Harbour View Gardens, “the GLS sites are beautifully wrapped with planning parameters set up in some detail”, says a property consultant. “For collective sale sites of ageing 99-year leasehold sites, developers have to embark on a lease top-up and there could be hiccups and delays along the way, yet developers have to complete the project and sell within the same time frame.”

Chances of success for 99-year leasehold mega collective sale sites are therefore very slim in the current market, especially with sluggish residential sales, falling prices and rising inventory, say property consultants. However, this has not deterred other ageing condos and privatised HUDC estates from attempting a collective sale. Word on the street is that privatised HDUC estate Tampines Court is exploring a collective sale. The last time it attempted that was during the property boom of 2007, but the sale lapsed the following year. The HUDC estate at Potong Pasir Avenue 1, which was privatised last year, is also said to be embarking on a collective sale exercise.

 

‘Ambitious’ Normanton Park
Perhaps the most ambitious collective sale site on the market right now is Normanton Park, launched on Oct 21. Mount Everest, a boutique firm handling the sale of land and buildings in Singapore and abroad, such as in Japan and Cambodia, is marketing the property.

Normanton Park sits on a sprawling 99-year leasehold site of 667,368 sq ft and a plot ratio of 2.1. The residential project was built by the Singapore Armed Forces (SAF) to house its personnel and their families. The proprietary owners subsequently purchased the common property and successfully applied for conversion to a full-fledged private strata-titled condo under the Land Titles (Strata) Act.

According to Dillon Loi, project consultant for Mount Everest who is handling the collective sale of Normanton Park, it took just three months to gather the minimum 80% consensus from the owners of the 488 units at Normanton Park to proceed with the collective sale. The site has a price tag of $840 million. The differential premium for topping up the lease to a fresh 99 years and intensification of land use works out to an estimated $400 million. That would mean the land cost is around $888 psf ppr.

Loi estimates that the breakeven price could work out to be around $1,200 to $1,300 psf, which would bring the selling price for the new project to the range of $1,400 to $1,500 psf. “We’re one step ahead of the rest,” he says. “We have institutional investors who are willing to come on board and take an equity stake — whether the price of the site is $500 million or $1 billion. What they want is to form a joint venture with a developer on the project.”

Loi says the uniqueness of the Normanton Park site is that it is on the border of Kent Ridge Park, and is surrounded by greenery. The estate is also a two-minute drive or just one bus-stop ride from the Kent Ridge MRT Station on the Circle Line. Given the size of Normanton Park’s site, it can be redeveloped into a brand new residential project with 1,388 units, assuming an average unit size of 1,000 sq ft. The tender for the collective sale at Normanton Park will close next Jan 19.

A short drive from Normanton Park is The Interlace, a redevelopment of the former Gillman Heights HUDC estate. The 1,040-unit, 99-year leasehold The Interlace was completed in 2013 and, over the last two months, units have changed hands at prices ranging from $845 to $1,237 psf, based on caveats lodged with URA Realis.

 

Normanton Park site is on the border of Kent Ridge Park, and is surrounded by greenery

 

Bigger sites, higher risks
Most of the GLS sites can yield 400 to 700 units. However, there were several launches of adjoining sites last year where the same developer won both plots. Examples include Kingsford Waterbay at Upper Serangoon View, with 1,165 units launched in February this year; MCL Land’s 1,327-unit Sol Acres executive condo in Choa Chu Kang, which was launched in August; and High Park Residences on Fernvale Road with 1,390 units, launched in July.

Developed by a consortium comprising Chip Eng Seng Corp, Heeton Holdings and KSH Holdings, High Park Residences saw close to 1,100 units snapped up at its launch weekend. The project is now close to 90% sold, with the latest median price achieved at $941 psf as at end- September. “That defies what’s going on in the market,” says a property industry veteran. “If you can repeat the success of High Park Residences, you would be bold enough to try one of these big [collective sale] sites.”

Why are there more such mega collective sale sites being launched on the market? “The collective sale process takes six to 12 months [as it involves] trying to get 80% of the owners to agree to the sale,” says Suzie Mok, senior director of investment sales at Savills Singapore. “The sale period is also for 12 months.” Collective sale owners are therefore taking the view that the unsold inventory would be cleared over the next few years by the time the new project on the site is launched. And that means, developers will be looking to replenish their land bank now, she adds.

Michael French, managing director of boutique realtor Asia Premier Property Consultants, the marketing agency for Amber Park’s collective sale, says it took him almost a year to obtain the consensus of 80% of the owners. The owners’ signatures have to be witnessed by a lawyer; sometimes, that meant he had to be there at 10pm or 11pm. Many of the owners of units at Amber Park are also living abroad, he adds.

“That’s why the bigger real estate agencies are reluctant to take on big collective sale sites,” laments French. “Even the lawyers are reluctant to take them on, unless the marketing agent can assure them that they can secure 80% of the signatories. That’s because we have to bear all the out-of-pocket expenses, including resources and time.”

 

Going against the clock
Amber Park is a 200-unit private condo sitting on a freehold site of 213,676 sq ft, with a plot ratio of 2.8. It was put up for collective sale in June this year with a price tag of $744 million, which translates into $1,225 psf ppr. It was the third collective sale attempt by the owners in the 30-year-old private condo. The two previous attempts were in 2009 and 2011.

When the tender for Amber Park closed in July, there was interest from a handful of developers, says French. However, their bids were in the range of $1,050 to $1,100 psf ppr, below the asking price. Therefore, the owners of Amber Park are planning a fourth collective sale attempt and will launch the site for sale next January. The price tag remains unchanged at $744 million, says French.

The breakeven price for the developer buying Amber Park would be around $1,600 psf. Assuming an average unit size of 700 sq ft, the new development will contain about 600 to 700 units, estimates French. “As long as the government continues to pump new sites through the GLS, developers won’t be looking at private land or collective sale sites,” he says.

 

City fringe in the limelight
Many of the recent collective sale sites such as Amber Park, Normanton Park and Shunfu Ville are located in the Rest of Central Region or city-fringe area. So are many of the new launches being rolled out from now until the end of the year. Besides Thomson Impressions, there is also the 663-unit Principal Garden at Prince Charles Crescent, which will be launched this weekend. The project by UOL Group and Kheng Leong has an average selling price of $1,600 psf, which is said to be lower than the selling prices of other projects in the Alexandra/Prince Charles neighbourhood.

Another launch in the RCR scheduled before year-end is MCC Land’s mixed-use project with 731 residential units and commercial units for sale, which is integrated with the Potong Pasir MRT station.

Other upcoming launches in the RCR over the next 15 to 18 months include a 306-unit condo development on Sturdee Road by Sustained Land, a 535-unit project in Toa Payoh by a consortium made up of Evia Real Estate, Maxdin Pte Ltd and Gamuda Bhd, and a 645-unit condo project on Dundee Road by Hao Yuan Realty.

The 3,608 units to be launched in the RCR in the next 15 to 18 months exceed the 2,710 mass-market condos in the OCR and the 1,193 prime condos in the CCR over the same period.

However, in terms of completed units between now and 2018, the segment with the most number of units is the Outer Central Region, property consultants says. About 60% of the 63,469 residential units projected to be completed are in the OCR. Units in RCR and CCR projects make up 25% and 15% respectively of the total number.

Based on the URA private property price index, the market segment that has seen the biggest price correction has been the RCR, which is down 8.6% since the peak of 3Q2013, and 5.2% y-o-y. The CCR has seen a correction of 8.2% and 3.1% y-o-y since. As for the OCR, prices have fallen 6.7% since the peak of two years ago, and 4.6% y-o-y (see table).

 

URA Residential Price Index

  ALL RESIDENTIAL CORE CENTRAL REGION REST OF CENTRAL REGION OUTSIDE CENTRAL REGION
3Q2013* 154.6 140.5 154.2 170.9
3Q2014 148.6 133.1 148.6 167
4Q2014 147 131.9 146.6 165.6
1Q2015 145.5 131.4 144.1 163.8
2Q2015 144.2 130.6 143.2 162
3Q2015 142.3 129 140.9 159.4
Q-o-q change -0.013 -0.012 -0.016 -0.016
Y-o-y change -0.042 -0.031 -0.052 -0.046
Change since peak in 3Q2013 -0.08 -0.082 -0.086 -0.067

*Peak of the market

 

Expected residential completions as at 3Q2015

YEAR

TOTAL

CCR

RCR

OCR

1Q-3Q2015

13,589

2,104

2,532

8,953

4Q2015E

5,388

407

993

3,988

2016E

22,351

3,624

6,493

12,234

2017E

14,312

2,817

3,496

7,999

2018E

7,829

603

2,451

4,775

Total

63,469

9,555

15,965

37,949

 

Prices have fallen the most in the RCR because the projects are rather “a mixed bag”, ranging from freehold residential blocks and 99-year leasehold developments, says Nicholas Mak, executive director of research and consultancy at SLP International.

Many of the projects launched in the RCR at the peak of the market were also shoebox units for which the price psf was relatively high although the absolute prices were bite-size. “As there are fewer of such projects, with predominantly shoebox units being launched and therefore fewer units sold, it appears that prices in the RCR have fallen further compared with the other two regions,” says Mak.

 

‘Stuck in limbo’
According to French, “High-end condos will continue to be stuck in limbo if the government doesn’t remove any of the property cooling measures. Buyers in the CCR and OCR are hit by the ABSD and the total debt servicing ratio (TDSR), regardless of the absolute price of a unit. It’s like the CCR is having to pay the price for the ramp-up in supply of mass-market housing.”

Appetite for residential property has also been reduced, especially with investors sitting on the sidelines, and only genuine home buyers on the market. New private home sales for the first nine months of 2015 amounted to 5,936 units. This is almost on a par with the 5,940 units sold in the first three quarters of last year, says Ong Teck Hui, JLL’s national director of research. He expects 2015 could end with developer sales of around 7,000 units, just slightly below the 7,316 units sold last year. In 2013, new home sales was about double the volume at about 15,000 units. At the peak in 2012, a total of 22,197 units were sold.

The five-year limit to complete a development and sell it or pay a hefty ABSD may have curbed developers’ appetite for big collective sale sites given the sluggish new home sales. There is likely to be more interest in smaller collective sale sites, Savills’ Mok notes. “We’re sourcing for sites in the ballpark of $30 million to $80 million, where a developer can build a new project of 20 to 30 units. Developers are more confident about selling out a 20- to 30-unit project than a 500-unit one over five years.”

 

Extension for voluntary conservation
Taking an alternative route to collective sale is the majority of the owners at Pearl Bank Apartments. After three failed collective sale attempts, they have opted for voluntary conservation. Last week, the liaison committee announced that they had received a six-month extension from URA to achieve a 100% consensus from all 288 owners to embark on a voluntary conservation of the residential block.

The committee now has until April 30, 2016, instead of Oct 31, 2015 to convince the remaining 28 owners to agree to the proposal. So far, about 90% of the owners have agreed. Besides conservation status for the building, homeowners hope to get approval for additional GFA to develop another residential tower at its current car park complex. With the sale of this additional GFA to a developer, the proceeds can be used to fund the estimated $28 million required to retro fit the existing building.

Liaison committee chairman Dr Lee Seng Teik says they are appealing to the Ministry of National Development for approval to reduce the consensus from 100% to 80%, which is on a par with the requirement for a collective sale. A URA spokesperson says the appeal is being reviewed.

If Pearl Bank’s voluntary conservation is successful, it could herald a new chapter in property renewal, and an alternative route to collective sales for other ageing condos in Singapore.

 

This article appeared in the City & Country of Issue 701 (Nov 2, 2015) of The Edge Singapore. 

 

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Normanton Park condo up for collective sale at $840 million

Normanton Park condo up for collective sale at $840 million

Normanton Park, a 488-unit condominium fronted by Kent Ridge Park, will be put up for collective sale. The reserve price is understood to be in the region of $840 million, excluding an estimated $300 million payable to the state to maximise the gross plot ratio and to top up the lease to 99 years.

Normanton Park sits on 667,000 sq ft site with a plot ratio of 2.1 based on the Urban Redevelopment Authority’s Master Plan 2014. The site has a balance lease of 61 years. Excluding the $300 million premium, the reserve price would work out to around $600 psf ppr.

Future development on the site can be built up to 24 storeys, according to a statement by Mount Everest Properties which is marketing the property. The site could yield 1,388 units based on an average unit size of 1,000 sq ft.

Each owner stands to pocket between $1.6 million and $1.7 million if the collective sale is successful. The project is said to be the first and only residential site in Singapore designated for the Singapore Armed Forces personnel and their families. The subsidiary proprietors subsequently purchased the common property and successfully applied for conversion to a full-fledged private strata-titled condominium under the Land Titles (Strata) Act.

Tender for Normanton Park will close on January 19, 2016.

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