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Site is first privatised HUDC estate to be sold en bloc

FAR East Organization has made its first residential land acquisition in Singapore’s private sector since the property market peak in 1996-97.

It has bought Amberville at Katong - making it the first privatised HUDC estate to be sold in a collective sale - for $183 million.

This works out to a higher-than-expected $396 per square foot per plot ratio inclusive of an estimated development charge of $35.2 million and $23.8 million to top up the site’s lease from the remaining 71 years to the original 99 years.

Market watchers see Far East’s move - after such a long absence from the private residential scene - as significant.

‘The giant has finally woken up,’ says Knight Frank executive director Foo Suan Peng, whose firm brokered the Amberville sale. ‘It’s an indication from an experienced developer monitoring the market for some time that the current recovery will be for real - not short-lived like we saw in 1999.’

Owners in other HUDC privatised estates will no doubt be hoping that the Amberville purchase will boost their chances of en bloc sales too.

Two sites are currently on the market - Minton Rise at Hougang and Waterfront View, which faces Bedok Reservoir. Several others are in various stages of preparation including Pine Grove, Gillman Heights and Farrer Court.

The owners’ chances of success will depend on two key factors, besides setting realistic asking prices, says Mr Foo. ‘Number one, how prime the location is. And number two, the size of the site. Many former HUDC estates are on huge sites that could generate 1,000 or more new apartments upon redevelopment. Developers may not want to put all their eggs in one basket, in one location.’

The 218,435 sq ft Amberville site can be redeveloped into a new condo of at least 20 storeys, with around 530 units averaging 1,200 sq ft.

Far East’s breakeven cost is likely to be around $600 psf, observers say.

The site is zoned for residential use with a 2.8 plot ratio - the ratio of potential maximum gross floor area to land area.

The new condo will boast unblocked views of the sea, and the site is next to a foot tunnel that connects with the beach.

The tender for Amberville had attracted four bids when it closed on Tuesday this week. Far East’s offer was the highest.

The other contenders were City Developments, MCL Land and Wing Tai, sources say.

The owners of Amberville’s existing 168 apartments will each receive $1.09 million on average - at least 85 per cent more than what their units would have fetched had they been sold individually.

The sale to Far East is subject to several conditions - including confirmation of the baseline gross floor area, the buyer obtaining outline planning permission for a residential development with a 2.8 plot ratio, in-principle approval from Singapore Land Authority to top up the lease to 99 years, and the nod from the Strata Titles Board.

Source : Business Times - 19 Jan 2006

THE Somerset area looks set to become hot property. Prices for en bloc redevelopment sites there will be closely watched, especially now that the latest land sales exercise by the Urban Redevelopment Authority (URA) at Orchard Road/Killiney Road has received a record bid of $1,085 per square foot per plot ratio.

Chez Bright Apartments at 18 St Thomas Walk is the latest property to go on sale in that area. It is marketed by Jones Lang LaSalle, whose regional director and head of investments Lui Seng Fatt believes that any new residential development on the freehold site would be able to sell at $1,500 psf.

The Somerset site is for a mixed development that may include a residential component.

Said Mr Lui: ‘Based on the highest price tendered for the Somerset site, residential units there would have to sell for between $1,700 and $1,800 psf. And these are 99-year leasehold units.’

After factoring in the freehold status of Chez Bright Apartments, and the ‘near prime’ location, Mr Lui said a 15 per cent discount, or $1,500 psf, for the new development on the St Thomas Walk site would not be unreasonable.

The asking price for the 34,402 sq ft Chez Bright site has been set at $61.3 million (including a development charge of $6.3 million) or $640 psf per plot ratio.

The break-even price is around $960-$980 psf.

Five months ago, a larger site also on St Thomas Walk went to Centrepoint Properties for $210 million, or $601 psf per plot ratio.

The present 12-storey apartment block can be developed up to 36 storeys. With a plot ratio of 2.8, the maximum gross floor area is 96,325 sq ft.

There are several new developments in the area already on sale, including Wheelock Properties’ The Cosmopolitan and Guocoland’s Leonie Studios. Still, Mr Lui feels there will be ample demand from foreigners.

‘Foreign investors, especially those from Hong Kong, are looking for this kind of investment grade properties,’ he said.

Source : Business Times - 19 Jan 2006

THE Baywater Collection site at Sentosa Cove has only just been awarded but its new owner, Ho Bee Investment, says it will be ready for launch in the fourth quarter of this year.

Ho Bee general manager (marketing and business development) Chong Hock Chang says prices for the beachfront residential development will be between $1,200 and $1,300 per square foot.

‘It will without a doubt be higher than the earlier projects launched there,’ he says.

Ho Bee bought four other parcels in Sentosa - The Berth By The Cove condo, The Berthside terraced homes, 21 bungalows on Coral Island and 29 on the neighbouring Paradise Island.

Based on the latest data on Singapore Institute of Surveyors and Valuers REALink system, the average price of units at The Berth was about $890 psf in November. REALink data for Centrepoint Properties’ Sentosa Cove property, The Azure, reveal an average price of around $1,100 psf.

Ho Bee says it will build an ‘integrated condominium’ of about 250 units with blocks of six to eight storeys. As the site is elongated, the development is expected to have double frontage to the sea and the waterway.

At 276,467 sq ft, the site, which cost $325.2 million (or $638.62 psf per plot ratio), is the largest of the condominium sites launched at Sentosa Cove. This may explain why Ho Bee has decided to let mainboard-listed Engro Corporation take a 10 per cent stake in Baywater.

Ho Bee says a new company called Ho Bee Cove has been incorporated to see the new development through to completion. Ho Bee Cove will be 90 per cent owned by Ho Bee Investment, with the remainder going to Engro, a cement producer and IT company.

In a separate press statement, Engro said that only Engro chairman/CEO Tan Keng Boon and Ho Bee Group chairman/CEO Chua Thian Poh are directors of both Ho Bee Investment and Engro.

Source : Business Times - 17 Jan 2006

Market looking to see if bids in tomorrow’s tender will top that for Orchard Turn site
THE property market is asking whether tomorrow’s tender for the Glutton’s Square next to Somerset MRT Station and Specialists’ Shopping Centre will fetch a higher bid than the $1,020 per square foot per plot ratio top bid achieved last month for the plum Orchard Turn site.

The answer depends on just what bidders are looking to develop on the latest 99-year leasehold site on Orchard Road, property market watchers say.

Developers planning either a hotel and retail development or an all-retail project would be able to afford to pay more for the Somerset site than those looking to build a residential and retail project, it is understood.

The Urban Redevelopment Authority has specified that at least 60 per cent of the project’s total gross floor area (GFA) of 387,985 sq ft must be set aside for retail, food and beverage or entertainment use.

There is a fair amount of interest in the Somerset site from hoteliers, including Hong Kong’s Park Hotel Group, which last year bought Crown Hotel, also on Orchard Road.

A seasoned property consultant estimates that bidders looking at hotel use for 40 per cent of GFA for the site can impute a unit land value of, say, $1,100 psf per plot ratio (psf ppr) and still get a yield of around 6 per cent from the hotel component.

In contrast, if the same GFA were to be set aside for residential use, the imputed land values would work out to a lower $700 to $800 psf ppr. This is assuming an average selling price for the apartments of about $1,200 psf and $1,320 psf respectively, factoring in a profit margin of about 10 per cent.

Of course, the Somerset site’s successful tenderer can opt to dedicate the entire GFA to retail use, which would again translate to a higher land value than a mix of retail and residential use.

Another factor cited by those who think the Somerset plot will surpass the Orchard Turn plot in terms of unit land price is that the latest plot involves a smaller overall investment. Its GFA of 387,985 sq ft is just under 30 per cent that of the 1.35 million sq ft for the Orchard Turn site.

Assuming the Somerset site fetches the same $1,020 psf ppr as Orchard Turn, the absolute land price works out to $396 million, compared with the whopping $1.38 billion for Orchard Turn.

However, those in the camp which believes the Somerset site’s unit land price is unlikely to match that for Orchard Turn point to basics like location.

‘No matter what, we can’t run away from the fact that the Orchard Turn location, above Orchard MRT station, is superior to Somerset,’ as a developer put it.

CIMB-GK Research analyst Tricia Song also points out that CapitaLand’s bid for Orchard Turn reflects its plan not to have anchor retail tenants, which typically drag down the per square foot average rent in a mall.

‘CapitaLand can do away with the anchor space as the surrounding shopping centres all have strong anchors. This isn’t quite the case in the Somerset location. A mall in this location will need an anchor tenant to draw shoppers,’ she reasons. And that spells lower average retail rents, translating to lower land value.

Centrepoint Properties, Lippo Group, Park Hotel Group, CapitaLand and Far East Organization are among those expected to bid for the Somerset site.

The URA will in March make available for application the present carpark site on the other side of Specialists’ Centre.

The ideal situation is one where both Somerset sites and Specialists’ Centre are under common ownership.

That would pave the way for a massive redevelopment of the location, whose attraction has waned over the years in the face of competition from stronger magnets along Orchard Road such as Ngee Ann City, Paragon and Heeren.

Source : Business Times - 17 Jan 2006

ASCENDAS Reit (A-Reit) has announced its first acquisition of the year. The property is Plot 23 International Business Park, a seven-storey building with a gross floor area of 10,116 sq m, currently being built by LabOne Singapore.

A-Reit says it has entered into a conditional put and call option agreement with LabOne for the property, at a purchase price of $20 million. A spokesman for A-Reit said the sale will be completed when the building is finished in the middle of the year.

In a press statement released yesterday, A-Reit said it would pay $4 million towards the ‘building fitout’ which will be recovered from LabOne over five years including an appropriate return which exceeds A-Reit’s weighted average cost of capital.

It is understood that this is the first time that A-Reit has structured an acquisition this way.

In 2004, when LabOne - which provides one-stop testing and certification services for information technology (IT) and computer peripherals - first announced the development project, it was reported as being worth $25 million.

Philip Pearce, portfolio manager of Ascendas-MGM Funds Management and manager of A-Reit, said: ‘The purchase price has been determined based on our investment criteria evaluation, in consultation with property consultants and taking into consideration the specifications of the property. A formal valuation will be done nearer the completion of the construction of the property.’

He added: ‘The $4 million has been treated as a separate investment with a required rate of return built in.’

Based on the purchase price of $20 million, the pro forma financial effect of the acquisition on A-Reit’s distributable income per unit for the financial year ended March 31, 2005, is expected to be 0.03 cents.

A-Reit says the acquisition may be funded through or new equity or a combination of both.

Upon completion of the property, LabOne will enter into a 10-year lease with A-Reit, with annual stepped rental increases.

LabOne will also pay for maintenance and utilities while A-Reit will pay for land rent, property tax and lease management fee. A-Reit will also incur costs relating to the acquisition amounting to $0.4 million, of which $0.2 million is the acquisition fee payable to the Ascendas-MGM Fund Management.

Source : Business Times - 17 Jan 2006