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MOST of the owners at the 50-unit Pinetree Condominium at Balmoral Park would end up out of pocket if they did a collective sale today, as they had bought their apartments at the peak of the market.

So their property agent Jones Lang LaSalle is proposing a collective deal in which bidders will have to provide an exchange unit in the new project they build on the site to all owners who would suffer a financial loss.

Those who will not incur a loss would have the option of receiving a cash payment from the developer.

Real estate lawyer SK Phang says current en bloc sale legislation provides that in a collective sale where the majority consenting owners are given exchange units in a new development, the minority who object to the sale must be offered a cash payment option. However, the minority still have grounds to object if they suffer a financial loss.

Under the legislation, an owner is deemed to have incurred a financial loss if the sale proceeds, after any deduction allowed by the Strata Titles Board, are less than the price paid for the property.

Another basis for objection by a minority owner to a collective sale is if the sale proceeds are insufficient to redeem the outstanding mortgage on the property.

JLL estimates that the current-day value of an exchange unit in a new development at the Pinetree Condo site would be roughly 30-40 per cent more than what the units in the present condo would fetch if sold individually today.

Owners who want a cash-out option would probably reap a lower collective sale premium of about 25 to 30 per cent. But as a market watcher points out, this premium may not be big enough to erase the financial loss for some of the owners.

Even if the financial-loss cases agree to the exchange option, other hurdles may await them - such as the expense of renting a property while they wait for the new project to be built on the current site. Likewise, owners who are renting out their apartments will have to forego rental income while the property is being redeveloped.

Owners will also have to make arrangements with their bank to roll over the mortgage to the new property, failing which they will have to redeem their existing mortgage.

Still, JLL says its proposal provides an exit opportunity for owners to move on, and that otherwise they may have no feasible way of exiting their investment under current en bloc legislation.

The original developer of Pinetree Condominium, Land Resources Group, still holds a substantial number of the project’s 50 apartments, BT understands. The majority, however, are held by other individuals.

JLL is inviting bidders to take part in an expression-of-interest exercise closing on April 27. They will have to indicate their bids providing at least two options - an exchange unit, and cash for owners who want out.

Bidders are also welcome to list a third option - offering the owners a unit in a completed project by the developer nearby.

‘This is the first time where competitive bids are being invited for a collective sale involving both cash and exchange options,’ said JLL’s regional director and head of investments Lui Seng Fatt.

Pinetree Condo is on a freehold site of 41,361 sq ft, zoned for residential use with 1.6 plot ratio and a 12-storey height limit. Bidders can also offer to buy four adjoining semi-detached houses, which would result in a bigger site of 50,329 sq ft. This would be big enough to house a new development of about 60-70 apartments averaging 1,100 sq ft, JLL says.

Source : Business Times - 30 Mar 2006

THE second commercial site near Somerset MRT Station - made available for application yesterday by the Urban Redevelopment Authority (URA) - is expected to fetch more than the first plot, the former Glutton’s Square site, that was sold to Far East Organization in January for $1,085 per square foot of potential gross floor area.

A property consultant and a developer separately told BT that at most, the top bids for the latest reserve list site, dubbed Somerset Central, could be about 5 per cent higher.

Knight Frank director Nicholas Mak predicts the top few bids will fall within the range of $1,050 to $1,155 psf per plot ratio, working out to total bid quantums of about $445 million to $490 million.

The developer said: ‘This will be the last chance to get a sizeable commercial site along Orchard Road.’

And the property consultant said: ‘At best it will be 5 per cent more than the Glutton’s Square site. Of course, someone can go higher. It depends on how desperately they want this site.’

Most market watchers reckon Far East Organization could be the most motivated bidder for the latest 99-year leasehold site, as it would enable the property giant, which has been on a land buying spree lately, to boost its hold in the Orchard area. Market watchers say the development of the two sites will increase pressure on OCBC to do something about its ageing Specialists Shopping Centre/Hotel Phoenix complex sitting between the sites.

OCBC spokeswoman Koh Ching Ching said yesterday the bank intends to hold its property for long-term investment. ‘The hotel-cum-commercial complex is in need of refurbishment, and it may be appropriate to do so in conjunction with the oncoming developments at the Glutton’s Square and Somerset Central sites,’ she said. ‘We appreciate the vision to inject vibrancy into the Orchard Road area, and we’ll explore possibilities as we find out more about these developments.’

Property observers consider the Somerset Central site’s location to be superior to the Glutton’s Square plot as the former is closer to Somerset Station.

Somerset Central comprises about 0.7ha of land above Somerset Station, is zoned for commercial use and will yield a total gross floor area (GFA) of about 424,205 sq ft. At least 60 per cent of GFA must be for retail, food and beverage or entertainment use. The rest can be for other commercial, hotel or residential use. Most market watchers however expect the successful bidder to build a pure-retail project as a mixed development may entail separate car parks, lifts and entrances - which will eat into the project’s lettable area.

The property consultant pointed to other drawbacks of the latest site which would cap developers’ bids: ‘The Somerset Central site is narrow, and there’s a canal,’ he said. ‘Assuming the developer uses the entire site to build a mall only, he will have no choice but to build upwards. Vertical transport like lifts will impact on efficiency.’ Efficiency refers to the ratio of net lettable area to gross floor area.

Putting things in perspective, the developer said the centre of action along Orchard Road will clearly be the new mall to be developed at the Orchard Turn site, which was awarded in December to CapitaLand and Sun Hung Kai Properties.

The developer of the Somerset Central site will be required to build a deck over part of the Stamford Canal to create an open pedestrian mall lined with shops and outdoor refreshment areas. The developer will also have to provide a walkway at street level, providing pedestrian passage between Orchard and Somerset roads through the building. The Somerset Central site, being on the reserve list, will only be released for tender upon successful application by a developer undertaking to offer a minimum price acceptable to the state. Its award will be solely on price.

A Design Advisory Panel will guide the developer in the project’s design after the tender has been awarded. Singapore Tourism Board is also expected to release soon a short-term lease site next to Faber House.

Source : Business Times - 29 Mar 2006

1,200 units sold out of 1,800 launched; pace put down to developers’ delay

AFTER developers’ sales of private residential properties in the primary market hit a three-year high of 8,955 units last year, things slowed down in the first quarter of this year, according to property consultancy Knight Frank.

About 1,200 private homes were sold, out of an estimated 1,800 launched.

Although the sales number is almost a 50 per cent drop from the final quarter of 2005, Knight Frank is unperturbed. ‘The figure is not alarming because in the past three years, the lowest number of primary market sales for that year was usually recorded in the first quarter,’ it said in a quarterly report.

Knight Frank attributed the slowdown in the number of launches to deliberate holding back by developers as they awaited positive news from February’s Budget.

Three more projects are expected to be launched this weekend. They are: 99-year-leasehold Southbank by United Overseas Land (UOL); One Amber, a freehold property by UIC, SingLand and UOL; and The Chuan, a 999-year leasehold project by Kheng Leong Co.

The secondary market is expected to remain buoyant, even though sales volume in Q1 neared 2,000, a slide from 2,311 units in Q4 2005.

Knight Frank said the movement in the secondary market is not due to speculative activities but ‘the rising number of successful en bloc sales and the active marketing of unsold units in developments that have newly obtained their Temporary Occupation Permit’.

Foreigners are estimated to have comprised about 22 per cent of the total number of private homebuyers in Q1. Indonesians and Malaysians remained the largest bloc, with Chinese, Indian and UK nationals fast expanding their market share.

Knight Frank also found that foreigners who bought properties at prices between half a million and a million dollars are more likely to be permanent residents, while those who spent $1-1.5 million are non-PRs.

Prices of high-end properties went up 3 per cent in the primary market, while those in the secondary market rose 5 per cent. But prices in the mass market segment remained flat.

Knight Frank believes average prices in the private residential market will grow between 4 and 8 per cent in the next 12 months.

The rental market for private residential properties has picked up in the high-end and lifestyle-driven segments, Knight Frank observed. Rents for high-end condos grew between one and 3 per cent quarter on quarter in Q1.

But Knight Frank thinks rents will consolidate in the coming months, as demand is concentrated in properties that are higher-end and higher profile.

For industrial properties, Knight Frank projects rents for conventional space to grow by 2 to 3 per cent for the entire year, while expanding 3 to 4 per cent for high tech space.

Source : Business Times - 29 Mar 2006

HEARTENED by rising property prices, owners of redevelopment property appear to be expecting more from the en bloc sale of their homes the second time around.

Ultra Mansion, a freehold 13-storey apartment building near Novena MRT station, was put on the market late last year but the public tender closed without a sale being made. Now it is back on the market with higher hopes.

Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle, also the marketing consultants for Ultra Mansion, said: ‘Though there were various interested parties from the previous tender which closed last November, the owners decided to benchmark the tender results with Orchard Turn and Glutton Square which subsequently attracted very competitive bids.’

The same property is now being relaunched for sale by ‘expression of interest’, and the starting price is $57 million or about 5 per cent more than was previously expected. Mr Lui added that the owners are looking at a premium of about 60 per cent more than what the units would have fetched individually on the open market.

The 45,512 sq ft site has a plot ratio of 2.8 and can be built up to 36 storeys. The maximum gross floor area is 127,433 sq ft. At $57 million this works out to be $450 psf per plot ratio. The last day for submission of expression of interest is 19 April.

Source : Business Times - 29 Mar 2006

Award delayed as SingTel seeks to reduce premium payable to state

CENTREPOINT Properties has emerged as the highest bidder for SingTel’s former warehouse site on West Coast Road, but its award has been delayed as SingTel is seeking to reduce the amount of differential premium (DP) payable to the state for the change of status of the site, BT understands.

Sources say Centrepoint’s top bid of about $220 per square foot per plot ratio (psf ppr) is inclusive of an estimated $40 million payment to the state.

The payment to the state comprises an estimated $30 million DP for a change in the use of the site from industrial to residential and about $10 million as lease upgrading premium, to top up the site’s lease from the remaining tenure of about 66 years to 99 years.

Provisional approval has been granted for the site to be redeveloped into a 225-unit, five-storey condo, with a 1.4 plot ratio (ratio of potential gross floor area to land area).

Originally, the successful bidder was supposed to make the payment due to the state. However, Centrepoint’s bid is for a lump sum of about $220 psf ppr, which includes the land price payable to SingTel as well as the DP and lease upgrading premium payable to the state. So if SingTel is successful in negotiating a lower DP, Centrepoint will accordingly adjust upwards the land price component it will pay to SingTel.

As a market watcher put it, ‘Either way the total cost to Centrepoint is locked at $220 psf ppr. So if there is a reduction in DP, SingTel will get a higher price for its land. Hence, SingTel has an incentive to try and negotiate the DP downwards.’

Credo Real Estate, which handled the tender for the West Coast site, declined to comment when contacted.

BT understands a similar situation may arise for SingTel’s site at the corner of Hillcrest and Dunearn roads, currently on the market.

Here, the successful bidder will pay the state almost $40 million, comprising a $35 million DP to change the site’s status from ‘utility’ to ‘residential’ and around $5 million for upgrading the property’s lease to 99 years.

In this case, industry watchers say that although the site is currently zoned ‘utility’, the price at which SingTel bought the property - which it has been using as a training centre - worked out to a price that reflected commercial land use at the time. Hence, the DP payable should be calculated on the basis of change of use from commercial to residential and not from utility to residential, goes the argument. The former scenario should result in a substantially lower DP.

Provisional approval has been granted to redevelop the Hillcrest property into 160 strata terrace houses with a 1.4 plot ratio, although market watchers suggest the successful bidder could instead apply to develop a five-storey condo with a 1.4 plot ratio.

Source : Business Times - 28 Mar 2006