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Investors seen buying bungalows for potential capital appreciation

TEN good class bungalows (GCBs) were sold in the first six weeks of this year. The prices were good too, with one particular $10 million bungalow in Ladyhill Road going for $662 psf.

To be classified as a GCB, the plot size must be at least 1,400 square metres - or 15,064 square feet.

Jones Lang LaSalle’s head of research (South Asia), Chua Yang Liang, said that the average GCB price for the whole of 2005 was $375 psf, while for the second half of 2005 alone, it was $394 psf.

With the latest recorded transactions for this year, the average price for GCBs has gone up to $476, an increase of 20 per cent over the figure for the second half of last year.

Dr Chua believes some investors are buying the bungalows not for their rental returns but for their potential capital appreciation.

‘While we do not have the absolute number of these buyers, the general market sense is that these are mostly older individuals who believe in holding properties for long-term capital appreciation,’ he said.

‘I have even heard of older buyers who hold a bundle of such properties that they started collecting some 15 years ago.’

Dr Chua said that the rental revenues from GCBs are generally low. Tenants are usually high net worth individuals, corporations or foreign embassies.

‘The risk of these properties are generally low and the returns are reflective of this risk,’ he said.

The level of speculation in GCBs may not be as high as in other property segments but there does appear to be some. Dr Chua said he has come across a large GCB property in Swettenham Road that had been ‘flipped’ three times last year with the price going up each time.

‘There are substantially more transactions involving GCBs with large land area since these properties generally can be sub-divided into smaller GCB lots fetching prices within the range that is most affordable for new entrants to the market,’ he said.

‘Fifteen per cent of GCB transactions in 2005 were of large property parcels that are capable of subdivision.’

And there could be an increase in foreigners buying too. According to caveats lodged, 15 per cent of the buyers of GCBs were permanent residents.

Dr Chua believes the proportion of foreign buyers could rise.

‘Coupled with the recent relaxation of foreign ownership of landed homes in Singapore, foreigners with Land Approval Dealing Unit approvals will be expected to fuel the increase in demand for GCB plots,’ he said.

Source : Business Times - 23 Mar 2006

It intends to use the space - 3 floors of John Hancock Tower - as its new premises in S’pore

SAMUDERA Shipping Line is buying three floors of prime freehold office space at the John Hancock Tower at Raffles Quay for $39.8 million, the company announced yesterday.

The feeder shipping operator said in a statement last night that it had entered into three option agreements to buy the 23rd, 24th and 25th floors of the building - covering a total floor area of some 30,000 sq ft - together with wholly owned subsidiary Foremost Maritime.

The deal, said to have been brokered by Colliers International, is expected to be completed on July 10. Samudera said the purchase would be funded by bank borrowings and internal resources.

In its announcement, the company - which is part of the Samudera Indonesia transportation group - said it intended to use the office space as its new premises in Singapore. Samudera’s current registered office in Singapore is on the sixth floor of Anson House on Anson Road.

‘(We) believe that the properties would cater for the long-term needs of the group and any future expansion business. Pending full utilisation of the properties, the group may lease any surplus space to third parties,’ said the statement.

Samudera’s current premises are on short-term leases, it added. ‘(We) believe that it would be beneficial for the group to own its offices as this would minimise future relocation costs and the effects of rental fluctuations.’

‘In addition, given the prime location of the properties, (we) also believe that the proposed acquisitions would be viable long-term investments,’ it said.

Samudera has already paid $398,000 or one per cent of the total price to secure the options to buy the properties, pending various legal and regulatory approvals.

The deal is also subject to approval by the investment committee of Asian Property Partners, of which the property vendor - Hancock Ltd - is an indirect subsidiary. Upon exercising the options - which expire on April 5 - Samudera will need to pay a further 9 per cent or $3.6 million to secure the properties.

The price tag of $39.8 million represents about 14 per cent of Samudera’s market capitalisation of $285.7 million, based on its closing share price of 53 cents yesterday, half a cent up from Tuesday.

Source : Business Times - 23 Mar 2006

BEVERLY Mai, a 32-year-old residential development in Tomlinson Road, is up for collective en bloc sale by public tender. And the price tag: $238 million.

Jeremy Lake, executive director, investment properties at CB Richard Ellis, which is also the marketing consultants, pointed out that the site is across the street from the upcoming St Regis Residences.

He said that St Regis is expected to fetch close to $2,600 per square foot.

‘The upcoming launch of St Regis is creating a buzz in the area. That, coupled with a clear, unobstructed view of One Tree Hill, makes Beverly Mai an attractive site.’

At $238 million, the price of the site based on its plot ratio of 2.8 is $1,184 psf per plot ratio, inclusive of an estimated development charge of $16.8 million.

In August 2005, a unit was sold for $2.5 million. Before this, the highest price was $1.79 million in March 2004. If the asking price is achieved, owners of the 52-unit development stand to make up to a 60 per cent premium or $4.4 million per unit.

The 76,888 sq ft site can be developed up to 36-storeys and have up to 107 units if each is 2,000 sq ft. The breakeven price for the future development is expected to be $1,550 psf.

Also for sale, but in a vastly different price bracket, is Sunshine Regency. This new freehold development on Rambai Road in the East Coast, developed by Fragrance Homes, will be launched this weekend at an average $554 psf.

The marketing consultant is Real ONE International and it says a range of unit sizes from one to four bedrooms (452 sq ft to 603 sq ft) are being offered with the smallest unit starting at $361,000.

Source : Business Times - 23 Mar 2006

Instead of cash for their homes, owners get a unit in new project

A COMMON bugbear for property owners selling en bloc is the difficulty they have finding a replacement property of the same size in the same location with their proceeds.

But the 20 owners of the freehold Paterson Lodge unanimously agreed on an answer. In a unique deal with a subsidiary of listed holding company Ace Dynamics, they will not be paid in cash for their units. Instead, they will get a new unit in the project that will go up on their land.

What’s more, it will be slightly bigger than their old unit, on the same floor and facing the same view.

What makes the deal different from a handful of similar cases in the 1990s - like Eng Kong Green and Char Yong Gardens - is that the land on which Paterson Lodge stands will not be transferred to the developer until the new project is completed and the existing owners have received titles to their new apartments.

This is to protect the owners in case the developer goes bust.

In the meantime, the owners have given the developer power of attorney so it can proceed with the 35-unit project.

Apart from the 20 exchange units that Ace Dynamics must give the owners, it can sell the remaining 15 units.

It took the existing owners of Paterson Lodge almost two years to iron out the deal, working with Ace Dynamics, property agent Knight Frank and real estate lawyer SK Phang of Phang & Co.

‘An exchange like this requires the unanimous consent of owners,’ said Knight Frank executive director Foo Suan Peng.

‘This means it is easier to replicate this collective exchange in estates with a smaller number of units, and very importantly, where owners are very comfortable with one another and cooperative. This isn’t a mere financial deal where owners walk away and need not see their neighbours again.’

Ace Dynamics executive director Lim How Boon said: ‘Not a single cent changed hands. And the owners get back the chance to stay in their units.’

Paterson Lodge sales committee chairman Quah Soo Gee said that the collective sale exchange allows all the owners to keep their prestigious address, besides significantly improving the value of their units.

Although three-quarters of the owners do not live in the development, they liked the deal as the rental value of the new apartments will be higher than that of the old ones they’re giving up, said Mr Quah, an architect by training.

Agreeing with this, fellow sales committee member John Cunningham, who has owned his unit for about five years, described the collective exchange as an ‘entrepreneurial solution’ for owners who like living in the same area after they’ve done an en bloc sale.

‘It is a nice exchange. We’re getting back much nicer apartments than the units we exchanged in a nicer environment and with facilities,’ said Mr Cunningham, creative director of ACTs of Life, which conducts speech, dance and arts classes and workshops.

‘If I don’t do an exchange, it (my apartment) is going to be sold out from under me and I won’t be able to live in this area - even if I screamed all the way to the STB (Strata Titles Board). This is the better of two evils.’

This is how the deal was structured. The existing 20 units in six-storey Paterson Lodge comprise 10 apartments of 743 sq ft and 10 others of 926 sq ft. The new Paterson Lodge that Ace Dynamics will build will be a 10-storey development with 35 units ranging in size from 861 sq ft to 1,033 sq ft.

Ace Dynamics will have to pay a development charge of about $4 million for the right to enhance the use of the site by building a new project with a gross floor area (GFA) of 32,472 sq ft - about 57 per cent more than the existing GFA.

On the top floor will be three penthouses. The project will also have a swimming pool, jacuzzi, gym and BBQ pits - none of which are present at today’s Paterson Lodge.

The current values of the existing apartments range from $630,000 to $800,000. The new units, assuming a price of $1,200 psf on average currently, will be worth about $1 million to $1.24 million.

Assuming prime district residential property prices escalate to $1,700 psf in two to three years, when units in the redeveloped project are handed over to the owners, the replacement units could be worth $1.5 million to $1.8 million, says Knight Frank.

‘This works out to a collective exchange premium of at least 100 per cent for the owners,’ said Mr Foo.

The advantage to the developer is that it does not have to fork out a large amount of money to buy the land upfront, thus saving on finance costs and cash flow.

It basically only pays for the construction cost and fees.

Lawyer SK Phang said the Paterson Lodge deal is the first collective exchange since en bloc rules were amended in late 1999 to allow collective sales without unanimous approval. ‘However, for a deal like this to go through, you have to get unanimous approval, otherwise it gets messy.’

Current en bloc sale legislation provides that minority owners who object to a collective sale must be given a cash payment option. To determine the cash price, the most transparent method is to hold a tender and use the highest bid as the basis. However, the top bidder may not want to do an exchange, and may be unhappy if his bid is used only to serve as a pricing peg for another developer to do an exchange, Dr Phang explained.

Hence, collective exchanges are best in developments with a relatively small number of like-minded owners.

Ace Dynamics’ Mr Lim said his company is looking at other such deals in prime areas.

Source : Business Times - 23 Mar 2006

DEVELOPERS or even large families and groups of friends are being offered a rare chance to buy into an area touted as Singapore’s most prestigious.

The Nassim Road apartment block, currently being redeveloped, is expected to sell for more than $30 million. It is being sold in one go, not as separate units.

Nassim Gardens, a three-storey block comprising 10 apartments with a swimming pool, is being put up for tender by a private investor.

Property consultant Credo Real Estate has been appointed to market the site. ‘Nassim Road is easily the most coveted residential address in Singapore,’ said Mr Karamjit Singh, executive director of Credo Real Estate.

‘Anyone in the society’s super league would know it, which is why in our press advertisements, we do not bother showing its location map!’ he quipped.

The block is made up of two- and three-bedroom apartments with sizes ranging from 125 sq m to 182 sq m.

The property along Nassim Road has a total land area of about 45,000 sq ft, and is expected to sell for over $30 million, which works out to $666 to $711 per sq ft (psf).

In August 2003, a bungalow plot at Nassim Road was sold for as high as $647 psf.

The current owner left the refurbishment work on the apartments incomplete about a year ago, but has now decided to sell it as market sentiment is picking up, said Mr Singh.

As the apartment block is located in a Good Class Bungalow (GCB) neighbourhood, the buyer can either refurbish the block or redevelop the site by building GCBs.

If the buyer chooses to complete the refurbishment work, the cost would be $2 million to $3 million and the total strata area would be about 19,000 sq ft, said Mr Singh.

‘On this basis, even a developer would find this project a very lucrative proposition, given that the high-end residential market is expected to surpass past record levels,’ he said.

After the apartments are refurbished, the new owners may be able to sell them for between $2,100 and $2,200 psf, he added.

Indeed, the sale is expected to better the performance of recent successful tenders for prime redevelopment sites at Eng Lok Mansion at Napier Road and Angullia Mansion at Angullia Park. Angullia Mansion, for instance, was sold last month to Far East Organization, for about $1,060 psf per plot ratio including the development charge.

Mr Singh expects interested buyers to be foreigners or large families and individuals who may team up to bid for the whole block.

The tender for Nassim Gardens closes at 3pm on April 28.

Source : Straits Times - 20 Mar 2006