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YET another group of homeowners has jumped on the collective sale bandwagon. This time it’s the folks at Charlton Garden.

They are collectively asking for about $23 million for their property. Charlton Garden has a site area of 49,471 square feet and a plot ratio of 1.4, with a three-storey mixed-land use residential zoning, according to the Urban Redevelopment Authority’s Master Plan 2003.

Located along Charlton Lane, it has double frontages onto Charlton Lane and Upper Serangoon Road. The site is also close to the Kovan MRT Station.

At $23 million, the price works out to $360 per square foot per plot ratio, including an estimated development charge of $2 million. Each of the owners in the development is expected to get about $1.1 million if the sale goes through, which is 30 to 40 per cent above current value, said DTZ Debenham Tie Leung, the project’s marketing agent.

Charlton Garden currently is a four-storey walk-up development with 18 apartments, DTZ said. It is also the owners’ first attempt at a collective sale.

DTZ reckoned that a three-storey cluster housing with facilities could be built at the site, with around 31 units, each at about 2,300 sq ft, with basements and attics.

The tender for Charlton Garden closes on May 18.

Source : Business Times - 17 Apr 2006

LUM Chang Holdings is looking at an estimated 60 per cent profit from a 2001 deal with Singapore Press Holdings (SPH) that included nine bungalows owned by SPH, then worth about $87.5 million.

Five years ago, SPH bought over Lum Chang’s 15 per cent stake in Paragon Shopping Centre and its 50 per cent stake in Promenade. The deal included a swop of properties.

Lum Chang now owns the bungalows and at current prices of around $500 psf for Good Class Bungalows (GCB), the pre-war bungalows which sit on a 291,735 sq ft site in Swettenham Road are worth about $146 million.

A recent GCB transaction in nearby Pierce Road went for $568 psf.

The nine bungalows have been gazetted for conservation but Lum Chang still managed to subdivide the site into 16 Good Class Bungalow (GCB) plots.

Chay Yue Kai, executive director of Lum Chang subsidiary LCD Property Management, says six lots have been sold since they were put on the market last year. These were priced at about $450-500 psf. The most recent transaction in March hit $10 million (including construction costs), and was sold to an Indonesian permanent resident here. The other buyers were all Singaporeans.

Mr Chay says that the remaining 10 lots, which include four houses designed by SCDA Architects, are now ready for sale at about $500 psf. The construction cost for the new houses is not included in the price for the land. Construction cost for each house is expected to be between $2 million and $2.5 million.

Noting that some GCB plots in the Jervois Hill area are being marketed for as much as $600 psf, Mr Chay says he expects Lum Chang’s pricing will help move their properties faster.

Source : Straits Times - 14 Apr 2006

Freehold units’ sales a sign that recovery in high-end property market trickling down

THREE freehold condominium projects that will officially be launched this weekend have already seen good take-up rates at their previews, which analysts view as a sign that the recovery in the high-end property market is finally trickling down.

One Amber at Katong sold 60 per cent of the 280 units it released in a preview last weekend at an average price of $730 per sq ft (psf), while boutique development D’Gallery at Kembangan has sold more than 40 per cent of its 21 units at up to $620 psf since the project was soft launched about a month ago.

Over at Moulmein Rise, 49-unit City Edge has sold a quarter of its units at an average of $800 psf in the five weeks since its soft launch.

These projects are what market watchers call mid-tier developments - freehold condos priced between $600 and $800 psf, located in popular city-fringe areas such as Marine Parade, Thomson Road, Holland Village and Tiong Bahru.

Amid escalating demand for luxury housing and flat prices for cheaper mass-market projects in suburban areas, these mid-market developments have seen prices creep up slowly but steadily.

This is because private home buyers, buoyed by slowly improving sentiment in the market, are becoming more willing to commit to a new home purchase, said

Mr Peter Ow, executive director at Knight Frank.

‘The market has been moving upwards since end-2004,’ he said.

‘People are sensing that the mid-market should be moving faster now, in terms of take-up and pricing, since it’s been slower than expected over the past year. If they don’t want to miss the boat it’s a good time to consider switching to a better home.’

One Amber is particularly noteworthy because the 562-unit project - which sits on the former Maryland Park site and was developed as a joint venture between United Industrial Corporation, SingLand and United Overseas Land - is one of the largest freehold developments to be launched in recent times.

Neighbouring developments like MCL Land’s The Esta have been selling well, with 337 of its 400 units sold since December at between $700 and $730 psf.

Almost all the two-bedroom units released for sale at One Amber were snapped up in the last week at about $700,000 each, said Mr Joseph Tan, residential director at CB Richard Ellis, which is marketing the project.

About 60 to 70 per cent of One Amber buyers plan to occupy their units, with the rest buying for investment purposes. ‘Quite a number’ of the buyers are Indonesian, said Mr Tan.

‘It’s not surprising because Indonesians are familiar with this stretch of Singapore, and there’s still very good demand in this location from home buyers in general.’

Source : Straits Times - 13 Apr 2006

Breakeven cost for a 100-unit condo project would be about $1,100 psf

RIDING on the current upturn in sentiment in the high-end residential market, construction and property group Chip Eng Seng has clinched the freehold Venus Mansion at Peck Hay Road in the Cairnhill area for $123 million in a collective sale.

The price works out to $785 per square foot per plot ratio, using a base line gross floor area (GFA) of 156,669 sq ft. This is the GFA of the existing development, which is slightly higher than the maximum allowed under the Master Plan 2003 plot ratio of 2.8.

The assumption is that Chip Eng Seng’s new condo on the site will be able to retain the GFA of the current development which is about 30 years old.

The breakeven cost of a new condo project for Chip Eng Seng works out to about $1,100 psf, market watchers say. Chip Eng Seng could launch the project next year and should be able to find a ready pool of buyers among parents keen to enrol their sons in the adjacent Anglo-Chinese School (Junior).

It remains to be seen if Chip Eng Seng will take a partner for the project - which it said yesterday was its single largest land purchase to date.

Doing a joint venture would leave the group with more capital to invest in other upmarket residential sites. In 2004, the group bought Quelin Gardens in the Devonshire Road area, for which it later teamed up with Keppel Land, which contributed its neighbouring Parc Devon site. Chip Eng Seng has a 40 per cent stake in the project on the combined site called Ritz Residences. The 157-unit condo is ‘launch-ready’.

Last year, Chip Eng Seng bought a Balmoral Road plot which it will redevelop into a 12-storey project with 35 apartments. This is expected to be launched in the second half of this year. Another project by the group, the 52-unit ShanghaiOne in the River Valley area, is about 75 per cent sold.

As for the Venus Mansion property, the 54,090 sq ft site can be redeveloped into a 20-storey condo with about 100 units, Chip Eng Seng said yesterday.

The owners of the existing 41 units in the 22-storey block will receive $3 million per unit, which represents a collective sale premium of more than 40 per cent, said Knight Frank, which brokered the sale through a private treaty deal.

Venus Mansion’s en bloc sale will be subject to approval by the Strata Titles Board unless the minority who are objecting to the deal decide to join in.

No development charge (DC) is payable for Venus Mansion. Last month, Bukit Sembawang bought the nearby Vermont for $750 psf per plot ratio including DC. All eyes in the area are now on the tender for Hilltops Apartments, which closes on April 19.

Source : Business Times - 11 Apr 2006

THE office market has moved beyond the recovery phase and into a strengthening mode, a phase that has every sign of being sustainable for a number of years provided Singapore’s strong economic performance continues. Occupancy levels are healthy across most segments of the office market and look set to increase off buoyant tenant demand. Rents are poised to rise at a faster pace, reversing almost 10 years of deflationary office rents and prices, save the short-lived spike of dotcom 2000.

This seems a far cry from the doom and gloom that hung over the office market only a couple of years back. So what has happened and what makes us so confident in the outlook for this sector? We observed the first signs of the office market stirring in late 2003 when a selected number of CBRE’s investment bank clients indicated that they were gearing up for a modest increase in headcount. This was exciting enough after the sector had just endured three desperately thin years of tenant demand, but when we also started to field inquiries from a number of MNCs considering global offshoring projects, recovery of the office market became a distinct possibility.

While the increased demand was led by the financial sector, in particular the growth in private equity and investment banking, the IT sector followed closely behind. In due course occupier expansion become broadbased.

Back in 2003 the average prime office rent was $4 per sq ft per month (equivalent to 1985 levels). Some even thought this might sink lower. So, more than a few eyebrows were raised when we made a call that office rents would rise 50 per cent in the following three years. With the average prime rent at $5.50 psf per month (+38 per cent) currently, the questions now are just how far rents can climb from here, and, will they return to the peak levels of the mid-1990s? It is my view that rents will increase a fair bit further and quite possibly hit their previous peak.

Today’s rent level is some 13 per cent below the last 10 years’ average prime rent and 40 per cent below the 1997 level. It seems there is ample room for further rental growth. Let’s have a look at some of the key reasons.

Most importantly, there is extremely limited new office supply in the pipeline. We estimate that there are only 3.55 million sq ft of known new office construction up to 2010. This is only about 41 per cent of what would typically be expected to be completed over this period. And no less than 76 per cent of the total new office supply is tied up in two major developments: One Raffles Quay (ORQ) and the Business and Finance Centre (BFC). The 1.3 million sq ft ORQ is already approaching a staggering 80 per cent pre-commitment in advance of its phased completion in April and October this year while the BFC’s 1.4 million sq ft space will not be ready until 2010.

If we assume that office demand continues at an average of 1.5 million sq ft per annum (roughly in line with the past 10 years), then there will be a shortfall of around 3.95 million sq ft through to 2010. This will result in occupancy levels islandwide rising above 92 per cent, which happens to be the occupancy levels in the mid-1990s. Of even more significance is that Grade A buildings could have virtually zero vacancy by 2008/09 pending the arrival of the BFC.

Another factor which may help maintain rental growth momentum is that Singapore is relatively cheap for office space. Rents can rise significantly without the city becoming uncompetitive. Singapore had slipped to the 63rd position in terms of occupancy costs in our latest Global Market Rents survey. It ranks well below Sydney (44th), Shanghai (43rd in Pudong and 47th in Puxi), Beijing (60th), not to mention Hong Kong which has moved up to eighth position. A multinational that wishes to lease the best office space in Hong Kong Central or in Tokyo will need to budget for 2.5 times and 3.5 times respectively more than the rent required in Singapore.

Taking account of both internal and external office market data, we have raised our market rent forecasts for Singapore for the second time in six months. Barring any external shock, we can see average prime rents increasing by 50 per cent from today’s level through to 2008-09. This would deliver average prime rents above $8 psf per month. Don’t be surprised, however, if rents start to test the historic peak of $10 psf per month, particularly for the best quality buildings. This is an outlook for about three years hence. The following are a few trends to look out for:

Consolidation of prime CBD: One Raffles Quay and the BFC will be the largest concentration of Grade A space. While we expect the volume of large tenant relocations within the CBD to tail off over the next few years due to the absence of any sizeable new developments, the BFC seems well placed to catch the next wave of major tenant movement by the end of the decade.

Renewed interest in business parks: As larger occupiers’ premises options become increasingly constrained, it is possible that some will relook the opportunities available in business parks including build-to-suit. Interest could develop further as Singapore’s office rent base increases. The rent delta between prime CBD and the business parks is typically 50 to 60 per cent. In a low rent regime, this translates to a saving of just $1.50 to $2.50 psf per month by going to a business park. There have been few takers for this type of move over the past few years when CBD space was cheap and plentiful. Two to three years out, the rationale for decentralisation could be pretty persuasive.

More back office set-ups: Contributions will come from two drivers. Firstly, further global offshoring investment coming into Singapore. We are currently advising many multinationals moving operations to Singapore from higher cost locations. To give a sense of scale, these set-ups could bring in up to 2,000 more high-end jobs.

Secondly, existing large occupiers in the CBD may need to split operations as they run out of space for front office departments. We have seen a number of banks moving support functions out of town to free up space to accommodate growth of private equity and corporate banking. The implications for the office market include likely increased demand for fringe and decentralised buildings, early pre-commitments to the decentralised developments in the pipeline and more activity in business parks.

Land release: This is perhaps the million sq ft question. The planners will be mindful that developers and landlords have had a fairly torrid run since 1997. It is not, therefore, unreasonable for the property sector players to be allowed a period of improved returns. As noted earlier, the office cost base in Singapore can move upwards without impacting the city’s competitiveness. To this extent, we would expect the Urban Redevelopment Authority to be prudent in any land release programme. In the short term, the focus might fall on a few decentralised sites.

The writer is executive director, office services, CB Richard Ellis

Source : Business Times - 11 Apr 2006