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Owners eager to push pending collective sales

They could soon face higher hurdles under new rules aimed at more transparency
Ahead of proposed changes to the Land Titles (Strata) Act, property agents and owners of affected en bloc sites are eager to push pending sales as they may soon face bigger hurdles when the amendments become law.

Changes in en bloc sale legislation, expected to be passed in early October, are aimed at providing more transparency and safeguards to ensure all stakeholders get a fair deal.

But this means owners that want to sell en bloc will have to follow new rules, which could mean higher costs and a prolonged process.

Jones Lang LaSalle’s regional director and head of investments, Lui Seng Fatt, estimated there are some 50 en bloc sites already launched by tender or expression of interest in the market, with about half of these not having obtained consent from owners holding at least 80 per cent of share value. ‘They would have strong incentives to get through. Otherwise, if the new law kicks in… they would have higher hurdles to clear,’ Mr Lui said.

The amendment will mean that the majority consent is to be based on the area of the units in the development. This is in addition to the current requirement for consent from owners holding at least 80 per cent of share values for developments more than 10 years old, or 90 per cent for developments less than 10 years old.

En bloc deals that have not taken the area of units in the development in their definition of majority consent will have to redraft their collective sale agreement (CSA) if they fail to reach the market before the new legislation is passed. ‘If we don’t achieve the 80 per cent consent we’ll have to restart the exercise,’ said Jeremy Lake, executive director of investment properties CB Richard Ellis.

‘That’s extremely time-consuming, so it makes more sense to try to achieve the 80 per cent as quickly as possible. And for projects that are far away from it with no chance of achieving 80 per cent before the legislation sets in, we will have to review the situation.’ Mr Lake said the new legislation will encourage owners who have been ’sitting on the fence’ about selling en bloc to decide sooner rather than later.

CBRE has about five en bloc applications that have not passed the 80 per cent mark, with the level of consent obtained so far averaging 50 per cent. DTZ Debenham Tie Leung revealed that six of the en bloc deals it is handling are at various stages of signature collection, with some close to achieving 80 per cent consent.

Credo Real Estate has seven or eight projects that have not reached 80 per cent. These consultancies said that while the amendments to en bloc sale legislation will enhance clarity and transparency, they will add to costs and slow the pace of sales. For instance, owners will have to spend more hiring lawyers to witness the signing of CSAs and obtaining valuation reports, said Credo managing director Karamjit Singh.

These consultancies have received calls from concerned sellers who want to discuss the implications of the new legislation on existing en bloc procedure. DTZ director Shaun Poh said: ‘We would probably need to reassess the situation right now. For those close to the 80 per cent mark, I would advise them to hold a meeting with our lawyers to discuss the salient points of the new legislation and encourage them to push through the 80 per cent mark.’ For those far from achieving the minimum consent requirement, DTZ will meet sales committees to help them make informed decisions and redraft CSAs if need be.

While there could be a rush to collect signatures for en bloc sites ahead of the changes to the Land Titles Act, this could be followed by a lull as prospective sellers mull over the new en bloc requirements. ‘I think the bottle-neck will clear once this new legislation becomes standard operating procedure but I can see that temporarily, it will slow down the pipeline,’ Mr Lui of JLL said.

Source : Business Times - 29 Aug 2007

Property stocks slip on fears over new rules

Investors worried over impact on land-banking; office market retains shine

RESIDENTIAL property stocks took a beating yesterday as investors got the jitters over tougher en bloc legislation that could slow land-banking.

City Developments slipped 40 cents or 2.6 per cent to $14.70, CapitaLand lost five cents or 0.7 per cent to $7.40 and Keppel Land shed five cents or 0.6 per cent to $7.90.

The counters were hit in a lacklustre market, as the benchmark Straits Times Index slid 45.44 points or 1.3 per cent to 3,343.

CIMB-GK property analyst Donald Chua said property firms were sold on worries the government could take further measures to contain prices.

‘Investors are sitting back to wait and see what policy comes out and how it affects the market,’ he said. ‘But even if you look at the en bloc legislation, it has no real impact on fundamentals.’

Other analysts also said proposed changes to en bloc sale rules are unlikely to have a major impact on developers, with the pace of such sales having already slowed because of higher asking prices.

Winston Liew of OCBC Investment Research said the dispute between en bloc sellers at Horizon Towers and buyers including Hotel Properties Ltd has been a dampener. ‘And these changes to legislation are just further impediments that have been put in place to reduce the rate of en bloc developments.’

OCBC has a ‘hold’ call on CapitaLand and Keppel Land while keeping a ‘buy’ call on City Developments given its exposure to the office market and substantial pre-sold projects that reduce earnings risk.

Some analysts feel the new legislation will not hit developers’ earnings too hard. ‘It’s a tweaking of rules but not very prohibitive,’ said Macquarie Research Equities analyst Soong Tuck Yin said. ‘The pace of land-banking depends more on pricing than the rules.’

CIMB-GK’s Mr Chua said: ‘The property market is still strong and prices for the past half-year have consistently surprised on the upside. But at current levels, we don’t think investors are willing to take much risk, so the bullish view of further physical price appreciation may be halted for the moment.’

He is more upbeat about the office market, with rents expected to keep going up amid the supply crunch. The highest current office rent of about $18.50 per sq ft per month is expected to breach $20 for prime space by this year, Mr Chua said.

He reckons the residential sector is expected to ‘take a step back’ to see whether demand is sustained.

Among developers, he favours those that have aggressively built up landbanks at lower prices, such as Ho Bee Investment and CityDev. He has a ‘buy’ rating on both stocks in view of current low valuations caused by the recent market correction.

Source : Business Times - 29 Aug 2007

FOR the first time in six years, the Urban Redevelopment Authority is offering small sub-divided landed housing plots for sale. It will auction 12 on 99-year leasehold tenure at Sembawang Road/Andrews Avenue on Oct 30.

The plots, in Phase 1 of a new landed housing estate called Sembawang Green, can be developed into a total of 57 homes - 42 terrace houses, 14 semi-detached homes and a bungalow. The sale is aimed at encouraging wider participation by smaller developers and even individuals wanting to build dream homes opposite Sembawang Park and near Sembawang Beach. The approach is similar to that taken by URA for Kew Drive in 1993-1994 and Eastwood Park in 1995-1996, both in the Bedok area, and Chuan Green in 1997-2001. The Sembawang plots range in area from 4,243 sq ft (for a two semi-detached house development), to 43,694 sq ft (for a 23 terrace-home project). All 12 plots can be developed up to three storeys.

Knight Frank director Nicholas Mak expects the terrace plots to fetch $220-250 psf of land area and the semi-detached and bungalow plots around $180-200 psf. These reflect breakeven costs of $870,000 to $930,000 per terrace house, $1.025 million to $1.1 million per semi-D and $1.5-1.6 million per bungalow.

CB Richard Ellis executive director (residential) Joseph Tan expects the terrace plots to fetch $220 to $250 psf of land area, the semi-D plots $240 to $270 psf and the sole bungalow site $260-$300 psf. Based on these bid ranges, the terrace houses could sell for about $1.0-1.1 million, the semi-Ds for $1.4-1.5 million and the bungalow for $2.6-2.8 million, according to Mr Tan.

The plots are next to the established landed housing estates of Straits Garden and Sembawang Straits Estate. URA has already put in infrastructure. A URA spokeswoman said the authority will decide on the number of phases for Sembawang Green and the number of homes in each phase after the auction of the Phase 1 plots.

Source : Business Times - 29 Aug 2007

It offers $237.2m for a 99-year leasehold office plot next to International Plaza

LASALLE Investment Management (LIM) was the top bidder yesterday for a 99-year leasehold commercial plot next to International Plaza, with a bid of $237.2 million or $941 psf of potential gross floor area.

Office Contenders

LIM, which bid on behalf of its LaSalle Asia Opportunity III Fund, is planning a 20-storey office development with about 200,000 sq ft net lettable area. ‘It’ll be a Grade A, ‘Gold Standard’ building,’ said LIM regional director Andrew Heithersay.

LIM managing director (Asia Pacific) Ian Mackie said: ‘We may or may not take a joint venture partner for the development.’ The office development, near Tanjong Pagar MRT station, will target occupiers looking for cheaper accommodation close to downtown, he added. The project may be completed around late 2009.

LIM’s top bid for the 27,281 sq ft plot was 7.8 per cent lower than the $1,021 psf per plot ratio that Mapletree Investments paid for a bigger site across the road last month. The price was lower as the latest site is ‘inferior in shape and size, resulting in an office development with a much smaller floor plate of around 12,000 sq ft - compared with 22,000 sq ft for the earlier site - as well as lower efficiency’, said an analyst.

A Mapletree unit was the second highest bidder at yesterday’s tender, at $800 psf ppr - 15 per cent below LIM’s price. The only other bidder, Wing Tai, offered $634 psf ppr.

CB Richard Ellis estimates that LIM’s bid reflects a break-even cost of $1,700-1,800 psf. ‘This would provide the successful bidder with a stabilised yield of around 4.5 to 5.0 per cent, based on a gross monthly rent of $9 to $10 psf,’ it said.

However, industry sources suggest LIM is looking at a $13 psf average monthly rent. The Anson Road site will be the maiden Singapore investment for the LaSalle Asia Opportunity III Fund, which is planning to make about US$12 billion worth of acquisitions over the next three to four years. ‘Singapore remains one of our primary target markets. We’re interested in all sectors - office, retail, industrial, residential and hotel,’ Mr Heithersay said.

Earlier acquisitions here by LIM for its other funds include the collective sale of Rainbow Gardens at Toh Tuck Road, and Swissotel Merchant Court hotel, as well as stakes in two hotels opening next year - Crowne Plaza Changi Airport and Ibis Bencoolen Street.

LIM, part of the Jones Lang LaSalle group and a leading real estate money management firm, yesterday also announced an A$738 million (S$926 million) acquisition, on behalf of Asia Property Fund, of a 50 per cent stake in the Westfield Doncaster mall development in Melbourne.

Source : Business Times - 29 Aug 2007

The tender for a 99-year-old office plot on Anson Road closed yesterday with local-based Firstoffice lodging the highest bid of $237.2 million.

It outbid Mapletree Lighthouse Trust trustee VivoCity, which offered $201.7 million, and Winglow Investment, which bid $159.8 million.

The Firstoffice price works out to $941 per sq ft per plot ratio (psf ppr), which is below the $1,021 psf ppr a Mapletree Investments unit paid for a larger plot nearby last month.

Mapletree also had to beat four rival bidders for that plot; only three bidders contested the latest tender.

But industry experts say this is not an indication that the property boom is starting to lose its fizz.

For one, the earlier site is 39,733 sq ft compared with the latest plot’s 27,281 sq ft.

Property consultancy Knight Frank’s head of research and consultancy, Mr Nicholas Mak, said the two locations also differed in their appeal.

‘The latest site is triangular in shape and one side faces a carpark and a large exhaust pipe from International Plaza.

‘Even if the owners choose to build higher, the occupants would still end up looking into the offices of International Plaza just 20m away.’

CBRE Research executive director Li Hiaw Ho said: ‘Based on the highest bid submitted, the break-even cost for the site is likely to be around $1,700 to $1,800 psf ppr.

‘This would provide the successful bidder with a stabilised yield of around 4.5 per cent to 5 per cent based on a gross rent of about $9 to $10 psf each month.’

The site was launched for tender by the Urban Redevelopment Authority (URA) on July 4.

URA said that a decision on the award of the tender will be made once the bids have been evaluated. It will be announced later.

Firstoffice is owned by Homerun 28, which is based in Mauritius.

The Singapore firm’s directors include Australian Andrew Heithersay, who lives in Hong Kong, Singapore permanent resident Ian Mackie and Singaporean Woo May Poh.

Source : Straits Times - 29 Aug 2007