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A SINGLE investor who owns 48 units in Duchess Crest at Bukit Timah wants to sell the lot en bloc for $72.1 million.

The asking price for the 99-year leasehold units works out to about $750 per sq ft (psf).

CB Richard Ellis (CBRE), which is inviting expressions of interest until June 13, would say only that the institutional investor is an overseas fund.

It had bought the units - comprising 43 apartments and five townhouses - from developer Wing Tai some years ago, said Mr Jeremy Lake, executive director of investment properties at CBRE.

The units are ’scattered around’ the estate, and range from two- to four-bedroom apartments of between 936 sq ft and 2,260 sq ft. The townhouses range between 4,123 sq ft and 4,241 sq ft.

Prices at the 251-unit Duchess Crest have been rising steadily this year.

Three units were sold in February for an average of $650 psf, according to caveats lodged. This rose to $773 psf for two units sold in March, and last month four units fetched $840 psf on average.

Mr Lake said keen interest is expected for the 48 units, ‘given rising rents and current strong market sentiments’.

He added that institutional investors buying and selling residential units in bulk is not rare. A United States fund bought an entire block of Wing Tai’s Draycott 8 project in May last year, while another US fund, Citadel, snapped up 25 units of Soilbuild’s One Tree Hill Residence in December.

Duchess Crest was launched in May 1996 at the height of the last property boom and right after the Government introduced measures to cool property speculation.

Wing Tai priced the first launch at $1,000 psf, but received lower interest than expected.

Two years later, it slashed the prices of remaining units by 10 per cent and offered buyers the choice of a rental guarantee or a buy-back option if the value of the units fell below their purchase price after three years.

The developer finally sold the last 48 units in the estate in 2000, although it is not clear if these are the same units that are now being put up for sale.

Source : Straits Times - 16 May 2007

With more MNCs choosing Singapore as a base for their regional headquarters, and increasing Reit activity, commercial property is becoming a popular investment choice. Today, many SME business owners are jumping on the bandwagon, choosing to purchase commercial property - some with the hope of selling it at a profit in the future, and others for more practical reasons, such as owner-occupancy in the face of rapidly rising rentals.

According to Standard Chartered estimates, the total demand for commercial property has increased by some 5 per cent over the past five years. In spite of this, supply remains limited with many new commercial projects being held by developers or Reits. Given the limited amount of land in Singapore, it is highly unlikely that there will be an over-supply of commercial property in the future, meaning that potential returns from such investments look promising.

However, while investing in commercial property looks promising, investors should be aware of the dependency of commercial property to the business cycle. Commercial property is also subject to government intervention should rents rise excessively to prevent office space from becoming unattractive to foreign businesses setting up shop in Singapore.

Another point to note is that commercial property investments may be more suitable for those looking for a stable yield rather than high returns from capital gains. Commercial properties are generally segmented into four categories - shops, offices, hotels and industrial usage - with the first two being most popular.

Investing in commercial property usually means investing in a large piece of property, and can entail quite a bit of risk. SMEs looking to invest in commercial property should consider the following:

Tailor the investment to your budget. Many SMEs overestimate their financial ability to invest in commercial property, and underestimate the cost of fixing up these properties. It might be best for first-time investors to consider investments on a smaller scale and in areas with future growth potential. They can then rely on the property increasing in value.

Diversify through commercial real estate. Investing in commercial real estate can help SMEs to diversify their business, as real estate developments can translate into condominiums, shopping centres and offices, just to name a few. In the short term, SMEs can continue to ensure income flow to retain the property by obtaining a lease agreement.

Compare rental yields with Reit yields. A quick way to establish rental yield would be to look at Reit yields. For example, an SME investing in shops might want to find out the rental rate that retail Reits are charging to get a better idea of the yield one might be able to obtain. Location, surrounding amenities, population catchment, trade mix and anchor tenant also play a role in rental yield.

Do your homework. Commercial properties are relatively sizable investments, and it pays to scrutinise all aspects of the transaction. Investors should check the sale and purchase agreement, and fully understand the terms and conditions. Ensure that finance arrangements and builders’ inspection are attached and adhered to, and that the owner is not a bankrupt. Search the property title and confirm its ownership.

Check the master and zoning plan to ensure that the premises can be used for commercial purposes, and confirm with the relevant authorities that the property is not affected by any government notice or projects. It will help you to obtain the necessary clearance and permits for commercial leasing as well. Ensure that there are no illegal alterations and additions to the premises as the ultimate responsibility lies with the owner, and not the renovation contractor.

Commercial property buyers fall under two main categories - business owners and investors. Both types of buyers tend to have more sophisticated needs than an average residential property buyer. Hence, traditional rate-based mortgage packages may not best serve their needs.

The writer is General Manager, SME Banking, Standard Chartered Singapore

Source : Business Times - 15 May 2007

The Urban Redevelopment Authority has received a committed bid of $172 million for a commercial site at Anson Road/Enggor Street and will now put it up for public tender. The 0.37 ha site was only put on the Government Land Sales reserve list in March.

Based on the committed bid, the site - which has a maximum permissible gross floor area of 383,808 sq ft - works out to be about $448 per square per plot ratio (psf ppr).

Most property consultants, however, believe that it will eventually fetch a much higher price.

Savills Singapore director of marketing and business development Ku Swee Yong reckons that bids of between $1,000 and $1,200 psf ppr can be expected. He adds that the relatively low reserve price is common in a rapidly rising property market. ‘The figure could be based on values three-quarters of a year ago,’ he said.

Indeed, so far this year, three office buildings - Temasek Tower, SGX Centre and SIA Building have been sold at benchmark prices, and Mr Ku says the developer for the Anson Road/Enggor Street site can even hope to sell the new building for around $2,000 psf.

And even if the new building is not for sale, a developer would probably achieve good rental returns.

Jones Lang LaSalle regional director and head of investments Lui Seng Fatt believes that if construction is put on a fast track, pre-commitment of leases as early as end-2008 could see rents start at between $8-$9 psf per month. Mr Lui notes that already, new office buildings like 55 Market Street are fully leased. ‘Even at today’s prices, it would not be difficult to get $7 psf,’ he added.

Mr Lui does add that the size of the floor plate will be important with most businesses in the CBD requiring 15,000 sq ft. According to URA, the Anson Road/Enggor Street site can have a floor plate of about 18,000 sq ft. The site has a height limit of around 50 storeys.

Source : Business Times - 15 May 2007

The first collective sale with a price tag of more than $1 billion has now arrived, as Farrer Court goes on offer with an official expected price of about $1.5 billion - around $850 per square foot of potential gross floor area.

Farrer Court

Sources say the reserve price is $1.2 billion, or slightly over $700 psf per plot ratio (psf ppr) inclusive of around $460 million payable to the state for enhancing the intensity of the District 10 site to a 2.8 plot ratio and for topping up the site’s lease from a remaining term of about 69 years to 99 years.

Market watchers say that more billion-dollar collective sale properties could come on the market this year - including The Claymore in the prime Claymore Road area and Neptune Court at Marine Vista - if some owners in these estates have their way.

Farrer Court is a privatised HUDC estate. Its $700 psf ppr reserve price and $850 psf ppr official expected price look reasonable compared with the $1,062 psf ppr that GuocoLand paid last month for the freehold Leedon Heights, according to some property players.

However, the sheer extent of the Farrer Court site and the huge outlay involved mean that it will appeal to only big players.

Whether at the reserve price of $1.2 billion or the officially expected price of $1.5 billion, Farrer Court has the highest asking price for a collective sale yet attempted.

At 838,488 sq ft, it has the biggest land area for an en bloc sale site.

The maximum potential gross floor area of almost 2.35 million sq ft for the site - or about 1,800 apartments averaging 1,250 sq ft - means that a new development on the site would be the largest condominium development yet to be undertaken in Singapore, according to Farrer Court’s marketing agent Credo Real Estate.

The all-in land cost alone to the successful developer will amount to $1.662 billion based on the $1.2 billion reserve price - or $2 billion if the sellers get their $1.5 billion officially expected price. Construction costs, fees, interest and holding costs could add a further $1 billion to $1.1 billion.

Despite the huge outlay involved, Credo is confident of the site being sold.

Credo executive director Tan Hong Boon says ’several large developers have been following up closely with us on the progress of Farrer Court for a few months’.

The property consultancy’s managing director, Karamjit Singh, sees bids for the site coming from developers partnering one another or with equity investors.

‘I think larger developers will see the value of what Farrer Court has to offer - the site has the characteristics for an iconic huge development like Reflections at Keppel Bay, involving big-name architects,’ Mr Singh said, adding that ‘Farrer Court’s reserve price is reasonable’.

Market watchers estimate the $1.2 billion or $700 psf ppr reserve price will result in a break-even cost of about $1,200 to $1,250 psf for a new luxury project on the site.

They also reckon that achieving an average selling price of around $1,600 psf or even more for a new 36-storey, 99-year leasehold project on the site in about a year’s time should be possible, based on current market projections.

‘Farrer Court is very unique in that it is the only private residential site in the Farrer Road and Holland Road vicinity that is accorded a high plot ratio of 2.8 and a height control of up to 36 storeys. Most of the surrounding sites are either landed housing, low or medium-rise developments up to five or 12 storeys,’ Mr Tan notes.

More than 80 per cent of owners of Farrer Court have signed the collective sale agreement (CSA). Rodyk & Davidson is representing the majority owners.

BT understands that based on the $1.2 billion reserve price, owners will receive $1.9 million for the smaller units of 1,453 sq ft and $2 million for the bigger units of 1,615 sq ft.

When signing of the CSA began in September last year, the pricing was slightly above $700 million, reflecting sales proceeds of $1.1 million and $1.2 million for the owners of smaller and bigger units.

Source : Business Times - 15 May 2007

Its $2,013 psf price is the highest in the current office cycle

Parakou Building

PARAKOU Building, a low profile but spanking new office building at the corner of Robinson Road and McCallum Street, has been sold at $2,013 per square foot (psf) of net lettable area - the highest in the current office cycle.

The seller is Parakou Shipping Group of Hong Kong, while the buyer is said to be a fund from overseas, most likely from the UK. The absolute sum of the Parakou Building deal was $128 million, BT understands.

The 16-storey freehold building was completed last year and has a net lettable area of about 63,580 square feet. Jones Lang LaSalle (JLL) is said to have advised the buyer.

The $2,013 psf deal surpasses the $1,783 psf achieved last month for SIA Building - when German pension fund manager SEB bought the property for $526 million from seller TSO Investment - a fully owned subsidiary of a property fund managed by CLSA Capital Partners.

SIA Building is on a site with a remaining lease of 86 years. The sale of SIA Building was also brokered by JLL.

Market watchers reckon that with the current buoyant office market conditions, it is just a matter of months before the all-time office price record of $2,200 psf set in early 1996 is surpassed. That was when Straits Steamship Land, now Keppel Land, sold seven floors of what is now known as Prudential Tower in the China Square area to Prudential Assurance Company Singapore.

Office rental and capital values in Singapore have shot up on the back of a shortage of office space and strong demand.

JLL’s Q1 2007 Asia-Pacific Property Digest shows that capital values for Grade A office space in Singapore have jumped 82.7 per cent year-on-year to US$14,258 per square metre. Over the same period, rental values have risen 106.2 per cent to US$820 per square metre per annum.

Source : Business Times - 15 May 2007