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More collective sales in store next year

THE success of three residential enbloc deals this year may spark the interest of more property owners to go down that route, considering the number of projects that have kick-started the collective sale process.

Posted on 28-Nov-2016

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More collective sales in store next year

THE success of three residential enbloc deals this year may spark the interest of more property owners to go down that route, considering the number of projects that have kick-started the collective sale process.

Among a minimum of eight potential collective sales, a collective sale committee (CSC) have been set up by owners ofLakeside Towersin Jurong, which has invited 14 property consultancies and seven legal firms to submit their proposals for consultancy services to execute the collective sale process.

This happened after three enbloc deals profited over S$1 billion in value this year, an increase from the S$380 million deal in 2015 and zilch in 2014. The increase in the potential of enbloc deals can be seen from the constant increase of profit, with the average annual value of collective sales from 2010 to 2013 being S$1.9 billion which consisted of mainly small and medium-sized deals as compared to now.

International director and head of residential of JLL, Karamjit Singh, noted that the pick-up this year was derived by a recovery of developers' residential perspective from negative to neutral-positive, a shortage of development sites as well as the strong attributes and realistic pricing of enbloc sites available this year.

The collective sale committee for Lakeside Towers is currently going through the tender submissions from property and legal consultants, and will then draft a collective sale agreement with a reserve price. This type of agreement will require the signatures of owners holding at least 80 per cent of the development's share value and strata area in order for the property to be put up for public tender.

"We reckon that S$250-300 million in tender price should be comfortable to a single developer," the CSC chairman Simon Lee told BT. The site at Yuan Ching Road, which now houses 144 apartments around 153,237 sq ft with a plot ratio of 2.1 still has a balance lease of 58 years.

Located near Singapore's second CBD,Jurong Gateway, the future High Speed Rail (HSR) station, and theLakeside precinctwith Jurong Lake Gardens, the new Science Centre and Jurong Innovation District, Mr Lee expects the site to receive a premium even though it is still early to calculate the amount that each owner can receive from the sale.

In general, premiums in enbloc deals are range between 20 and 30 per cent, to a maximum of 50 per cent or more if each unit were sold individually in the open market according to Cushman & Wakefield. However, there is an estimation of a that four in five collective sale exercises failure conducted over the past five years.

Mr Singh of JLL has estimated that there were approximately 20 projects that tried to sell collectively over the last four years but failed as there wasn’t any buyers willing to pay the set price.

Developers are also cautious of the 15 per centadditional buyer's stamp duty (ABSD)that they will incur if they are unable to develop and sell all the units in a project by the end of the five-year remission period.

Even though leasehold sites are common, enbloc sales are the only source of supply for freehold sites as of now.

Due to the long period, which might take more than 6-12 month, that developers must wait for the High Court approval before the start of the five-year ABSD period, CBRE director for investment properties Galven Tan noted that this approval is the main concern among developers and sellers.

He continued by saying that the government land sales (GLS) programme is a more straightforward method to the developers. Hence, the first-half 2017 GLS list "will be something to look out for". Although devepers are very keen to look for collective sale sites in good locations and attractive pricing too based on CBRE's recent interaction with them.

The joint venture (JV) of UOL Group and United Industrial Corporation in 2016 managed to purchase Raintree Gardens inPotong Pasirfor S$334.2 million in October; Qingjian Realty, a Chinese developer, aquired Shunfu Villefrom owners for S$638 million in May; and Singapore-listed Roxy-Pacific Holdings boughtHarbour View Gardensin Pasir Panjang for S$33.25 million in August. As compared to last year where there was only enbloc deal which was the sale of a commercial property off Orchard Road, Thong Sia Building, to Sin Capital Group for S$380 million.

"Next year, I expect more and a wider range of offering in the market, mainly of small and medium-sized enblocs, which should find takers among developers who are keen to have a new project to work on, as long as they are realistically priced," Mr Singh said.

Although the total value may not outdo the S$1 billion this year as land sales supply from the government may pick up, he continued.

Among other collective sale,Cairnhill Mansionsin District 9 which had been through 4 collective sale attempts may hit the market in the first quarter next year.

Around the same time, the 12-unitVilla D'Esteon Dalvey Road in prime District 10, its second attempt since 2010, could be ready too. CBRE is the appointed marketing agent for both Villa D'Este and Cairnhill Mansions. Owners of the 330-unitEunosvillelocatednear the Eunos MRT station are reviving their collective sale process and have appointed OrangeTee as the marketing agent.

In the meantime, the collective sale committee ofRio Casa, a privatized HUDC estate with 286 units at Hougang Avenue 7, is appointing a lawyer. The sale committees forDunearn Court, a 12-unit freehold block on Dunearn Road in prime District 11 andOne Tree Hill Gardens, a 13-unit freehold project in prime District 10, are drafting the collective sale agreements. They have appointed Knight Frank as the marketing agent.

The Business Times

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