The en bloc purchase of Raintree Gardens in Potong Pasir by a joint venture (JV) of UOL Group and United Industrial Corporation (UIC) brings the total value of successful en bloc deals in Singapore so far this year to over S$1 billion. The latest deal follows similar successful attempts with Shunfu Ville and Harbour View Gardens in the past six months.
This is a huge improvement from the S$380 million worth of en bloc deals in 2015 and zilch in 2014 – although it definitely still pales in comparison to 2010-2013, when the average annual value of successful deals was S$1.87 billion.
In separate announcements on Thursday, the two JV partners said they have secured a privatised former HUDC estate in Potong Pasir Avenue 1 for S$334.2 million in a public tender. HUDC estates were initially built as more upmarket public housing for the sandwiched middle class, but the scheme came to an end when the response to its completed flats started to dwindle.
Each Raintree Gardens apartment owner will receive an average gross sale price of about S$1.9 million upon the success of the collective sale, which is subject to conditions. The site was launched for collective sale in September with a reserve price of S$315 million, after more than 80 per cent of the owners consented to the en bloc sale. Raintree Gardens has a 99-year tenure which started in 1987.
The sale price reflects a land cost of about S$797 per square foot (psf) per plot ratio on the potential gross floor area, inclusive of an estimated differential premium payable to the state to top up the lease to a fresh 99 years, and for redevelopment of the site to a gross plot ratio of 2.8. The property comprises two 12-storey masionette blocks and one seven-storey masionette block, with land area of about 201,405 square feet. It was privatised in 2014.
The result of the tender is a good reflection of the strong attributes of the site, which has a direct and broad frontage along the Kallang River. The park connector along the river was also a strong draw, as it allows residents of the new development to jog and cycle to many parts of the island, even to the central business district.
The pick-up in the collective-sale activity has been attributed to three factors: the switch in the outlook of the residential market from negative to neutral-positive, the shortage of development sites from the government and private sectors, and the strong attributes and realistic pricing of the developments sold this year.
Over the last three years, there have been as many as 20 unsuccessful en bloc attempts. Whether a transaction goes through or not depends on the attributes of the property and owners’ price expectations.
BT understands some still-unsuccessful en blocs include Katong Shopping Centre and Normanton Park.
On the turn of market sentiment, a consultant said that it is not about where the market is right now but the developers’ outlook, because when they buy land today, they are projecting where the market will be going forward. The general expectation is that there could be some stabilisation before recovery.
Last year, only one development, the mixed-use Thong Sia Building along Bideford Road, was sold for S$380 million. This year, the Shunfu Ville estate in Bishan was sold for S$638 million in May; that was also a privatised HUDC estate. In August, Roxy-Pacific Holdings agreed to buy the freehold Harbour View Gardens site on Pasir Panjang Road for S$33.25 million.
Asked what his plans are, Liam Wee Sin, deputy group CEO of UOL, said the JV will look at developing a project with about 750 units to attract homebuyers and upgraders. “The acquisition is part of our landbanking strategy, and the location allows us to ride on the Bidadari story. It is a very timely replenishment for us as there are less than 20 units left at Botanique at Bartley. The new site has a unique selling point of being close to nature with a riverfront view and a park connector, and yet is so near the city. There is a scarcity of sites with such rare attributes.”
According to Bloomberg data, UOL currently owns 43.85 per cent of UIC, making this an interested person transaction. Both sides will be funding it with bank borrowings and internal resources.
Adapted from: The Business Times, 7 October 2016