Yahoo Finance Domino effect of en bloc sales
A decade after its last peak, en bloc fever has struck the prestigious Orchard Boulevard neighbourhood once again. Orchard Bel-Air is preparing for its collective sale debut and Park House is just a few signatures short of the requisite 80% for its collective sale.
Despite its age relative to the other luxury condominiums in the prestigious Orchard Boulevard neighbourhood, such as The Orchard Residences, Tomlinson Heights and 3 Orchard by-the-Park, the 34-year-old Orchard Bel-Air remains a landmark today. Developed by UOL Group (formerly United Overseas Land) and designed by established home-grown architectural firm Architects 61, Orchard Bel-Air is a trefoil-shaped 25-storey tower clad in dark-brown ceramic tiles.
Orchard Bel-Air is one of the few representatives of the vernacular architecture popular in the mid-1970s and 1980s that has stood the test of time. The others were demolished following the last en bloc frenzy more than a decade ago: the former The Parisian (now TwentyOne Angullia Park), Futura (now New Futura) and Westwood Apartments (now 3 Orchard By-the-Park). With en bloc fever raging again, Orchard Bel-Air could well be the next to go.
The 71-unit Orchard Bel-Air at Orchard Boulevard (Credit: Samuel Isaac Chua/The Edge Singapore)
Close to 85% of the owners at Orchard Bel-Air who attended an extraordinary general meeting on Dec 16 voted to go ahead with a collective sale. “This is the first formal collective sale attempt for Orchard Bel-Air,” says Kristine Lumley-Holmes, a Canadian citizen-turned-Singapore permanent resident. The owner of the sole penthouse at Orchard Bel-Air — a 6,500 sq ft duplex — Lumley-Holmes was appointed chairwoman of the collective sale committee (CSC) at the EGM.
A request for proposals was made, with submissions from top law firms and property consultants in Singapore. In addition to their proposals, the law firms and property consultants were also interviewed. “It was a rigorous selection process,” recounts Lumley-Holmes, who was an investment banking lawyer before she became associate general counsel to a US medical devices firm.
The CSC appointed Withers KhattarWong as legal adviser and Savills Singapore as marketing agent. The next EGM to determine the method of apportionment, terms of the collective sale agreement and the reserve price will be held within the next two months, says Suzie Mok, senior director of investment sales at Savills Singapore (see the flow chart for the collective sale process here).
Lumley-Holmes: This is the first formal collective sale attempt for Orchard Bel-Air (Credit: Samuel Isaac Chua/The Edge Singapore)
What triggered the collective sale?
Talk of a collective sale came about last May after the successful collective sale of the neighbouring One Tree Hill Gardens to Lum Chang Group for $65 million, says Lumley-Holmes.
Another motivating factor was the diminishing lease, she adds. Orchard Bel-Air has 61 years left on its 99-year lease, which started from 1980. While some felt that there was no need to rush for a collective sale, Norman Ho, deputy head of corporate real estate at Rajah & Tann Singapore LLP, cautions: “For owners of leasehold properties in which the lease is running low, resisting a collective sale opportunity today could mean another 10 to 20 years before the next collective sale wave.”
For ageing 99-year leasehold properties, an en bloc sale is the only way to achieve a premium above market price, says Savills’ Mok.
When the tenure falls below 60 years, homebuyers will be affected, as there will be restrictions on the use of their Central Provident Fund savings to purchase a property, which in turn affects the amount they can borrow from the bank, says Eugene Huang, director of Redbrick Mortgage Advisory.
As a building ages, more maintenance issues will arise too. “That’s why I think the timing of the en bloc sale of Orchard Bel-Air is good,” says Lumley-Holmes.
According to Rajah & Tann’s Ho, developers are generally keen on en bloc sites, even 99-year leasehold sites. However, there is a price difference, owing to the lease top-up premium payable to the state (Singapore Land Authority) to secure a fresh 99-year lease, he adds.
Ho represented the owners of the 124-unit Mayfair Gardens in their collective sale to Oxley Holdings for $311 million last October. Rajah & Tann is acting for the owners of Park House on Orchard Boulevard and represented the buyers in five of the nine en bloc deals concluded since the start of the year, including Brookvale Park, Pearl Bank Apartments and Hollandia.
The 71-unit, 25-storey Orchard Bel-Air is located adjacent to the site of the future Orchard Boulevard MRT (Credit: Samuel Isaac Chua/The Edge Singapore
Redevelopment potential
While the reserve price for Orchard Bel-Air has yet to be set, Savills’ Mok estimates that the lease top-up premium for the site is at least $80 million. However, there is no development charge, she adds. The site area is 93,126 sq ft, with a plot ratio of 2.8 and maximum height of 36 storeys. “It’s the largest plot in the prime neighbourhood available on the market today,” she adds.
Assuming an average size of 70 sq m for each unit, the site can be redeveloped into a 346-unit project, estimates Mok. Given the prime location, developers are likely to build larger units, she adds. Based on an average size of 1,000 sq ft for each unit, the new development could have 261 units.
The existing Orchard Bel-Air has 71 units. Besides the penthouse, 48 units are four-bedroom apartments of 298 sq m (3,208 sq ft) and 22 units are four-bedroom apartments of 300 sq m (3,229 sq ft).
Lumley-Holmes’ penthouse was purchased in 2013 for $8.3 million ($1,275 psf), based on a caveat lodged with URA Realis. As it was an old property, she spent another $1 million gutting and refurbishing it. The penthouse has five en suite bedrooms, with four located on the lower level, which also has a living room and family area. The upper level, where the main entrance is, contains a spacious living area, entertainment space, balcony, formal dining room, large kitchen and guest bedroom. “The apartment enjoys views all around,” says Lumley-Holmes. “The side facing One Tree Hill will be unobstructed, as it’s a low-rise, landed estate.”
According to Lumley-Holmes, developers have expressed interest in the collective sale of Orchard Bel-Air, but they have to go through the tender process like everyone else.
The 6,500 sq ft duplex penthouse at Orchard Bel-Air enjoys sweeping views (Credit: Samuel Isaac Chua/The Edge Singapore)
Prime GLS sites as benchmarks
On Feb 27, URA launched the residential site on Cuscaden Road for sale by public tender. The 99-year leasehold site of 61,596 sq ft is on the Confirmed List of the 1H2018 Government Land Sales (GLS) programme. The site has a maximum gross floor area (GFA) of 172,470 sq ft. Assuming an average size of 1,000 sq ft for the new units, the site could be developed into a 170-unit project.
“It is extremely rare for a vacant condo land parcel in the prime Cuscaden Road area to be offered for sale, either through a GLS tender or an en bloc sale,” says Nicholas Mak, executive director of ZACD Group. “Owing to the limited new supply of private non-landed residential units in the vicinity, this tender will draw strong interest from many developers.” Mak estimates that the tender will attract 10 to 18 bidders.
According to Mak, the highest bid for a GLS site was for a property on Jiak Kim Street, in prime District 9. The tender closed on Dec 5 last year and Singapore-listed Frasers Property won with a bid price of $955.4 million ($1,733 psf per plot ratio). Another listed group, City Developments Ltd (CDL), placed the top bid of $212.2 million ($1,722 psf ppr) for the site on Handy Road at end-January. Therefore, Mak is expecting bids for the Cuscaden Road site to be in the range of $310 million to $326 million ($1,800 to $1,890 psf ppr).
Incidentally, the Cuscaden Road GLS plot is located across the road from Orchard Bel-Air and flanked on either side by YTL’s 3 Orchard By-The-Park and the 48-year-old Park House. However, the Cuscaden Road GLS site is not accessible via Orchard Boulevard, notes Savills’ Mok.
Both the Orchard Bel-Air and Cuscaden Road GLS sites share similar locational attributes, such as proximity to the upcoming Orchard Boulevard MRT station on the Thomson-East Coast Line, which is just one stop from the future Orchard MRT interchange station. Orchard Bel-Air is also close to the prime Orchard Road shopping belt and a short drive to the CBD, Marina Bay and the Botanic Gardens.
Unobstructed view of the One Tree Hill landed estate from the penthouse at Orchard Bel-Air (Credit: Samuel Isaac Chua/The Edge Singapore)
‘Catalyst for more en bloc sales’
What could cool the collective sale fever is the hike in development charge for non-landed residential projects, which came into effect from March 1. The increase, by an average of 22.8%, was the highest in a decade.
Lee Liat Yeang, senior partner at Dentons Rodyk & Davidson, sees the Cuscaden Road GLS site acting as a catalyst for more en bloc sales in the prime districts. “Developments with a high baseline — with little or no development charge payable — appeal to developers, as they are concerned about the risks of higher development charges on top of their purchase price,” he observes. Dentons Rodyk & Davidson acted for the buyers and sellers in three-quarters of the en bloc deals concluded since 2016. They include Cairnhill Mansions, City Towers and Riviera Point.
Park House, located at the corner of Orchard Boulevard and Tomlinson Road, is also attempting a collective sale, with CBRE as the marketing agent. The existing development was completed in 1970 and contains a block of 56 apartments, with four shops on the first level. The freehold site is about 47,000 sq ft and has a plot ratio of 2.8. Even though there is a height restriction of 20 storeys, the site can be redeveloped into a new condo block of 170 units.
The development is said to be just a few signatures shy of the requisite 80% for a collective sale to be launched. Word on the street is that the reserve price for Park House is $307 million, or $2,380 psf ppr. No development charge is payable.
The Cuscaden Road GLS site that was launched for sale at end-February is located between 3 Orchard By-The-Park and Park House (Credit: Samuel Isaac Chua/The Edge Singapore)
Waiting out
Located directly opposite Orchard Bel-Air is the luxury condo 3 Orchard By-The-Park. The freehold property was developed by YTL Land, part of Malaysia-listed YTL Corp, and designed by Italian architect Antonio Citterio, who is famous for his design of Bulgari Hotels around the world. Completed in 2015, the development comprises 77 units in three 25-storey towers. Property consultants such as Savills’ Mok reckon the new development is likely to be launched at prices from $4,000 psf.
YTL paid $435 million for the 62,179 sq ft, freehold site in November 2007. The en bloc price for the former 24-unit Westwood Apartments translated into $2,525 psf ppr. “It is still a record price for collective sales,” points out Mok. “The price was achieved 11 years ago — at the peak of the last property boom.” Savills had brokered the sale of the former Westwood Apartments. YTL is not the only developer with the wherewithal to mothball the launch of a luxury project for more than a decade. Another developer that did just that is CDL. Its New Futura luxury condo was previewed on Jan 18. The New Futura is a redevelopment of the former Futura, purchased by CDL in a collective sale for $287.3 million ($1,179 psf ppr) in October 2006.
The 124-unit New Futura was designed by renowned international architectural firm Skidmore Owings & Merrill and completed last year. Since its preview, close to 50 units have been sold, at average prices above $3,200 psf. According to CDL, all 40 four-bedroom units in the 64- unit South Tower have been snapped up, at prices from $7 million.
About two-thirds of the buyers at New Futura are foreigners, with half of them comprising Mainland Chinese, notes Dominic Lee, head of the luxury team at PropNex Realty. “It’s an indication that well-heeled foreign buyers are back and shopping in the luxury condo segment,” he says.
City Developments’ New Futura was launched on Jan 18 and so far, 48 units have been sold at an average price of more than $3,200 psf (Credit: Samuel Isaac Chua/The Edge Singapore)
Queue of collective sale hopefuls lengthens
The encouraging sales at New Futura bode well for other developers looking to roll out their high-end projects and for collective sale hopefuls in the prime districts as developers renew their hunt for prime sites, says PropNex’s Lee.
Since the beginning of the year, 24 collective sale sites have been launched for sale. As at March 7, nine sites were sold en bloc for a total of $3.3 billion (see table).
According to property consultants such as Ian Loh, head of investment and capital markets at Knight Frank, two to four new sites have been launched for tender each week since the start of the year. “We continue to get new enquiries every week,” he adds. He says the number of projects attempting a collective sale is about 150 currently.
Greater optimism about the prospects of the property market and future prices is fuelling the collective sale fever. Leading the charge at Orchard Bel-Air is Lumley-Holmes. “The timing is perfect,” she says.
The most recent collective sale site to find a buyer was the 48-unit Hollandia. Hong Kong-listed developer Far East Consortium International bought the site on March 2 at a land rate of $183.4 million, or $1,703 psf ppr (Credit: Samuel Isaac Chua/The Edge Singapore)
This article, written by Cecilia Chow, appeared in EdgeProp Pullout, Issue 821 (March 12, 2018).
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