Billion-dollar sites not giving up on en bloc dreams


TUE, SEP 11, 2018

YUNITA ONG


DESPITE fears that the latest cooling measures could sound the death knell for mega en bloc sites, billion-dollar projects are pressing on with their collective sale plans.

Laguna Park - a sprawling 669,486 sq ft East Coast development - is launching its tender sale on Sept 18 at a reserve price of S$1.48 billion.

Over the weekend, owners of the 623-unit Pandan Valley condo in the Holland Road area agreed on a record asking price of S$2.6 billion in an extraordinary general meeting (EOGM), according to media reports. Owners will have to hold another EOGM to agree on the apportionment method before collecting signatures.

Besides the reserve price, the buyer for Laguna Park would have to splash out on a differential premium of an estimated S$453.5 million and a lease top-up of S$416 million, according to marketing agent Knight Frank.

Owners of the 516 residential units in Laguna Park stand to receive S$2.6 million to S$5 million each, while owners of the 12 shops will each get S$2.53 million to S$2.66 million. The tender closes on Nov 1.

"It's a unique site where it has a panoramic seaview and MRT at the doorstep, and it's very difficult to find something like that," Ian Loh, executive director and head, investment and capital markets, Knight Frank, told The Business Times.

He was referring to the Siglap MRT station on the upcoming Thomson East-Coast Line. According to him, it could yield a breakeven price of S$1,800 to S$1,900 psf, and over 1,700 units based on its 1.87 million sq ft gross floor area (GFA).

Notwithstanding Laguna and Pandan Valley's attractive locations, some analysts said their size increased the risks for buyers.

Ku Swee Yong, International Property Advisor's chief executive, said that while the S$1,253 per square foot per plot ratio (psf ppr) land rate for Laguna Park appears to be in line with prices at nearby Seaside Residences, its "size and the five-year timeline would probably be one of the biggest risks that developers would be mindful about".

Under the new cooling measures from July 6, developers would have to pay 4 per cent buyer's stamp duty, plus a non-remissible additional buyer's stamp duty (ABSD) of 5 per cent and a remissible 25 per cent if it does not complete and sell the entire project within five years from buying the site, Mr Ku said.

Nicholas Mak, executive director for ZACD Group, agreed that the land rate was attractive, considering the East Coast location. But he said developers now also have to face the looming risk of interest rate hikes.

For Laguna Park - a 99-year ex-HUDC estate - reaching the 80 per cent consensus puts it a big step ahead of other billion-dollar potential en bloc sites.

Several are still in the process of collecting signatures for the 80 per cent consent level before the expiry of their collective sales agreements.

These include Mandarin Gardens (S$2.48 billion), Braddell View (S$2.08 billion), Pine Grove ($1.72 billion), The Dairy Farm (S$1.68 billion) and Ivory Heights (S$1.34 billion).

The tender for Horizon Towers (S$1.1 billion) which was launched days before the cooling measures and was extended by over a month, will close on Sep 12.

Commenting on the prospects for billion-dollar en bloc deals, ZACD's Mr Mak said: "It's a lot of eggs in one basket.

"For S$1 billion, a developer could buy two to four sites which could help spread out the risk and allow them to buy different sites over a long period of time."

Alan Cheong, senior director of research and consultancy at Savills Singapore, added: "For billion or even half-a-billion-dollar sites, the chances of a successful closure has diminished significantly.

"This is because sellers have thus far been unwilling to reduce their reserve prices significantly to account for extra upfront payments and penalties developers have to pay if they fail to sell within five years from the date of award of the site."

The record for the largest collective sale ever, at S$1.34 billion, is held by the former Farrer Court, which was acquired by a CapitaLand-led group in 2007 and rebuilt into the 1,715-unit d'Leedon.