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Thread: As a private company, FEO has more options for Chancery Court

  1. #1
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    Default As a private company, FEO has more options for Chancery Court

    As a private company, FEO has more options for Chancery Court

    Tue, Nov 05, 2019

    KALPANA RASHIWALA


    IT'S been more than a year since Far East Organization (FEO) bought Chancery Court in Dunearn Road en bloc - yet there's still no sign of the project being torn down for redevelopment.

    Typically, one would expect redevelopment work to have begun by now and hoarding bearing the main contractor's name to be up around the site.

    What is also not there is the usual information board listing the name of the developer and key information on the proposed development.

    According to the grapevine, FEO has decided not to redevelop the plum District 11 site soon. Instead it is looking to renovate the existing development and rent out the units.

    This is a highly unusual route for a Singapore residential developer.

    Most developers would want to start developing a residential site as soon as possible after its purchase, because of deadlines stipulated by the authorities on completing the new project and selling all its units.

    Moreover, most developers - especially if they are listed - would face pressure from shareholders to generate profits, every quarter. Generally, returns from leasing residential units are low compared with property development.

    FEO, however, is not listed. It is helmed by Philip Ng, younger son of the business' founder, the late Ng Teng Fong.

    Being privately held, the group has more leeway to take a longer-term approach.

    If it were to launch a new project on the site today, it may face intense competition given the substantial pipeline arising from developers' residential land-buying spree in 2017 and the first-half of 2018.

    That sales boom ended abruptly in July 2018, with the announcement of the latest cooling measures.

    By holding off on redeveloping the Chancery Court site, FEO is eyeing a more opportune development window. More on this later.

    There was an important hurdle the group had to clear in deciding to postpone redevelopment.

    Since late 2011, all developers, listed or not, are liable for payment of additional buyer's stamp duty (ABSD) on any residential development site purchase.

    However they may qualify for upfront remission of ABSDincluding giving an undertaking to complete developing the residential project on the site and selling all units within five years of purchase.

    BT understands that FEO, however, paid ABSD on the S$401.78 million purchase price for Chancery Court, and is thus not subject to any deadlines on completion or sales.

    Based on the prevailing rate when it was awarded Chancery Court in May last year, FEO would have paid ABSD of 15 per cent.

    That would seem a hefty sum, but the consolation for FEO is that two months later, starting from July 6, 2018, the government hiked the ABSD rate for residential development site purchases to 25 per cent and introduced a 5 per cent non-remissible ABSD.

    Chancery Court, a privatised HUDC estate, has 136 residential units and eight commercial units. The development's 16-storey tower block comprises 52 apartments with eight strata commercial units. There are also seven blocks of four storeys each housing 84 maisonette units.

    Market watchers expect leasing demand to be good.

    It would be attractive to parents with very young children who currently do not reside in the area but would like to boost their chance of securing a place for their child in one of the popular primary schools nearby.

    Next door is Anglo-Chinese School (Primary). Farther up the road is Singapore Chinese Girls' Primary School.

    Expats and others wanting to be near Orchard Road, but avoid the congestion, may also find the location desirable.

    Of course, FEO will have to pay to the state a differential premium and lease upgrading premium before redeveloping.

    Chancery Court is on a site with 99-year leasehold tenure starting from March 1981, leaving about 60 years on the lease.

    The land area of 259,134 sq ft is zoned for residential use with 1.4 plot ratio under Master Plan 2014.

    FEO could divide the project into a few parts. One part could be residential units for sale, while the rest could be held for lease or as serviced apartments.

    The residences-for-sale component could help partially fund the development, while the group can enjoy a recurring income stream from the lease/serviced apartment component.

    In short it could get the best of both worlds.

  2. #2
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    Default Re: As a private company, FEO has more options for Chancery Court



    1. According to the grapevine, FEO has decided not to redevelop the plum District 11 site soon. Instead, it is looking to renovate the existing development and rent out the units.

    2. deadlines stipulated by the authorities on completing the new project and selling all its units.

    3. BT understands that FEO, however, paid ABSD on the S$401.78 million purchase price for Chancery Court, and is thus not subject to any deadlines on completion or sales.

    30% ABSD now. (That would seem a hefty sum, but the consolation for FEO is that two months later, starting from July 6, 2018, the government hiked the ABSD rate for residential development site purchases to 25 percent and introduced a 5 percent non-remissible ABSD.)

    Based on the prevailing rate when it was awarded Chancery Court in May last year, FEO would have paid ABSD of 15 percent.


    By holding off on redeveloping the Chancery Court site, FEO is eyeing a more opportune development window. More on this later.

    The total Land cost increase 27% to redevelop later.
    Last edited by Arcachon; 22-01-20 at 12:59.

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    Default Re: As a private company, FEO has more options for Chancery Court

    https://www.straitstimes.com/busines...loc-for-40178m

    MAY 18, 2018 - The winning bid for the Dunearn Road site translates to a land price of about $1,610 per sq ft per plot ratio (psf ppr), after factoring in a differential premium and lease upgrading premium of some $182.4 million.

    https://mustsharenews.com/en-bloc-singapore/

    https://blog.moneysmart.sg/property/en-bloc-singapore/

    Liat Yeang is acting for Far East Organisation in their acquisition of leasehold residential project Chancery Court, which is their only acquisition of collective sales site since 2011.

    https://dentons.rodyk.com/en/liatyeang-lee
    Last edited by Arcachon; 22-01-20 at 13:21.

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    Default Re: As a private company, FEO has more options for Chancery Court

    Bonjour, good to see you back Arcachon!

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    Default Re: As a private company, FEO has more options for Chancery Court

    Quote Originally Posted by Arcachon View Post


    1. According to the grapevine, FEO has decided not to redevelop the plum District 11 site soon. Instead, it is looking to renovate the existing development and rent out the units.

    2. deadlines stipulated by the authorities on completing the new project and selling all its units.

    3. BT understands that FEO, however, paid ABSD on the S$401.78 million purchase price for Chancery Court, and is thus not subject to any deadlines on completion or sales.

    30% ABSD now. (That would seem a hefty sum, but the consolation for FEO is that two months later, starting from July 6, 2018, the government hiked the ABSD rate for residential development site purchases to 25 percent and introduced a 5 percent non-remissible ABSD.)

    Based on the prevailing rate when it was awarded Chancery Court in May last year, FEO would have paid ABSD of 15 percent.


    By holding off on redeveloping the Chancery Court site, FEO is eyeing a more opportune development window. More on this later.

    The total Land cost increase 27% to redevelop later.
    Sounds like a good move as I see price fatigue in this area with freehold developments like Pullman, Hyde as well as the resale not able to make any meaningful break through in price level (psf as well as quatum wise). With Chancery being a 99LH site, it has to be priced at a significant discount for units to move but we know FEO is not a `discount' developer.

    Having said that, am I right to say FEO cannot top up the lease now unless they redevelop the site and increase the GFA. therefore if they only `renovate' the lease continues to decay. And of course, the later they top up the lease, the more uncertainity the lease top up preium will be. Just wondering....

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    Default Re: As a private company, FEO has more options for Chancery Court

    Quote Originally Posted by HP65 View Post
    Bonjour, good to see you back Arcachon!
    Merci

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    Default Re: As a private company, FEO has more options for Chancery Court

    Quote Originally Posted by HP65 View Post
    Sounds like a good move as I see price fatigue in this area with freehold developments like Pullman, Hyde as well as the resale not able to make any meaningful break through in price level (psf as well as quatum wise). With Chancery being a 99LH site, it has to be priced at a significant discount for units to move but we know FEO is not a `discount' developer.

    Having said that, am I right to say FEO cannot top up the lease now unless they redevelop the site and increase the GFA. therefore if they only `renovate' the lease continues to decay. And of course, the later they top up the lease, the more uncertainity the lease top up preium will be. Just wondering....

    You are right about the uncertainty the lease top-up premium will be, they may be looking at the development from another angle.

    Just like Townerville.

    https://www.fareast.com.sg/-/media/R...mark-2013.ashx

    After the houses were upgraded, an open tender was held for their sale. Far East Organization won the tender and acquired all 84 homes for S$39 million.

    I went to one of the URA talks, they regret offering the tender. Their intention was for the middle class to buy and they did not expect FEO to buy all.

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