OCBC withdraws 2 properties after tender closing

2 Mount Elizabeth Link, Lavender shophouses were launched through separate tender exercises last Sept

Fri, Jan 17, 2020


OVERSEA-CHINESE Banking Corporation has withdrawn from sale two freehold properties which it had put up for tender last year: a serviced residence block at 2 Mount Elizabeth Link, and a portfolio of 32 shophouses along Lavender Street and Serangoon Road.

The two properties were launched through separate tender exercises in September last year and which closed in October.

Word on the street is that in late November, OCBC withdrew the properties from the market; no reasons were cited.

When contacted by The Business Times this week, a spokeswoman for OCBC declined to comment.

Some market observers read the withdrawals of the properties as a strategic decision by the bank's top management to hold its remaining freehold properties - in anticipation of future capital appreciation.

BT understands that the tender for 2 Mount Elizabeth Link, which closed on Oct 23, drew a handful of bids and that the indicative price of S$230 million was surpassed.

Located off Orchard Road, the prime district 9 property is currently leased to Frasers Hospitality, which operates it as Fraser Residence Singapore.

The 22-storey tower comprising 72 serviced residences is a short walk from the Orchard Road shopping belt and the Orchard and Somerset MRT stations. The property is within a 1 to 2 km radius of Anglo-Chinese School (Junior and Primary), River Valley Primary School and Singapore Chinese Girls' Primary School.

The property had been pitched as offering a new owner the option to either redevelop the plum site into a new luxury residential project, or retain its existing serviced apartment use and continue catering to demand from business and leisure travellers as well as medical tourists. The property is a stone's throw from Mount Elizabeth hospital and medical centre.

According to the grapevine, a buyer who undertakes to stick to serviced apartment use may not have to pay any additional buyer's stamp duty on the purchase price.

BT understands that the 32 shophouses in Lavender Road, dubbed "Lavender Collection", may have drawn just a couple of bids; it is not clear if the S$138 million guide price was met. The tender closed on Oct 16.

Assuming no development charge is payable, the indicative price for the Lavender Collection translates to S$1,736 per square foot on the estimated current gross floor area (GFA), or about S$934 psf of potential GFA. As the property is within the Jalan Besar Secondary Settlement conservation area, there is potential for the new owner to build a six-storey extension at the back of the shophouses, which would nearly double the GFA to 147,732 sq ft. This would be subject to approval by the authorities.

The existing GFA stands at 79,502 sq ft while the land area is 49,244 sq ft. The property is zoned for commercial use with 3.0 plot ratio. No ABSD is payable on the property, given its commercial zoning.

JLL was appointed the exclusive marketing agent for Lavender Collection, and Cushman & Wakefield for 2 Mount Elizabeth Link.

Over the years, OCBC has sold a string of Singapore properties which it did not require for its business operations. This followed the Singapore government's announcement in June 2000 of watershed rules to separate the financial and non-financial activities of banks in Singapore.

Under the Banking Act, the Monetary Authority of Singapore (MAS) required banks to divest all properties held for development, with certain exceptions. OCBC sold residential land along Mount Emily in late 2003 to a joint venture between City Developments and TID, a condo development site in Kim Seng Road to Lippo Karawaci Corporation in 2006, and a plot along Bassein Road in the Novena area to Far East Organization group in 2010. All the above were freehold properties.

MAS allowed banks to hold properties solely for investment purposes but subject to their aggregate value not exceeding 20 per cent of a bank's capital funds. Certain exclusions from this limit apply, such as properties used for the bank's business or to house or provide amenities for its officers.

According to media reports in 2002, OCBC's permitted property holdings, that is, properties held solely for investment purposes, was within the 20 per cent limit. On Thursday, OCBC's spokeswoman told BT that currently, the figure stands at about 3 per cent.

Nevertheless, the bank has divested a string of assets in this category. These include a 55 per cent stake in White Sands mall in Pasir Ris in 2004, an office building at 110 Robinson Road which the bank sold to Indonesian tycoon Tahir in 2016, and some office space at The Octagon in Cecil Street in 2019. Except for White Sands, the other assets were freehold.

OCBC also sold its six floors at the 999-year leasehold Samsung Hub along Church Street in 2007; the bank had co-developed the office project.

It has also sold conservation shophouses in Bukit Pasoh Road, Boat Quay, Circular Road, South Bridge Road and Amoy Street; they were all either freehold or 999-year leasehold.

Among the investment properties the bank continues to hold are two blocks at The Waterside condo development in Tanjong Rhu, The Compass at Chancery (residences for lease), and Hotel Jen/Orchardgateway at 277 Orchard Road. All of the above are freehold.