Singapore Property News Upfront 24

25% price premium paid for a East Coast en bloc
St Patrick's View sold to TG Development for $79 million. St Patrick's View, off Telok Kurau Road, has been sold en bloc to TG Development Pte Ltd (TGD) for $79 million, 25% higher than the indicated price when the collective sale was launched three months ago. On its bullish bid, TGD managing director Ong Boon Chuan said: 'The prices for Districts 9, 10 and 11 are quite high but there is room for more upside in the outskirts.'

Giving a contrarian view, Mr Ong also said that while higher asking prices for en bloc sites may lead to resistance from developers, it also means there will be 'less supply in the market'. Marketed by Colliers International, executive director (Investment Sales) Ho Eng Joo added: 'The benchmark price of St Patrick's View reflects developers' continued confidence and optimism in the East Coast area, as demand for new residential projects still remains strong.'

At $79 million, the price works out to $682 per sq ft per plot ratio (psf ppr), including an estimated development charge of $302,318 for the 83,013 sq ft site. Mr Ong said that TGD plans to build a five-storey development of about 100 units with unit sizes of between 1,000 sq ft and 1,400 sq ft. The launch is targeted for mid-2008. The breakeven cost is estimated at around $1,000 psf, which means new units have to be sold in excess of this.

Over in Kembangan, Savills Singapore is marketing the launch of the 32-unit D'Oasia by Monfort Land at about $910 psf. To date, more than 50 per cent of the apartments have been sold during a recent private preview. The development is expected to be completed by Dec 30, 2010. Savills is also marketing the collective sale of Trendale Tower on Cairnhill Road. The indicative price of $180 million is 12.5 per cent higher than it was three months ago when it was put up for sale through an expression-of-interest exercise. The latest price works out to about $2,477 psf ppr with the breakeven estimated at between $3,100 and $3,200 psf. Savills director of investment sales Steven Ming said: 'It is reasonable to project a selling price of a new project on this site at between $3,500 and $3,600 psf.' The 21,709 sq ft site has a plot ratio of 2.8 and can yield about 36 units of 2,000 sq ft condominium apartments.

In the Clementi area, GRE Realty is marketing the sale of Park West Condominium through the expression-of-interest mode. So far, 75 per cent of owners have agreed to the sale.
The indicative price for the 633,638 sq ft site is $620 million to $660 million, inclusive of development charge of about $115 million. GRE Realty estimated that the breakeven price would be around $750-$780 psf.
Source : The Business Times, 26 July 2007
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$2b Bids for Beach Road site expected, what else?
A state tender for the former NCO Club/Beach Road camp grounds yesterday drew seven bids with market watchers estimating bids could have topped the $2 billion mark or $1,250 psf of potential gross floor area. The all-in development cost for the 99-year leasehold project is expected to be in the $3 billion region, analysts estimate. The development cost for the future 99-year leasehold project could hit $3b

Urban Redevelopment Authority revealed the bidders, but not their bid prices, under yesterday's two-envelope system tender, where bidders had to submit concept proposals and tender prices separately. The tender attracted big names familiar with the local market such as CapitaLand, City Developments, Pontiac Land, Overseas Union Enterprise (OUE), Keppel Land and Cheung Kong Holdings. And some of them have teamed up with heavyweight overseas partners like Dubai's Istithmar (part of Dubai World group) and a unit of US-based Elad Properties (these two teamed up with CityDev). Morgan Stanley is believed to have partnered Pontiac. OUE, controlled by Indonesia's Lippo Group and Malaysian tycoon Ananda Krishnan, is expected to rope in partners like Austria's Raiffeisen Zentralbank (RZB).

Billion Rise Ltd (believed to be linked to Li Ka-shing's Cheung Kong Holdings) partnered Keppel Land to put in two bids. OUE is also believed to have placed two bids, one through Beach Development and the other through Nicoll Development. Such a strategy, of placing two bids, presumably gives the bidders an opportunity to present alternative concepts, whether at the same or different prices, and hopefully boost their chances of success.

Under the two-envelope system, the concept proposals will first be evaluated against a set of prestated criteria (including overall design concept, quality of architectural design, adaptive reuse of conservation buildings, and composition and placement of uses). Only proposals that substantially satisfy the evaluation criteria will be shortlisted. At the second stage, the tender price envelopes of these shortlisted bidders will be opened and the site awarded to the highest of these bidders, provided this top bid meets the government's reserve price.

Market watchers reckon the majority of bids at yesterday's tender would be in the $1,000 to $1,200 psf per plot ratio range which works out to around $1.6 billion to $1.9 billion for the 99-year site which can have a maximum gross floor area of nearly 1.6 million sq ft. Construction costs, fees and interest could amount to a further $900 million to $1 billion, bringing the likely all-in investment to about $2.5 billion to $3 billion. The site can be developed into a project with nearly 1.6 million sq ft gross floor area, of which a minimum 40 per cent is for office use, and at least 30 per cent for hotel rooms. The rest can be for complementary retail and residential use.

The development will entail the conservation and restoration of the former NCO Club building and three blocks of the former Beach Road camp. The new towers in the building can be up to 45 storeys high. Market watchers reckon that some of the schemes could possibly entail a high-rise tower with hotel rooms on the lower floors and apartments on the upper floors, seen in places like New York but novel in Singapore. The release of the Beach Road site is part of the government's strategy to alleviate the shortage of office space.

JP Morgan real estate analyst Chris Gee said: 'The office rental market is the most volatile of all the investment property segments in Singapore.' He noted that even before the close of yesterday's tender, the URA had made known its plans to offer four other sites in the CBD which can be substantially developed into offices - two at Anson Road and two near the One Shenton condo project. The tender for the first of the Anson Road plots closed on Monday and was yesterday awarded to highest bidder Mapletree Investments at $1,021 psf per plot ratio. The tender for the second Anson Road plot closes next month. The tender for a plot directly behind One Shenton closes in September, while that for the next-door site will be launched by the end of this month.
Source : The Business Times, 26 July 2007
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Jobs growth & foreign inflow will put a crunch on residential supply
The property supply crunch is likely to get worse despite government assurances that supply over the next few years is sufficient, Citigroup says in a report released yesterday. The report comes just a week after the investment bank advocated a shift from property to bank stocks, amid what it termed 'policy uncertainty'. Since mid-May the government has announced measures to tackle the surge in the property market - especially the rise in office rents. This has undermined the performance of property stocks, Citigroup said in a July20 report.

In yesterday's report, Citigroup analysts Chua Hak Bin and Lim Jit Soon say a supply crunch can be expected because the number of units completed from 2007 to 2010 will likely fall short of the Urban Redevelopment Authority's projection of 42,200. 'Completion rates have been consistently over-estimated in the past,' the analysts say. 'Units under construction provide better guidance and suggest a potential shortfall. Shortage of construction materials and workers implies that risk of delays has risen.' Units under construction far lag completion estimates, with only 25,100 to be built from 2007-2010, according to Citigroup. Specifically, just 4,573 units are under construction in 2007 plus a further 6,633 in 2008. Jobs growth and the foreign worker inflow continue to overwhelm available residential units, Citigroup says. Jobs growth in 2007 is keeping pace with the 176,000 jobs generated in 2006, of which about half were taken up by foreigners.

'Accommodating the current flow of foreign workers looks near impossible with the current supply stock and pipeline,' the bank's report says. 'The lack of any slack also shows in completed but unsold units, which reached a new low of 567 at the end of the first quarter of 2007.' En bloc sales will exacerbate the residential supply squeeze, Citigroup reckons. And it sees a risk of more policy measures.

'The government will likely favour supply side responses, including more land supply, more HDB flats and further relaxation of measures on rental of HDB properties,' it says. 'But demand-side measures cannot be ruled out if price increases continue to accelerate and speculation begins to test the comfort zone of the authorities.' Anticipating dampening policies, Citigroup last week called for a shift from property counters to banks. But it remains positive about the fundamentals for property because demand and supply dynamics continue to favour rental and capital growth for both the office and residential sectors. Still, policy uncertainty has affected the share prices of some property stocks, the report said. Banks, which are beneficiaries of the property upturn because of property loans, are better proxies for the property boom, it said. 'With reasonable valuations and steady earnings growth, banks provide exposure to the reflation theme without the downside from policy uncertainty.' Source : The Business Times, 24 July 2007

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Will Expression-of-interest sparks off more interest?
Credo Real Estate will market two prime properties for collective sale through expression-of-interest (EOI) exercises - and it could just prove to be the faster way to get a sale done. Each of the properties - The Hillpark off Dunearn Road and Chateau Eliza at Mount Elizabeth - has less than 80 per cent of owners' approval for sale at the indicative prices, so the process of a collective sale cannot officially proceed. However, by launching an EOI exercise, owners who are undecided may be swayed by bids from interested developers, even though the bids will not be legally binding offers. But as Credo's managing director Karamjit Singh notes: 'It can be faster because you can secure a bid at an earlier threshold.'

The Hillpark sits on 77,646 sq ft of land and is zoned for two-storey bungalows. The indicative asking price is $106 million to $110 million, which works out at $1,365 to $1,416 per square foot. Chateau Eliza sits on a 17,997 sq ft site and has a designated plot ratio of 2.8. The height limit is 36 storeys and the indicative price is $120 million or $2,223 per square foot per plot ratio. Both developments have achieved around 70 per cent of owners' approval for collective sale, an important consideration when proceeding with an EOI.

Giving an idea of how EOI can work, Credo's executive director Tan Hong Boon revealed that for a recent collective sale deal it brokered through an EOI - Watten Heights off Dunearn Road - Credo received 16 bids. One was high enough to convince undecided owners to agree to sell quickly.

An Offer to Purchase was then drawn up with the highest bidder and the collective sale was done within days, without having to proceed with a public tender.
Source : The Business Times, 24 July 2007
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Should we rejoice for Singapore being the world's hottest property market?
Singapore has emerged as the world's "hottest" property market this year, with Japan and China also among the top favourites of real estate investors, an international consultancy said Thursday. Capital values of prime property in the city-state soared 50 percent in the first six months of 2007, Jones Lang LaSalle said in a press statement.

Globally, the value of property bought or sold for investment totalled a record $382 billion in the first half, up 16.6 percent from the year before, it said. Global real estate investment expanded for the 16th consecutive quarter, with the Americas, Europe and the Asia Pacific seeing record volumes, it added. Property investment in the Asia Pacific jumped 12 percent to $55 billion, mainly bolstered by cross-border investments, the consultancy said.

"Japan, China and Singapore represented the strongest real estate markets in the region," it said. "Singapore became 2007's hottest global market, with prime capital values increasing by 50 percent (in the first half) fueled by astounding rental growth and yield compression." Singapore's property market is heating up after years of weakness following a regional financial crisis in 1997. A strong domestic economy and efforts by the wealthy island-nation to raise its competitiveness, including a decision to build two massive casino resorts, have helped perk up the property market.

Stuart Crow, head of Asia capital markets at Jones Lang LaSalle, said Asia remains attractive to investors due to its strong economies, improved liquidity through real estate investment trusts and better transparency. "Cross border investment is at an all-time high, yet is likely to increase further in the next 12 months, particularly in the most sought after markets of Japan, Singapore, India and China," Crow said. In the Americas, total investment was up 32 percent to $170.7 billion and investment in Europe climbed 4.0 percent to $156.6 billion, with the UK, Germany and France accounting for more than two thirds of the volume, it said.
Source : Turkish Daily News, 21 July 2007

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