The Resurgence of Billion Dollar Enbloc Deals?

Since the introduction of new property cooling measures in July, our collective sales market had slowed down considerably. But this week, I am getting excited with the spate of news in the enbloc market. During the week, 4 new collective sale tenders were announced. The most anticipated enbloc sale is the tender for Laguna Park that is about to be launched.

Laguna Park – Launching collective sale tender @ S$1.48 bil asking price

Laguna Park owners are seeking for a mind-blowing S$1.48 bil from developers. This project is located in District 15, next to the upcoming Siglap MRT station. What is so unique about this site? This development offers panoramic sea view, is located near to educational institutions and has good transportation/road network connectivity. Laguna Park has a huge land area of 669,486 sq ft and has a remaining leasehold of around 58 years.

A developer will have to pay a differential premium of S$453.5 mil and lease top-up of S$416 mil to the Singapore government to redevelop the site. Hence, the overall land cost will be around S$2.35 bil or S$1,253 psf ppr, before factoring the newly-introduced 5% non-remissible ABSD and 4% buyer’s stamp duty that are upfront costs to the developer.

Fernwood Towers, a freehold condo near Laguna Park, has launched its collective sale tender on 12th Sep.  Fernwood Towers has a land area of 148,963 sq ft, with a higher plot ratio of 3.0. Owners at Fernwood Towers are seeking S$688 mil or S$1,540 psf ppr. Comparing with Laguna Park, Fernwood Towers is less attractive as it is located further away from the future Siglap MRT station. Its sea view will also be partially blocked once Seaside Residences is completed. The only plus point for this site would probably be its freehold status.

As these two collective sales tender of significant size prepare for their tender launches, the tender for S$1.1 bil collective sale of Horizon Towers in the prime District 9 closed on 12th Sep 2018 without getting a buyer.  The Horizon Towers collective sale is one of the casualties resulting from the latest round of cooling measures as developers have turned more defensive towards acquiring new development sites.

Hence, collective sales of significant sizes, such as Laguna Park and Fernwood Towers, are likely to face challenges in securing buyers.

But the launch of Seaside Residences Phase 3 on 29th September might have some impact on the collective sale tenders for Laguna Park and Fernwood Towers. During its Phase 2 launch, Seaside Residences achieved an average selling price of S$1,933 psf. However, as reported in the news, the estimated breakeven price for Laguna Park is around S$1,800 psf to S$1,900 psf. This means that the profit margin is thin and it might not be sufficient to compensate for the higher risks that developers face now.

Nonetheless, the response from buyers will an important factor that developers will consider when evaluating a bid for Laguna Park and Fernwood Towers. A strong demand for the Phase 3 units at Seaside Residences should help to improve the odds of a successful collective sales of Laguna Park and Fernwood Towers.

Owners at Laguna Park and Fernwood Towers should be eagerly anticipating the launch of Seaside Residences Phase 3.


Collective Sale Activities Hint At A Shift in Landbanking Strategy

The collective sale market in Singapore continues to perform strongly. Property developers snatched up 26 sites worth S$8.5 bil for the year to date. This has already exceeded the collective sale transactions for the entire 2017. There is one noticeable fundamental shift in developers’ land banking strategy. There is now a shift of preference away from suburban sites towards freehold sites in prime districts. Redevelopment of all the collective sale sites will yield close to 22,000 new units, but this will not cause an oversupply situation yet as these units will enter the market over a period of time within the next 1 to 2 years.

This insight first appeared on Singapore Investment Research and SmartKarma – a global independent research network .

Image result for collective sale

The collective sale market in Singapore continues to perform strongly. For the year to date, property developers have snatched up 26 sites worth S$8.5 bil and this has already exceeded the collective sale transactions for the entire 2017.

This insight provides a review of the activities in the collective sale market in Singapore for the year to date:

Collective Sales Data at a Glance
  • 27 collective sale transactions were concluded for the year to date, surpassing the 26 transactions done in the entire year of 2017
  • The combined value of the collective sale transactions for the year to date was S$8.5 bil, 5% higher than the combined value of all collective sale transactions in 2017
  • Average value per transaction for the year to date was S$315 mil per transaction, similar to that in 2017 (S$311 mil)
  • There were 2,564 en-bloc sellers who benefitted from collective sales for the year to date, 22% lower than the number of en-bloc sellers in 2017. This was due to the concentration of collective sale transactions in the higher value prime properties in 2018
  • Out of the 27 collective sales transaction for the year to date, 17 of them are in the prime districts, 9 of them are in the city fringe area and 1 of them is an industrial building. No suburban collective sales were done for the year to date. This is in stark contrast to the situation in 2017, when 9 out of the 26 collective sale transactions were suburban condominiums, accounting for 41% of the total collective sale transaction value in 2017
Districts with Most Collective Sale Transactions
  • Redevelopment sites in prime District 10 were the most sought-after sites by developers for the year to date, with 8 out 27 collective sale transactions involved condominiums in District 10 and total transaction value of condominiums sold en-bloc in District 10 was S$2.26 bil. This was in stark contrast to the situation in 2017, when redevelopment sites in the suburban District 19 were the most popular among developers.
  • Freehold estates are back in favor, with 25 out of the 27 transactions involving freehold/999-year leasehold estates. There are 2 possible explanations for this phenomenon. Firstly, a developer that acquires a leasehold property for redevelopment is subject to the payment of lease top-up premium that is dependent on the Development Charge set by the government, which is revised semi-annually. The long collective sale process may expose the developer to an upward revision in Development Charge and potentially higher land cost. Buying a freehold redevelopment site would remove this element of uncertainty in developers’ profit planning. The second reason relates to the current trend of land-banking of prime land by developers. The target market of these high-end redevelopments is likely to be the HNWIs in the region. For these buyers, purchase considerations are more driven by the unique attributes of a development and they are less price sensitive. Hence, a freehold prime development might be more appealing to such buyers, instead of a leasehold property.
  • The average premium over reserve price paid by developers for the year to date has fallen to +5%. In 2017, developers paid a higher average premium of +13% above the reserve price. Declining premiums could be a case of higher reserve prices set by sellers and greater supply of redevelopment sites available for collective sale this year.
  • The 26 residential developments collectively sold for the year to date could potentially yield up to 8,650 new units for future launch, of which 3,669 units (42.4%) were in the prime district and 4,982 units (57.6%) were in the city fringe. No new supply (via collective sale) was added to the suburban area for the year to date.
  • Out of the 26 collective sale transaction for the year to date, 13 of these sites were acquired by consortiums of developers. These sites tend to be the bigger sites with higher transaction value. By forming consortiums, developers can mitigate their risk exposure in a single large-scale development project.

There has been a fundamental shift in developers’ land replenishing strategy in 2018. Developers have shifted their focus from the mass market segment to the luxury property segment and building up their development landbank in the prime districts. This comes as no surprise as new launches of luxury properties in Singapore (such as New Futura) have done surprisingly well despite the high price quantum and there is growing evidence of foreign buyer returning to the Singapore property market.

Despite the surge in collective sale activities in the prime districts, potential new supply in the prime district does not look excessive at this stage, with an estimated 4,405 units that could potentially enter the supply pipeline, probably a year later. The actual number of units could be lesser as it is likely that developers may build bigger size luxury units for sale.

In the mass market segment, potential new supply from collective sale transactions does not look excessive as well, with an estimated 6,946 units that could potentially enter the supply pipeline. Developers will start launching some of these units as soon as within the next 1 to 2 months. According to public announcements, Oxley Holdings Ltd (OHL SP) is planning to launch Rio Casa and Serangoon Ville redevelopment in 1H 2018.

Most of the future supply from collective sale transactions are in the City Fringe area, with an estimated 10,480 units that could potentially enter the supply pipeline. These developments tend to be in well-established mature estates that are highly sought-after by buyers.

Potential Supply of New Units for Future Launch

In total, the supply of new units from collective sale sites is estimated to be around 21,830 units. This is subject to change, depending on the final submitted plans and approvals from authorities. This new supply will enter the market in a staggered manner, depending on the speed of getting Strata Title Board’s approval for the collective sale transaction and relevant authorities’ approvals for redevelopment.

Do you feel the enbloc heat?

The enbloc craze just keeps getting crazier. There were many significant developments in collective sale market over the past week.

The Next Enbloc Blockbuster – Mandarin Gardens


First, we have a potential blockbuster collective sale exercise coming up! Mandarin Gardens is one step closer to being put up for collective sale. A mind-blowing reserve price of S$2.45 billion has been set for Mandarin Gardens. This price has not even taken into account of the additional lease upgrade premium that a developer will need to pay the state for a fresh 99-year leasehold.

If Mandarin Gardens is successful in its collective sale attempt, it will set a new record as the most expensive collective sale transaction in Singapore.

In a Business Times news article, Mr Raymond Khoo from C&H Realty mentioned that “Chinese developers might want to showcase what they have done in Johor Baru and want to bring it over to Singapore”. Chinese developers such as Guangzhou R&F Properties and Country Garden Holdings do come to my mind as what Mr Raymond Khoo had described as possible bidders for the site.

Other potential bidders named by another “industry specialist” includes big names like Capitaland, Qingjian, Longan Property and Nanshan Group. Capitaland is probably still in an early stage of its landbank replenishing exercise, having only acquired 1 site since the market recovers.

It seems that the strategy is already in place in search of buyers for this mega-site and if Mandarin Gardens succeed in its collective sale attempt, the risk appetite of developers may be raised to a higher level and there will be a significant amount of enbloc money to flow back into the property market and hence sustaining the sales momentum.

The date for an extraordinary general meeting to approve sale conditions for Mandarin Gardens has been set for March 25. With a requirement of 80% approval from the over 1,000 owners in the development, this is not an easy task to achieve. I will definitely be looking forward to the EGM results next week!

Achieving 20% Premium over Reserve Price – Katong Park Towers

katong park

Sitting on a piece of prized land? Don’t worry, developers are still willing to pay a good premium for your land.

Last Friday, Bukit Sembawang acquired Katong Park Towers for S$345 mil, a 20% premium over the reserve price of the development.

Katong Park Towers is located along Arthur Road in District 15, near the future Katong Park MRT station. It is within short driving distance to town and CBD via East Coast Parkway expressway. The property has a 99-year leasehold tenure from 5th April 1982. An estimated lease upgrade premium of S$60 mil is payable by Bukit Sembawang to top up the leasehold to a fresh 99-year. Including the LUP, total land acquisition cost payable by BSEL will add up to a total of S$405 mil or S$1,280 psf ppr.

Prior to the collective sale of Katong Park Towers, there were 4 collective sales concluded in District 15 around Amber/Meyer Road since last year. These sites were sold at an average land price of S$1,442 psf ppr. Katong Park Tower’s price of S$1,280 psf ppr is 11.2% below the average land price of a freehold land in the area reflecting a fair discount due to the difference in the land tenure.

Looks like we have 116 happy owners at Katong Park Towers now. And the redevelopment by Bukit Sembawang is definitely a project to look forward!

2nd biggest enbloc sale in Singapore – Pacific Mansion

pacific mansion

Just this morning, Guocoland and Hong Leong Group announced the acquisition of Pacific Mansion for S$980 mil, 4.5% above the reserve price of S$938 mil. This is the most expensive acquisition made by developers in this round of collective sale cycle, and the 2nd biggest enbloc sale ever in Singapore property market. The S$1.3 bil sale of Farrer Court still holds the record as the largest enbloc transaction (for now).

Base on my estimate, the breakeven price for Pacific Mansion is approximately S$2,400 psf to S$2,500 psf and eventual selling price for the project could be more than S$3,000 psf.

Each owner of the development’s 290 apartments will stand to receive a gross payout of S$3.26 million to S$3.48 million, while the owners of the two shop units there will pocket between S$2.2 million to S$4.5 million each. Units at Pacific Mansion were just going for S$1.7 mil to S$1.9 mil less than a year ago! You would have made a huge profit if you bought a unit there last year!

290 happy owners out there!


Looks like the collective sale market is heating up and not cooling down. Let’s see if Mandarin Gardens can bring the heat up to the next level. Akan Datang!

So I was wrong

I have to admit that I am wrong this time round.

This morning, property giant Capitaland announced that it has acquired the iconic Pearl Bank Apartments in Outram Park area for S$728 mil, at the reserve price of the sellers. The site has a land area of 82,376 sq ft and plot ratio of 7.45, translating to a permissible GFA of approximately 613,701 sq ft. Capitaland will pay an additional S$201.4 mil to the government to top-up the land lease to a fresh 99-year. The total cost of the site will be S$929.4 mil or S$1,515 psf PPR. Capitaland plans to build around 800 units in the new development.


When I was writing my earlier post on Pearl Bank , I felt that the high asking price of the owners and the large investment quantum are major hurdles for a collective sale to happen at Pearl Bank and risk-reward is not optimal for the developer. Based on my estimate, such a project would probably breakeven at S$1,900 psf to S$2,000 psf and developer will need to sell at S$2,200 psf for a decent margin. Assuming an average unit size of 750 sq ft at S$2,200 psf, an average unit at the redeveloped site will cost a whopping S$1.65 mil! Mind blowing numbers for a district 3 property! For this amount, you could actually get a prime district property instead.

But it looks like this is turning into reality with CapitaLand’s bid and the aggressive land acquisition strategy by developers seem to have even exceeded my expectations. With this new development possibly setting a new record price in District 3, it is likely that the nearby District 9/10/11 properties will get to enjoy the spillover effect. A rising tide lift all boats!

Probably one thing that I got it right is that Capitaland is finally jumping on the enbloc bandwagon, which I mentioned in an earlier blog post. With CEO Lim Ming Yan expecting property prices to rise up to 10% this year, it is unlikely that Capitaland’s acquisition spree will end here.

Let’s also not forget that some of the big boys have not started playing this enbloc game yet! Wanna make a guess who they are?


Why Frasers Property is raising prices at Seaside Residences

Just two weeks ago, I blogged about why Seaside Residences may sell like hotcakes this year.

Today, I heard that Seaside Residences has just raised its selling prices by 1% on average. Coincidentally, it was also reported today that the nearby Fernwood Towers is close to launching an enbloc sale.


Is it a coincident or a premeditated move by Frasers Property to raise prices at Seaside Residences?

Firstly, let us try to understand how the Fernwood Towers enbloc will affect the neighbouring projects.

The freehold Fernwood Towers is asking for S$688 million or S$1,572 psf PPR. Assuming that the sale goes through at the reserve price, the estimated breakeven for the new development should be around S$2,100 psf to S$2,200 psf and the eventual selling price may be as high as S$2,500 psf!

No doubt that Fernwood Tower is a freehold development, but it does not have the direct seaview frontage that Seaside Residences offers. So if we compare a S$2,500 psf freehold project with Seaside Residences’ S$1,700 psf average selling price, the price gap looks too wide to be justifiable.

Moreover, Seaside Residences has been selling well since the property market picked up last year. Phase 1 of the launch is close to selling out.

It seems like a well-timed move for Frasers Property to raise its selling price for Seaside Residences to take advantage of the upcoming enbloc at Fernwood Towers, and also to set the stage for its Phase 2 launch, which may be at an even higher price if Fernwood Towers manage to sell at its reserve price!

Fourth time unlucky for Pearl Bank owners?

Looks like it’s a fourth time unlucky for Pearl Bank owners.


EdgeProp reported that public tender for Pearl Bank Apartments closed on 19th December and the collective sale committee had instructed marketing agent – Colliers International to enter into private treaty negotiations with interested parties. Owners were asking for S$728 mil, translating to around S$S$1,505 psf ppr after adding in a lease upgrading premium of S$195 mil.

According to the article, there were ‘keen interest’ from developers, but there was no mention of whether any offers had been received.

Some of the concerns developers raised include the requirement for pre-application feasibility study (PAFS) and whether there is a need to conserve the development in future.

The pre-application feasibility study might be a valid concern but it is unlikely to be the deal-breaker as we have seen buyers for other collective sale sites after the implementation of the PAFS.

And regarding the other concern relating to conservation, this is not something new. URA had publicly stated its position in an official release, saying that any conservation of the property will depend on the council of the management corporation’s interest in having the property conserved and it requires the support from individual owners. Wouldn’t the management council be in a good position to answer any question from developers relating to conservation?

As mentioned in SPK’s earlier blog post, SPK already highlighted that the high asking price of the owners and the large investment quantum are major hurdles for a collective sale to happen at Pearl Bank and risk-reward is not optimal for the developer.

It might not be surprising if the ‘concerns raised by developers’ are attempts to persuade the owners to reduce their asking price for a developer to bite. 10 more weeks to conclude a private treaty. Let’s wait and see!

Jackpot day for Vista Park owners

Yes, Vista Park owners have hit their jackpot this time round.

Vista Park

Enbloc-King Oxley Group announced last night that owners of Vista Park had accepted its tender offer of S$418 mil to acquire all the units for redevelopment. Its tender price is almost 20% above the reserve price of the owners. After factoring in the S$72 mil lease upgrade premium, the offer price from Oxley translates to a rate of S$1,096 psf per plot ratio and approximately S$1,056 psf per plot ratio after factoring in the bonus balcony GFA.

In the earlier blog post titled “Are Vista Park owners hitting their jackpot this time round?”, SPK had pointed out the challenges in the redevelopment and positioning of this site. And that was probably why the site was not as hotly contested as other sites, with just 5 bids and a few expression of interest.

Nonetheless, the final outcome is a good one for all Vista Park owners and within SPK’s thumbs up expectation for the collective sale at Vista Park to succeed.

Pricing in a 9% increment in future prices

Oxley’s tender price of S$418 mil translates to an estimated breakeven price of around S$1,500 psf and SPK expects the launch price of the new project at Vista Park site to be around S$1,800 psf on average. In comparison to the S$1,650 psf that nearby new launches were fetching in today’s market, Oxley could be pricing in a 9% future price increase in its tender offer price.

Jackpot day for Vista Park owners

Vista Park owners are expected to receive 20% that what they had asked for. Each owner could now take back $1.39 mil to $4.2 mil.

Congratulations to the 209 owners at Vista Park!

Going once…going twice…Crystal Tower sold!

Yes, it is a 3rd time lucky for Crystal Tower owners. It was reported on the Business Times that Allgreen Properties had emerged as the winning bidder to acquire Crystal Tower, in a fiercely contested tender that attracted a total of 12 bids. Allgreen Properties offered S$180.65 mil for the freehold site, reflecting a land rate of S$1,840 psf ppr. Allgreen’s offer price is a huge premium of 31% above the asking price of the owners!


An aggressive bid by Allgreen? What was the developer thinking?

Few months back, the nearby Sloane Court Hotel site was snapped up by Tiong Seng and Ocean Sky at a land rate of S$1,616 psf ppr (including Development Charges). Allgreen’s offer price for Crystal Tower would be 14% higher than what Tiong Seng and Ocean Sky paid for their site.

SPK estimates that based on Allgreen’s offer price, the breakeven selling price for the new project will be around S$2,300 psf to S$2,400 psf. To make a decent profit margin of 10% to 15%, Allgreen will probably have to sell this project at S$2,600 psf to S$2,750 psf.

Was Allgreen overly-aggressive in its bid? Did it overpay for the site?

These are difficult questions to answer at this point in time.

But what we can be sure is that developers are returning to the prime districts and this is probably a hint of their optimism on the prime residential property segment. Allgreen’s price might look high at this point in time, but if the property prices in CCR move in line with the optimism of the developers, then what Allgreen is pricing in right now might not be too far away from the prices in future.

Any brave soul out there who bought the penthouse at S$9.8 mil?

The penthouse unit was listed for sale at S$9.8 mil in October 2017. If you were brave enough to buy the unit a month ago, then congratulations to you!

Base on Allgreen’s offer price, the penthouse owner will receive about S$12.3 mil while the rest of the owners will pocket around S$6 mil to S$6.6 mil each. If you had bought the penthouse at S$9.8 mil, you could have easily pocketed a tidy profit of close to S$700k, after deducting stamp duty and additional seller stamp duty!

Congratulations to the 28 multi-millionaires at Crystal Tower!