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.