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.

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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?

 

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Fourth time unlucky for Pearl Bank owners?

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

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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!