What will en bloc millionaires buy next?
By Cecilia Chow
/ EdgeProp Singapore |
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Retired chartered surveyor and valuer Lim Lian Seng was chairman of the collective sale committee for the third time at the freehold Amber Park condominium when it was sold for $906.7 million ($1,515 psf per plot ratio) in October. The price paid by the top bidder — joint venture partners City Developments and Hong Leong Holdings — at the close of the tender reflected an 18% premium to the reserve price of $768 million.
“We didn’t expect Amber Park to fetch such a premium,” says Lim. Amber Park comprises 200 units, 192 of which are identical 1,744 sq ft, three-bedroom units and eight of which are double-storey, 3,789 sq ft penthouses.
The reserve price was initially set at $3.2 million for the typical units, but there was great reluctance among the owners to sell. To make it more palatable, the reserve price was adjusted twice — to $3.5 million and subsequently $3.7 million — before it obtained the 80% consensus required for a collective sale. JLL was the appointed marketing agent for the Amber Park collective sale, launched at end-August, with the tender closing on Oct 3.
Members of the Amber Park collective sale committee (from left): Eric Ang, Koh Piak Chang, Lim Lian Seng (chairman of the committee), Richard Lee and Haja Mohideen (Credit Photo: Samuel Isaac Chua.EdgeProp Singapore)
Beyond expectation
Lim recalls the moment when the collective sale committee members opened the first envelope at the close of the tender: It contained the top bid of $906.7 million. There was a collective gasp. “We couldn’t believe our eyes,” he says.
For the owners of the three-bedroom units, the $906.7 million meant a payout of $4.376 million for each of them, 2.1 times higher than the last transacted price of $2.08 million pri- or to the collective sale. Owners of the eight duplex penthouses will walk away with $8.3 million each.
While Lim is happy with the success of the collective sale, he is feeling a little sad too: Amber Park has been his home for 31 years. “We were the pioneers of this place and among the first residents to move in when the condo was completed in 1986,” he recalls. “I’m sad that we have to relocate but happy that we are getting such a good premium that we can still buy a condo in the Amber Road neighbourhood.”
Lim is considering buying an HDB flat. HDB announced on Dec 15 that it was releas- ing 17,000 new public housing flats under the build-to-order scheme in 2018. “It will depend on the price and the property itself,” he says. “If the price is right, we would even consid- er buying a landed property, but farther out in the east.”
‘Asking prices artificially inflated’
Richard Lee, a fellow collective sale committee member at Amber Park, went house hunt- ing soon after Amber Park was sold. He pur- chased a 1,200 sq ft, two-bedroom unit at Vertis, a boutique, freehold 42-unit condo ad- jacent to Amber Park. The asking price of the unit was $1.62 million, but he negotiated for a better price and secured it for $1.6 million.
While Lee feels that the asking price for the unit at Vertis is certainly higher than what he would have paid prior to Amber Park’s collective sale, he feels “it’s not bad”. More importantly, his wife and daughter like the boutique con- do, as it is a newer development, having been completed in 2009. He and his family like the convenience of the Amber Gardens location. Lee says it is well serviced by buses and, by 2023, there will be a new Tanjong Katong MRT station on the Thomson-East Coast Line locat- ed just a short walk from their future home.
Haja Mohideen, another resident and collective sale committee member at Amber Park, has been monitoring asking prices in the vicinity over the past two months. “I wrote down all the asking prices and, compared with two months ago, owners are asking for prices that are $300,000 to $400,000 higher,” he laments. “Asking prices in District 15 are now artificial- ly inflated by 15% and are unrealistic. In Dis- trict 16, asking prices are at least 10% higher.”
Mohideen reckons the real test for these ask- ing prices will come when owners of Amber Park receive the actual payout at the comple- tion of the collective sale.
Wealth redistribution
The 488-unit Normanton Park was sold for $830.1 million to Kingsford Development (Credit Photo: Knight Frank)
As at Dec 20, a total of 33 en bloc deals had been concluded, with a total sales value of $8.63 billion. “With $8.6 billion in wealth be- ing redistributed, a lot of millionaires are be- ing created across Singapore,” says Desmond Sim, CBRE head of research for Singapore and Southeast Asia.
Owners of projects that have been successful in collective sales see it as “an opportunity to unlock some value”, says Sim. He points out, however, that they might not want to park all that cap- ital back into property. “If they do invest in real estate, it might not even be in Singapore but overseas.”
Most of the prices of collective sales this year were done at premiums of 40% to about 100% to market prices, says Ian Loh, Knight Frank Singapore executive director and head of investments and capital markets. With resale prices rising as well, the collective sale premi- um could be compressed next year, he adds.
Karamjit Singh, CEO of Showsuite and senior consultant at JLL, has been a veteran of the col- lective sale market for more than two decades. In the last collective sale wave of 2005 to 2007, the firm he founded, Credo Real Estate, topped the charts in terms of the number of deals and deal sizes. They included the biggest collective sale deal so far: that of the privatised HUDC es- tate, Farrer Court, for $1.3388 billion. It has since been redeveloped into the 1,715-unit d’Leedon. Credo was acquired by JLL in 2012.
Many firms are hoping to get a slice of the collective sale pie. In this year’s en bloc boom, JLL is in the lead, with seven deals totalling $2.1 billion, followed by Knight Frank Singapore with six deals worth $1.85 billion (see table).
‘More cautious’
What JLL’s Karamjit has observed in this re- cent collective sale boom is a difference in the general profile and investment behaviour of the beneficiaries versus a decade ago. “I see a bigger percentage looking to downgrade or choosing to make a lateral move rather than upgrade,” he says.
Karamjit also observes greater caution when it comes to reinvesting the newfound wealth. “They are less willing to put everything into one property,” he notes. “There’s a chance that they might split the capital across two proper- ties and make sure they have set aside enough cash for their retirement and their children’s education.”
The recent en bloc wave is a boon for the beneficiaries who are middle-income salaried households, especially those in their 40s and 50s, adds Karamjit. “Economic and job prospects are not very rosy for this group, owing to disruption taking place across different sec- tors,” he says. “Anecdotally, we hear more of such beneficiaries choosing to downgrade rather than plough the capital into a bigger property and taking on a bigger mortgage to finance a higher standard of living.”
The natural tendency for some would be to look at other options to preserve capital and generate recurring income. “That might be the case for some of these en bloc beneficiaries,” says Karamjit.
Alternative investment options
Then, there are those who already own more than one property and are therefore in no hurry to buy another. That is certainly the case for Colonel Sukhvinder Singh Chopra.
Chopra (pictured with his family) is chairman of both the Management Corp Strata Title committee and the collective sale committee (Credit Photo: Albert Chua/EdgeProp Singapore)
Chopra, 56, is chairman of the collective sale committee at Normanton Park, which is overseeing the sale of the estate to Chinese developer Kingsford Development for $830.1 mil- lion. Chopra says the price offered by Kingsford Development for Normanton Park is “fair”. For owners of the 488-unit development, it translates into a gross payout of $1.68 million to $1.86 million each.
Chopra and his family live in a 144 sq m (1,550 sq ft) apartment and would, therefore, be looking at gross proceeds of $1.86 million from the collective sale. He has no intention of buying another property for now but is instead looking at investing his collective sale proceeds “very conservatively”, hoping to receive an interest of 2.5% to 5.5% a year. “The interest return would be sufficient to rent an- other property,” he says.
The retired colonel with the Singapore Armed Forces (Singapore Navy) is now managing di- rector of Civica Singapore, a global software solutions company, where he has been for the past three years.
Normanton Park was built by the Ministry of Defence in 1977 for Singapore Armed Forces officers. Chopra and his family have been liv- ing there since 1990 and he has been elected chairman of the Management Corp Strata Title (MCST) committee every year since 1995. While it is unusual for the MCST chairman to be collective sale chairman as well, Chopra occupied that position because of owners’ request. “I’ve a very good relationship with the owners, many of whom I’ve known for many years,” he says.
Knight Frank was the marketing agent for Normanton Park in its second and successful collective sale attempt. The first attempt was in October 2015.
Shopping for a new home
H K Tan, an entrepreneur in the manufacture of leather goods, is a collective sale beneficiary of the 336-unit privatised HUDC estate, Florence Regency on Hougang Avenue 2. It was sold to Chinese developer Logan Property (Singapore) for $629 million on Oct 20. Each owner will get $1.84 million to $1.89 million each.
Florence Regency was sold to Logan Property in its first collective sale attempt, for $629 million (Credit Photo: Samuel Isaac Chua/EdgeProp Singapor
Tan has been a resident of Florence Regency for the past 18 years, and his home is an apartment of more than 1,700 sq ft. “It’s a good and safe neighbourhood,” he says. “There are good food stalls around the Kovan area, just a 10-minute walk from the condo.”
He is considering reinvesting in property. While he views prime District 15 as “a good bet” because it is highly sought after, Tan is open to considering District 19, such as the Yio Chu Kang area. “My folks are more famil- iar with the area around District 19,” he says.
Although Tan does not consider the collective sale proceeds a windfall, he recognises that “it’s a rare opportunity” to cash out of the leasehold property as the lease recedes. “As such, I welcome it,” he says.
For many owners in ageing 99-year leasehold private condos especially, there is a greater ur- gency to sell, notes CBRE’s Sim. Many of the residents tend to be retirees. “For them, a collective sale would be an opportunity to monetise their single-largest asset,” he says.
This story first appeared in EdgeProp Singapore Pullout Issue #811 (Dec 25-31, 2017)
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