Commercial En Bloc List – Progressing
The en bloc commercial sale has been gaining strength to strength. While it is day, on this part of the world, the Investors and the Developers are flocking to make hay.
It is a general remark in the Industry that en bloc sales are once a decade phenomenon. So, not to be left out, almost all commercial properties that ever had the intention for collective sale, have been making attempt after attempt to quick sell their properties in the last few months.
As many such attempts have started yielding successful results, many more are encouraged to join the fray.
A typical recent transaction is the acquisition of 27 residential units (out of 28) located between 7 and 14 floors on 336 RV by Far East Organization (FEO) at S$124.10 million in July 2018.
As early as 2013, FEO, which has interests in residential, hospitality, commercial, medical and industrial properties, had acquired the lower six floors of the same building from Automobile Association of Singapore (AAS).
Subject to approval, FEO has intentions to make this site fully commercial by developing serviced apartments.
When the en bloc sale fever touched its peak by the last quarter of 2017, the Owners were already driven by the ambition to get two to three times their property value in collective sales while the Developers were eager to acquire a lion’s share of their properties for redevelopment.
This sentiment resonated in the transaction values, as they soared from S$8.7 billion (2017) to an astounding S$ 10.5 billion in the next quarter (Q3/2018).
Concerned about the notable redevelopments in the last few quarters, which pose risk of an oversupply of residential units, the Government barged in with its cooling measures in July 2018, especially to pace out the new launches.
Now, the developers would have to pay 25% on an acquisition against the previous 15%. This is remissible only on successful sale of all the residential units in the next five years, failing which it would be forfeited.
Moreover, the additional 5% ABSD tax on the transaction price would not be remissible. So, upfront, a developer is stripped of 30% through ABSD, leading to external borrowings.
Sailing on the same boat, the home buyer would need to shell out higher ABSD on their second or more properties with tightened Loan-To-Value (LTV) limits, adding to his woe.
Almost within two months, another wing of the URA released more guidelines to moderate the home sizes.
This time, the points under contemplation were, the need of the big families to have larger living spaces and to disperse vehicular traffic congestion.
Accordingly, Outside the Central Area (OCA) projects would have the minimum average unit size increased from 70 sqm to 85 sqm, with some specific areas at 100 sq m.
These new guidelines that come into effect from 17th Jan next year has applied more pressure on the Developers, who all along have been used to producing affordable
Mickey Mouse units to keep their product marketable. The need to produce a mix of unit sizes, has a direct impact on their profits too, aggravating the situation further.
Another marketing strategy also fell, as, they would not be in a position to offer higher psf ppr rates to woo the owners.
So, Investors and Developers are just waiting for the dust to settle down on the residential properties market and of course busy, reworking their strategies.
So, with the craze that raged the residential en bloc sale simmering down, more than 50 projects listed for collective sale remains unsold without takers.
Shockingly, property developers like Lafe Corp and Tee Land have walked out of their purchases of Fairhaven and Teck Guan Ville respectively, which speaks of the gravity of the situation among residential property developers currently. Both the companies would suffer the loss of security deposits made.
While Real Estate Sentiment Index (RESI) has noted the slump in the residential sector in the last quarter, it has also recorded the strong performance of the commercial sector, maintaining the vibrancy of the Singapore Real Estate Market currently.
So, it is evident that commercial en bloc sale is experiencing a surge against all odds.
Of late, there have been accounts of successful commercial collective sales from every direction. Those accounts, no doubt, have spurred many more commercial property owners to join the bandwagon.
One such success story is the Chinatown Plaza acquired by Royal Golden Eagle (RGE) under collective sales in May 2018.
With a global presence, diversified interests and assets exceeding U$18 Billion, RGE has stumbled upon this freehold site, thereby parting S$260 million in the deal.
With URA’s approval already in place, the property might be developed into a commercial unit with serviced apartments.
Acquisition of Citimac Industrial Complex is a classic instance, that reveals foreign players getting keen to invest in commercial collective sales.
Reported to be the largest freehold Business 1-White redevelopment site in Singapore, Citimac houses showrooms, factories and warehouses in its eight-storey light industrial building.
Strategically located at the corner of MacPherson and Upper Paya Lebar Roads, within 300 meters from Tai Seng MRT Station, the site offers unmatched opportunity to redevelop retail units, banking on the white zone component.
When requirements matched, a quick deal got struck and Elite Building changed hands, in one of the most exciting commercial collective sale.
Built two decades ago, the Elite Building is a six-storey freehold property on the Aljunied Road with an attractive 60m long frontage.
13 of its 16 strata units were occupied by the Institute of Singapore Chartered Accountants (ISCA) along with its educational wing, Singapore Accountancy Academy (SAA).
Out of the balance three strata units, two were occupied by Evangel Baptist Church and the last by an individual.
So, when the collective sale was launched for the Elite Building, the Tabernacle Church and Missions Ltd (TCM) struck the deal, when the Elite Building lowered its asking price to S$ 52 Million, in their third attempt. The TCM’s Corporate Office along with its Training Wing for Pastors, Counsellors and Social Workers plus a large collection of Library was the purpose of the acquisition.
Under the URA Master Plan 2014, the Elite Building is zoned for residential/institution and approved for commercial school with shops on the ground floor.
The Goh & Goh Building, a mixed development of the 1980s with seven shops and seven flats acquired by BBR Holdings was yet another collective sale that brought about high expectations, which boasts an attractive triple frontage.
Earmarking the ground floor for retail shops, BBR Holdings plans to build a hundred residential units on the most coveted site, which has permissible Gross Floor Area of 8,604.9 sq m.
Another major commercial property collective sale transaction is the acquisition of Pei Fu Industrial Building by SLB, the Construction Division of the 45-year-old commercial giant, Lian Beng Group, through its subsidiary, Oxley Kyanite Pte.
The S$76.25 million deal shows how the popularity of commercial collective sales has become strong among Investors and Developers, pulling major players to follow the flow.
This property could be redeveloped with gross floor area (GFA) 155,864 sq ft, which translates the land rate to S$489 per sq ft per plot ratio (psf ppr).
In the 336 RV collective sale, the Far East Organisation (FEO) would have full ownership of the building except one unit.
This win-win deal was orchestrated by Richmond Capital Investments through tendering and negotiations. FEO already has offices in the first three floors, a recreational facility on the fourth and serviced apartments on the fifth/sixth floors.
Since it has no immediate plans for redevelopment, it might lease out the recently purchased residential units from the seventh to the fourteenth floor.
Owning an adjacent plot, with just its own sales gallery on a 70,637 sq ft freehold site, FEO is likely to reserve this prized possession for long term investment.
While severe rains dampened the residential sector, it’s all sunshine on the commercial sector now.
The Investors and Developers, of course, cannot sit back and relax through the wait period that has been forced on the residential sector.
Luckily, they have found their bonanza on the commercial sector to work on, in the meanwhile.
What’s more, Commercial Properties offer a wide range of incentives and scopes to take the Industry forward and the Nation as well.
By Commercial Properties, we mean a broad assortment of Retail, Office, HDB shophouse, Strata title Shops, Conservation Shophouses, Hotels, Commercial Buildings and Mixed Developments.
The Additional Buyer’s Stamp Duty (ABSD) is nil on commercial properties, which is highly lucrative against residential developments.
The Seller’s Stamp Duty (SSD), again, does not apply on commercial properties, while it could be a headache to residential property owners.
Yet again, commercial properties differ from residential counterparts with no TDSR applicable.
Believe it or not, commercial properties enjoy absolute freedom to subsale (buyer’s stamp duty is payable if option is exercised) , that is to make a secondary sale before the completion time.
While foreigners do not have the eligibility to buy landed properties and a long list of residential property categories, they are welcome to invest in commercial properties.