Far East top buyer of en bloc sites

Singapore
Published December 1, 2006

PROPERTY FOCUS
Far East top buyer of en bloc sites

CityDev in 2nd spot, followed by SC Global; CBRE the No 1 broker

By KALPANA RASHIWALA
FAR East Organization has been the biggest buyer in the collective sales market so far this year, spending a total of $838 million.

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Waterfront View: It was the biggest collective sale transaction this year, fetching $385 million

It has bought six sites - Amberville, Rose Garden, Angullia Mansion, Pacific Court, Century Ville/Le Marque/Villa Margaux and Waterfront View. The last site was bought jointly with Frasers Centrepoint.

City Developments is the second-biggest buyer. It has spent $827 million on three sites - Lucky Tower in Grange Road, Futura in Leonie Hill Road, and Lock Cho Apartments/Comfort Mansions and a walk-up apartment in Jalan Datoh in the Thomson/Balestier area.

The third-biggest buyer is SC Global and the family of its chairman, Simon Cheong, with a total of $721 million spent on collective sale sites. SC Global bought Hilltop Apartments and some surrounding terrace houses, as well as Paterson Tower, while Mr Cheong's family is said to have picked up Emerald Mansion.

Companies controlled by banking tycoon Wee Cho Yaw - United Overseas Land, Kheng Leong and United Industrial Corporation - have been involved in four collective sale deals this year totalling $615 million.

Other big buyers include Frasers Centrepoint, which bought Far East Mansion in the River Valley area for $256 million and teamed up with Far East Organization to buy Waterfront View.

Chip Eng has teamed up with big-name overseas players Lehman Brothers and Citadel for three collective sale deals this year totalling $510 million.

The wave of collective sales has also drawn out parties that have not bought land in Singapore for a long time, such as the Kwee family's Pontiac Land which acquired Pin Tjoe Court in Ardmore Park.

Among property consultants, CB Richard Ellis has brokered the lion's share of collective sales - more than $1.9 billion of them. They include Pin Tjoe Court, Ardmore Point, Eng Lok Mansion, Beverly Mai and Grange Tower.

Next comes DTZ Debenham Tie Leung, with about $1.5 billion of transactions. Its deals include Waterfront View in Bedok, Hilltop Apartments and Holland Hill Mansions.

Savills is in third spot with about $800 million of deals, including Nassim Park. Jones Lang LaSalle brokered about $700 million in collective sales.

The biggest collective sale transaction in dollar terms so far this year is the $385 million sale of Waterfront View, a privatised HUDC estate that faces Bedok Reservoir. The leasehold site has a land area of 809,037 square feet.

The priciest deal in unit land price terms is Ardmore Point, bought by Wing Tai for $1,369 psf of potential gross floor area.

Far East, Frasers Centrepoint buy Waterfront View
In a move seen as reducing the risks of undertaking a massive development, Far East Organization and Frasers Centrepoint have set up their maiden joint venture, which has bagged Waterfront View, a privatised former HUDC estate facing Bedok Reservoir, for $385 million.

The price for the private treaty deal sealed late Tuesday night before the planned tender close for the property this Friday works out to a land price of $241 psf per plot ratio inclusive of an estimated $102.2 million payment to the state for lifting title restriction to enhance the site’s plot ratio, and upgrading the site’s lease from a remaining 78 years to 99 years.

The 809,037 sq ft site can be developed into a new condominium with a whopping gross floor area of over two million sq ft – enough for a massive project with about 1,600 units.

This is the biggest residential collective sale to date in terms of number of units involved (there are 583 units in the existing development), land area as well as dollar quantum, says DTZ Debenham Tie Leung, which brokered the sale.

Far East’s and Frasers Centrepoint’s breakeven cost could be about $450 psf, say analysts. Currently, 99-year condos in the area are going for above $500 psf for units that face the reservoir and below $500 psf for those that don’t.

Depending on how Far East and Frasers Centrepoint come up with their design scheme, about 80 per cent of units in the new development may face the reservoir.

Industry watchers reckon that instead of competing with each other for Waterfront View at the tender, Far East and Frasers Centrepoint figured it made more sense to team up.

This reduces their risks in terms of exposure to such a huge development – and eliminating at least one competitor in the process. The duo are said to have made their offer, good for only a day, late Tuesday afternoon, accompanied by a $19.25 million cheque (for a 5 per cent deposit).

The collective sale agreement signed by Waterfront View’s owners give the sales committee the mandate to negotiate a private treaty deal as long as the reserve price is met. This is understood to have been $370 million.

‘The sales committee could either take the offer on the table, good for only a day – or take the risk of waiting and hoping for a higher offer at the tender that may or may not come,’ said a source.
Waterfront View’s sales committee chairman Matthew Yu said: ‘We are very happy. It’s a good price. The outcome came earlier and is better than we expected.’

DTZ’s director for investment advisory services Tang Wei Leng said: ‘Given the size of the development, there were really only a few parties who have demonstrated genuine interest. The sales committee was decisive, having considered all the options carefully. We are very happy for the owners.’
The $385 million price is above an independent valuation for the property which DTZ did not disclose. Owners controlling 82.33 per cent of share values in Waterfront View have agreed to the collective sale, which will be subject to approval from the Strata Titles Board. Owners of the existing 583 apartments and maisonettes have equal share values, which means they will each receive about $660,377 per unit, which is over 60 per cent more than what the units would fetch if sold individually today.
The site is zoned for residential use with a 2.5 plot ratio.

While the deal involves the maiden tie-up between Far East and Frasers Centrepoint, it is not the first time that the men helming the two organisations have joined hands. Far East is headed by property magnate Ng Teng Fong while Frasers Centrepoint is the property arm of listed Fraser & Neave group, which is now headed by Han Cheng Fong who, during his days as group CEO of the former DBS Land, oversaw many tie-ups with Mr Ng’s Singapore unit Far East and Hong Kong arm Sino Land.
Market watchers are wondering if the two sides will team up for other acquisitions, including the second Somerset site being offered by the state. Far East clinched the first Somerset plot, the former Glutton’s Square site, in January.

Waterfront View is the fifth site Far East has bought here this year. The five total $1.2 billion.

Source : Business Times – 25 May 2006

Owners of the existing 583 apartments and maisonettes have equal share values, which means they will each receive about $660,377 per unit, which is over 60 per cent more than what the units would fetch if sold individually today.

Is there an error in the amount they received $660,377. Selling price if sold individually is $264,150??????

What can they buy with $660,377 in 2006?
What motivate them to sell at such a low price?
Are they happy after selling their HUDC the government sell to them and FEO is the one who gain the most.

Fix bank-or-CPF charge problem

By Jessica Cheam, PROPERTY REPORTER

THE Strata Titles Board's (STB's) recent decision to throw out the sale of Tampines Court has put an end to a three-year en bloc saga. But the issues raised during the objectors' hearings will no doubt resurface again in future en bloc sales. They deserve a closer look.

Essentially, STB killed the application because it was not done 'in good faith, taking into account the sale price and the method of distributing the proceeds of the sale'.

Although there was no mention of financial loss, this was at the heart of the minority owners' objections.

A financial loss is deemed if an owner's sale proceeds, after deductions allowed by STB, are less than the price he paid for his property.

But the law does not specify what deductions are allowed. Based on precedents set by STB decisions, stamp duty and legal fees are allowed but interest and renovation costs are not.

In the Tampines Court case, a fair number of owners faced the prospect of financial loss. They might have ended up with no cash in hand and a big hole in their CPF accounts if the sale had gone ahead. No wonder they fought it with such determination, scrutinising the deal for every possible flaw.

This problem is not likely to go away, for estates can be sold en bloc once they are 10 years old. Many would have bought their apartments at, or near, the previous 1996 peak. Those facing financial losses will contest en bloc sales to the bitter end and STB may well be hearing many appeals.

Which begs the question: Is there a win-win situation for all? I believe there is, but this would require a tweaking of the rules. Let me explain.

The current procedures on how to deal with financial loss have been created by a combination of rules and rulings.

Under the law, the STB can reject an en bloc sale application if an objecting owner can show that he will suffer financial loss.

The sales committee and their lawyers usually make a provision for this by running a financial check on all owners to determine who might suffer losses and calculating the sums that would be needed to pay them. Usually this sum is deducted from the total sales proceeds, before they are distributed equally among owners.

Some other brokers, however, set aside a specific sum obtained from developers, as in the case of Tampines Court. In most cases, the industry way of doing things works out fine. But the problem arises for individual owners when there is a financial loss and it is the bank, and not the CPF, that has first charge upon the sale of the property.

If it is the CPF that has first charge of the property, then it is a straightforward case. Sellers will always have their CPF accounts fully reimbursed first and then the bank loan will be paid off with whatever money is left. If there are insufficient funds, the sales committee will compensate them from the total proceeds. Everyone is happy.

But if the bank has first charge, then it is possible for an owner to lose from the sale. The proceeds of the sale go first to repaying the bank loan. After that, the money goes to top up the owner's CPF account - but in some cases, the remaining sum is not enough.

You would think that the law would require this CPF shortfall to be made good. But this is not the case, as shown in the Waterfront View ruling last year.

In that case, a couple tried to stop the en bloc sale by claiming financial losses. They said the $660,000 payout for their home was not enough to pay off their bank loan and top up their CPF accounts. The CPF Board had said the couple did not have to top up this shortfall.

As a result, the STB made a landmark ruling - upheld by the High Court - that since the CPF Board had not required them to top up their accounts they could not claim financial losses. This decision sparked an outcry. Deputy Prime Minister S. Jayakumar later explained in Parliament the principle behind the decision.

In a property purchase, CPF funds can be used to pay for three components: the initial downpayment, the monthly repayment of the bank loan principal, and the monthly repayment of the interest on the bank loan.

Professor Jayakumar explained that CPF funds that go into repaying bank loan interest are not taken into account. This is to distinguish between owners who take no loans at all or who take a small loan with little interest, and owners who take long-term mortgages with a high component of interest payments.

This seems to make sense, but not for owners who have been forced to sell their home and take a hit in their CPF accounts - which affects their ability to buy a new home, as well as their retirement savings.

If it is a forced sale, no owner should have to suffer financial losses just because he made a decision to take a big loan some years ago.

There are many who might be caught in this situation. The CPF Board used to have the first charge on private properties, but in 2002, banks were given first charge.

For former HUDC developments such as Waterfront View and Tampines Court, the change was made as early as 1996 to give banks first charge.

There are two possible solutions to this problem. One is to reverse the policy and require all owners facing financial losses to top up their CPF accounts fully, regardless of whether CPF funds were used to pay loan principal or interest.

A second less drastic solution would be to mandate that the CPF Board should have the first charge for all en bloc sale cases.

The CPF Board would not object and neither would banks, since it would not affect them: The current custom of compensating owners who suffer financial losses would continue, ensuring bank loans would be repaid.

To owners facing financial losses, however, this change would make a world of a difference. If they can be assured that they will not be worse off after a sale, they might drop their opposition.

The other en bloc sellers will, of course, need to share the cost of compensating financial losses. But this is a relatively small price to pay, considering that most will reap a windfall.

In the case of Tampines Court, there was a couple who claimed CPF losses of $69,000. Divided among the 560 units in the estate, this works out $123 per seller. Even in the unlikely situation of all 100 dissenting owners claiming this amount, it would have worked out to $12,300 per seller - still small compared with the overall profit, which might have amounted to $300,000 for some owners if the sale had gone through.

It will serve the interests of all parties involved to address the bank-or-CPF charge problem. When a home owner is assured that he will not suffer a financial loss, a forced sale in the name of urban renewal might begin to make sense.

[email protected]

Waterfront an en bloc watershed?

Record collective sale reshapes property landscape

Friday • May 26, 2006

Shobha Tsering Bhalla
shobha@...

ON TUESDAY night, Singapore's biggest residential collective sale to date took place, with the massive Waterfront View being sold to two major local developers for $385 million.

But experts and analysts see the record-setting deal as one that goes beyond just dollars and cents.

The landmark agreement, which follows a smaller one earlier this year, could mark a shift in Singapore's urban renewal process by opening up new opportunities for redevelopment, as well as allowing more Singaporeans to benefit from the trend of collective sales.

The Waterfront View, a privatised former HUDC estate facing Bedok Reservoir, was sold to FCL Peak, a joint venture between Far East Organization and Frasers Centrepoint.

Among the many precedents it set was for the 809,037 sq ft land size involved — the largest for a collective sale — and the amount paid, which is the biggest in terms of absolute price, working out to $241 per sq ft per plot ratio. This includes $102.2 million for permission to enhance the plot ratio and extend the lease from 78 years to 99 years.

"By buying this site, the developers are setting a record and it shows that they have the appetite to take up the challenge, and have the ambition to undertake such a huge development project," said Ms Tang Wei Leng, director for investment advisory services at DTZ Debenham Tie Leung (South-east Asia), which brokered the deal.

Which leads to the other significant aspect of the deal: This is the first time such a big former HUDC property had been sold en bloc, according to Ms Tang. It gives so many "ordinary" people a chance to move up the property value chain.

Many of the owners of Waterfront View units are the original owners, having bought their units when the development was a Government housing project pitched between HDB flats and private housing. They stand to get $660,000 each, or an average premium of 65 per cent over the prevailing market rate of about $400,000 per unit.

"It allows heartlanders to benefit and be a part of the en bloc process. We always talk about how the rich are getting richer. Now it's not just the rich but also the heartlanders," said Ms Tang.

Equally importantly, the Waterfront View sale could point to a shift of interest by property developers to the mass market, said Dr Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle.

"It could be a signal that the interest has now come to the mass market. It appears that developers' interest in popular, mature markets is beginning to pick up," he said.

Waterfront View is the second former HUDC property sold so far and both were bought by Far East Organization. In January, it bought the 168-unit Amberville along Marine Parade Road.

The Waterfront site can be developed into a new 1,600-unit condominium with a gross floor area of more than two million sq ft. Analysts said the break-even cost is likely to be about $450 psf.

The Government's move to grant permission for upgrading the site's lease is also seen by some as beneficial for urban development and social cohesion.

"Politically and socially, I think it is a good move, because I think it is part of the urban environment renewal process, where the older estate will be revamped as these former HUDC and Executive Condos are not covered by the Government's MUP (Major Upgrading Programme)," said Dr Lui.

Additionally, the sale of Waterfront is expected to lead to an acceleration in the momentum for en bloc sales of other former HUDC properties, said DTZ's Ms Tang. Her company is already working on a collective sale for Pine Grove in Ulu Pandan.

She predicted that some owners of units in mature developments might take advantage of the interest generated by the Waterfront sale.

As for buyers, property investors might see the Waterfront deal as a signal to buy in mature estates to take advantage of a potential collective sale, said Dr Lui.

An extreme example is that of Mr Yeo Loo Keng and his wife, whose $660,000 proceeds from the sale of their Waterfront View home was not enough to top up their CPF accounts.

Although developer Frasers Centrepoint offered them a $200,000 settlement, they took their case to the High Court to 'test the legal system' and how it treated minority owners, said Mr Yeo's brother Loo San.

They lost the case and now have to foot the legal costs, which could come up to $100,000, he added. But he said there are 'no regrets about the decision' because they learnt valuable lessons.

Another way in which the public is making its unhappiness felt is through feedback to the Government.

'Stop collective sale - I'll suffer $106k loss'
Resident takes fight to Strata Titles Board; he is one of 2 owners opposing the deal

By Jessica Cheam

A RESIDENT of the Waterfront View condominium is fighting the bid to sell it en bloc, demanding that the deal be scrapped or more compensation be paid.

Mr Yeo Loo Keng and his wife Cheryl Lim Pui Yew told a Strata Titles Board (STB) tribunal yesterday that they will lose $106,244 if the deal goes through.

They bought their 14th-floor, 1,711 sq ft apartment 12 years ago for $515,000 - considered a relatively high price at that time for the former HUDC flats.

Located in Bedok Reservoir Road, the estate was sold for $385 million in May to FCL Peak, a joint venture between Frasers Centrepoint and Far East Organization. Each of the 583 owners will be paid about $660,000.

While this makes it seem like Mr Yeo, 43, will make a profit, he declared yesterday that, after repaying his bank loan, he and his wife would not have enough money to repay their CPF principal amount and accrued interest in full.

He will have to hand over $342,844 towards his bank loan and $407,599 in CPF principal amount and accrued interest - to make a total of $750,443.

After subtracting lawyer's fees and stamp duty, he will get $644,199 from the collective sale - making for a shortfall of $106,244.

The CPF Board has told Mr Yeo that he does not have to make good this shortfall, but he says it is his money which is being written off.

'I don't think it is fair that the sale is being done at our expense,' Mr Yeo told The Straits Times later, pointing out that he is not demanding bank loan interest.

His lawyer, Mr Leong Yung Chang, wondered whether the sale was carried out in 'good faith'.

He asked why the deal was agreed at $385 million despite the appointed marketing agent - DTZ Debenham Tie Leung director Tang Wei Leng - writing to the sale committee on the day of the transaction that 'based on DTZ analysis, the offer price has to exceed $395 million in order for the provision (for financial losses) to be sufficient'.

Sale committee member Kevin Tan, a lawyer by profession, told the tribunal that the sale committee believed $385 million was a good price, and that other owners had absorbed losses to their CPF accounts.

He said later that the owners had agreed to sell despite some of them suffering losses because they believed that they would not get a similar price later on.

Dr Tan's lawyer, Mr Michael Kwa of Lee and Lee, said that mediation efforts have failed because Mr Yeo's demand is too high.

Said Dr Tan: 'If we pay his amount, it's like getting cash out of your CPF in a backdoor way', because Mr Yeo does not have to make good the CPF shortfall.

'It's also penalising others who have taken a smaller loan, since their interest accrued is not as much,' he added.

STB president Tan Lian Ker told The Straits Times that it is rare for the board to rule against a sale. 'But if the objector proves he really suffered a loss in a clear-cut case, we wouldn't approve of the sale,' he said.

He could not confirm if this is the first time the STB has been asked to rule in a case regarding CPF interest as a financial loss. Initially, owners of 16 apartments had objected to the sale - but now only Mr Yeo and another couple have not agreed.

Dr Tan said that the other couple - Mr Ho Yue Tak and his wife Cheah Phaik Lay - have not withdrawn their objection, nor filed an affidavit.

But they have written a letter saying that they will leave it to the tribunal to decide the fate of the deal.

Both parties will file their final submissions by next month and a ruling will be announced in January next year.

Waterfront View, a 99-year leasehold property, was built by the HDB in 1984 and privatised in 2002.

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Only if it were freehold. Enbloc is not a sure way for owners to make money...

Don't understand, HUDC sell en-bloc can make $$$??????. Unless brought from HDB. I was thinking of getting a HUDC until I read the above, heng heng buy one and then en-bloc ?????

Quote:

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Originally Posted by Arcachon

Don't understand, HUDC sell en-bloc can make $$$??????. Unless brought from HDB. I was thinking of getting a HUDC until I read the above, heng heng buy one and then en-bloc ?????

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You can consider buying Potong Pasir HUDC, there are Kallang river facing units in block 112 and huge plots of land around the estate.

Since the ruling Party just took over, they'd most probably keep to their promise before the next election of doing up the entire stretch of kallang river in potong pasir. Im sure the enbloc there will fetch a good deal :2cents: :2cents: :2cents: :2cents: :2cents:

Toa Payoh 110 01 to 05 156.00
Maisonette 1987 $918,888.00 Jun 2011

Toa Payoh 110 06 to 10 158.00
Maisonette 1987 $950,000.00 May 2011

131Potong Pasir Ave 10 1 to 05 151
Maisonette 1984 $700,000.00 Feb 2012

EM look better than HUDC. 200,000 cheaper.

Quote:

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Originally Posted by Arcachon

131Potong Pasir Ave 10 1 to 05 151
Maisonette 1984 $700,000.00 Feb 2012

EM look better than HUDC. 200,000 cheaper.

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Those will never get privatised

Quote:

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Originally Posted by Arcachon

Toa Payoh 110 01 to 05 156.00
Maisonette 1987 $918,888.00 Jun 2011

Toa Payoh 110 06 to 10 158.00
Maisonette 1987 $950,000.00 May 2011

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$1m HDB here we come.

Quote:

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Originally Posted by kane

$1m HDB here we come.

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haha many already long past the 1m mark

Quote:

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Originally Posted by price

haha many already long past the 1m mark

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Exclude hudc leh.

Quote:

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Originally Posted by price

haha many already long past the 1m mark

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frankly, doesn't make economic sense:confused:

Shd base on psf rite...those EM about 150sqm....hit 1mil also like dat lor....if 90sqm 4rm flat hit 1mil den tell me lor....wakakaka

hooray to the development ard this project. FEO is here to increase the value of the development in the area! quick buy the resale before FEO launch!