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Morgan Stanley fund mulls bulk sale of luxe units

It appoints two agents to explore demand for a bulk transaction for its 23 units in Draycott Eight; Blackstone has inked deal for 21 Anderson Royal Oak Residence

By Kalpana Rashiwala

[email protected]@KalpanaBT

8 Jan


THE momentum for bulk transactions of high-end residential units looks set to continue this year.

A German core fund managed by Morgan Stanley is said to be exploring a bulk sale for its 23 units in the Draycott Eight condo. It has appointed two agents to help it find a buyer in a transaction which will be effected through the sale of shares in a company that owns the 22 four-bedders and a penthouse with a total strata area of 68,419 square feet.

Based on market talk, the asking price is S$2,300 per square foot, which would amount to S$157.4 million. Some agents estimate the units could be worth around S$150 million assuming an average price of S$2,194 psf - derived from a 20 per cent discount to an average price of S$2,742 psf achieved last year for the nearby Ardmore Park, which has freehold tenure. Draycott Eight is on a site with a balance lease term of about 82 years.

Except for the penthouse, the other 22 units (all four- bedders) owned by the Morgan Stanley-managed fund at Draycott Eight are leased, mostly at about S$18,000 a month. Based on their current rental income and assuming the penthouse unit is leased at S$20,000, the net yield on a pricing of S$150 million would work out to around 2.7 per cent.

Developed by Wing Tai, Draycott Eight comprises 136 units in three blocks of 24 storeys each. The 23 units owned by the Morgan Stanley-managed fund are in a block that also has another 23 units owned by a fund managed by Alpha Investment Partners. Alpha purchased its units in 2010 for slightly more than S$157 million or about S$2,300 psf from another Morgan Stanley-managed fund. The two funds bought their respective stacks of units at the same time in 2007 at an identical price of S$2,600 psf.

Luxury residential rents in Singapore have eased - including those in the prime Ardmore Park/Draycott Park locale - on the back of a tightening in the influx of expats allowed into Singapore as well as a contraction in their rental budgets.

The average contracted rental for four-bedroom units at Draycott Eight, for instance, has eased 9.3 per cent to around S$17,500 for rental contracts inked between September and November 2014 from S$19,286 in the same year-ago period, according to information on the Urban Redevelopment Authority (URA) website. Still, the average rent for Draycott Eight is higher than the average rent of about S$16,000 at the nearby Ardmore Park condo last September-November. Agents attribute this to more competition for tenants at Ardmore Park, which has 330 units compared with Draycott Eight's 136 units. Also, Ardmore Park is a few years older than Draycott Eight; the latter received its temporary occupation permit (TOP) in 2005 whereas Ardmore Park got its TOP in 2001. Another attraction for expat tenants at Draycott Eight is its grand clubhouse in a large black-and-white conservation bungalow.

At Pontiac Land Group's Ardmore Residence, an even newer project that received its TOP in 2013, the average rent achieved last September-November was S$19,817. Among other things, Ardmore Residence offers concierge services by luxury hotel Capella Singapore. Moreover, the freehold project is considered more exclusive, with only 58 units. It was developed on the former Pin Tjoe Court site.

Meanwhile, Blackstone has finally sealed a deal for the en bloc purchase of 21 Anderson Royal Oak Residence, a 10-storey property with 34 units.

The price is believed to be about S$164 million or S$1,917 psf based on the total strata area of 85,552 sq ft. That is higher than the S$159 million original price at which Blackstone entered into an exclusive due diligence on the transaction last October.

However, the due diligence period expired without a deal materialising. According to market talk, Blackstone then proposed to seller Arch Capital a lower price of S$155 million, while Arch Capital opened the floor to other bidders. Eventually, Blackstone returned to the table, culminating in the deal done just before the New Year. JLL brokered the sale.

BT reported in December that Blackstone had completed the purchase of 18 units at Paterson Suites for S$83 million or close to S$2,100 psf based on the units' total strata area of 39,538 sq ft. The 18 units, all four-bedroom apartments, were sold by a fund in the Real Estate Capital Asia Partners (Recap) series managed by SC Capital Partners. Savills brokered the deal.

The units were part of a stack of 20 units that the Recap fund had bought in 2010 for S$118.61 million or S$2,700 psf from the project's developer, Bukit Sembawang.

Located in the Paterson Road/Lengkok Angsa area, Paterson Suites received its TOP in Q3 2010. Both transactions were effected through a sale of shares in the companies that own the units, and both projects are completed freehold developments.

Also expected to be wrapped up soon is a sale of the remaining 16 units at 111 Emerald Hill, a 40-unit freehold project developed by a fund managed by LaSalle Investment Management.