Going en bloc: The long road for Pine Grove Condo

May 6, 2018

Competition for buyers, legal disputes, delays and derailed sales just some setbacks sellers may face

Grace Leong


Residents of Pine Grove near Ulu Pandan Road have been trying - and failing - for 10 years to hit the collective-sale jackpot, but this time, they may just make it.

The signs look more favourable now than they did in 2008 and 2011, when owners at the 660-unit development fell short. This time they are making fast progress at reaching the required approval of 80 per cent, with 75 per cent reached in just seven months. Reaching 80 per cent took a year in 2011.

Sweetening the deal, the reserve price was raised in March to $1.72 billion from $1.65 billion.

That means owners stand to get between $2.19 million and $2.65 million, compared with between $2.08 million and $2.64 million previously. SRX Property notes that a 1,755sq ft unit last sold in Pine Grove for $1.42 million in February.

Just 29 more signatures are needed, but getting 80 per cent is not enough; the last attempt failed as there were no bidders.

While there have been some blockbuster deals in this collective-sale cycle, such as the $980 million purchase of Pacific Mansion in River Valley, the road to a successful collective sale is not smooth sailing for all.

Pine Grove's journey has been rocky. Earlier this year, some residents alleged that there were heated meetings and forming of factions. There is even a lawsuit pitting the former management committee chairman against the chairman of the collective sale committee and a police report made over alleged threatening messages.

But owners continued to sign, with some reportedly motivated by water leakage in some areas of the estate after heavy rain last month.

Pine Grove owners are hardly alone in their haste to cash in. With record-setting sums paid for some sites by land-hungry developers, it is small wonder that this cycle has seen the 80 per cent mark being hit in less than three months or, in some cases, within weeks. It took Normanton Park a mere 11 days to reach the consensus on its second collective-sale try; while Florence Regency in Hougang attained 80 per cent in less than three weeks.

Lease depreciation and the physical deterioration of some condos and former HUDC estates is more pronounced today, International Property Advisor chief executive Ku Swee Yong noted. "More sellers are motivated because land prices have increased, and there are also more retirees motivated to sell, downsize and protect their nest egg," he added.

But analysts say mega sites like Pine Grove and Braddell View face stiff competition for buyers due to their massive land size and total price quantum. A key consideration is the requirement for developers to buy, build and sell the new residential development within five years of acquiring the land in order to avoid paying a 15 per cent additional buyers' stamp duty (ABSD) on the land purchase price, JLL senior consultant Karamjit Singh said.

They are also taking note if there is a pipeline of new units near the site. "A large site with lots of competing projects nearby - current and upcoming - would be less appealing," said Colliers International managing director Tang Wei Leng.

THINGS CAN GO WRONG

Not all projects that attempt a collective sale get the asking price they want. Sellers of some projects whose tenders closed without a buyer are getting realistic in their expectations in private treaty talks.

Cairnhill Heights, a freehold District 9 site next to the prime Orchard Road retail belt, was sold this month for $72.6 million, less than the initial asking price of around $80 million.

Freehold Dunearn Gardens off Newton Road was sold on its third attempt for $468 million, well under the $488.8 million reserve. And if there are legal disputes, the process could drag on for a long time.

Case in point, the owners of Shunfu Ville, whose $638 million sale to Chinese developer Qingjian Realty made headlines in May 2016, did not get paid until more than a year later because some owners had objected to the sale. That hurdle cleared only in May last year after the Court of Appeal dismissed the objection.

In the worst-case scenario, the sale could be derailed, such as in the Horizon Towers case, which was aborted in 2009, after a handful of objectors fought all the way to the Court of Appeal, which ruled in their favour.

TECHNICAL HITCHES

Sometimes, even when a buyer is found, the deal may get delayed. Sellers of Tampines Court, which was sold in August last year to Sim Lian Development for a record $970 million, will likely get their proceeds around mid-June this year instead of April.

This is because the sale process has been delayed as the developer awaits planning approval from the Urban Redevelopment Authority (URA). Sim Lian is also engaged with the Land Transport Authority (LTA) over proposed road improvements so it can increase the number of units from 560 to about 2,000.

New regulations can also delay the collective-sale process.

The Government last November mandated that developers must conduct a Pre-Application Feasibility Study (Pafs) assessing the traffic impact of redevelopment and proposing measures to manage traffic demand. They must obtain LTA clearance for collective-sale projects completed after last November.

This new rule affected the tender process of Pearlbank Apartments in Outram, which closed in mid-December without securing firm bids. But it sold in February under private treaty to CapitaLand for $728 million, making it fourth-time lucky.

Colliers' Ms Tang, who was marketing the property, said earlier: "It was unfortunate that the announcement of the Pafs was made just weeks before the closing date for the Pearlbank tender on Dec 19, 2017. Developers who were keen on the site needed more time to understand the new requirements and to assess their implications."

Under the rule, developers intending to build 700 or more units must prepare a Transport Impact Assessment (TIA).

Projects with fewer than 700 units still need to check with the LTA if they need to do the TIA, said JLL's national director for research and consultancy, Mr Ong Teck Hui.

"From 2016 to March 22 this year, about 12 collective-sale sites sold can be redeveloped to above 700 units. Out of the 12, only four obtained development planning permission in the fourth quarter of 2017," Mr Ong told The Sunday Times.

Hence, the other eight would need to conduct the TIA before submitting a development application."

The key issue for leasehold commercial or mixed-use projects such as People's Park Complex and People's Park Centre in Chinatown, Golden Mile Complex and Golden Mile Tower in Beach Road, and Sim Lim Square will likely be how sales proceeds are to be distributed and if the Government will top up their ground leases, JLL's Mr Singh said.

What is uncertain is the lease issue, especially if the site is zoned for a commercial development and is in the Central Business District (CBD), he said.

"The Singapore Land Authority has in the past rejected applications for lease topping up for some commercial developments in the CBD," he noted.

"If the lease cannot be topped up, the buyer will need to decide if it's still viable to redevelop with the outstanding lease period. In most cases, buyers prefer to have a longer lease runway, ideally 99 years."


Obstacles aplenty

UNWILLING PEOPLE, DAUNTING LAND SIZE

• Large developments like Pine Grove in Ulu Pandan face stiff competition for buyers due to their massive land size and total price quantum.

• They also have to reach 80 per cent consensus among residents which can be hard.

LEGAL WOES

• Some developments face legal disputes which take a long time to settle.

• The collective sale for Horizon Towers was aborted in 2009, after objectors fought all the way to the Court of Appeal, which ruled in their favour.

NEW RULES

•A new rule from last November requires developers to assess the traffic impact of redevelopment and obtain LTA clearance for collective-sale projects.

• It affected the tender process of Pearlbank Apartments in Outram, which closed in mid-December without securing firm bids. It managed to close the sale in February - on its fourth try.

LEASE RENEWAL

•A key issue for leasehold commercial or mixed-use projects, such as People's Park Complex and People's Park Centre in Chinatown, is how sales proceeds will be distributed and if the Government will top up the ground leases.

• If the lease cannot be topped up, the buyer must decide if it is still viable to redevelop the land with the outstanding lease period.