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Published February 12, 2007

Collective sale sites in next wave may fetch around $1 billion each


(SINGAPORE) The record for collective sales in terms of absolute dollar price has been broken twice since the start of the year - Horizon Towers in January with $500 million, and Gillman Heights this month with $548 million.

The Claymore: The prime 246,000 sq ft freehold site at Claymore Hill has a price tag of about $1.3 billion

But in the works are the next wave of collective sale sites about twice that quantum. These include The Claymore, a prime freehold site of about 246,000 sq ft at Claymore Hill, with a price tag said to be about $1.3 billion, and Farrer Court, a privatised HUDC estate, with a land area of 838,500 sq ft and an asking price believed to be about $900 million.

Another large scale residential collective sale in the pipeline is Ridgewood Condominium in the Mt Sinai area, said to have an estimated price tag of over $900 million.

The $1.3 billion price being indicated for The Claymore reflects a unit land price of about $2,030 psf per plot ratio inclusive of an estimated $100 million development charge that its developer will have to pay to the state. This would set a new benchmark price for residential land in Singapore.

Apart from these jumbo collective sale sites, there are a slew of others that could be launched this year, although with slightly smaller price tags.

This includes Tampines Court, with a $420 million indicative value, and several in the Farrer Rd area such as Leedon Heights (whose indicative price is said to be about $700 million) and Spanish Village (over $400 million). Tulip Garden was launched last month with an asking price of over $420 million.

The big question on many market watchers' minds is whether there'll be takers for so many big-ticket sites. Property agents are predictably sanguine.

'There will be demand for big plots as increasingly you see developers teaming up with financial partners or funds from overseas. And these foreign players are looking for significant-sized acquisitions, otherwise they won't bother spending resources studying the local market,' says DTZ Debenham Tie Leung director Tang Wei Leng.

Agreeing, CB Richard Ellis executive director Jeremy Lake observes: 'The deal size in terms of absolute dollar quantum is less of a hindrance than it might have been a couple of years ago, as there's plenty of liquidity now. We see developers teaming up with other developers, or developers teaming up with financial partners, for large acquisitions.'

He acknowledges, however, that pricing is an issue. 'Minimum pricing set by owners in terms of the unit land price (psf per plot ratio) for en bloc sales is being pushed into uncharted territory,' he said.

But as residential project launches test fresh highs, the unit land prices being sought by some owners may not be completely far-fetched - although they seem high relative to previous benchmark prices for residential land, Mr Lake added.

An important factor that affects developers' ability to raise prices of their high-end projects is supply in the location, note property players. And supply is one factor developers take into consideration when trying to decide whether or not to buy a collective sale site.

'If you have just one large en bloc site in the vicinity but no new projects nearby, then the developer will find it easier to control the market and move up his selling prices. But when you have a few big ones in the same location, developers may be less enthusiastic about bidding for big en bloc sites in such micro-markets.' One such example, say property watchers, is the Farrer Rd area.

However, Savills Singapore managing director Michael Ng, whose firm is marketing three sites including Tulip Garden and Spanish Village, is confident saying that the sites are in District 10, a prime district.

'The area's pull will become even stronger when the Farrer MRT Station (under Circle Line) opens,' he said. 'In fact, the area is just five minutes' drive from the Grange Rd area where condo units are commanding $2,000 psf or even higher,' he added.

Over at Tampines Court, marketing agent Dennis Wee and the appointed lawyer for the majority owners, Phang & Co, plan to make the huge, 702,162 sq ft leasehold site more digestible to prospective developers by dividing it into two smaller plots.

Developers will be invited to bid for one or both sites. The award will seek to maximise the overall sale price achieved for the two sites combined.

'If one party submits the highest bid for one plot and another for the second plot, then both developers will have to jointly agree to buy the entire site as the two halves must be sold together,' explains SK Phang, principal in the law firm.

After completion of the sale of the site, the developers would then partition the site into the two halves and each developer will become the sole owner of the half he has bid for.

As far as owners of the 560 units in the estate are concerned, their sale proceeds will be the average of their share value in the estate and the floor area of their unit - regardless of which subdivided plot their unit stands on.