Category Archives: Orchard/River Valley/Holland

Districts 9 & 10

Closing up the Circle Line starting in 2018

Advance preparatory works to make the Circle Line a complete loop, by joining HarbourFront station to Marina Bay station, have begun. Tenders for the civil works are expected to be awarded by the year end, and construction will begin in 2018Q1

The 4-km CCL6 line will close the loop for the CCL by connecting HarbourFront Station to Marina Bay Station. When the three CCL6 stations of Keppel, Cantonment and Prince Edward are completed in 2025, the CCL will have a total of 33 stations, including 12 interchange stations with other MRT lines.

Expanding the rail network to more areas such as the southern edge of the existing CBD, CCL6 will support direct east-west travel. Besides reaching new commuters, the extension will allow those travelling between the south-western and south-eastern ends of the line – such as from Pasir Panjang to Nicoll Highway – to have more direct and quicker access.

The stage is being set to build the three new stations that will complete the Circle Line. Keppel station will serve commuters at Keppel Distripark, while Cantonment station will be near Tanjong Pagar Railway Station and offer access to Spottiswoode Park Estate. The Prince Edward station will be near Palmer Road, where heritage landmarks are.

The extension will also serve part of the Greater Southern Waterfront, a massive mixed-used development that will commence once the Tanjong Pagar, Keppel and Brani port terminals are relocated to Tuas after their leases expire in 2027.

Preparatory works include relocating affected facilities at PSA Keppel Terminal for the construction of Keppel station, dismantling the platform canopy structures of Tanjong Pagar Railway Station and the relocation of Shenton Way Bus Terminal for the construction of Prince Edward station.

Investment property sales drop in Q1

FROM a high base in the fourth quarter of last year, big-ticket property transactions of at least S$10 million declined substantially in the first quarter.

However, the mood in the market is decidedly positive – with much anticipation of the imminent mega transactions of Jurong Point mall, and Asia Square Tower 2 in the CBD.

“Investment market sentiment is positive and the price gap has mostly disappeared except for hotels,” said CBRE executive director, capital markets, Jeremy Lake.

In particular, the tone of investors towards the office sector seems to have reversed dramatically. “The oversupply in the Singapore office market is yesterday’s story, and today’s story is all about the recovery and rental growth,” said Mr Lake.

Figures compiled by Savills Singapore showed that S$5.2 billion of investment sales of property, as these big deals are known, were sealed in Q1, down 34.8 per cent from S$8 billion in Q4 last year. However, the Q1 number is double the S$2.5 billion in the same year-ago period.
Photo: The Business Times
Photo: The Business Times

Both Savills and Cushman & Wakefield (C&W) estimate that some S$2.7-2.8 billion of deals in the commercial property segment were transacted in January to March this year – giving it a share of slightly over 50 per cent of total investment sales.

Major transactions include the S$881 million sale of a 70 per cent stake in TripleOne Somerset by a consortium led by Perennial Real Estate Holdings to Stanley Ho’s Hong Kong-listed Shun Tak Holdings, and Manulife’s S$747 million purchase of PwC Building at 8, Cross Street, from DBS.

Savills said the S$2.8 billion of commercial property investment sales in Q1 was a 41.9 per cent increase from the nearly S$2 billion in the previous quarter.

The residential sector saw S$2.1 billion of big-ticket sales in the first quarter, giving it a 40.2 per cent share. On a quarter-on-quarter basis, however, the Q1 tally was down almost 12 per cent, according to Savills.

C&W Singapore research head Christine Li highlighted the flurry of bulk residential sales in Q1 as some foreign housing developers sought to offload their remaining unsold units ahead of regulatory sales deadlines imposed on them under the government’s Qualifying Certificate rules – to avoid paying hefty penalties.

A string of last-minute deals were also inked on the night of March 10 – including TwentyOne Angullia Park, The Line @ Tanjong Rhu, Robin Residences and The Lumos – before the new Additional Conveyance Duties (ACD) took effect the next day.

The ACD plugged a loophole that some bulk buyers in Singapore residential projects had been using to enjoy significant savings in stamp duties.

Savills Singapore managing director Steven Ming said: “Unless annual residential prices are expected to rise significantly in the coming years, it is unlikely that institutions will return to the bulk residential sales market as the hefty 18 per cent stamp duty cuts deep into their required rates of return.”

The effect of this would be the shift of interest by institutional investors to other sectors of the real estate market here, he added.

Industrial properties posted S$344.2 million of investment sales in the first quarter, down 67.8 per cent quarter-on-quarter.

CBRE and Savills expect the total investment sales for 2017 to be in the S$18-20 billion region – down from around S$23 billion last year. C&W expects the number to remain in the S$20 billion range.

Mr Ming of Savills commented that with institutional investor interest expected to be diverted from residential towards the office, retail and hospitality sectors here, investment sales are expected to continue despite yield compression.

“As both private equity funds and ultra high net worth individuals have either raised new money or have a need to diversify to reduce concentration risk, yields have potential to remain low and go lower as prices will either hold firm or even edge up,” he reasoned.

Ms Li of C&W noted office asset prices are already starting to trend upwards, with rents expected to bottom this year.

In similar vein, CBRE Research’s head of Singapore and South-East Asia, Desmond Sim, argued that as the office recovery story gets more real in terms of rising commitment rates for new projects such as Marina One, this will push more institutional investors to be ready to commit.

CBRE predicts that by the end of the year, seven out of 10 institutional investors who are looking at the Singapore office sector will be ready to buy – up from five out of 10 investors now, which in turn is a higher ratio than just one out of 10 investors a year ago.

Regina Lim, JLL’s head of capital markets research, South-east Asia, observed that in the past four years, Singapore has seen a gradual decline in office demand, retail sales, food and beverage receipts, and gross domestic product growth.

As a result, the republic’s attractiveness to overseas institutional investors has waned, and they have gravitated to Australia, Japan and China commercial property, which have stronger growth stories.

“However, capitalisation rates in these markets have compressed and now Singapore looks less expensive in comparison to these markets.”

Mr Sim of CBRE said that on the residential sector front, while bulk purchases of units from developers have now become harder to do, there may be a bright spot in collective sales. “We should see more interest in en bloc sales from land-hungry developers, especially in the face of limited supply through the Government Land Sales Programme.”
– See more at: http://news.asiaone.com/news/business/investment-property-sales-drop-q1#sthash.8H86fsyp.dpuf

Asia’s ultra rich still favours Singapore real estate

The property market of Singapore remains high on the agenda of Asia’s ultra-rich. Its commercial properties are a top consideration for Asian ultra high net worth individuals (UHNWIs) keen on this asset class, moderately ahead of the UK and the US.

Singapore’s residential market is the second most likely place for Asian UHNWIs to own an overseas home, after the UK, according to the recent Attitudes Survey in Knight Frank’s wealth report.

There are some 46,080 UHNWIs, each having a net worth of over US$30 million excluding their primary residence residing in Asia-Pacific, based on data from New World Wealth. Singapore continues to appeal especially to the Asian community to live, work and set up businesses. Districts 9 and 10 are still highly favoured by the ultra wealthy given their prime location, close proximity to high quality amenities and schools.

The overall slide in property prices due to the government’s cooling measures has also enhanced the value proposition of Singapore property, with demand for property gradually returning as seen in the improved transaction volumes last year.

The property consultancy also selected 20 prime city markets and calculated, based on the typical luxury residential value for each city and the exchange rate at the end of 2016, how many square metres US$1 million can buy in each city.

As of end-2016, the most expensive prime homes – generally defined as the top 5 per cent of each market by value – turned out to be Monaco, Hong Kong, New York, London and Geneva, followed by Singapore.

Online Stores getting offline presence amidst slump

The falling rental rates provide a silver lining for online retailers amid the current retail slump.These retailers have a chance to venture offline and into shopping malls. Last month, for example, online furniture retailer HipVan opened its permanent 11,000 sq ft flagship store at The Cathay in Dhoby Ghaut.

Lifestyle retailer Naiise similarly opened its 8,500 sq ft flagship store in that mall last June. Other online retailers, such as Reebonz, Love Bonito and Ohvola, have opened short-term stores in Suntec City and Orchard Gateway, to catch shoppers who want to see, touch or try on a product before buying.
 The islandwide vacancy rate for retail space was 7.5 per cent at the end of last year, up from 4.5 per cent at the end of 2013, Urban Redevelopment Authority (URA) data showed.
The Median rental rate per sq ft per month for the Orchard Road area is $9.82, the first time it fell below $10. The median rental rate for retail space in the third quarter of last year was the lowest on record. 

The median rental rate for retail space in the third quarter of last year was the lowest on record, falling to $9.82 per sq ft per month for the Orchard Road area – the first time it fell below $10, according to URA data.

Naiise has five other stores in malls such as Westgate and 112 Katong, which offer self-collection services for online orders. Its online plus offline strategy has paid off, with its six retail stores combined now generating more revenue than its online store.

 

HipVan co-founder Danny Tan, 33, said the retail slump has benefited his business, which now occupies the space formerly rented by sportswear brand Adidas. The store is seven times larger than HipVan’s previous pop-up space in Millenia Walk and Suntec City. It features more than 1,000 of HipVan’s bestsellers, including beds, dining tables and rugs. Its website attracts 200,000 to 300,000 views a month, while revenue has been growing by 12 per cent on average every month.

Meanwhile, high-end fashion retailer Reebonz, whose lease for its pop-up boutique in Suntec ends next year, is moving into its own eight-storey building in Tampines this month. The building will house a permanent showroom.

TripleOne Somerset office for sale

TripleOne Somerset – in Somerset Road – is a prime integrated development with two premium-grade office towers and a retail podium next to Somerset MRT station.

A $120 million renovation is under way to enhance the retail offerings, incorporate medical suites, and spruce up the office lobby and common areas.

All of the seventh floor of Somerset Tower in TripleOne Somerset has been put up for sale for about $41.56 million via an expression of interest. The rare offering of an entire floor of 15 office units in the premium Orchard Road area is expected to attract keen interest from investors.

The indicative price translates to about $2,650 psf for the 15,683 sq ft space. The refurbishment work for the office space on the seventh floor will be completed in May.

TripleOne Somerset has a lease of 99 years, starting from Feb 19, 1975. Office tenants at the property include luxury fashion and lifestyle brands such as Gucci, Bottega Veneta, Samsonite and Bell & Ross.

The expression of interest exercise closes on April 7.

Perennial selling huge stake in TripleOne

TripleOne Somerset is a prime integrated development comprising two premium-grade office towers and a retail podium next to Somerset MRT station. Perennial Real Estate Holdings (PREH) is leading a group of investors that are selling their combined 70 per cent stake in TripleOne Somerset to Hong Kong’s Shun Tak Holdings.

PREH and six other shareholders of Perennial Somerset Investors (PSI), their holding company for TripleOne Somerset, are offloading a combined 61 per cent stake in the property for $305 million. PREH, which originally held 50.2 per cent of PSI, is divesting a 20.2 per cent slice while retaining 30 per cent. It will collect about $101 million for the sale, making a pre-tax gain of about $34.3 million.

The other six shareholders, all of whom have fully divested their stakes in PSI, are SingHaiyi Group, Boustead Projects, BreadTalk Group, Shun Fung Holdings, ROOI Holdings and Grandma’s Holdings.

Unified Elite Limited, another existing shareholder of PSI and a connected person to Shun Tak, will sell its 9 per cent stake to Shun Tak. The sale price was based on an agreed total property price of about $1.258 billion, or $2,200 per sq ft. The divestments are expected to be completed by June 30.

Goodwood Park investors bought out

Goodwood Park Hotel was buying out its remaining minority shareholders. The Khoo family used Hotel Holdings, a private vehicle, to mount a voluntary unconditional cash offer in Oct 2016 for all the remaining shares it does not own at $43 per share.

The offer values the company at $1.85 billion. Accordingly there were 183 minority shareholders. These investors would have chosen to hold their stock despite the firm delisting after a buyout offer in 2004.

Hotel Holdings owned 24.24 per cent of Goodwood Park Hotel, with irrevocable undertakings from parties holding a further 75.43 per cent. That brings the total held to about 42.8 million shares or 99.67 per cent of the company.

This means that the 183 minority shareholders collectively own a mere 0.33 per cent stake in Goodwood Park Hotel.

Hotel Holdings said the move is aimed at consolidating the holdings of Goodwood Park Hotel – comprising the Goodwood Park Hotel, York Hotel and Royal Garden Hotel – under a single holding company. The three hotels have a total gross market valuation of $1.03 billion, according to an independent valuation by CBRE.

Heeton divests iLiv@Grange

HEETON Holdings has finally sold its entire interest in the completed iLiv@Grange project, through a sale of shares in a wholly-owned subsidiary of Heeton which in turn owns 100 per cent interest in the company that developed the 30-unit freehold project.

The deal values the entire 16-storey project (on an en-bloc basis) at S$95 million, which works out to S$1,623 per square foot based on the total strata area of 58,534 sq ft.

In another filing also on late Friday night, the mainboard- listed property and hotel group said it had completed the disposal of its entire shareholding interest in Heeton Residence on Sept 30, 2016, to a group of Singaporean private investors whom it said are not related to Heeton, its controling shareholders and directors; it did not name these investors.

Heeton Residence is the sole shareholder of Heeton Realty, the developer and owner of the iLiv@Grange project at 74 Grange Road.

An ACRA (Accounting and Corporate Regulatory Authority) search showed that Heeton Residence’s new shareholders are Chew Gek Khim, executive chairman of The Straits Trading Company; KSH Holdings’ executive chairman Choo Chee Onn; Michael Tan Wee Chong and Diana Goh Yan Ching. All are investing in their private capacities and have equal stakes.

Heeton’s chief executive Eric Teng Heng Chew, prior to joining the company on Jan 4 this year, had been adviser at The Straits Trading Company. He was also previously CEO of Straits Trading’s property and hospitality divisions from 2010 and 2011 respectively until 2013. Mr Teng had also served as CEO of the Tan Chin Tuan Foundation and still remains an adviser to the foundation.

The development received Temporary Occupation Permit (TOP) in October 2013 and under Singapore’s Qualifying Certificate (QC) rules, had two years after the TOP date, that is, until October 2015, to finish selling all the units in the private housing development.

Housing developers that come under QC rules may seek permission from the authorities for more time to dispose of the units subject to paying extension charges to the state. Heeton already paid extension charges for the first year of extension to the tune of 8 per cent of the purchase price of the site.

Based on the S$72.8 milion land cost, the charge would have been around S$5.82 million. Had the group decided to hang on to the project and pay extension charges for the second year, the amount would have been higher at 16 per cent of land cost or S$11.65 million (assuming no units in the project had been sold). Factoring this in, the consideration offered by the buyers seemed “reasonable and offered a viable exit option for the company – given current market conditions”.

Heeton noted that the residential property market is not recovering due to various factors, including cooling measures, new supply and macro-economic conditions

Heeton said on Friday that the consideration for the disposal comprised a nominal amount of S$4 for the purchase of all one million ordinary shares in Heeton Residence as well as S$21 million for the transfer of the shareholder’s loan owing from Heeton Residence to the listed Heeton Holdings. “The consideration was arrived at on a willing-buyer, willing-seller basis after taking into account the adjusted net asset value of Heeton Residence and Heeton Realty as at date of completion, and the agreed property value at S$95 million…”.

On completion, the buyers paid S$4 for the sale shares as well as S$4 million for the subscription of junior notes in Heeton Residence which was used to partially discharge the consideration with the balance of S$17 million to be paid in in a year’s time on Sept 30, 2017.

The remaining sum of S$74 million would appear to be bank borrowings in Heeton Residence that will be taken over by its new shareholders.

On Friday, Heeton Holdings also said that as part of the transaction, it subscribed for $4 million senior notes in Heeton Realty due 2019, which bears interest at 5 per annum. The unaudited net tangible assets at the consolidated financial statement level of Heeton Holdings attributable to the disposal as at Aug 31, 2016 is about S$32 million.

The QC rules are aimed at preventing hoarding and speculation of private-sector residential land by foreign developers – defined as any company that has even a single non-Singapore citizen director or shareholder. This effectively covers all listed companies – including Heeton Holdings.

The iLiv@Grange transaction will see Heeton Residence’s equity ownership change from being 100 per cent owned by listed Heeton Holdings to a private structure, with full ownership by Singaporeans.

This would set the stage for Heeton Residence (which will be renamed following the change in ownership) to seek a clearance certificate from the authorities, followed by a further application to cancel the QC, say market watchers.

SC Global’s Hilltops purchase plan

High-end developer SC Global is launching a payment scheme for Hilltops luxury condominium in Cairnhill, completed in 2011 but only 20 per cent sold.

The company’s “enhanced purchase plan” comes after a slew of creative payment schemes used by developers of late. Some have been successful, such as a deferred payment scheme at OUE Twin Peaks which has helped it sell over 160 units.After a long hiatus, SC Global is seeking to sell its units now as “the market is in a mood to buy into such schemes. Buyers are looking into the next property cycle. Under the latest plan, buyers pay an upfront payment equal to 20 per cent of the unit price, and are given a two-year option to purchase the unit at a price fixed today. A total of 30 units owned and being leased out by SC Global are available under this scheme.

During the two years, buyers get an annual return of 10 per cent on the downpayment – thanks to tenancies managed by SC Global. So, a 20 per cent payment on a $3 million unit, or $600,000, would generate an annual income of $60,000 a year for the buyer.

Should the buyer eventually decide not to exercise the option, the downpayment is forfeited although he gets to keep the rental income.

Hilltop has 241 units in all, comprising two and three bedrooms from 800 sq ft to 1,700 sq ft. Prices are from $2.5 million to $6 million, or about $2,700 per sq ft (psf) to $3,000 psf – much lower than around $4,000 psf when its units were first sold in Oct 2007.

PPS for Nouvel 18 at Ardmore Park

Faced with a looming November deadline to finish selling all its units in the completed Nouvel 18 condo project in a plush District 10 locale, City Developments Ltd (CDL) is racing to stitch together a profit participation securities (PPS) scheme for the project.

The securitisation structure which CDL is proposing to potential investors and lenders will price Nouvel 18, which is located near the corner of Anderson Road and Ardmore Park, at around S$965 million; this translates into S$2,750 per square foot based on its saleable area of some 351,000 sq ft.

CDL gained full ownership of Summervale Properties, after buying out partner Wing Tai’s half-stake and was trying to wrap a potential securitisation deal involving Nouvel 18 and to clinch all necessary approvals before November 2016.

The project received Temporary Occupation Permit (TOP) in November 2014 and Summervale has to finish selling all units in the project within two years of the TOP date, as part of government conditions on foreign housing developers (which by definition includes all listed companies). Otherwise, the developer will have to pay hefty extension charges to the state for each year of extension, pro-rated to the number of unsold units in the project.

Once the proposed structure is fully in place and all the approvals given, the plan is to begin selling Nouvel 18 units in the market; the indicative target price is understood to be above S$3,000 psf.

The PPS scheme has the following highlights:

  • If the selling price achieved is higher than the S$2,750 psf entry level, the equity investors and the junior mezzanine bond holders (that is, CDL) will split the gains equally.
  • If units have to be sold below S$2,750 psf, the junior mezzanine bond holders (CDL) will take the first hit of up to nearly S$300 psf loss, translating into a selling price of at least S$2,451 psf.
  • If the selling price were to sink below S$2,450 psf, the equity investors will start to suffer a loss, according to market talk.
  • The junior mezzanine bonds will have a longer tenor of seven years, compared to five years for the other three groups of participants in the exercise – the equity investors, the banks that will provide the 60 per cent senior debt, and the senior mezzanine bond holders.
  • The longer tenor for the junior mezzanine bonds is seen as potentially catering for a situation where the units in the Nouvel 18 project could not be sold out within five years and refinancing is required from the banks.

If the PPS is not in place, CDL will have to pay extension charges, amounting to around S$38 million (or 8 per cent of the purchase price of the site) in the first year of extension. The extension charges will escalate to S$76 million (or 16 per cent of the land purchase price) in the second year and 24 per cent of the land purchase price per annum in the third and subsequent years. The extension charges are pro-rated to the number of unsold units in the development.