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Monthly Archives: March 2010

Reserve list plot triggered by $82m offer

Posted on 13 Mar 2010 | Comments Off

DEVELOPERS continue to hunger for land. The Urban Redevelopment Authority has announced that a private housing site at Upper Changi Road North/Flora Drive, next to Edelweiss Park Condominium, has been triggered for release from the government’s reserve list.

An unnamed developer has agreed to bid at least $82 million or $177.37 per square foot of potential gross floor area.

The 99-year leasehold plot is next to the Japanese School (Primary) and a stone’s throw from Changi Prison. It is nestled amid several large condominiums developed by the Hong Leong Group over the years on a huge tract of land acquired mostly in the 1970s by the group. The most recent of these projects is The Gale, which was launched last year. Earlier releases include Azalea, Ballota, Carissa, Dahlia, Edelweiss and Ferraria Park condos.

Property consultants polled by BT estimate that the latest plot on offer could fetch top bids of $300-400 psf per plot ratio (psf ppr).

Knight Frank managing director (advisory services) Lydia Sng estimates that a $320-350 psf ppr land bid would translate to a breakeven cost of $580-600 psf and a target average selling price of about $730 psf for the 99-year leasehold project.

In the first two months of this year, units at the freehold Gale and Ferraria Park – the two most recent projects in the area – have changed hands at a median price of about $740 psf, according to caveat data, she notes. The Gale is under construction, while Ferraria Park was completed last year. There’s typically a 15 per cent price difference between freehold and 99-year properties.

DTZ’s South-east Asia research head Chua Chor Hoon reckons that the highest offers for the Flora Drive site will be around $300-350 psf ppr, and the average selling price for the project around $700-750 psf. ‘As it’s not close to any MRT station, the unit land price will be lower,’ she says. ‘The developer can target the mass-market segment, in which there is strong demand.’

Real estate lecturer Nicholas Mak says that the site could draw 6-10 bids, with the highest around $350-400 psf ppr.

Chesterton Suntec International head of research and consultancy Colin Tan suggests that developers may be ‘pretty aggressive’ with their bids.

Most developers have reported excellent results and are sitting on a pile of cash, Mr Tan notes. ‘If the market is hot, you’re running out of land and you need to bid aggressively to get some land, it’s better to do so at the earlier stage of the up-cycle. As time passes by and the market gets closer to the correction point, the risks get higher.’

URA said yesterday that following the triggering of the Flora Drive housing site, another 16 residential plots remain on the first half 2010 reserve list that can potentially be triggered for launch. These include three executive condo (EC) plots and two mixed-use sites where private homes can be built. The 16 land parcels can potentially generate a total of 6,770 private homes.

The H1 2010 confirmed list has eight residential sites that can yield 2,925 units. Of these, four plots have been launched – EC sites near Buangkok MRT Station and at Yishun Avenue 11, the Ten Mile Junction plot and a site at Tampines Ave 1/10 fronting Bedok Reservoir. Two choice sites – one near Lakeside MRT Station and Jurong Lake, and the other diagonally opposite Simei MRT Station – will be launched from the confirmed list before the month runs out.

This week, National Development Minister Mah Bow Tan said that the H2 2010 government land sales (GLS) programme will have a ‘larger supply and wider variety of sites’ on the reserve list to give developers more choice.

DTZ executive director Ong Choon Fah suggests that the H2 2010 GLS Programme may feature more private housing sites further from the city, even if they are near MRT stations, as well as plots near HDB estates such as Choa Chu Kang, Yishun, Sengkang and Simei, where there is strong upgrader demand.

Such sites will hopefully sell at a lower unit land price and translate to more affordably-priced housing for end-buyers – compared with plum sites near MRT stations and closer to the city.

‘I think the affordable price range for private home buyers in the mass market is still $700-800 psf,’ Mrs Ong says.

In the meantime, developers are expected to continue triggering sites from the current H1 reserve list. ‘Developers need to replenish their landbanks and there’s a lot of choice now. So if they like something, why wait?’ says DTZ’s Ms Chua.

Source : Business Times – 13 Mar 2010

Comments Off on Reserve list plot triggered by $82m offer

Posted in Property Market / Real Estate

Tagged Flora Drive, Land Sales, Upper Changi Road North, URA, Urban Redevelopment Authority

Waiting for Lippo’s next move on OUE

Posted on 12 Mar 2010 | Comments Off

LIPPO Group has positioned itself in a pretty sweet spot by buying out ex-partner Ananda Krishnan’s stake in Overseas Union Enterprise (OUE), and upping its hold on the property company to 88.52 per cent.

With the deal, it has just enough interest to effectively dictate OUE’s direction – and also all the time it needs to decide whether to delist the latter, or turn it into a stockmarket darling.

For now, Lippo is unlikely to take OUE private. If history shows anything, it is that Lippo sees some worth in letting the latter stay listed.

When Lippo first joined hands with Mr Krishnan to buy into OUE in 2006, a general offer was triggered. OUE Realty (the 60:40 joint venture between Lippo and Usaha Tegas) ended up with a 94.51 per cent stake in the property company.

Under Singapore Exchange (SGX) listing rules, the free float of a company’s shares cannot fall below 10 per cent. OUE Realty was short of just another 5.49 per cent to take OUE private, and it could have paid just $10.20 a share, but it did not do so. Instead, it placed out new shares at a slightly higher $10.50.

Compare this with today’s situation, and it would seem like there is less incentive for Lippo to delist OUE. First, Lippo would have a larger stake of 11.48 per cent out there to buy. Second, OUE’s share price has increased since; it was $11.14 at market close yesterday. The price has stayed above $11 after Lippo paid that amount per share for Mr Krishnan’s stake on Tuesday.

History aside, there could be other restrictions at play. To part-finance the $957 million buyout of Mr Krishnan’s shares, Lippo had to borrow from banks. One would never know if the loans came with certain covenants, such as a requirement to keep OUE listed.

Most unequivocally, Lippo said on Tuesday that it aims to keep OUE listed. Of course, it is a case of ‘never say never’ in the business world, and it takes only the right price to get anything done. But so far, the signs point to OUE staying on the exchange.

Lippo stands to gain in some ways from this. There are the usual benefits which accrue to listed companies – the ability to raise funds from shareholders or issue debt, just to name a few.

The question now is whether Lippo would be keen to spur investor interest in OUE. More trading in the counter could help it reach its full value, which would ultimately benefit Lippo, the majority shareholder.

This would be hard without raising OUE’s free float, which is just slightly over 10 per cent. The good thing for Lippo is that unlike four years ago, when regulators were breathing down its neck, it is in no hurry to decide whether to place out more shares. It can wait for an attractive price to come about before doing so.

Apart from bringing more shares into the market, Lippo would also need to convince investors of OUE’s potential. There are still lingering doubts over the health of Singapore’s property market. And some analysts even suggested that cashing out was a smart move by Mr Krishnan, given the possibility that OUE’s earnings would come under pressure later from a possible oversupply of hotel rooms in Singapore.

But in all, it would be fair to say that Lippo has gotten itself into a rather comfortable driver’s seat at OUE. The market will be keeping its eyes peeled for what plans Lippo has for the company next.

Source : Business Times – 12 Mar 2010