Wednesday, July 14, 2010

Biggest collective sale of the year clinched

Meng Garden sells for $137m; more prime district sites may come to market

(SINGAPORE) A collective sale is said to have been sealed for Meng Garden Apartments off Killiney Road for $137 million or about $1,380 per square foot per plot ratio, including an estimated development charge of $681,000.

This is the biggest collective sale transacted this year and the first in a prime district.

It also takes the year-to- date tally to 16 deals at about $786 million.

Boutique developer TG Development, the buyer of Meng Garden, will not have to seek the Strata Titles Board's approval for the transaction as CB Richard Ellis, which brokered the collective sale, had secured 100 per cent consent from the owners prior to the property being put up for tender last month.

The 35,639 sq ft freehold site is zoned for residential use with a 2.8 plot ratio and a 10-storey height control.

The site can potentially accommodate a new development with about 95 apartments averaging 1,000 sq ft each.

The existing eight-storey block comprises 26 apartments and a penthouse, with over half the units owned by an extended Lim family.

The tender for Meng Garden closed on July 7 and is understood to have attracted six bidders, including mid- and large-sized listed developers.

Meng Garden is located on Lloyd Road and was built in the mid-1980s. Prior to its development, the site was the original residence of the Alkaff family.

The 16 collective sales at $786 million so far this year is a marked improvement from last year's solo deal at $100.8 million and the 2008 showing of eight transactions for a total $346 million.

'Whereas most of the deals so far this year have involved sums below $100 million and were primarily outside the prime districts, we could see bigger sites and a few more in the prime districts coming to the market in the current half,' said CB Richard Ellis executive director (investment properties) Jeremy Lake.

He predicts that the full-year tally could cross the $2 billion mark.

Credo Real Estate managing director Karamjit Singh noted that the 13 collective sale deals in the first half of this year averaged $40 million per transaction - a far cry from the peak of the en bloc sale fever during the first half of 2007, when there were 55 transactions averaging $170 million each.

'For H2 2010, we expect to see 20-40 successful deals, which would mean a doubling from the first-half performance. We also expect the average deal size to somewhat double to $80-100 million in H2 2010.'

However, most market watchers are not expecting the peak volumes seen in 2006 and 2007 - when $7.8 billion and a record $11.6 billion respectively were done (according to Credo figures) - to be re-visited anytime soon.

CB Richard Ellis' Mr Lake argues that some collective sales are no longer viable due to the high cost of replacement properties. 'The cost of the replacement property has moved up to an extent that the en bloc premium is no longer attractive to owners,' he said.

'As a result, the number of viable collective sales that agents are working on has diminished.'

Mr Lake also observed that back in 2006-2007, land prices appreciated so quickly that almost every collective sale effort worked. 'However, prime district residential land prices currently are not back to their previous peaks, which mirrors the price trend for new residential units.'

Source: Business Times, 14 Jul 2010

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