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EN BLOC FEVER

Cairnhill Mansions owners gunning for S$362m

The incoming developer will have to sell units in the new project at above $3,000 psf, but it's achievable: observers

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Owners of the 61 units in Cairnhill Mansions made previous attempts at an en bloc sale in 2005, 2007, 2011 and 2014, but failed.

Singapore

YET another residential development here has obtained sufficient backing from owners to launch a collective sale in the next few weeks.

Owners of Cairnhill Mansions in prime district 9 are putting the freehold development up for sale with an asking price of S$362 million; as of last week, more than 80 per cent of the owners there had signed the collective sale agreement.

The price works out to S$2,101 per square foot per plot ratio (psf ppr), said its marketing agent CBRE. Subject to confirmation by the Urban Redevelopment Authority (URA), no development charge is payable.

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This counts as fifth time lucky for Cairnhill Mansions, for which attempts at a collective sale failed in 2005, 2007, 2011 and 2014.

Gross profits for owners of the 61 apartments are estimated to be 70 to 80 per cent higher through the collective sale than if they were to sell their units individually, said CBRE director of capital markets Galven Tan.

But market watchers note that the incoming developer would have to sell units in the new project at above S$3,000 psf, which they deemed "bullish" - but achievable.

One seasoned property broker, who estimated the break-even price to be at between S$2,700 and S$2,800 psf, said it will be a "very optimistic pricing" at this juncture to sell the project at S$3,000 to S$3,100 psf. But such a level is "not unachievable", given the prospect of rising prices next year, he added.

ZACD Group executive director Nicholas Mak reckoned that it would be the highest asking land rate among all collective sales launched in the past three years. "The developer would need to be one with a very strong luxury branding in order to command such a price for the new condo," he said.

But CBRE's Mr Tan said the site's prime location, freehold status and palatable deal size are major attributes, and that market conditions are now working in its favour.

The maximum allowable gross floor area (GFA) of the 43,103 sq ft site works out to 172,239 sq ft if a 10 per cent bonus GFA for balconies is included. With this, the new development could accommodate up to 140 units with an average size of 1,200 sq ft.

The site is a few minutes' walk from the Orchard Road shopping belt, which offers amenities such as retail shops, F&B outlets and entertainment establishments; the Newton MRT station is some 400m away.

Cairnhill Mansions is the first sizeable and prime freehold site to be offered in the area in recent years, Mr Tan said.

The last time a residential site of this size in the prime Orchard vicinity was sold was nearly 10 years ago, when YTL bought Westwood Apartments for S$2,525 psf ppr.

The momentum in the prime residential market has picked up over the past year and developers are keen to replenish their land banks as unsold inventories have fallen below the historical average, he said. "Judging by the trigger of the land parcel at Jiak Kim Street and the market response to the site, it is clear that developers are keen to enter the high-end residential segment."

The Jiak Kim Street site was triggered for sale under the reserve list of the government land sales programme after the URA received an application from a developer, who committed to bid at a price of not less than S$689.35 million.

Knight Frank head of consultancy and research Alice Tan noted that the development risk for the site of Cairnhill Mansions is low, given its palatable size. She expects the future project to be launched for at least S$3,200 to S$3,400 psf, based on the asking land rate.

The Business Times understands that since news of the impending public tender for Cairnhill Mansions broke on Thursday, foreign and local developers who are "household names" have expressed initial interest.

The nascent upcycle of the en bloc market has so far seen deals crossing the S$5 billion mark this year, up from just S$1 billion for the whole of last year.

Mr Mak noted that Cairnhill Mansions may not be the only collective sale to be launched this year or next year with an asking price of more than S$2,000 psf ppr; Spring Grove in Grange Road is believed to be inching towards its initial asking price, reportedly at S$1,807 psf.

Sounding a note of caution, he said: "As the asking prices of en bloc sales approach stratospheric levels, it remains to be seen whether the purchasing power of home-buyers can catch up."

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