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Changi Garden sold to Chip Eng Seng for S$249m

Psf ppr price of S$888 expected to set new and much-higher benchmark for prices in vicinity

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The buyer, CEL Real Estate Development, a wholly-owned unit of Chip Eng Seng, plans to redevelop Changi Garden into a low-rise residential condominium with full condominium facilities.

Singapore

PROPERTY group Chip Eng Seng has picked up Changi Garden in a collective sale for S$248.8 million, a price that consultants say will set a new and much-higher benchmark for properties in the vicinity.

The listed company beat eight other bidders with a price that was 27 per cent above residents' initial asking price of S$196 million. The price for the freehold site works out to an auspicious S$888 per sq ft per plot ratio (psf ppr).

ZACD Group executive director Nicholas Mak called it a "fairly bullish bid" and estimates that the break-even price in current market conditions will be about S$1,350 psf to S$1,400 psf. Adding a 10 per cent profit margin would lead to launch prices in the region of S$1,500 psf to S$1,600 psf.

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This is a definite jump from average transaction prices in the range of S$929 to S$999 psf for units at nearby and recently completed condominiums such as Palm Isles, Parc Olympia and The Inflora.

"The breakeven price of the new project on the site of Changi Garden is about 40-60 per cent higher than the average transacted prices of comparable condominiums in that area. Owners of those surrounding condominiums who wish to sell their units should be happy," he remarked, as Changi Garden's selling price sets a new benchmark for the neighbourhood.

Each owner at the project will receive between S$2.14 million and S$2.27 million, while a penthouse owner will receive between S$4.03 million and S$4.74 million. Shop owners are expected to receive S$4.7 million to S$7.08 million, broker Edmund Tie & Company said.

Mr Mak added that it is also an indication that the developer expects "a very strong, sharp increase in prices".

Commentators have said that developers seem to be gambling that prices will keep going higher, but this could spell trouble if prices increase to a point that exceeds the purchasing power of home buyers.

On Monday, data from the Urban Redevelopment Authority (URA) showed that developers launched only 73 new private homes in September, possibly holding back on launches in the hope of riding a price recovery next year. The sale of Changi Garden brings the en bloc tally this year to 17 collective sales worth S$6.1 billion.

The buyer, CEL Real Estate Development, a wholly-owned unit of Chip Eng Seng, plans to redevelop the property into a low-rise residential condominium with full condominium facilities.

The proposed redevelopment is expected to yield about 320 residential units and potentially some retail shops, it said in a filing to the Singapore Exchange.

Chip Eng Seng shares rose half a cent to a two-year high of S$0.905 as bullishness on the property market trickles down from big caps to small- and mid-caps and derivative plays such as construction counters. The stock has risen 44 per cent from the start of this year.

Changi Garden was developed between the late 1970s and early 1980s and comprises 60 apartments, 12 penthouses and 12 shops. Located at the junction of Upper Changi Road North and Jalan Mariam, the freehold property sits on a plot size of about 200,093 sq ft.

According to URA's Master Plan 2014, it is zoned "residential" at plot ratio of 1.4. This means it can be developed to a maximum allowable gross floor area of 280,130 sq ft.

Chairman of Changi Garden's en bloc sales committee Tay Siong Siew said: "Given positive feedback on the existing shops at Changi Garden from the neighbours as well as patrons from the nearby work places, if the developer can obtain approval to incorporate a retail component within the new development, it is anticipated to be very well-received."

The committee started the collective sales process in March last year, and worked with solicitors Dentons Rodyk & Davidson. This is its sixth collective sale attempt.

Chip Eng Seng said both the acquisition and the proposed redevelopment will be funded by internal resources and bank borrowings.

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