Sim Lian Development is believed to have placed a bid of S$970 million for the collective sale of Tampines Court.
On Tuesday evening, the tender for the privatised HUDC (Housing and Urban Development Company) estate, which closed at 3 pm the same day, received a bid of that sum - above the reserve price of S$952 million.
Conditions were attached to the S$970 million bid, so the collective sales committee is evaluating the bid.
A price of S$970 million works out to around S$655 per square foot of potential gross floor area, inclusive of two payments to the state. One is a differential premium for enhancing the intensity of the site to a gross plot ratio of 2.8; the other is a lease-upgrading premium, which will top up the site's lease to 99 years.
The site has a leftover lease of 69 years.
Assuming Tampines Court is sold at S$970 million, this would be the second largest collective sale in dollar quantum after Farrer Court, which went for S$1.3388 billion back in 2007.
Tampines Court has a land area of 702,164 sq ft.
Based on a 2.8 plot ratio - which is the ratio of maximum gross floor area to land area - the site could be redeveloped into a project with up to 2,609 units, based on an average unit size (gross floor area) of about 753 sq ft.
A seasoned property consultant estimates the breakeven cost at around S$1,150 psf. While this would still leave a profit margin for the developer based on the current buoyant market conditions, the development risk for this project lies in its huge size of more than 2,500 units.
"There is a risk that the developer may end up having to pay the 15 per cent ABSD (additional buyer's stamp duty) on the purchase price of the land, with interest of 5 per cent per annum, if it does not fulfil the conditions for upfront remission of ABSD," said a market watcher.
These conditions include completing the new development on the site and selling off all its units within five years of the collective sale order granted by the Strata Titles Board (STB) or the court.
The successful bidder of Tampines Court will also factor in an expected increase in development charge rates come Sept 1, given the recent bullish residential land bids in general. This in turn will push up the differential premium payable on the Tampines Court site and hence raise the breakeven cost for the new project.
That said, Sim Lian, is no newbie to the Tampines area, having developed for the Housing Board two Design Build and Sell Scheme (DBSS) projects in the area - The Premier and Centrale 8 - in addition to an executive condo (a public-private housing hybrid) project, Tampines Trilliant.
Moreover, the group has a construction arm, which, assuming it handles the building works of the new project, will result in some savings in construction cost, say analysts.
Market watchers believe that among the conditions that the potential buyer of Tampines Court is likely to have sought from its owners would be requiring confirmation of the development baseline for the property, which will have a bearing on the quantum of differential premium.
In addition, the deal would be subject to a lease top-up for the site. The buyer would also have stipulated a timeframe for the order of sale to be granted by the STB or court - as one of the conditions of its purchase.
Adapted from: The Business Times, 16 August 2017