ERA Daily Research - 13 July

Could an en bloc lottery ticket be found in a Singapore parking lot?

The Business Times, 12 July 2021, Mon 4:27 pm

By Lisa Kriwangko

DEMAND for car parks has been gaining traction among real estate investors for its low maintenance costs and recurring income.

But down the line, quiet hopes of a redevelopment windfall may also be at the back of the minds of some investors with more patient capital.

It comes as family offices are springing up as popular buyers of such property assets - which are rare because of a legal tweak that limited the number of car parks in Singapore with separate strata titles.

Property industry veteran Karamjit Singh noted that some car park buyers may be hoping to gain leverage in the event of a collective sale.

For a property to be sold en bloc, it must obtain the consent of at least 80 per cent of the owners, measured by both share value and floor area.

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"Strata-titled car park spaces tend to have low share value allocations but may hold the trump card on account of the large floor area measurement," said Mr Singh.

Notably, the strata-titled basement car park of Holland Road Shopping Centre was bought in 2020 for S$17.3 million or more than S$360,000 per parking space by a family office. The car park, according to a 2019 expression of interest announcement, represents a quarter of the total strata area in the development.

According to Sammi Lim, executive director of Brilliance Capital, since the 1980s, car parks within a development were no longer allowed separate strata titles.

This makes those with separate strata titles limited in supply and highly sought after, said Ms Lim.

Naturally then, the recent car parks that changed hands are of a certain vintage.

Earlier this year, Brilliance Capital concluded the sale of a parking lot at Parklane Shopping Centre, bought by a local family office for S$16.2 million or S$70,000 per parking space.

Just last month, another car park at People's Park Complex was made available for sale, again marketed by Brilliance Capital. The multi-storey car park with a restaurant unit at People's Park Complex was put up for public tender with a guide price of S$42 million. For the car park, the price works out to about S$57,000 per parking space.

Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Solutions (IREUS) at National University of Singapore, said there is a "speculative component" when buying car parks. "It is possible that the buildings may be developed to a more intensive use in the future," he noted.

Still, Dr Lee noted that while buyers would probably consider the possibility of en bloc in making their decisions, the factor is likely to be "heavily discounted".

He said: "It will be difficult for the different owners to agree on the distribution of sales proceeds, unless the reserve price is sufficiently high. But the conundrum is that a high reserve price would drive away interested investors."

Ms Lim estimated a 4 per cent gross yield return on the asset.

This is even as fewer Singapore residents are driving compared with a decade ago. The latest population census showed that about a quarter of all residents used to drive a car to work in 2010. In 2020, that shrank to about one-fifth of respondents.

She added that some buyers might be keen to convert excess parking space into higher-value uses such as skyrise greeneries, storage spaces, e-commerce spaces, car washes and capsule hotels.

Since 2016, the Urban Redevelopment Authority has allowed owners to convert surplus car parking spaces into other commercial, mixed use and hotel developments within the central area. This was in support of the government's plans for Singapore to go car-lite.

Ms Lim said: "Any en bloc is a bonus and windfall for the buyers, but may not be the immediate aim of why they enter into this purchase."

The parking lot at Holland Road Shopping Centre was sold to an ultra-high net worth family office from Hong Kong, with the deal brokered too by Brilliance Capital.

It comes as car parks are "quite actively" traded in Hong Kong, said Dr Lee, noting that such a trend is especially apparent in cities where land price is high and supply is limited.

"The Hong Kong government reduces the supply of car parks to encourage people to take public transport. However, the lack of supply ends up pushing up the prices," he said.

To add, in Hong Kong, car parks at residential developments can be sold with a separate strata title, noted Mr Singh. This encourages the trading of most car parks in the market.

Earlier in June, a single parking bay at Mount Nicholson, a luxury residential development, sold for a record HK$10 million (S$1.7 million).

That same month, Melco International, the owner of Hong Kong's Jumbo Kingdom floating restaurants, announced that it was looking to sell its 509-bay car park with a guide price of HK$500 million.

In September last year, Hong Kong tycoon King Cho also announced his plans to add 7,000 parking spaces spanning across China worth 700 million yuan (S$146.2 million) to his existing portfolio of 3,800 spaces worth between 800 million yuan and one billion yuan by the end of 2020, according to Yahoo.


Is luxury property Eden the last of its kind?

The Business Times, 13 July 2021, Tue 5:50 am  

By Leslie Yee

AMID the strong performance of the Singapore private residential property market this year, a deal that stood out was the purchase by the Tsai family of Taiwan, who are behind snack food giant Want Want China Holdings, of all 20 apartments in the freehold luxury residential project Eden, at 2 Draycott Park.

Developer Swire Properties of Hong Kong sold the units for S$293 million or around S$4,827 per square foot (psf).

Located at the corner of Draycott Park and Draycott Drive, the 22-storey development was completed in 2019. Each apartment is a four-bedroom unit of about 3,035 square feet (sq ft), which occupies an entire floor.

Is this transaction an anomaly? Does it provide useful pointers on the prospects of ultra luxury homes?

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What stands out is not just the sale of all the units in a development to one party, but also that the developer held on to the units for some time post-completion.

Residential developers here typically pursue good sales rates selling off-plan as construction gets under way so as to lower financing costs and drive higher return on equity, which is important as profit margins are generally thin.

Holding vacant completed units adds costs such as property taxes and maintenance expenses.

With Eden, Swire Properties would have incurred additional buyer's stamp duty charges on the land purchase price, and possibly, extension charges under the Qualifying Certificate rules for foreign housing developers in Singapore.

Perhaps being in little hurry to sell completed units at premier developments makes sense. Potential buyers get to see the finished product and hence, receive the assurance that top dollar is being paid for truly top quality.

In Hong Kong, Swire Properties took over three years post-completion to sell all twelve super luxury residential units of Opus Hong Kong, which is located at Stubbs Road in the Peak and is designed by Pritzker Prize winner Frank Gehry.

Swire Properties likely has strong holding power as it owns a large portfolio of investment properties and its gearing was 2.3 per cent as at end-2020.

As for the purchaser, Want Want's chairman, Tsai Eng Meng, bought one apartment while his son Shao Chung, who is an executive director of the company and a permanent resident here, bought 19 units.

There are probably few options available in the luxury home market here to house the over 60,000 sq ft of space that Eden offered.

A permanent resident may be able to get approval to buy a good class bungalow (GCB). Foreigners can buy villas in Sentosa Cove. The drawback with landed homes in Sentosa is that they sit on original land leases of 99 years as opposed to the freehold tenure of Eden and typical GCBs.

Whether with GCBs or landed homes in Sentosa, it is difficult to find a plot or combine several adjoining land parcels to house over 60,000 sq ft.

A rare exception is to buy the nearly 90,000 sq ft freehold GCB plot at 2 Lermit Road, near the Singapore Botanic Gardens, from Stamford Land executive chairman Ow Chio Kiat and his family for S$300 million or more.

Perhaps holding 20 separate strata titles for Eden is an advantage as this provides flexibility for one or more units to be transferred to other family members, leased out or sold if the situation warrants.

From an investment yield perspective, it is hard to justify Eden's pricing. If each unit is rented out at S$20,000 per month, gross yield is about 1.6 per cent per annum. On a net basis, the yield may be around 1 per cent, which is below the Singapore 10 year government bond yield or typical home mortgage rates.

But the price psf of Eden is below that of Park Nova, which is being developed by another Hong Kong group Shun Tak Holdings.

Sales at this 54-unit luxury condominium project at 18 Tomlinson Road started in May, with 12 units sold in that month for a median price of S$5,006 psf.

Such sales numbers must be put in a certain context. Singapore has been successful in attracting the super wealthy. More affluent families have flocked to Singapore as a base to park their wealth amid a global pandemic.

Data analysis firm Handshakes estimates that 221 single and multi-family offices opened in Singapore in 2020, which is up from 129 in 2019, and 22 in 2018.

Singapore's draw is a confluence of many factors, such as favourable tax rates, stability, rule of law, ease of doing business, quality education and high standards of healthcare.

This is against a backdrop of Asia's ascent and wealth creation in the region.

Forbes found a record 2,755 US dollar billionaires in 2021, nearly a third more than the 2,095 in 2020. Largely due to newcomers from China and India, the Asia Pacific region had 370 more billionaires, reaching a record 1,149 this year.

Based on a global wealth report by Credit Suisse, Asia Pacific had 57,318 ultra high net worth adults in 2020, representing slightly over a quarter of the global ultra high net worth adult population. The report forecasts that the number of such individuals in the Asia Pacific, with net worth exceeding US$50 million, will rise to nearly 99,000 in 2025.

Singapore remains open to foreigners choosing to grow their presence here. Through the Global Investor Programme, there is a path to permanent residency for qualified business owners or families if they invest S$2.5 million in a local business, certain funds or a family office with at least S$200 million in assets.

If more of the super rich emerge in Asia, and Singapore is attractive as a place to work, live, play and invest, monies will likely flow to super luxury condominiums in a few select addresses here.

Think well-conceived projects in super prime locations in a few streets such as Claymore Hill, Draycott Park, Ardmore Park, Nassim Road, Cuscaden Road, Tomlinson Road and Angullia Park.

Scarcity of such offerings can provide the basis for capital appreciation of ultra luxury apartments.

Early this year, CK Asset Holdings sold Asia's priciest apartment. A five-bedroom penthouse at the 21 Borrett Road project in Hong Kong's Mid-Levels, spanning 3,378 sq ft, sold for HK$459 million or HK$136,000 (S$23,650) psf.

Pricing psf of super luxury homes in Hong Kong that is a few times that of Eden or Park Nova is not unheard of. Relatively, Eden's pricing for a top address in a major business and wealth management hub looks a bargain for those who can afford it.

Singapore luxury home prices will rise so long as the super rich continue to grow in numbers and in wealth, especially in Asia, and some of these individuals park their money here. Activity in luxury apartments may get a boost when potential foreign purchasers can more freely travel here.

Developers seeking to cash in on the top-end of the market will need to focus on delivering global best-in-class products to meet the aspirations of clients who can afford to buy in any major global city.

What may impact the high-end home market would be measures to aggressively fight inequality such as imposing hefty wealth taxes on owners of luxury abodes.

The Tsai family would have needed plenty of savvy, guts and vision to build a successful food empire.

Likewise then, perhaps the Tsai family is ahead of the game in securing a luxurious residential project here. For such illustrious families, Eden is no ungodly investment.


Singapore office landlords embrace flexibility and tech as they spruce up properties

The Business Times, 13 July 2021, Tue 5:50 am

By Fiona Lam

OWNERS of Grade A office properties in Singapore are injecting more flexibility, tech innovation and refurbishments into their offerings, to vie for tenants seeking higher-quality spaces and agile workplace leasing.

Gone are the days of cubicles and rigid lease structures as the template. Cushman & Wakefield (C&W) noted that available traditional office space will start to decline as landlords incorporate more flexible space into their buildings, either via direct lease or management agreements with co-working operators, or through the landlord's own co-working brand.

Based on C&W's basket of Grade A office properties in the central business district (CBD), the largest landlords include CapitaLand, Suntec Reit, Keppel Reit, and M+S.

Tenants are requesting flexibility due to hybrid working and evolving space requirements. Citi analyst Brandon Lee wrote in a recent report that some want right-to-give-back and right-to-offer clauses, to reduce or increase space in a certain number of years, while others are asking for space within co-working operators' premises in the same buildings.

Suntec Reit: T82U 0%  and Keppel Reit: K71U 0%  are among those that have allowed for greater flexibility in lease tenures, rent structures and lease terms for some tenants, their spokespeople separately told The Business Times (BT).

More landlords, including CapitaLand and Keppel Reit, are also offering core-and-flex solutions. CapitaLand: C31 0%  has partnered co-working operator The Work Project to provide flexible spaces in Capital Tower, Asia Square Tower 2, CapitaGreen, and the upcoming 51-storey CapitaSpring.

The CapitaSpring integrated development will house hot desks, meeting facilities, private offices, large enterprise suites and bare-shell leases, to support any new, flexible requirements of conventional office tenants and the expansion needs of small and medium enterprises. About 68,700 square feet across three floors - or 10 per cent of its office net lettable area - is set aside for flexible workspaces.

And at CapitaLand Integrated Commercial Trust's (CapLand IntCom T: C38U 0%) office tower 21 Collyer Quay, currently closed for enhancement works, US co-working giant WeWork's seven-year lease for the entire 200,000 square feet of net lettable area is expected to start in early Q4 2021 on a gross rent basis.

Bridge+, CapitaLand's wholly-owned co-working and flexible workspace business unit, is also curating a fintech hub at 79 Robinson Road.

The manager of OUE Commercial Reit (OUE C-Reit), which has co-working operators in most of its office properties, described flexible workspaces as complementary to traditional offices. "Having co-working operators as tenants within our portfolio has proven to be a competitive advantage as more tenants seek this flexibility," its spokesperson said.

Where feasible, OUE Com Reit: TS0U 0% has also been relocating some tenants to other properties in its portfolio to support their evolving space requirements, as it gets more proactive in engaging tenants.

These relocation efforts have helped maintain a stable committed occupancy of about 95 per cent at its Singapore office properties since the pandemic started, and were possible as OUE C-Reit "has a foothold" in the key CBD submarkets of Raffles Place, Marina Bay and Shenton Way, the spokesperson added.

Meanwhile, City Developments Limited (CDL) told BT it has been taking a "nimble" approach to office lease renewal discussions, in tune with market conditions. "The emergence of work-from-home and hybrid working models during the pandemic continue to make the demand for office spaces more fluid," CityDev: C09 0%  said.

The emphasis on flexibility looks here to stay.

Two upcoming CBD Grade A projects will incorporate the core-and-flex concept, CBRE co-head of office services David McKellar noted. In particular, GuocoLand's Guoco Midtown has developed the concept even further by featuring a purpose-built Network Hub of lounges, agile offices and collaborative workspaces with seminar and training facilities, he added.

Guoco Midtown, CapitaSpring and IOI Properties' Central Boulevard Towers are also set to bring more innovation into the CBD, as these new developments will be equipped with intelligent building systems, biophilic features and large floor plates, Mr McKellar said.

CapitaSpring will be equipped with WiFi 6 technology and ample power points for users to plug-and-work in common areas, and turnstiles will use facial recognition. Also in the plans are the deployment of Internet of Things (IoT) sensors, and fully automated smart-cleaning robots integrated with the access control system.

Likewise, Keppel Reit's Keppel Bay Tower has facial recognition and mobile apps for contactless access, a cooling tower water management system, and integrated sensor technology to optimise fresh air intake.

Apps to engage office workers are increasingly being rolled out and beefed up with additional services. Common features include building access and amenities booking.

CapitaLand's CapitaStar@Work app, launched in July 2020, provides building-related updates, food and beverage deals, employee pulse surveys, contact tracing, and visitor pre-registration. Six of the group's office properties and two Bridge+ co-working spaces in Singapore had been onboarded to the app as at May 2021.

CDL in December launched a contactless lift eCall function at Republic Plaza, enabling occupiers to call for lifts from their smartphones. The feature is integrated with the developer's proprietary app, CityNexus, which also provides services such as hourly tracking of indoor air quality and contactless turnstile access. CDL plans to introduce more value-added services on CityNexus to boost productivity and convenience for office tenants.

Keppel Reit pointed out that technology adoption is essential, given the shift towards hybrid work arrangements. "Landlords will have to provide robust IT infrastructure and incorporate smart building technologies to support tenants' conferencing requirements," it added.


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