Sitting on a pot of ‘collective’ gold


While the market mulls over the impact that rule changes will have on collective sales, the spotlight has fallen on developers sitting on prime sites acquired during the previous en bloc boom in 2006-2007.

If the proposed changes make it tougher for prime freehold residential sites to make their way to the market, that will be good news to developers who are already holding such sites acquired earlier.

A compilation by property consultant CB Richard Ellis shows that developers currently have 26 sites in prime districts 9, 10 and 11 snapped up in collective sales in 2006 and 2007 where new projects are still to be launched.

These sites are planned for redevelopment into nearly 4,300 new homes. Outside the prime districts, developers could build a further 4,700 homes on 16 sites purchased through collective sales in 2006-2007

CapitaLand, City Developments Ltd (CDL), Wing Tai, GuocoLand and Overseas Union Enterprise are among the developers who bought prime district en bloc sale plots earlier. For instance, CapitaLand, together with its partners, acquired the Farrer Court plot and is planning a 1,715-unit redevelopment project. Hong Leong Group (including CDL) has exposure to six sites slated for development into over 600 units in locations like Leonie Hill, Anderson and Thomson roads.

These sites and projects will become more precious to developers and they will want to time their launch more judiciously if it gets tougher to replenish landbank in this segment through en bloc sales, say industry observers.

CB Richard Ellis executive director Jeremy Lake says: ‘The proposed amendments are unlikely to facilitate the en bloc process significantly and as such, the number of collective sales coming to the market is likely to remain relatively limited.

‘From a developer’s point of view, it will be more difficult to replace landbank in prime areas so those who have such sites may think more carefully about the timing of launch of new projects on these sites as it will not be easy to find replacement land.’

Giving a more pessimistic take, a developer said: ‘I don’t think anyone would be too far wrong to say that en bloc sales are just about the only source of supply for prime district freehold sites. The proposed amendments to the Land Titles (Strata) Act will put the ‘last nail in the coffin’ for en bloc sales in the near future, and the market will be completely dried up for freehold District 9, 10, 11 land supply.’

This will create upward pressure on land prices, he added.

Putting things in perspective, DTZ senior director (investment sales) Shaun Poh says: ‘En bloc sales in many developments have already been activated and these are unlikely to be affected by the proposed amendments. The supply from this source should be enough for the market for the time being.

‘However, the future pipeline of en bloc sales will be affected.’

On Monday, the Ministry of Law released proposed amendments that will among other things make it harder to restart a collective sale within two years of a failed attempt. Any attempts to convene EGMs to appoint a sales committee during this period will require higher requisition levels from owners – 50 per cent by share value or total number of owners for the first re-try and 80 per cent for any subsequent attempts.

‘Already it’s not easy to secure requisitions for EGMs based on existing thresholds of 20 per cent by share value or 25 per cent of number of owners,’ says DTZ’s Mr Poh.

‘Now that they’re proposing to raise the threshold for restarting previously failed en bloc attempts, it’s going to be more difficult for those who want to have another shot when, say, the market suddenly turns hot.’

On a more positive note, Credo Real Estate managing director Karamjit Singh notes that the instances of failed attempts that will be affected by the two-year restriction do not cover cases where owners’ 80 or 90 per cent majority consent was secured but the Collective Sales Agreement (CSA) expired because a buyer could not be found in time.

‘The projects that may be affected are likely to be those that had attempted an en bloc sale when they should not have, either owing to the project not being fundamentally ‘enblocable’ or the market was not on their side to an extent that the majority owners rejected the proposal,’ he said.

MinLaw hopes its proposal will discourage repeated attempts at en bloc sales where there isn’t enough support from owners.

Industry players lauded MinLaw’s proposal to streamline the number of EGMs, which should speed up the process. ‘We expect to see further en-bloc activity this year,’ said Chris Fossick, managing director Singapore and South East Asia for Jones Lang LaSalle.

Others, however, complain that the the ministry is not doing anything to mitigate bottlenecks caused by the need to have lawyers witness signing of the CSA.

This has also jacked up legal costs. Some have suggested doing away with this requirement since those who sign are given a five-day cooling-off period.-Asiaonenews

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