What factors are necessary for a possible en bloc or collective sale?
PHOTO: Savills
PUBLISHED ONSeptember 26, 2021 8:30 AMByPriyanka Elhence
Earlier in September 2021, Flynn Park at 18-22 Yew Siang Road went en bloc at $371 million, making it the largest collective sale of the year.
Brokered by Savills Singapore, the buyer (a joint venture between Hoi Hup Realty Private Limited and Sunway Developments Pte. Ltd) bought all 72 apartments at $1,355 psf per plot ratio (or $1,318 psf ppr when including the 7 per cent bonus gross floor area from balconies).
Several other ageing properties have begun to be put for collective sale, or at least, seen its majority owners’ doing so. One of them is the 50-storey International Plaza, the commercial-and-residential building in Tanjong Pagar, which has a record reserve price of $2.7 billion – marking it as Singapore’s largest en-bloc deal in its number of units and value once a buyer is found.
Indeed, Singapore’s lucrative en bloc sales have often made overnight millionaires out of property owners, making them highly prized real estate options. 99.co takes a look at what factors contribute to a successful en bloc sale .
In land-scarce Singapore, old buildings have traditionally been torn down to accommodate newer, swankier developments. En bloc stems from French for ‘all together’ or ‘as one block’. It translates to a sizeable collective sale of a condominium development by one purchaser (usually the government or a property developer) to be redeveloped and priced into a new project.
For condos less than ten years old since TOP, at least 90 per cent of all owners must agree to sell, while condos older than ten years need at least 80 per cent of all owners to do the same.
Essentially, such collective sales translate into a mini golden handshake for each landlord, as the reserve price is set at a premium that is usually higher than the current resale market value.
It’s a lucrative win-win situation for both parties with en blocs, as the buyer will also eventually recoup his cost and make a healthy profit with the new planned development.
The largest en bloc sale happened in 2007, where all 618 apartments of Farrer Court were collectively bought for $1.339 billion, working out to a payout of approximately $2.122 to $2.238 million per apartment.
Not bad at all when you consider the market price for the same units was only about $500,000 to $600,000 before the en bloc negotiations started. The site was subsequently redeveloped into the d’Leedon, the grand apartment complex with more than 1,715 high-end, luxury apartments by Farrer Road.
What factors contributed to a potential collective sale?
1. Age of the development
Older developments tend to be quite decrepit, requiring expensive ongoing maintenance, so replacing the building with something new and more profitable makes financial sense.
Furthermore, most older developments (especially those approved before 1990) have usually not been built up to the prevailing Master Plan plot ratio, so it will undoubtedly yield a much higher return for a redevelopment today, given its land value.
2. Location
Has the area been earmarked for redevelopment by the government? It’s no secret that if the condominium development is located in prime Districts (9, 10, 11 or 15), an en bloc sale is relatively high compared to the rest of the island, as there are fewer chances of government land sites being released in these areas.
Likewise, is there a new MRT or other exciting developments coming up in the area? Such developments usually manifest as a hike in the area’s land and property prices.
For instance, the redevelopment plans for the Greater Southern Waterfront have certainly played a role in the recent lucrative collective sale of Flynn Park.
Said Wong Swee Chun, Chairman and MD, Hoi Hup Realty Private Limited (purchase of the en bloc), “We are very pleased to secure the tender of Flynn Park. It is a rare hillside plot that offers panoramic views to the South.
“It is tranquil, lush and green, yet enjoys proximity to the MRT network and is minutes to the city. It will also benefit significantly from its adjacency to the new Southern Waterfront development. We look forward to developing a premium product on this unique site.”
3. Plot ratio
Condos with a lower plot ratio means fewer units are sitting on the plot of land. The land can be used more intensively by putting up more units for future developments. The profits will also increase by putting up a new, more densely-packed development, so these plots of land are potential cash cows for en bloc sales where a larger plot ratio is allowed.
4. En bloc fatigue
When an en bloc sale isn’t successful the first time, owners might feel discouraged from going through the whole process again and may opt to not go for en bloc again.
5. Size of the apartment and alternative options
The older the condo, the more spacious the units. While some owners might be keen to sell their units for money, others might reject the offer because of having to settle for small units elsewhere.
6. Residential makeup of the development
An old development is likely to have a larger, more ageing population living in it, with most residents also being the owners of their units. In such cases, it is usually easier to convince the older folk to take the golden handshake and to move to a smaller, newer unit somewhere else where they will be more comfortable in their remaining years.
7. Size of the development
The chances of a collective sale are higher in smaller developments as there is a higher probability of getting the majority of owners to agree to sell their units collectively.
On the flip side, having a smaller pool of people to contend with can also mean that sale efforts can be thwarted more easily if even a small percentage of the owners don’t want to go ahead with en bloc, making it difficult to achieve the required 80 per cent consent level.
ALSO READ: Co-owner refuses to sell your Singapore property: What to do
What is an en bloc or collective property sale?
In land-scarce Singapore, old buildings have traditionally been torn down to accommodate newer, swankier developments. En bloc stems from French for ‘all together’ or ‘as one block’. It translates to a sizeable collective sale of a condominium development by one purchaser (usually the government or a property developer) to be redeveloped and priced into a new project.
Why is an en bloc sale lucrative to homeowners?
Essentially, such collective sales translate into a mini golden handshake for each landlord, as the reserve price is set at a premium that is usually higher than the current resale market value. It’s a lucrative win-win situation for both parties with en blocs, as the buyer will also eventually recoup his cost and make a healthy profit with the new planned development.
What is required for an en bloc sale to go through?
For condos less than ten years old since TOP, at least 90 per cent of all owners must agree to sell, while condos older than ten years need at least 80 per cent of all owners to do the same.
This article was first published in 99.co.
