109 deals done at $13.3 billion

Sales in H2 account for only $2.8b as price gap between owners, developers surfaces

It was the best of times, it was the worst of times.

With 82 en bloc deals worth $10.49 billion transacted in the first-half, and just 27 sites worth $2.81 billion transacted in the second-half so far, ‘2007 has been a ‘tale of two halves’ for the collective sales market,’ says CB Richard Ellis executive director Jeremy Lake.

Nonetheless, the year- to-date tally for 2007 - 109 deals done at $13.3 billion - is a whopping jump from the 79 deals amounting to $8.2 billion transacted for the whole of last year.

‘A price gap (between what owners were asking and what developers were prepared to pay) that was not there between January to June this year began to surface in July, so owners’ price expectations had overshot, and this was compounded by the sub-prime crisis. By September/Octo-ber, developers took a back seat when it came to bidding for land,’ Mr Lake said.

As for next year, CBRE’s view is that the total value of en bloc sales for 2008 may not be as high as this year’s all-time record.

A major highlight on the collective sale calendar this year was the introduction of new legislation in October which put in place more processes and safeguards to ensure the entire en bloc process is more transparent for all owners.

This led to a rush to sign collective sale agreements before the onset of the legislation - everything otherwise would be unwound and the process have to be restarted under the new law. As a result there was a flurry of en bloc sale tenders launched between September and November.

However, in the longer term, the new rules and procedures - which include how sales committees are formed and how they conduct their business - mean it could take a longer time to launch collective sale sites for sale.

As for next year, CBRE reckons ‘developers will still remain interested in acquiring development sites, although they are likely to be much more selective and focus on acquiring reasonably-priced sites in good locations’.

Industry observers also predict the pace at which developers acquire more collective sale sites will be a function of how well their residential projects sell.

The top buyers of collective sale sites so far this year have been companies linked to banker Wee Cho Yaw (UOL Group, Kheng Leong, United Industrial Corp and Singapore Land), which collectively bought six collective sale sites for a total of $1.6 billion.

This was followed by Malaysian tycoon Quek Leng Chan’s GuocoLand, which bought three sites (Leedon Heights, Palm Beach Garden in the East Coast area and Toho Garden at Yio Chu Kang Road) for a combined $972.5 million.

Property giant CapitaLand was in third position, with stakes in three sites (Char Yong Gardens, Gillman Heights and Farrer Court) purchased for a combined $953 million.

Up-and-coming property player, Bravo Building Construction, snapped up $824.5 million worth of en bloc sales deals.

The Kwek family’s listed City Developments and privately-held Hong Leong Holdings have picked up a total of $672 million of collective sale sites.

Other sizeable buyers this year include Hotel Properties (about $640 million) and Lippo Group and its listed unit Overseas Union Enterprise ($681 million).

Property magnate Ng Teng Fong’s Far East Organization has invested in about $400 million of collective sale sites so far this year, after buying close to $1 billion worth of such properties last year.

CBRE’s analysis also shows that a total of 142 collective sale launches have been advertised so far this year, of which about half or 69 sites have been sold. The other 40 deals struck this year involved either sites launched prior to 2007 or sites whose launches were not advertised.

Source : Business Times - 10 Dec 2007