Ageing buildings take another crack at going en bloc

Citi Commercial Pte Ltd

SOME ageing buildings in the Orchard vicinity are hopping on the collective sale bandwagon, with Tanglin Shopping Centre (TSC) and Orchard Towers among those eyeing a collective sale, The Business Times understands.

TSC, which is mounting its fourth attempt, is gunning for a reserve price of S$785 million. This works out to a little over S$2,500 per square foot per plot ratio (psf ppr) based on the gross floor area of approximately 313,000 square feet (sq ft).

BT understands that close to 60 per cent of owners (in terms of both share value and strata area) have signed the collective sale agreement thus far. City Developments' (CDL) hotel arm, Millenium & Copthorne Hotels, which owns over 34 per cent of TSC - or 85 strata-titled lots - is said to be among the consenting owners. When contacted by BT, a CDL spokesperson declined to comment.

A minimum 80 per cent of owners will have to consent before the building can proceed to be launched for collective sale via tender. Savills has been appointed the marketing agent for TSC.

Touching on TSC's redevelopment potential, Savills' deputy managing director (investment sales & capital markets), Galven Tan pointed out that TSC is zoned commercial under the Urban Redevelopment Authority's (URA) guidelines, with no less than 60 per cent to be used for commercial use, while 40 per cent could be for other uses such as luxury residential or a six-star hotel. He added: "As it is zoned commercial, no additional buyer's stamp duty (ABSD) will be payable."

Assuming a developer explores an alternate use for the 40 per cent, the reserve price would translate to an estimated S$2,700 psf ppr (including the development charge), market watchers said.

Highlighting the attributes of the 68,512 square foot (sq ft) freehold site offering unobstructed views towards The Botanic Gardens, Mr Tan added: "Some Hong-Kong based developers are already eyeing the site and talking to their architects."

With over 360 strata retail and office units, TSC - which is over 50 years old - comprises one 12-storey office block as well as a six-storey retail podium, with a basement car park and a multi-storey car park. The strata area is around 230,000 sq ft.

It has a plot ratio of 4.2, with a 20-storey maximum height under the Master Plan.

This is the fourth time TSC is looking at a collective sale, having made earlier attempts in 2011, 2014 and more recently in 2017. The previous attempt in 2011 reportedly had a higher reserve price of S$1.25 billion, which was not met. The second and third attempts did not reach the public tender stage.

TSC's chairman of the collective sale committee (CSC), Hoo Len Yuh, told BT the apportionment method this time around is fair, which could help garner more support. "It makes a lot of difference when the apportionment method is well received," he said.

Not far from TSC, freehold strata-titled Ming Arcade is also said to be looking at a collective sale. Completed in the 1980s, the seven-storey building with three basement storeys is situated near the junction of Orchard Road and Cuscaden Road.

For Orchard Towers, the process is understood to be in the early stages, with an extraordinary general meeting convened recently to form the CSC, sources said.

When contacted by BT, the management office for Orchard Towers declined to comment.

Typically, the next step would be to appoint a marketing consultant and lawyers to determine a reserve price and the method of apportionment. 

Chief executive officer of Showsuite Consultancy, Karamjit Singh, reckoned that both TSC and Orchard Towers are "ripe for redevelopment", citing their age as well as the dynamic retail and hospitality scene. Mr Singh added: "They enjoy freehold tenures and great spots on the iconic Orchard shopping belt, which make them highly coveted especially to foreigners."

Orchard Towers, with a plot ratio of 4.9, sits on a site of some 6,130 square metres (sq m) in area.

It spans two buildings, with retail and office space in the front tower along Orchard Road, as well as some commercial units and 58 private residential units in the rear 25-storey tower along Claymore Road. In addition, it has 361 car park lots.

Completed in the early 1970s, it is next to Palais Renaissance mall and opposite Forum The Shopping Mall, and is a short walk from Orchard MRT station.

However, the development is perhaps better known for its seedy reputation, while also having made the headlines in 2019 after a pub brawl led to a man's death.

Still, consultants whom BT spoke to said that Orchard Towers offers attributes that could prove attractive to developers.They declined to comment on a likely reserve price at this stage.

According to a media report from 2007, Orchard Towers has considered a collective sale in the past.

Steven Tan, senior director (investment services) at Colliers, expects that Orchard Towers - flanked by high-end and prestigious developments - would pique the interest of prospective buyers because of its location in the Orchard/Claymore area as well as its freehold tenure.

Mr Tan also noted that there is limited supply in the vicinity, adding: "Such opportunities (are) seldom available in the market."

ERA's head of research and consultancy, Nicholas Mak, pointed to Orchard Towers' redevelopment potential, especially given its location, "surrounded by prime real estate within a stone's throw".

Mr Mak went on to add: "But the price will have to be right in order for developers to bite. Given the ongoing headwinds in the retail and commercial sectors, the value of commercial space after the property is completed in a few years' time is still very uncertain."

It can sometimes be challenging for a mixed-use development - in this case, with retail, office and residential units - to meet the minimum 80 per cent threshold for consent in order to be launched for sale by tender.

"There's a higher probability that owners of different types of space may disagree on the apportionment method because each have a higher estimated value of their own property," said Mr Mak.

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