Research & Forecast Report Singapore Investment Sales Accelerating success. Investment sales transaction volume moderated in Buying momentum in public and private sectors waned The lack of impetus to sustain the upturn of the preceding quarter led the Singapore property investment sales market to turn in a lacklustre performance in. Total investment sales value receded by 10.9% quarter-onquarter (QoQ) to $4.98 billion in after rebounding 26.6% QoQ to $5.59 billion in 1Q 2014. The falter in sales momentum resulted in the shrinking of total investment sales value tallied for 1H 2014 by 43.6% to $10.57 billion, from the $18.74 billion concluded in the second half of 2013. Total investment sales value receded by 10.9% quarter-on-quarter (QoQ) to $4.98 billion in after rebounding 26.6% QoQ in 1Q 2014. Weakened sales were recorded for both the private and public sectors in. Private property investment sales slowed for the third consecutive quarter, by 5.9% QoQ, to reach a five-year low of $2.96 billion during the three months spanning from April to June 2014. In the public sector, the $2.02 billion amassed from the award of 10 State land parcels (comprising one commercial plot as well as five industrial and four non-landed residential sites) in 2Q 2014 was 17.2% lower than the $2.44 billion garnered from the sale of 14 land parcels in the preceding quarter. Total Investment Sales $ Million $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 Public Sector Private Sector 4Q 201 1Q 2014 Private property investment sales slowed for the third consecutive quarter to reach a five-year low of $2.96 billion during the three months spanning from April to June 2014. Residential sector led the decline in investment sales The fall in Singapore s property investment sales in was led by the plunge in the sale of residential properties. In fact, the residential sector suffered the deepest cut with total investment sales thinning by 22.5% QoQ to $1.96 billion from the $2.53 billion transacted in 1Q 2014. A key reason for the dive in residential investment sales value was the dent in public residential land sales. During the quarter, only four residential State land parcels (including two for the development of executive condominiums) were scheduled for public tender and sold for a total of some $1.36 billion. This was 3
27.7% lower than the $1.88 billion accumulated from the sale of eight residential land parcels in the preceding quarter. The most sizeable public residential land sale in terms of quantum value was the award of the 257,257-sq ft condominium plot located on Sims Drive to Guocoland Ltd for $530.89 million or $688 per sq ft per plot ratio in April 2014. This was also the largest State land sale of a residential site thus far in 2014. It was reported that the developer plans to develop a 19-storey condominium with about 800 to 850 units of mainly one-, two- and three-bedroom units. The proposed development is expected to be launched for sale in mid-2015. Meanwhile, private residential investment sales continued to slump to a new five-year low of $606.31 million in the quarter ending in June 2014 after contracting 6.4% from the $648.07 million gathered three months ago. This stemmed from the double whammy of frail investor interests in en bloc and stratatitled properties as well as anaemic developers quest for land acquisition via collective sales. The confluence of multiple cooling measures and the Total Debt Servicing Ratio (TDSR) framework have put investors into a cautious stance, bringing about sluggish sales activity for the en bloc and strata-titled properties investment market in. In fact, the sluggish home-buying momentum was extended to the market at large. This, coupled with the record pipeline supply of new private residential homes that will be completed by 2018, have restrained developers offering prices for collective sales sites. This has exacerbated the mismatch in buyer-seller price expectations and hampered deal closures. As a result, the collective sales market, which has ceased to be developers preferred land banking avenue for a long while now due to its cumbersome and lengthy sales process, stood still for the third successive quarter in. The decline in overall property investment sales value in was also caused by muted transactions in the hospitality and mixed-use sectors. The decline in overall property investment sales value in 2Q 2014 was also caused by muted transactions in the hospitality and mixed-use sectors. Impeding hotel transactions, in particular, was the wide gap in price expectations between buyers and sellers. Rising hotel operating costs, which are expected to curb earnings, have put a cap on buyers offering prices. The number of good-quality hotels available for sale and the willingness of owners to sell, remained low in. Commercial properties were favoured Nonetheless, the fast-returning investors interests in office properties, given that the sector is on a firm recovery path, saw commercial investment sales rising 26.2% QoQ to $2.29 billion in the three months between April and June 2014. This helped to cushion the fall in s overall investment sales value. Four big-ticket deals worth above $100.00 million apiece were concluded in the commercial sector in the second quarter, three of which are located on Cecil Street, a prime office location in the Central Business District. The first of these three was the sale of Equity Plaza for $550.00 million or $2,181 per sq ft over its net lettable area (NLA). Sitting on a land parcel with a balance lease term of about 74 years, the 28-storey office building was offloaded by Keppel Land Ltd and its fund management arm, Alpha Investment Partners, to a consortium company, Plaza Ventures, which is led by GSH Corporation. The building was transacted with a 97% occupancy rate. Reportedly, the transaction price reflects a net property yield of 3.0% based on the current rental property income. The second commercial transaction that took place on Cecil Street in was Keppel REIT s disposal of a 92.8% stake in Prudential Tower to a consortium comprising KOP Ltd, Lian Beng Group, KSH Holdings and Centurion Global for $512.00 billion or $2,316 per sq ft over its NLA. The 30-storey office building sits on a site with a balance lease term of 81 years. Based on the current rental income generated by the building, the price reportedly reflects a net yield of about 3.5%. The other commercial deal on Cecil Street that breached the $100.00 million mark was the sale of Cecil House by Ececil Pte Ltd to Shentoncil Pte Ltd, a tie-up formed by Vibrant Group and DB2 Group, for $110.00 million or $2,169 per sq ft over its NLA. Reportedly, the buyer intends to hold the11-storey office building as an investment property for rental income and capital appreciation, and therefore, has plans to retrofit the building to maximise its gross floor area (GFA). The fourth big-ticket commercial deal concluded in was Frasers Centrepoint Trust s acquisition of Changi City Point mall located at Changi Business Park for $305.00 million or $1,472 per sq ft over its NLA. Sitting on a leasehold site of 60 years commencing from 2009, the three-storey retail mall, located opposite the Expo Mass Rapid Transit (MRT) Station, was sold by Ascendas Frasers, a 50-50 joint venture between Frasers Centrepoint Ltd and Ascendas Development. The mall first opened its doors to the public in November 2011. Besides these four deals, the commercial sector also saw the sale of a three-storey Housing and Development Board (HDB) commercial property at Tampines Central to Sheng Siong Group for $65.00 million. An entire strata-titled floor on the 14th storey of Samsung Hub was also acquired by a mainland Chinese company from Arch Capital Management, a Hong Kong-based private equity real estate firm linked to Ayala Group of the Philippines, for $39.72 million or $3,030 per sq ft over its strata-titled floor area. The 30-storey strata-titled office building has been popular among investors due to its prime location near the Raffles Place MRT Station as well as its rare leasehold tenure of 999 years. In the public sector, a 99-year leasehold commercial Government Land Sales (GLS) site located on Woodlands Avenue 5/Woodlands Square was awarded to a consortium comprising Far East Organization, Tannery Holdings Pte Ltd and Sekisui House Pte Ltd for $634.00 million or $906 per sq 2 Research & Forecast Report Investment Sales Colliers International
ft per plot ratio. Incidentally, the award of the site was also the most sizeable investment sale in the quarter, in terms of quantum value. Being the first commercial site with a predominantly office use in Woodlands, the 199,873-sq ft site garnered healthy interest from eight bidders. The strong participation rate at the tender for the Woodlands site was fuelled by its potential for strata-titled subdivision for the future development, given that latent demand for stratatitled commercial units remains healthy. The strong interest was also an indication that the contenders are likely to be seeking first-mover advantage to leverage the growth story of the Woodlands Regional Centre as the site is expected to serve as the catalyst to kick-start the development of the Woodlands Regional Centre. Reportedly, the new owner intends to develop two 16-storey office towers on the site, featuring both large and small strata-titled office units for sale as well as for lease. The total investment sales accumulated in the industrial sector, too, increased by 41.8% QoQ to $660.67 million in 2Q 2014. The most noteworthy industrial property transaction in the quarter was Ascendas-REIT s buy of Hyflux Innovation Centre at 80 Bendemeer Road for $191.20 million including an upfront premium of $21.20 million, translating to $409 per sq ft over its GFA. The sector also saw the transaction of a private industrial land parcel at 24 Leng Kee Road for $46.20 million. The site was sold by Borneo Motors Singapore to Wealth Assets Pte Ltd, a joint-venture comprising Lian Beng Group and VinCar Pte Ltd. It was reported that the joint-venture plans to develop the land, subject to obtaining relevant approval from the HDB. This transaction was the sole private land sale across all sectors in the three months ending June 2014. Investment Sales Value in PROPERTY SECTOR NON-INSTITUTIONAL PRIVATE SECTOR SALES INSTITUTIONAL SUB-TOTAL PUBLIC SECTOR SALES GRAND TOTAL Industrial 442.16 191.20 633.36 27.31 660.67 Commercial 1,350.55 305.00 1,655.55 634.00 2,289.55 Residential 606.31 0.00 606.31 1,356.62 1,962.93 Hospitality 0.00 0.00 0.00 0.00 0.00 Mixed 0.00 0.00 0.00 0.00 0.00 Others 68.80 0.00 68.80 0.00 68.80 Total 2,467.82 496.20 2,964.02 2,017.93 4,981.95 Overall, on a sector contribution basis, the commercial sector topped the quarter s sales chart, accounting for the majority or 46.0% of the $4.98 billion closed in. The sale of residential and industrial properties contributed $1.96 billion (39.4%) and $660.67 million (13.3%), respectively, to all investment sales transactions in the quarter. Composition of Investment Sales Value in by Sector Residential 39.4% Others 1.4% Industrial 13.3% Commercial 46.0% Note: Numbers do not add up to 100% due to rounding off adjustments Land sales to moderate; sales activity for buildings to heighten In the next six months of the year, sales emanating from land sales are forecast to stay subdued. On the private sector front, the collective sales market will likely remain depressed as the same factors that have kept it at a standstill will continue to play out in the months ahead. In particular, the Government has announced that it is still too early to remove any of the cooling measures, given that the price decline for private homes has been modest. Perhaps when the market shows clearer signs of stability, some measures, such as the Additional Buyer s Stamp Duty could be systematically tweaked, so that property transaction volume in the Republic can flow in tandem with economic growth. This could help to negate the possible longerterm unfavourable effects of funds flowing out of the country and foreign funds bypassing Singapore to other markets. Sales originating from public land sales, especially those of residential sites, are likely to fall below the $3.23 billion level seen in 1H 2014. This is due to the fact that the Ministry of National Development has trimmed the supply of housing units in the 2H 2014 GLS Programme on the back of the record pipeline supply of new private residential homes. Additionally, 3 Research & Forecast Report Investment Sales Colliers International
the residential property market is showing some signs of stability with sales having slowed down substantially from the heady days of 2012 and early 2013. In the latest bi-annual GLS Programme for 2H 2014, some 38 land parcels, including 18 sites on the Confirmed List and 20 sites on the Reserve List, were introduced. Collectively, these land parcels would be able to yield about 10,220 private residential units (including 1,520 executive condominium units), some 3.79 million sq ft of GFA of commercial space and 3.35 million sq ft of GFA of industrial space. As the supply of hotel rooms in the next few years is expected to remain robust, the Government has not released any hotel sites in the 2H 2014 GLS Programme. Notably, the total supply of 10,220 housing units on the 2H 2014 GLS Programme is 11.8% lower than 1H 2014 s 11,585 units and is the lowest number of new residential units made available via the half-yearly GLS Programme since the 2H 2009 GLS Programme when some 8,655 housing units were lined up. On a positive note, the slack in land sales could be picked up by heightened activity foreseen in the completed properties segment. First, the Singapore-REIT Initial Public Offering (IPO) market is poised to see the launch of Frasers Hospitality Trust in July 2014. The initial portfolio of the trust will comprise 12 properties six hotels and six serviced residences coming from its sponsor, Frasers Centrepoint Ltd, and TCC Group (Frasers Centrepoint Ltd s major shareholder). Of the 12 properties to be injected, two are located in Singapore, namely, Fraser Suites Singapore and InterContinental Singapore. These two properties have a combined value of $824.10 million. Second, interest in commercial properties could gather pace on the back of a steadily recovering office rental market. In addition, small and mid-sized family offices or single family offices are increasingly shifting their asset allocation towards property-oriented investments, particularly that of good quality office buildings that have potential upside in yield and capital appreciation. More of such deals can be expected to be sealed in the coming quarters. Being cognisant of the above, the total investments sales value for 2H 2014 is forecast to surpass the $10.57 billion level garnered in the first six months of the year, assuming the successful listing of the new REIT. Thus, Singapore s investment sales market should be on track to achieve the $20.00 billion to $25.00 billion worth of sales forecast for the whole of 2014. Singapore s investment sales market on track to achieve the $20.00 billion to $25.00 billion worth of sales forecast for the whole of 2014. 4 Research & Forecast Report Investment Sales Colliers International
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