Record $1.7bn Pine Grove en-bloc asking price has market stunned

Kim Eng Property analyst Ooi Yi Tung has put out some interesting research on the two mega en-blocs working their way through the Singapore property market right now. At the top of the list is the $1.7b the owners of Pine Grove are asking for, which, if successful, would mean developers may need to market the new peoperties at close to $1,900 psf.

Jones Lang LaSalle is trying to find the buyer and this is the Pine Grovers third attempt, so will it be third time lucky ?

Here is what Kim Eng's Ooi Yi Tung had to say:

In 2007, before the property market peaked, Farrer Court was sold for $1.3b and Leedon Heights, $840m. The former became the first en bloc deal in Singapore to cross the $1b mark, making it the largest, while the latter was the second largest. As the collective sale market revives and tries to outdo itself, two eye- catching deals have appeared. They are Pine Grove in Ulu Pandan and Pearlbank Apartments in Outram.

Pine Grove is at the top with owners asking for a record $1.7b, excluding the development premium that will be needed to top up the site’s lease to 99 years. As a comparison, this amount is equivalent to the total sales value of last year’s 34 en bloc deals put together. Pearlbank Apartments, on the other hand, has a reserve price of $750m, or $1,495psf including an estimated development charge of $167.2m.

Pine Grove sits on 893,000 sq ft of land and has a gross plot ratio of 2.1. If the deal eventuates, it will cost the developer a cool $2.2b, or $907 psf ppr. We estimate the breakeven to be around $1,630 psf, 5% above the average prices achieved in 1Q11 by The Trizon, a freehold project by UIC that is currently being built. The Trizon was launched in 2009 and still has 77 units unsold. To justify the deal, the Pine Grove’s developer may have to sell at close to $1,900 psf, which will be a new benchmark for the area. The closest comparable, the 99-year Quinterra, that was completed in 2009, saw a unit transacted at $1,175 psf last month. Supply-wise, there are about 3,300 units in the immediate vicinity.

So the asking price may be close to the money, but it seems the owners will be in for a nervous wait hoping for that en-bloc to come through.

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