GOLDMAN SACHS issued a 29-page report on the property market (click here) two days ago, forecasting that private residential prices in Singapore would exceed their 2007 peak by this year-end. This bodes well for developers such as Roxy-Pacific Holdings, which has acquired six plots of land in the last six months.
Its shares recently traded at 33 cents, just above its 30-cent IPO price in early 2008 but substantially below its RNAV of 53.6 cents as at end-Sept ’09.
Roxy-Pacific is gearing up for a high level of property development activity. Just last month (Dec), it announced a $100.8 m purchase of an old condo in Outram - the one and only successful en-bloc transaction in Singapore in 2009.
The deal doubles its current investment in landbank to about $200 m (including estimated development charge).
WHEN Roxy-Pacific Holdings secured the en-bloc purchase of Dragon Mansion condominium, which was announced last month (Dec 09), its chairman and CEO, Teo Hong Lim, was elated.
He deemed the price of $100.8 million to be good for Roxy-Pacific, which is listed on the Singapore Exchange.
After all, the sellers' reserve price was $120 million.
Aside from that, Dragon Mansion on Spottiswoode Park Road has a rare significance for Mr Teo. That project was developed by his father, Teo Kok Leong, in the late 1960s.
Back then, as the younger Mr Teo recalls his father saying, the land cost was about $500,000 – and that was for land on which two blocks were built in different phases in Dragon Mansion.
The Roxy-Pacific deal covered land for only one block – Block 18 which faces Spottiswoode Park and the sea.
Dragon Mansion is a good example of how rapid land prices in Singapore have risen in the past few decades of robust economic growth.
Observes Mr Koh Seng Geok, an executive director of Roxy-Pacific: “Now, with $500,000, you can’t even get one unit at Dragon Mansion!"
From $500,000 to $100.8 million, the compounded annual growth rate was about 19%. The figure would be far higher based on the land value for the two blocks.
It was by some luck that Roxy-Pacific ended up buying the freehold property for re-development.
Roxy-Pacific had not taken part in a tender in July when the marketing agent had put up the land for sale. In fact, no developer submitted a bid.
The agent subsequently approached several developers for an offer, but they probably thought the reserve price was too high and did not bid.
Mr Teo says: “Many developers thought that from going $120 m to $110 m was possible, but it was not a price that they would buy at. To go from $120 m to $100.8 m, they believed would be a big challenge. No point trying.”
Roxy-Pacific had a special advantage: it had the site plans and guidance from the senior Mr Teo regarding aspects such as the site's soil condition, and its ‘maneuverability’ in terms of development.
With the owners’ collective sale agreement on the verge of expiry, Roxy-Pacific made its offer of $100.8 million, recalls Mr Koh.
As it was below the reserve price, the marketing agent had to gather the signed consent of at least 80% of the owners. This was achieved.
The next milestone is for the Strata Titles Board to issue a sale order, which would ensure that the remaining 20% of the owners sell out too.
It is still a good deal for the 72 owners: They will each collect S$1.4 million, which is far above the highest transacted price of $880,000 for a unit that was achieved in May 2008.
The sale and purchase agreement is expected to be completed in the second half of this year. The sales launch of the upcoming condo could be held as early as Q4 this year.
Mr Teo says the base price will be $1,500 psf, and chances are the actual selling price will be higher.
For comparison, The Lumeire condominium in the nearby Tanjong Pagar area sits on 99-year leasehold land, and is going for $1,500-$1,600 psf currently.
Roxy-Pacific's new condo will be just about 600 m away from the Outram MRT Station, is a short drive from the two Integrated Resorts – and boasts a view of the greenery of Spottiswoode Park nearby, and the sea and Sentosa from the higher floors.
| ROXY-PACIFIC'S NEW LANDBANK: 6 PLOTS IN 6 MONTHS | ||||||||||||||||||||||||||||||||||||||||||||||||
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After selling out its projects (table on the right),
| SOLD....$396.9 M IN PRE-SALE REVENUE FOR ROXY-PACIFIC
recognised by Roxy from Q4 FY09 to FY 11. |
Roxy-Pacific has replenished its landbank in the last six months. It now holds six plots of land for redevelopment (table above), all of which were acquired in the last six months for a total of about $200 million, including estimated development charge.
“The land cost was not high, in our view, as we have the right contacts,” says Mr Teo.
While Dragon Mansion at $863 per square foot per plot ratio (psf ppr) is in the mid- to high-end category, the other plots – also freehold - were acquired at below $500 psf ppr.
This compares favourably with similar mass-market sites in Singapore that the government is selling at close to $500 psf ppr – but they are all 99-year leasehold sites.
“We do have a lead there in terms of pricing,” says Mr Teo.
The launch of Roxy-Pacific’s next project would be at its Haig Road site, possibly in the middle of the year, he says.
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ROXY-PACIFIC: Stock price 28 cents, RNAV 60 cents
