SINGAPORE - The collective sale tender for People's Park Centre in Chinatown closed Thursday (Aug 18) without any bids.
A spokesman for its marketing agency, ERA Realty Network, told The Straits Times it will be initiating private negotiations with some developers in the next 10 weeks.
The mixed-use development was launched for collective sale by public tender with a reserve price of $1.8 billion last month.
It came three years after an attempt to sell the centre en bloc for $1.35 billion failed as a majority of owners did not consent to the move.
Property analysts said the $1.8 billion price tag could be a drawback for developers due to the high capital requirement.
But they said larger players or consortiums could be interested in the site, given its size and proximity to the Central Business District.
Huttons Asia senior director of research Lee Sze Teck said the centre’s location is attractive to developers, but noted that the price tag is steep.
“Construction costs have increased a lot since 2020. Depending on the proposed mix, the development costs may be around $2.5 billion or higher. This is seen as very risky to developers,” he said.
Mr Sunny Wong, who leads the ERA team handling the collective sale of the development, said: "There have been inquiries, but developers had to consider the quantum.
"There's demand for mixed-use developments especially after the sale of Golden Mile Complex, Tanglin Shopping Centre, Peace Centre and Peace Mansion, and there's also no additional buyer's stamp duty (ABSD) for commercial land."
While buyer's stamp duty applies to all properties, the ABSD, which was introduced as part of cooling measures, is only for residential properties.
The reserve price for People's Park Centre works out to a land rate of $2,620 per square foot per plot ratio (psf ppr).
It also factors in the differential premium and the premium to top up the land tenure to a fresh 99-year lease.
Mr Lee said the current land rate may set a new benchmark for residential units in the Chinatown area.
“This may not be seen as realistically possible in today’s market,” he added.
Built in 1970, the commercial-cum-residential development sits on a 95,467 sq ft site, with a gross floor area of about 821,017 sq ft.
It comprises a 13-storey block and a 30-storey block, and has 324 shops, 256 offices, 120 apartments and a carpark.
According to ERA, owners of shops could receive sale proceeds of between $213,000 and $22.7 million, while those with offices could receive between $536,000 and $12.5 million.
Owners of apartments could receive between $2.39 million and $3.42 million, with penthouses drawing between $3.42 million and $5.33 million.
Mrs Lee Qing Qing, 68, who owns two shops in People's Park Centre, told ST she hoped the collective sale would go through as she saw it as a good opportunity to retire.
"Of course, I feel sad and sentimental, but all good things must come to an end.
"It has been a good 48 years, but it is time for me to rest and enjoy my life," she said in an interview last month.
Property analysts said Singapore’s commercial investment sales market surged in the first half of the year with the closing of several big-ticket deals.
Mr Wong Xian Yang, head of research at Cushman & Wakefield, said the commercial property market has garnered around $9.8 billion in investments, in deals of at least $10 million each in the first half of the year.
This is about 72 per cent higher than the total volume for the whole of 2021.
“Despite rising interest rates, high-quality commercial assets which can deliver stable cashflow remain well sought-after by investors,” he said.
Colliers Singapore head of research Catherine He noted that office capital values saw a 7 per cent growth in the second quarter of 2022 compared with the second quarter of 2021, while prime retail rose 3 per cent over the same period, based on the real estate firm’s data.
“Despite lower yields because of rising borrowing costs, investors are looking towards the long-term capital appreciation of these assets,” she said.
Mr Wong added that pricing levels remain robust, on a par with that before the interest rate hikes.
For instance, the entire eighth storey of Samsung Hub was sold at $4,050 per sq ft (psf) last month, the same psf price achieved by the record-breaking sale of the ninth storey in May 2021.
The highest transaction by quantum in 2022 was about $1 billion for Income@Raffles, a 999-year leasehold office with 37 storeys, in June.
The building was sold by NTUC Income Insurance Co-operative.
The buyer, Bright Ruby Resources, is an investment firm backed by Chinese billionaire Du Shuanghua. The group also owns Pullman Singapore Orchard, formerly known as the Grand Park Orchard.
More foreign investors are interested in commercial assets in Singapore, with the sale of Income@Raffles, at $3,617 psf, being the highest psf price for a commercial property sold to a foreign buyer this year, Ms He noted.
She said: “In Q2 2022, for transactions whose ownerships are available, foreign investment as a percentage of total investment rose to 76.1 per cent from 22.1 per cent in Q1 2022.”
Other parties interested in acquiring commercial properties include institutional funds, family offices and high-net-worth investors, Ms He added.
Mr Wong said investors are willing to invest in the top end of the office market as the supply of Grade A offices remains tight and rents continue to rise.
“Given the overhang of cooling measures on the residential market, some interest has gravitated towards the commercial market,” he added.