Owners set for windfall if Tan Boon Liat Building sale goes through, but buyers face challenges

SINGAPORE – The owners of strata-titled Tan Boon Liat Building are set to pocket a windfall if the collective sale goes through, but that is if potential developers are willing to fork out billions of dollars for it.

Built in 1976, the 15-storey building at 315 Outram Road was one of Singapore’s earliest high-rise industrial buildings.

It was put on the market on Feb 3

with a reserve price of $1.15 billion.

The tender closes on March 18 at 3pm.

With the addition of a land betterment charge that is estimated between $830 million and $840 million, a developer would have to shell out close to $2 billion – and that is excluding construction and engineering costs.

This would be a significant investment even for major consortiums, said Mr Justin Quek, chief executive of property firm OrangeTee & Tie.

Mr Nicholas Mak of local property portal Mogul.sg said it would be one of the biggest collective sales in recent years if it goes through.

“There are very few land sales in Singapore that cross the billion-dollar mark, private or not,” he said. “In terms of government land sales, in the past five years, there was one in Marina Gardens and another in Zion Road that crossed the $1 billion mark.”

The Zion Road Parcel A had a land price of $1.1 billion in April 2024 and was bought by City Developments and Mitsui Fudosan. The Marina Gardens Lane site was sold in July 2023 with a land price of $1.03 billion.

Putting almost $2 billion into one basket is a risk, said Mr Mak.

“In terms of risk management, you don’t put all your eggs into one basket. So developers will be asking themselves if they really want to do this,” he said. 

Mr Mak added that with that amount of money, developers could “buy two to three, even four other government land sales parcels” in other locations.

The building’s original zoning is Business 1, but the Urban Redevelopment Authority has supported the rezoning of the site into residential with commercial on the first storey, subject to compliance with the planning and urban design requirements.

The Tan Boon Liat family is the biggest majority stakeholder of the property, followed by the Sin Soon Lee Group. Together, they hold over 40 per cent ownership. The rest of the units are owned by others.

In all, 128 owners agreed to sell their combined 118 units, or 83.92 per cent of the total area of lots. There are 152 units in total.

Ms Christina Sim, senior director of capital markets at commercial real estate services firm Cushman & Wakefield, which is the property’s advisory and marketing agent, said her firm pushed for the rezoning to reap a “decent premium for the owners”.

Commercial properties such as shopping centres and office buildings represent the most profitable use of land in Singapore, followed by residential buildings. At the bottom of the list, profit-wise, are industrial and agricultural use properties.

The “biggest game changer... is the fact that there will not be any additional buyer’s stamp duty (ABSD) levied on the potential purchase as the original site has a ‘Business 1’ zoning”, Ms Sim added.

Part of the Singapore-Johor water pipeline runs across the entire plot, technically splitting the site into two plots: the main building and the smaller two-storey building at the carpark entrance. The carpark is currently situated above the pipeline.

“Legally speaking, there are two lots. (National water agency PUB) owns that strip of land, but the pipe is underground,” Ms Sim said. “Whoever buys the site gets the air rights (over that). You can’t build anything over it, but you can use the land.”

The water pipeline underground presents an engineering challenge for the potential developer, and it will need to coordinate specialist advice between engineers and architects.

This will not necessarily deter developers from pursuing the sale.

Mr Mak said: “They are businessmen. The more information they have, the more informed decisions they can make. This is why they like government land sales, because they can get a lot of information (about the site).”

Even if the developer is prepared to deal with that and take out loans to finance the cost, the deal may still fall through if the owners of the building are not able or willing to meet conditions set out by the potential buyer.

Interested developers may likely factor in the risks and extra costs involved, and deduct that amount from their bid as well.

Another consideration for developers is the high land rate of $1,888 per sq ft per plot ratio (psf ppr). This is even higher than the government land sales site in Orchard Boulevard, which had a land rate of about $1,617 psf ppr, with a land price of $428.3 million.

It was bought by UOL and Singapore Land in April 2024.

There is also the big land area of Tan Boon Liat Building – about 175,655 sq ft. Developers may need to build as many as 1,000 residential units and market them at a certain price point to reap a decent profit. 

But marketing it as a luxury residence may be difficult to do.

Mr Mak said: “Around Orchard Road, none of the apartments is over 1,000 units. If you’re talking about luxury, you don’t want to put in a one-bedroom unit. Rich people may not want serviced apartments there. They will want privacy. And are they going to be sharing the swimming pool?”

He added: “On the whole, the Tan Boon Liat Building is in an attractive location, but I also understand the challenges of trying to do (a collective sale) in today’s market, and under market conditions that are shaped by government policy such as the ABSD.”