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Maxwell House up for collective sale at reserve price of $295 million

by • September 22, 2020 • Commercial EnblocComments (0)220

Maxwell House at No. 20 Maxwell Road is up for sale via a public tender. Cushman & Wakefield, the appointed property consultants for the collective sale has confirmed that owners holding not less than 80 per cent by strata area and share values have agreed to put the property to market at a reserve price of $295 million

Maxwell House

Image : Cushman & Wakefield

Maxwell House is built on a trapezoidal island plot with views from all 4 sides of the building.

It is currently a 13-storey commercial building and has a site area* of 3,883.45 sq m (41,801 sq ft approximately). Under the Master Plan 2019, the site is zoned “Commercial” of plot ratio 4.3.

According to Cushman & Wakefield, the URA had, in an advice given in January 2019, stated that they will support a mixed-use “Commercial & Residential” development of plot ratio of 5.6 with a gross floor area of 21,747.32 sq m (234,086 sq ft approximately). This results in an uplift of the plot ratio of Maxwell House by some 30 per cent, subject to a successful rezoning. The commercial quantum shall not exceed 20 per cent of the total Gross Floor Area (GFA). The allowable building height has been increased to 75 Above Mean Sea Level or approximately 21 storeys high for the tower block.

Assuming 80 per cent of the total GFA is for residential use and the remaining 20 per cent GFA for commercial use, the blended land rate works out to approximately $1,691 psf per plot ratio, after factoring the seven per cent bonus balcony plot ratio for the residential component plus the differential premium and an estimated lease upgrading premium for the site.

Another possible development alternative for Maxwell House is ‘Hotel’ which also has a plot ratio 5.6, subject to approval from the relevant authorities. The ‘Hotel’ option would increase the land rate to $1,998 psf per plot ratio, also inclusive of the differential premium and an estimated lease upgrading premium.

Maxwell House will be one of the rare exceptional residential plots to be on the market, especially in a location where there are mostly retail, F&B outlets and office users. Located at the fringe of the CBD juxtaposed the charming enclave of Tanjong Pagar and Chinatown, it has the advantage of enjoying diversity in the old world charm of the conservation shophouses as well as taking in the new gleaming skyscrapers of Guoco Tower and several hotels in the vicinity. The expected completion of the Maxwell MRT Station which is part of the Thomson East Coast line will add the connectivity dimension to this site, the expected completion date being 2022.

According to Ms Christina Sim, Director of Capital Markets at Cushman & Wakefield, ‘Maxwell House is expected to be well received as there is a dearth of residential development land in this part of the business and heritage district. With the surrounding neighborhood filled with a plethora of entertainment and retail outlets plus a smorgasbord offering of much-loved Singaporean food, it will be one of the best ‘work-live-play’ sites to be made available. Added to this is the advantage of being in the Central Area where it is not constrained by the guideline on the maximum allowable number of units calculated based on an average size of 85 sqm per dwelling unit. Potential Developers have the creative flexibility of building studio units or dual key units, subject to the approval of the competent authority.’

The tender for Maxwell House at 20 Maxwell Road will close on Tuesday 12 November 2020 at 3.00pm.

With the winding down of the success of residential en bloc sales, commercial properties are now trying to join in the bandwagon but the Covid-19 pandemic makes such deals even more difficult. Many commercial en bloc sale attempts fail because the asking prices are often too high. Two critical factors affecting the success of commercial sites going en bloc are pricing and location. Older commercial buildings especially, may see a need to catch the current wave as an exit strategy as their rental yields come under pressure due to competition from newer commercial buildings.

One report said investors looking for alternatives to park their money in the wake of property cooling measures, would divert their attention to the strata office and shophouse markets as they are not subjected to this round of purchase or sales restrictions/encumbrances.

Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “Maxwell House is a very prominent location in the very heart of District 1. As such, it will appeal to a lot of savvy investors.”

He added, “Even with the global economic uncertainties, Singapore remains an attractive location for investments to flow into, and properties like The Arcade are prime real estates worthy of investment.”

Commercial properties may be bought under personal name, but total debt servicing Total Debt Servicing Ratio (TDSR) will apply on the individual’s income on such purchases. To buy a commercial or industrial property under company name, total debt servicing ratio TDSR also applies on the individual director’s income if the company is an investment holding company or an operating company that is loss-making or does not have sufficient cash flow to servicing the repayment.

To buy a commercial or Industrial property under company name where the company is well established with an existing operating business with strong financials, TDSR may be waived on the individual. However director is usually required to become personal guarantors of the loan the company undertakes. Hence this may affect the director’s other purchases, such as for buying a residential property, due to the loading from the TDSR for guaranteeing a loan.

Some banks even advertise 100 to 120% loan. This is due to a combination of working capital as well as commercial/industrial property loan, but this only applies to company with strong cash flow position. Commercial property is different from residential property and the considerations are more complex and varied, though the payoff may be worthwhile for discerning investors.

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