Over 80 per cent of owners of the Sultan Plaza commercial building have launched a public tender for a collective sale with a reserve price of $380 million. The 99-year leasehold development along Jalan Sultan, sits on 52,471 sq ft of prime land that is zoned for commercial use.
The reserve price for Sultan Plaza, a mixed-use development site built in the 1970s, with office and retail space is $380 million.
According to ERA Realty Network, the exclusive marketing agent for the en bloc sale of Sultan Plaza, the development baseline for Sultan Plaza is about 244,667 sq ft, and development charge is payable. The maximum permissible gross floor area can be redeveloped to 283,803 sq ft, referenced against the 5.3 gross plot ratio of neighbouring City Gate and subject to regulatory approval. This translates to a land rate of $1,860 psf per plot ratio (ppr), inclusive of development charge and differential premium payable for topping up the lease.
Sultan Plaza comprising of 244 units of retail and office space sits between Beach Road and North Bridge Road, near the Kampong Glam conservation enclave.
There are three MRT stations across three different lines within 750m of the plot – Nicoll Highway station on the Circle Line, Lavender station on the East West Line, and Bugis station on the Downtown and East West Lines.
Under the 2014 Master Plan, the maximum permissible plot ratio is subject to detailed planning. The adjacent City Gate is a redevelopment of the former commercial building Keypoint. It had an approved development plot ratio of 5.3 and a development height control of about 140.48 above mean sea level (AMSL). City Gate is now a mixed-use development with 311 residential unit and 188 retail units completed last year.
“We have already received strong interest from local and overseas developers even prior to our tender launch, given Sultan Plaza’s choice location,” said Mr Jeremy Chiu, director of investment sales at ERA Realty Network, the agent for the sale.
He added: “This site presents a lot of opportunities for the prospective buyer as it is a beautiful canvas where a piece of Singapore’s history can be redesigned with creative architectural concepts that can contribute to Singapore’s future development stories. Future expansion into the neighbouring site is also conceivable, which makes it attractive for developers who want to create an architectural masterpiece in this precinct.”
The tender for Sultan Plaza will close at noon on March 28.
With the winding down of the success of residential en bloc sales, commercial properties are now trying to join in the bandwagon. 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.
The biggest gainers following the new property cooling measures is likely be owners of strata portfolio of offices and shophouses approved for commercial use. The property cooling measures affected almost all categories of buyers and is predicted to achieve its intended objectives of cooling demand and moderating price growth.
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.
Commercial properties such as the Sultan Plaza 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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