Why Shun Tak aborted the en bloc purchase of High Point

Source: EdgeProp Singapore (edgeprop.sg)
Date: December 24, 2021 6:03 PM SGT
Author: Cecilia Chow

Shun Tak aborts en bloc purchase of High Point (Photo: Albert Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - Hong Kong-listed Shun Tak Holdings has backed out of the en bloc purchase of High Point for $556.7 million, just a fortnight after its Dec 9 announcement on winning the tender. The group did not proceed with the 5% down payment due yesterday (Dec 23), and has forfeited its $1 million tender deposit.

Shun Tak Holdings public relations and investor relations did not respond to queries from EdgeProp Singapore, and Savills Singapore, the marketing agent who handled the collective sale, likewise declined to comment. Dentons Rodyk, which represented Shun Tak in the deal, and Rajah & Tann, which represented the owners of High Point, likewise could not be reached for comment.

As the deal was done before the latest property cooling measures rolled out close to midnight on Dec 15, 2021, the developer would not have been hit by the higher additional buyer’s stamp duty (ABSD) of 35%, up from 25% before.

The 59-unit High Point had fetched $556.7 million at the close of its tender on Dec 9 (Photo: Albert Chua/EdgeProp Singapore)

Property observers attribute Shun Tak’s withdrawal from the deal to the property cooling measures, which are especially punitive on foreign buyers who will now be slapped with a 30% ABSD, from 20% earlier. After all, foreigners are the primary buyers of luxury condos in Singapore.

“The developer could have assessed the market and felt that the 30% ABSD may be too much of a deterrent for foreign buyers,” notes a property industry source who declined to comment. “Hong Kong businesses are swift to react and willing to cut losses in the case of uncertainty. In this case, the developer has only forfeited a $1 million deposit.”

In its Dec 9 announcement, Shun Tak had said that its plan was to “redevelop the property [High Point] into a luxury residential development with project target completion in 2027”.

The purchase of High Point would have been Shun Tak’s fifth property acquisition in Singapore. “With the acquisition of this fifth property, we shall further expand our portfolio and foothold in Singapore and continue to bring in top-quality and unique elements to enrich the vibrant development of the city,” Pansy Ho, group executive chairman and managing director of Shun Tak had remarked in the Dec 9 statement.

Panoramic view of Orchard Road from High Point (Photo: Albert Chua/EdgeProp Singapore)

Staking a claim on the luxury condo market

Shun Tak had made a series of acquisitions in Singapore since 2016. It started with the purchase of a bungalow at Cuscaden Road which is being redeveloped into the upcoming luxury hotel, the 142-room Artyzen Singapore. In 2017, Shun Tak had acquired a 70% stake in 111 Somerset, followed by the remaining 30% 30% from Perennial Holdings in April 2020.

This was followed by Shun Tak’s purchase of two residential sites in Singapore’s prime District 10: Park House in a collective sale for $375.5 million ($2,910 psf ppr) and a bungalow site at 14 and 14A Nassim Road for $218 million ($2,725 psf ppr), according to Shun Tak’s announcement on June 13, 2018.

These two sites were purchased just three weeks before the last round of property cooling measures kicked in on July 6, 2018. However, Shun Tak had gone ahead with both purchases.

The two residential sites were launched in May this year as luxury condos, namely the 54-unit Park Nova (former Park House) and the 14-unit Les Maisons Nassim (redevelopment of the bungalow site). Park House saw 32 units sold at a median price of $4,844 psf as at mid-December. Its two biggest penthouses were sold at $34.4 million ($5,838 psf) and $26.026 million ($5,784 psf). They were also ranked at No. 3 and No. 5 among the Top 10 penthouse deals of 2021. (Refer to: A year of outsized deals, where super penthouses commanded the highest prices).

Like Park Nova, Les Maisons Nassim shattered records this year: Its 12,077 sq ft, super penthouse fetched $75 million ($6,210 psf) in October, making it a chart-topper in terms of top penthouse deals of the year.

“The successful launches of our previous projects, including Les Maisons Nassim and the award-winning Park Nova, have demonstrated Shun Tak’s strength in developing high quality residential projects with innovative concepts and creative touches that well-matched the demand of discerning buyers from both local and international markets,” according to Ho in the Dec 9 statement.

In light of the property cooling measures, perhaps Shun Tak is of the view that it already has sufficient exposure in Singapore’s luxury residential market.

The en bloc purchase had marked the first collective sale deal of a high-end condominium in a prime Orchard Road district this year (Photo: Albert Chua/EdgeProp SIngapore)

Higher stakes

The 59-unit High Point sits on a 47,606 sq ft, freehold site at Mount Elizabeth in prime District 9. The purchase price of $556.688 million had translated to a land rate of $2,626 psf per plot ratio (psf ppr).

The en bloc purchase had marked the first collective sale deal of a high-end condominium in a prime Orchard Road district this year. It would have been the highest psf price achieved since Shun Tak’s previous record prices for the purchase of Park House and Nassim Road bungalow in June 2018. The purchase had boosted sentiment in both the luxury condo and collective sale market, especially when Shun Tak is expected to launch the new project at prices upwards of $3,800 psf.

The stakes are higher too. The two residential sites that Shun Tak purchased in 2018 had totalled $593.5 million. This time, High Point alone is $556.7 million. The site has the potential to be redeveloped into a new 36-storey tower with 98 luxury apartments averaging 200 sqm (2,148 sq ft) each. That is more units than Park Nova and Les Maisons Nassim combined.

The impact of the cooling measures was immediately felt at Hong Kong developer CK Asset Holdings' luxury condo project Perfect Ten. Launched on Dec 19, about 12 units or 5% of the 230-units were sold at an average price of $3,200 psf. The developer had even dangled a 5% discount for homebuyers on launch day, following the property cooling measures.

This year, the luxury residential market was driven not just by well-heeled foreigners but Singaporeans and permanent residents too. They have not been spared from the higher ABSD either. For Singaporeans making a second property purchase, the ABSD is now 17%, and 25% for their third and subsequent property purchases. PRs will now have to pay 25% ABSD for a second property and 30% for third or more. The total debt servicing ratio has been further tightened to 55% from 60% earlier.

“The government sledgehammer is well targeted as the debt cycle is a concern with rising interest rates and inflation against the backdrop of slower economic recovery,” says a property industry veteran.

For Shun Tak, aborting the deal at this stage may prove to be a smart move after all.

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