Orchard Road shopping malls face challenges in en bloc sale

Tanglin Shopping Centre is trying for an en bloc sale for the second time.

It failed to find a buyer on its first attempt last year at a reserve price of S$1.25 billion.

In fact, there has never been a successful en bloc sale in the Orchard Road shopping belt.

Teresa Wong purchased a freehold shop spanning 330 square feet at Far East Plaza 25 years ago.

For the beauty therapist, the need to control costs was crucial.

She said: “The landlord might ask us to leave after two or three years. So my best bid was to buy the shop and stay here permanently. When we shift, we have to renovate. And renovation cost money.”

The shop space cost S$0.5 million back then and its current value is triple that or at least S$1.6 million.

Should an en bloc sale take place, Madam Wong would only sell at double the current value or S$3 million.

Satisfying the expectations of owners with shops of varying degrees of human traffic is a major obstacle to putting a strata-titled mall on the market.

Jones Lang LaSalle’s head of investments, residential, Karamjit Singh, said: “In Orchard Road, you will always have a situation where some trades, despite the age, may be doing very good business. Whenever you have that taking place, the owners are always very reluctant to sell because there aren’t many comparable replacement properties for them to channel their investments towards.”

This could also be the challenge to getting 80 percent of the 173 owners at Tanglin Shopping Centre to approve an en bloc sale. But, it may be second time lucky for this 40-year-old mall.

Christina Sim, director for investment and capital markets at Cushman & Wakefield, said: “They have a good chance of succeeding because I don’t think there are many big ticket commercial properties right now. And with QE3 coming in, there would be some hot money coming in too. What would likely happen is that a foreign investor would team up with a local developer to do this.”

Analysts say an en bloc sale attempt could be made easier should URA’s masterplan, reviewed once every five years, indicate a new building could yield more gross floor area than the existing one.

Another push factor to convincing numerous strata titled owners in a building to agree is to an en bloc sale is the change of land use from say shops to a hotel.

Source : Channel NewsAsia – 23 Oct 2012

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