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"I am a BLOGGER NOT an expert. This is a BLOG not a 'go-to' website for official information. I represent no one's view save my own. I have neither legal nor financial training, nor do I have anything to do with the real estate industry. My understanding of the Collective Sale Process is from a layman's position only. My calculations, computations and tables are homespun and may contain errors. Please note that nothing in this blog constitutes any legal or financial advice to anyone reading it. You should refer to your lawyer, CSC or financial adviser for expert advice before making any decision. This disclaimer is applicable to every post and comment on the blog. Read at your own risk."
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There is one thing worse than an Enbloc ----- and that is an Enbloc done badly. Since the majority have the necessary mandate to sell, then they owe it to all SPs to make a success of it. Minority SPs can only watch and wait, if they sell then lets pray it's at a price we can move on with, if they don't sell, then we are happy to stay for a few more years.

Setting the Reserve Price

Anonymous said...
As a layman, I would like to do a simple calculation to show TC's land value based on the tender result of Waterview site which is located at Tampines Ave 1/10 and also estimate the RP of TC.
Below is the news:
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Sim Lian Land Pte Ltd has won the tender for the residential site at Tampines Ave 1/Tampines Ave 10.

The Urban Redevelopment Authority (URA) awarded the company the tender after it submitted the highest bid for the site.

The 31,740.4 square meter land parcel was offered for sale on a 99-year lease. Sim Lian Land put in a $302 million bid, translating to $4,530.79 psm/gfa. The site has a maximum permissible gross floor area (GFA) of 66,655 square meters.
-----------------------------------------------

Waterview's land value is $4,530.79 psm/gfa which is equal to $421 psf/gfa.

TC's gfa is (702,157 sqft * 2.8) = 1,966,039 sqft

If we use the same land value of $421 psf/gfa, then TC's land value is 1,966,039 sqft * $421 = $827,702,419 which is equal to ($827,702,419 / 560) $1,478,040 per unit.

I believe TC is in a better location than Waterview.

A 5% increase will translate to $1,551,952 per unit.

A 10% increase will translate to $1,625,844 per unit.

The land value for TC is in the range of 1.55 m to 1.65m per unit as at now.

For en bloc sales, we must also factor in the price increase at the end of 2 years.

I think $1.6m to 1.7m is a fair estimation of RP for TC.

Regards
December 28, 2010

Excellent

I have done a quick LAYMAN computation of DC/DP for (a) increase in intensity and (b) upgrading of lease tenure from 78 years to 99 years based on Residential GPR 2.8.

Whilst (a) is pretty straightforward and the major part of the DC/DP,  (b)  is complete guesswork because there is no governmental table you can refer to, and I have no way of knowing in advance what market value the Chief Valuer will set on a 99-year lease based on residential use at GPR 2.8. I can do a stab at it by using the 2007 figure but really, I need something more concrete than that.

Until I can get a feel for a probable value - I shall not even hazard a guess at the total DC/DP as yet. But looking at the range of probabilities from $130m to $180m

$1.7 million is about right

9 comments:

  1. forgot your DC/DP and top up

    ReplyDelete
  2. Comment not worth posting as the calculation used to estimate the enbloc value of TC is flawed. It did not take into account the differential premium to increase the intensity of land use to 2.8 plot ratio and omitted the upgrading premium to top up the lease to 99 years. This flawed comment can only mislead TC owners. Is Ishometome just as ignorant as the person who posted this comment?

    TC Owner

    ReplyDelete
  3. Who is paying for DC/DP and Lease Top up? Buyer or seller? TC owners or Developer?

    I search the old news from TC enbloc round 1 and found this:

    Source: Weekend Today, 27 January 2007
    --------------------------------------
    Tampines Court, a 22-year old HUDC development, is up for collective sale after obtaining an 80 per cent consensus from the owners.

    The indicative value is $527 million.The development, which was privatised in 2001, sits on a 702,458 square foot (sq ft) site and has a plot ratio of 2.8 and a potential gross floor area of about 2 million sq ft. This is one of the largest en bloc sale sites available on the market said Mr Jimmy Teng, investment sales director of the Dennis Wee Group which is brokering the sale.

    Prospective developers can be looking at building projects with around 1,700 units averaging 1,250 sq ft each.

    “This translates into an estimated indicative value of $527 million for the leasehold site, inclusive of development charges and differential premium of approximately $107 million,” said Mr Teng

    ------------------------------------------------

    It seems to me that DC/DP was not included in the Reserve Price for TC Enbloc Round 1. We were told that the Reserve Price is $389 mil.

    I am still searching for Lease Top and will get back here later.

    Regards

    ReplyDelete
  4. This is the rational model for calculating the value of each unit. May I know how much would be DC and other charges. These charges can be subtracted from the given number

    ReplyDelete
  5. Correct: the DC/DP is not included in the bare reserve price.

    But when the newspapers give out data on price, psf, psm, pga, psf ppr, etc it can confuse the layman because the layman does not know how these calculations are made.

    For example,
    RP: does not include DC/DP
    Sale price: does not include DC/DP
    Indicative Value; includes DC/DP
    psf: does not include DC/DP
    psf ppr: includes DC/DP and plot ratio
    GFA: includes the plot ratio

    ReplyDelete
  6. I am the layman from TC who posted the simple calculation here.

    Sorry if I have caused any confusion to TC owners.

    My purpose is to show some self-help calculation to derive the RP for TC as we have been talking about RP since enbloc round 1 (year 2005) but nobody has shown us any detailed calculation on how to derive the RP.

    Now we are talking about RP of $1.2mil/$1.4mil/$1.5mil but are the proposed RPs reflect the true value of TC?

    I hope the experts can help to answer the question or else we will repeat the same story as Round 1, i.e.
    the transaction is not in good faith - the final verdict of Round 1.

    Regards

    ReplyDelete
  7. I posted your comment because I respect your honest attempt at using a recent leasehold land sale in Tampines area to compare with TC. Anyone can make a derogatory remark but it takes effort to make a thought out contribution.

    You have not caused confusion - you have started a debate :)

    The calculations are actually not that difficult, since they are based on constants and estimated variables within reason. The next SC better have their ducks in order and their calculations done for everyone to see.... not just the result but the actual workings laid out.

    ReplyDelete
  8. may i know when in the timeline will URA actually inform the DP/DC? if developers and sellers don't know this variable, how are we going to determine what price to bid / sell?

    Didn't the DC/DP get a big jack up in August/Sept? It would be closer to 200m now, based on 107 in 2007?

    ReplyDelete
  9. Differential Premium

    A payment, known as differential premium (DP), will be charged for lifting the title restriction. The DP is the difference in value between the use and/or intensity stated in the State title and the approved use and/or intensity in the provisional planning permission.

    DP is computed based on the Development Charge (DC) Table of Rates. The material date of determination of DP is pegged to the date of Provisional Permission (PP) or the date of the second and subsequent PP extensions. Where the tenure of the land is leasehold, the DC rates will be adjusted to reflect the remaining tenure of the land using the Leasehold Table.

    In TC enbloc round 1, the there were 3 points where governmental permissions were sought AFTER the S&P had been signed: in order and over 3 months-

    1) OPP (outline planning permission) (which I think is the same as the PP mentioned above)
    2)LTU (lease top up approval date)
    3)RPA date: (residential property act)

    It's all in this blog... how to calculate the DC/DP etc... man, I am going around on circles!

    The DC rate is adjusted every 6 months - either upwards or downwards.
    For Tc:
    2007: $1300 (mar) $2100 (sep)
    2008: $2100 (mar) $1960 (sep)
    2009: $1820 (mar) $1820 (sep)
    2010: $2100 (mar) $2450 (sep)

    This DC figure is slotted into equations. It does NOT mean that the overall DC/DP charge will be double the charge in round one !!!!!. Do not assume anything of the sort! The computation of DP for increase in intensity and upgrading of lease tenure is a 2 step process.

    Fron the SlA website: "the system of determining DP does not apply to the computation of premium payable for the upgrading of lease tenure (ie the topping up of lease tenure). Such premium will still be assessed by the CHIEF VALUER on a case-by-case basis."

    ReplyDelete