East Coast development goes on collective sale by auction – the first since 1997

The freehold development is a three-storey structure housing six apartments. There are also eight car park lots in the 7,418 sq ft plot. The guide price is S$12 million. 

Updated from : The Business Times, 10 Feb 2021

A SMALL freehold apartment block off East Coast Road will soon be put up for collective sale at a public auction – which is a rarity in Singapore, as most en bloc sales take place via tender.

This is believed to be only the second time a collective sale will be held through a public auction; the first was more than two decades ago, in January 1997, when Far East Organization outbid DBS Land for Scotts Tower.

Joy Tan, Edmund Tie’s head of auction and sales, said that a public auction is a more transparent process for the owners and for the prospective buyers in a collective sale.

“If successful, we will have more alternative modes of sale for en bloc sites,” she said. She noted that in Hong Kong, sites up for redevelopment are commonly sold at public auctions.

The property going on the block for a collective sale is a three-storey building on Marshall Road, housing six walk-up apartments. There are eight car park lots on the property.

In collective sales by tender, prospective buyers are invited to submit their bid confidentially for the property on a specified date.

In the case of the Marshall Road property, all six owners of the units agreed to sell their homes collectively, and to do this through an auction, which they believed would be a more transparent track, and also a faster one, said Ms Tan.

The auction has been slated for Feb 24, and the guide price is S$12 million, she said.

If bids come in below the guide price, “we will get mandate or instructions from the owners”, she said.

S. Lee, one of the owners, told The Business Times that sometime last year, one of the six owners had broached the idea of going en bloc, as this would usually result in a higher price than if they were to sell their units individually.

Mr Lee, who has lived in the building for about 30 years, said: “One or two of us are retired and want to downgrade to a smaller flat.”

In the 2019 Masterplan of the Urban Redevelopment Authority, the land in this development is zoned residential, with a plot ratio of 1.4.

The squarish land plot has a frontage of 23.4 m and depth of 29.2 m. The land area is 7,418 square feet.

Ian Loh, Knight Frank Singapore’s head of Capital Markets for Land and Building, Collective Strata Sales, said consultants generally advise sellers on the mode of sale after considering factors such as owners’ expectations and the quality of the asset.

“At auctions, people can see who’s bidding and what the price is, but if there is no bid, everyone would know; the negotiating power of the seller may be weakened,” he said.

“Generally speaking, I feel not all properties are suitable for en bloc sale – (and this is) if prices are too high, for instance,” he added.

In a tender exercise, buyers are “at liberty to submit offers for owners’ consideration; these may be below the reserve price, and owners can then think through and decide”, he said.

He noted that government land sales nowadays are by tender.

Back in January 1997, the collective sale of Scotts Tower by public auction was handled by Knight Frank amid a boom in collective sales.

The property had been expected to fetch about S$90 million, but following lively bidding, it was sold for S$96.8 million – a better-than-expected outcome for the building’s 32 apartment owners, The Business Times reported at the time.

Each of these owners pocketed slightly more than S$3 million for their 1,152 sq ft units. If they had sold their apartments individually, they would have got less than half that – an estimated S$1.2 million, the report said.

The auction generated enough interest for virtually all the major property players to send representatives to watch the proceedings, but only four parties took part in the bidding.

Bidding began at S$83.8 million, with the price going up by S$500,000 over the course of 26 bids, before Far East bagged the property.