Why Far East Shopping Centre En Bloc Sale Aborted?
A Deep Dive into Why the $910 Million Deal Fell Through
In a surprising turn of events, the much-anticipated en bloc sale of Far East Shopping Centre, one of Singapore’s landmark mixed-use developments located at the prestigious 545 Orchard Road, has been abruptly aborted.
The $910 million deal, which had garnered significant attention from the real estate community and the public alike, fell apart following the Urban Redevelopment Authority’s (URA) rejection of the proposed redevelopment plan under the Strategic Development Incentive (SDI) Scheme.
This article explores the factors leading to the cancellation of this high-profile transaction.
The Crux of the SDI Scheme
Central to the fallout is the URA’s SDI Scheme, aimed at fostering collaborative redevelopment to forge “new destinations” by offering a 20% bonus gross floor area (GFA).
Glory Property Development, under Bright Ruby Resources and led by Du Shuanghua, banked on this additional GFA for the Far East Shopping Centre’s overhaul.
The URA’s disapproval on January 24, however, invalidated the economic basis of the project, leading to the withdrawal of the buyer.
Collaborative Redevelopment Stumbles
Glory Property Development faced a significant hurdle in redeveloping Far East Shopping Centre under the Strategic Development Incentive (SDI) Scheme, which requires joint redevelopment proposals with neighboring property owners by specific deadlines.
Despite efforts, securing a partnership with adjacent property owners proved challenging.
Neighboring properties include Voco Orchard Singapore, owned by Hotel Properties Ltd (HPL), which has already obtained URA approval for redevelopment under the SDI Scheme, and Liat Towers, owned by Bonvests Holdings, which recently underwent a renovation and is not in a rush to redevelop.
Wheelock Place, another neighbor and owned by Wharf Estates Singapore, is also not poised for immediate redevelopment.
The inability to form a redevelopment alliance with neighboring properties, combined with the failure to secure necessary approvals under the SDI Scheme, led Glory Property Development to withdraw from the Far East Shopping Centre en bloc deal.
Financial Feasibility in Question
The reserve price for Far East Shopping Centre, set at a plot ratio of 6.72 and a whopping $3,750 psf per plot ratio (psf ppr), was already ambitious.
Without the 20% bonus GFA, the project’s financial viability came into question, making the reserve price seem even more prohibitive and ultimately leading to the deal’s collapse.
Implications for the Future
The fallout from the aborted en bloc sale of Far East Shopping Centre has broader implications for Singapore’s commercial real estate market, particularly in the prime Orchard Road area.
It highlights the challenges of aligning redevelopment ambitions with regulatory approvals and the importance of collaboration between property owners under incentive schemes like SDI.
As the collective sale committee of Far East Shopping Centre considers its next steps, the saga serves as a poignant reminder of the complexities inherent in en bloc sales, especially those dependent on additional development incentives.
The aborted deal may prompt a reassessment of expectations and strategies, not just for Far East Shopping Centre but for similar properties eyeing redevelopment under the SDI Scheme.
The cancellation of the Far East Shopping Centre en bloc sale underscores the intricate dance between ambitious redevelopment plans, regulatory approvals, and the realities of the market.
As stakeholders regroup and reassess, the aborted deal remains a significant case study in Singapore’s dynamic real estate landscape.
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