Far East Shopping Centre’s $908 mil en bloc deal aborted

/ EdgeProp Singapore |

April 10, 2024 10:14 PM SGT

At $908 million, the sale of Far East Shopping Centre was the biggest en bloc deal of 2023 (Photo: Albert Chua/EdgeProp Singapore)

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Rumours about Far East Shopping Centre’s en bloc deal have been swirling around for several months. It intensified in recent days when owners of Far East Shopping Centre, the 298-unit, strata-titled, mixed-use development at 545 Orchard Road, were said to have received a circular informing them that the $908 million en bloc deal has been rescinded.

Michael Tay, head of Singapore capital markets, CBRE, who brokered the sale could not be reached for comment.

The buyer, Glory Property Development, is said to have walked away after failing to get URA approval to redevelop the property under the Strategic Development Incentive (SDI) Scheme. Without the SDI Scheme, it would also not be able to obtain a 20% bonus gross floor area (GFA). Glory Property Development is an investment vehicle under the Singapore-registered mining and resources company Bright Ruby Resources, controlled by Chinese steel tycoon Du Shuanghua, the head of Rizhao Steel Corporation.

Launched in April 2019, URA's SDI Scheme was updated in April 2022. URA's SDI Scheme offers bonus GFA to owners who redevelop their properties jointly with at least one of their neighbours to create "a new destination". Besides an increase in GFA, the new owners could also enjoy flexibility in land use and building height.

Under URA's Strategic Development Incentive Scheme and 20% bonus gross floor area, Far East Shopping Centre has to be redeveloped with a neighbouring property to create a new destination along prime Orchard Road (Source: EdgeProp Landlens)

Finding a neighbour to team up with

To qualify for the SDI Scheme, URA has stipulated that the owner of the Far East Shopping Centre and the adjacent property need to submit a joint Outline Application for a joint redevelopment proposal by December 31, 2023. They must also obtain the relevant Provisional or Written Permission by December 31, 2024.

Glory Property Development's conundrum was finding an owner of a neighbouring property that wants to redevelop it jointly with Far East Shopping Centre. To the left of the Far East Shopping Centre is Voco Orchard Singapore, a hotel owned by Hotel Properties Ltd (HPL) and controlled by tycoon Ong Beng Seng.

Last August, HPL obtained URA approval to redevelop its cluster of properties - Voco Orchard Singapore, Forum The Shopping Mall and HPL House -- under the SDI Scheme. HPL's new mixed-use development will have a hotel, retail, office and residential components, a rooftop garden, and a performance art theatre.

To Far East Shopping Centre's right is Liat Towers, a freehold, 21-storey office tower with a retail podium. Owned by Bonvests Holdings, Liat Towers opened in September 1965 and was redeveloped, reopening in 1979. Liat Towers has had a makeover recently and a new anchor tenant in homegrown furniture brand Castlery, which took over the two-storey, 24,000 sq ft retail space previously occupied by fashion brand Zara.

Far East Shopping Centre is flanked by Liat Towers on one side and Voco Orchard Singapore on the other (Photo: Albert Chua/EdgeProp Singapore)

Directly behind Liat Towers is Wheelock Place, owned by Wharf Estates Singapore (formerly Wheelock Properties). Completed in 1994, the 21-storey office and retail mall has an underground link to neighbouring malls, ION Orchard and Shaw House and the Orchard MRT Station.

Neither Bonvests Holdings nor Wharf Estates are in a hurry to redevelop their Orchard Road assets. Liat Towers and Wheelock Place, along with Far East Shopping Centre, Voco Orchard, Forum the Shopping Mall and HPL House, were the six buildings along Orchard Road – between Cuscaden Road and Orchard Boulevard - that URA wants to see "redeveloped into a new exciting destination".

Directly behind Far East Shopping Centre is a public car park that URA owns and manages.

With no neighbouring property to join in its redevelopment of Far East Shopping Centre and failing to get approval for the SDI Scheme, Glory Property Development is said to have walked away from the deal.

The public carpark behind Far East Shopping Centre (Photo: Albert Chua/EdgeProp Singapore)

Reserve price too high?

Far East Shopping Centre sits on a 36,014 sq ft site with a 999-year lease from 1871. It is zoned for commercial use and has a 75m frontage along Orchard Road and a 55m frontage along Angullia Park.

The property has an allowable gross plot ratio (GPR) of 4.9 and a maximum height of 30 storeys under the 2019 Master Plan. The existing GFA is about 242,145 sq ft, equivalent to a plot ratio of 6.72. The purchase price of $908 million would translate to about $3,750 psf per plot ratio (psf ppr).

Under the SDI Scheme, the GFA would be 20% higher at 290,574 sq ft, and the plot ratio raised to 8.06. The purchase price of $908 million works out to about $3,350 psf ppr based on the higher GFA.

"Without the 20% bonus GFA and uplift in plot ratio under the SDI Scheme, the reserve price on a psf basis is too high," says a market observer who declined to be named.

The last successful en bloc deal in the prime Orchard area was Ming Arcade in December 2022. The seven-storey, freehold commercial building with 88 strata units was located at the corner of Cuscaden Road and Orchard Road, which fetched $172 million. It set a new benchmark price in the collective sale market at a land rate of $3,125 psf ppr.

The buyer of the former Ming Arcade is Royal Group of Companies, founded by property magnate Asok Kumar Hiranandani and his son, Bobby. The group is redeveloping Ming Arcade into a 20-storey, upscale 170-room hotel, in line with the other luxury hotels in its portfolio, such as Sofitel Singapore Sentosa Resort & Spa and the Raffles Hotel in Sentosa.

Bright Ruby Resources owns Pullman Singapore Orchard, a property it purchased a decade ago when it was still the former Grand Park Orchard (Photo: EdgeProp Singapore)

Stake in Orchard Road

Far East Shopping Centre was developed by the Ng family-controlled Far East Organization, which still owns over 30% of the property by share value. Built 50 years ago in 1974, Far East Shopping Centre was considered the most prominent commercial complex along Orchard Road.

Its reincarnation into a new integrated development may have to wait for the next collective sale cycle. The recent collective sale attempt was the first by the strata-titled owners of Far East Shopping Centre.

The collective sale process kicked off in June 2022, and by June 24, 2023, 80% of the strata-titled unit owners had given their support. The property was launched for sale on July 25 at a price tag of $928 million. The site had to be sold by the end of 2023 to give the new buyer sufficient time to submit the Outline Planning Permission for a new integrated development to URA for redevelopment under the SDI Scheme. Given the compressed timeline, CBRE's Tay called it "a short-fuse collective sale".

Glory Property Development may have aborted its purchase of Far East Shopping Centre. However, Bright Ruby Resources still has a foothold on prime Orchard Road through its ownership of Pullman Singapore Orchard. When Bright Ruby Resources purchased the property for $1.15 billion a decade ago, it was the former Grand Park Orchard, and its retail podium was named Knightsbridge.

The property was refurbished and soft-opened as Pullman Singapore Orchard in December 2022. The 326-room luxury hotel at 270 Orchard Road includes a retail podium that hosts the first Adidas brand centre and largest store in Singapore, Singapore’s first Apple Store and Malmaison, The Hour Glass Singapore’s flagship store.

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