BT : 16 houses at Fort Road close to being sold

Business Times - 27 Mar 2010

16 houses at Fort Road close to being sold

Chip Eng Seng said to have clinched option to buy the freehold properties for $86 million

By KALPANA RASHIWALA

SIXTEEN freehold terrace houses at Fort Road in the Tanjong Rhu area are said to be close to being sold for about $86 million.

Construction and property group Chip Eng Seng is believed to have been granted an option to buy the houses. However, this is still subject to one of the sellers - a company which owns a few of the houses - securing approval from its shareholders for the sale, BT understands.

The 16 houses have a land area of nearly 37,000 square feet and the party that's buying could potentially purchase from the state a cul-de-sac or dead-end road, which has a land area of about 11,000 sq ft. This would increase the total site area to about 47,900 sq ft - large enough to be redeveloped into a new condominium project with about 90 units averaging 1,100 sq ft.

The terrace houses, which make up a development named Fort Terrace, are owned by several parties who have come together for the proposed sale. The site is zoned for residential use with a 2.1 plot ratio (ratio of maximum potential gross floor area to land area) under Master Plan 2008.

Back-of-the-envelope calculations show that the price of $86 million could work out to about $1,100 per square foot of potential gross floor area, inclusive of development charge (DC), for intensifying the site and estimated payment for the state land.

Going by this unit land price, analysts estimate the breakeven cost for a new condo development on the site would be about $1,450-1,550 psf.

While that hardly leaves any profit for the developer based on current selling prices in the area, Chip Eng Seng's strategy would probably be to build a high proportion of smallish units to achieve higher per square foot selling prices, said a property consultant.

Fort Terrace was put on the market back in February 2008 with an indicative price of $95 million or $1,238 psf per plot ratio inclusive of DC prevailing at the time and the estimated cost for purchasing the state land.

But it was not sold back then. 2008 was a weak year for the property market, which was reeling from the effects of the US sub-prime crisis that began in 2007 and escalated to a global financial crisis in 2008, culminating in the collapse of Lehman Brothers in September that year.

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NUMBERS GAME
The terrace houses, which make up a development named Fort Terrace, are owned by several parties who have come together for the proposed sale