Enbloc definition: In a lump or block; as a body or whole; all together.
In property definition: All owners come together and sell their property collectively to achieve a better prices thru land intensification rather than selling each individual strata units.
Collective sales is also another name used to refer as enbloc sales in Singapore. In this article, we shall use enbloc sales for consistency.
Understanding the fundamental behind that “potential”
That potential lies in the “land”.
Developers want to buy the land and not the strata units. This is because the land allow developers to build more units at a higher selling prices.
Why owners want to enbloc?
Higher cost of maintenance.
Increasing difficulty in finding tenants compare to newer projects.
Layout and design become obsolete.
Lower return in capital value.
Increase number of tenanted units which lead to undesired living environment.
The risks include paying a significant "enbloc premium" for that condo that didn't enbloc. It could also involved opportunity cost as time is wasted investing in the wrong condominium that didn't go through. Some enbloc process could be long drawn affair that involved disputes and legal actions between residents.
Typically, enbloc potential condominium may generate a return of 40% to more than 100% than individual strata sales. Let's explore the 3 case studies as follow:
Case Study - 3 condos that went enbloc
Serangoon Ville Enbloc
Former HUDC estate Serangoon Ville was sold en bloc for $499 million to a Oxley Holdings-led consortium in July 2017. The consortium also has to pay $195 million in estimated charges to top up the lease to 99 years and intensify the land use. The additional charges and purchase price work out to a land rate of $835 per sq ft per plot ratio. Serangoon Ville comprises 244 apartments and maisonettes across seven blocks, with sizes ranging from 1,625 sq ft to 1,733 sq ft. Each owner will receive about $2 million from the sale.
Average Profit (Before taxes and expenses): From $1 million
Shunfu Ville Enbloc
Shunfu Ville was sold for $638m to Qingjian Realty in May 2016. Shunfu Ville was built in the late 1980s by the former Housing and Urban Development Company (HUDC) and privatised in 2013, sits on a 408,927 sq ft site with about 70 years left on its lease and a plot ratio of 2.8. Each owner of the 358-unit condo, which lies less than 200 metres from Marymount MRT Station, stands to get around S$1.78 million.
Average Selling Price prior to enbloc : $1.3 million
Average Profit (Before taxes and expenses): From $500,000
Tulip Garden Enbloc
A joint entity of Chinese developer Yanlord Land Group and MCL Land has bought freehold Tulip Garden for $906.9 million in April 2018. The price is 20.4% higher than the reserve of $753 million submitted by owners of the 316,708 sq ft estate which was completed in 1985. Each residential unit owner will receive between $4.3 million and $7.6 million, depending on the size of the home - unit sizes range from 1,701 to 3,412 sq ft.
Average Selling Price prior to enbloc (For 1,701sqf): $2.1 million
Average Profit (For 1,701sqf)(Before taxes and expenses): From $2.2 million
Disclaimer: The above calculation are based on the difference between the payout for successful enbloc properties as reported in the newspapers and the last 5 transaction for each specific condominium. These are estimate figures without factoring other expenses.
How I can help?
It requires experience to sniff out potential enbloc sites before they hit the market.
I am actively in the market to help you identify one. I can help you run through the numbers using a “back of the envelope calculation“ methodology to see if it is financially feasible before you even think of committing to purchase. (By the way, enbloc feasibility studies are very time consuming and require lots of ground work.)
After the studies, buyers will have full conviction that a specific condo is worth investing in. Time in the market is better than timing the market! There is no shortcut to making a windfall in life. Many buyers looking for potential enbloc purchases plan their purchases way before the rest start looking into it. Equally important, risk management is key prior to any commitment. There are some condos to avoid even if they look very potential for enbloc. Do not be caught up by paying a enbloc premium! There’s no better way in finding out through me with my past experiences working in a property consultancy firm dealing with enbloc properties.
An enbloc purchase is not suitable for those with a low risk appetite. Buyers will need time to realize their investment. They must have holding power to hold in the long term. They must believe in buying an enbloc potential property. Here, caveat emptor (buyers beware) apply. But once you can identify the correct property, the risk will be mitigated and odds of striking that jackpot will be greatly increase.