Former HUDC estates hopeful about hitting en bloc thresholds under proposed collective sale measures

SINGAPORE: Some former Housing and Urban Development Company (HUDC) estates are hopeful that proposed lower en bloc thresholds could improve their chances of securing a collective sale. Pine Grove is pushing forward with its fourth attempt, which will conclude in mid-September, while Ivory Heights and Laguna Park have ended their en bloc attempts earlier this year, after failing to reach the current 80 per cent consent threshold. These former HUDC estates have yet to be sold collectively, alongside Lakeview Estate and Braddell View. Built in the 1970s and 1980s for middle-income households and later privatised, they sit on sprawling sites with a large number of units. Analysts previously said that the developments, which are reaching the mid-point of their 99-year lease, could potentially yield significantly more homes if redeveloped. For instance, the 516-unit Laguna Park plot could reportedly yield about 1,700 new units, while the 660-unit Pine Grove may be redeveloped to offer over 2,000 new homes, said PropNex CEO Kelvin Fong. Management corporation strata title (MCST) and collective sale committee members at the estates said they were optimistic about prospects of en bloc attempts should the proposed changes take effect, especially as maintenance needs of the ageing estates become more pressing. “This is about the best time. Everything has come into place,” said Mrs Cheryn Liew, Pine Grove’s MCST chairperson. She pointed to the proposed measures on top of the recently revised additional buyer’s stamp duty (ABSD) rules , which would give developers of large en bloc projects more time to sell units. “We are really too big, and the asset is really too old - 42 years old. The lights in that whole estate are also getting very dark,” she said. “To be honest, the shelf life has gone kaput many years (ago).” The Ministry of Law tabled a Bill on Aug 4 to lower the consent threshold for older developments aged 40 to 59 years from 80 per cent to 70 per cent, and from 80 per cent to 65 per cent for those aged 60 years and above.

The change could reduce the “hold-up” problem that many of these estates face from proceeding with a collective sale – particularly because of its sheer size – said Professor Sing Tien Foo, provost's chair professor of real estate at the National University of Singapore (NUS). At the same time, other proposed measures would tighten rules governing en bloc attempts, including raising the threshold to convene a general meeting to form a collective sale committee and halving the timeline for collective sale committees to secure signatures for a collective sale agreement from 12 months to six months. Prof Sing said these measures strike a balance between facilitating a collective sale and protecting the safeguards of owners who wish to stay. “Different owners may have different considerations. If you allow (en bloc exercises) to be carried out too frequently and even without strong support, it can create a lot of tension among the residents,” he said. RENEWED HOPE The law ministry said lowering the consent threshold would give owners of older developments a more practical option to consider redevelopment where there is broad support. Many developments have got significantly older since Singapore's collective sale regime was introduced in 1999. Such estates often require substantial investment for maintenance, repairs and upgrading works to remain safe and liveable, the ministry added. According to official government records, about one in 20 private non-landed residential units are over 40 years old.

For the former HUDC estates that have edged slowly towards the elusive 80 per cent, the lowering of the consent threshold is a welcome measure. Laguna Park concluded its fifth attempt with a reserve price of S$1.48 billion (US$1.16 billion) in early April, ahead of the expiry of its collective sale agreement in mid-August, with about 49 per cent of signatures secured. “We're definitely going to miss the boat on this one. So let's just kind of close this exercise and then prepare better for the next one,” said Ms Rita Waswani, the secretary of the estate’s collective sale committee. A key challenge was engaging owners, such as those who live overseas and those with medical issues requiring a power of attorney, leading to long-drawn processes. “But now that we have that experience, we thought it'll be a good way to rethink how we want to do this. And then, by the time Laguna Park is 50 in 2028, we can relaunch again,” she said. She raised concerns about the shortened timeline to collect signatures. For large estates, to reduce the timeline by half and give them 10 percentage points fewer signatures to collect is not proportionate, she added. “So, I just feel the six months is going to be a challenge unless the CSC is very, very well prepared and owners are very decisive ... No room for wait-and-see at all. People have to be decisive and sign, don't sign, close the story.” Ivory Heights ended its third official attempt in June with a reserve price of S$1.68 billion, and about 60 per cent of signatures. Mr Sambanthan Thavarajah, a member of that collective sale committee, cited mismatched pricing expectations as a main challenge in garnering the necessary signatures. But he is optimistic about future efforts, should a collective sale attempt be relaunched. He added that the shorter timeline is not an issue, since most of the signatures were gathered in the first six months. “All major roadblocks I see have been removed. Only the psychological part that can't do anything,” he said, pointing to some residents’ emotional attachment to their homes. Meanwhile, Pine Grove has gathered 64 per cent of signatures at its reserve price of S$1.78 billion, and Mrs Liew said the estate needs “less than a hundred” signatures to meet the current 80 per cent threshold by Sep 20, pending the passing of the law. The Bill will be debated by Members of Parliament (MPs) at the next available sitting, before they vote on it at the third reading. If passed and then assented to by the president, the amendments will take effect at a later date. If passed, most of the amendments would apply to ongoing en bloc exercises where the first signature to the collective sale agreement has not been obtained before the law comes into force. However, committees that are still collecting signatures will be allowed to convene general meetings to decide whether to terminate the agreement, and if so, to approve terms for a new agreement that will be subject to the new rules. Such collective sale committees will be given seven months from the start date to meet the required consent threshold for the new agreement. Mrs Liew said: "We have to decide come end of this month whether are we going for the 70 per cent or are we going to soldier on with this 80 per cent … it should be doable, it's just that we need the residents to be more forthcoming and realise what are the other challenges ahead should this en bloc fail."

NEED FOR RENEWAL Maintenance costs at the three estates have crept up over the years, presenting an impetus for redevelopment. At Pine Grove, a mandatory periodic facade inspection, lift replacement, spalling concrete repairs and sewerage repairs could cost the estate at least S$5 million. At this year’s annual general meeting (AGM), a resolution was passed for the monthly maintenance and sinking fund contribution fees to be raised by about 50 per cent from S$318.28 to S$479.60. Mrs Liew said the council might have to raise fees at the next annual general meeting to keep up with repair costs, adding that she was not keen on a special levy, as it would be financially taxing for some senior residents. A key concern is lifts, for which some replacement parts have become obsolete, she said. “I actually dread to think ... there are so many seniors and wheelchair residents in the apartment blocks. What would happen if something happened? I do not know how the paramedics are going to go up to the 17th floor to get our dear friend down,” she said. Laguna Park recently attempted to raise management fund and sinking fund contributions from residents by about 14 per cent and 40 per cent respectively. However, both resolutions failed. Ms Waswani noted that former HUDC estates – which were mainly built for those who did not qualify for Housing and Development Board (HDB) flats but could not yet afford private homes – do not come with “luxurious” condominium finishes. “The actual materials used to build were supposed to be low-cost maintenance, but the Laguna Park of 2026 is not the Laguna Park of 1978, and the Laguna Park of 2038 will not be the Laguna Park of 2026,” she said, pointing to the ageing infrastructure. “We have to keep trying (for en bloc), because there's no way this is going to last for 50 more years, so the writing is on the wall. It's not a question of if, it's a question of when,” she said. The situation is similar at Ivory Heights, where lift upgrading has become a pressing issue. Residents would have to fork out cash to cover the cost of lift replacement – which is at least a few million dollars – said Mr Thavarajah, although he did not disclose exact numbers. “For me it is particular because (it’s a) safety concern. Something can happen in the lift. Old people or young people can get caught,” he said.

CLEARING THE FIRST HURDLE Despite the need for maintenance, some residents are hesitant to participate in a collective sale because of their attachment to their homes. “Some people don't want to sell ... (They say) I grew up 30 years here. This is a 40-year-old building, the best of my life was spent here. “That one we cannot put a value,” said Mr Thavarajah. Ms Waswani said some residents “think with their heart” when it comes to these decisions. “(Some residents say) I work my whole life for this apartment. I want to leave it to my children,” she said. “I think with freehold, you leave a legacy to your kids. But with a leasehold, is it really a legacy, or are you leaving them a headache?” she said, adding that there is a need to “build awareness” before the estate launches a new attempt.

A more practical concern is the costs and hassle of finding a replacement home. Mr Tan Hong Boon, executive director of AlpsEdge Real Estate, noted that home prices have gone up in recent years. Some older residents or those who are already retired may choose to move to an HDB flat, with some spare cash for retirement – a route now made more accessible with the removal of the 15-month wait-out period. “But if they were to look at another private property of the same size, chances are it's very difficult for them to find,” he said. Units at HUDCs are generally more spacious. For example, a three-bedroom unit at Pine Grove can range from about 1,600 sq ft to 1,900 sq ft. By comparison, a three-bedroom unit at the upcoming Thomson Reserve condominium is estimated to be 950 sq ft. Ultimately, hitting the minimum number of signatures is just the first step. The next is finding a suitable developer willing to pay at the price point. Mr Chew Peet Mun, managing director of Investment and Development at CapitaLand Development Singapore, said the proposed changes provide flexibility in the execution of certain redevelopment projects, particularly larger, older residential estates, including former HUDC developments. This may broaden the range of opportunities available for developers to consider. Each site is assessed on its individual merits, taking into account factors such as location, planning parameters, development potential, land pricing, execution considerations and prevailing market conditions, he added. These large-scale redevelopments come with risks, said NUS Prof Sing. Unlike Government Land Sale (GLS) tenders, buying these estates is less straightforward because the collective sale may come with legal processes. “So the lowering of the threshold is just one factor. The second most important factor is the expectation. You need to set a reasonable expected price. The developer also has to evaluate whether it is possible for profitability based on current interest,” he said. “So if you set a very high price, the gap is too high. It's very difficult to find potential buyers.” The challenge of meeting price expectations is compounded by the fact that the older the estate, the more developers will have to pay for a top-up of the 99-year leases. Consequently, they might offer a lower reserve price. Mr Tan said setting price expectations right is a “process of education”. The collective sale committee should have an understanding of the market, with the help of a consultant. Owners are naturally more concerned about whether they will be compensated enough to find a replacement property. “So sometimes, their expectation is hinged on the replacement cost or expectation of what they should get, rather than what the market will pay for the site. “As a committee and a consultant, we have to then try to manage sellers’ expectations as well as the buyer's expectations … so both sides can eventually come to an agreement.”