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

Rumors about Far East Shopping CenterThe deal has been brewing for several months, but it intensified in recent days when the owners of Far East Shopping Centre, the 298-unit mixed-use building at 545 Orchard Road, reportedly received a circular informing them that the deal valued at $908 million has been withdrawn.

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

The buyer, Glory Property Development, is said to have pulled out after failing to obtain approval from the URA to redevelop the site under the Strategic Development Incentive (SDI) Scheme. Without the SDI Scheme, it would not have been possible to achieve a 20% increase in gross floor area. Glory Property Development is an investment vehicle of Singapore-registered mining and resources company Bright Ruby Resources, which is controlled by Chinese steel magnate Du Shuanghua, head of Rizhao Steel Corporation.

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Launched in April 2019, the URA’s SDI program was updated in April 2022. The URA’s SDI program offers additional gross floor area to owners who redevelop their properties jointly with at least one of their neighbors to create “a new destination.” In addition to an increase in gross floor area, the new owners can also benefit from flexibility in land use and building height.

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

Find a neighbor 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 must submit a joint application for a joint redevelopment proposal by December 31, 2023. They must also obtain the relevant preliminary or written approval by December 31, 2024.

The problem for Glory Property Development was to find an owner for a neighbouring site who would like to redevelop it together with the 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 received approval from the URA to redevelop its property complex – Voco Orchard Singapore, Forum The Shopping Mall and HPL House – under the SDI scheme. HPL’s new mixed-use development will include a hotel, retail, office and residential areas, a rooftop garden and a performing arts theatre.

The story continues

To the right of the Far East Shopping Centre is Liat Towersa 21-storey freehold office tower with a retail outlet. Liat Towers, owned by Bonvests Holdings, opened in September 1965, was refurbished and reopened in 1979. Liat Towers has recently been refurbished and has a new anchor tenant: homegrown furniture brand Castlery, which has taken over the two-storey, 24,000 sq ft retail space previously occupied by fashion brand Zara.

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

Directly behind the Liat Towers is Wheelock Squareowned by Wharf Estates Singapore (formerly Wheelock Properties). Completed in 1994, the 21-storey office and shopping centre has an underground connection to the neighbouring shopping centres ION Orchard and Shaw House and Orchard MRT station.

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

Directly behind the Far East Shopping Centre there is a public car park owned and managed by URA.

Since there was no neighbouring land available for the redevelopment of the Far East Shopping Centre and Glory Property Development did not receive approval for the SDI programme, the company is said to have withdrawn from the deal.

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

Minimum price too high?

Far East Shopping Centre is located on a 3,350 sqm site with a 999-year lease dating back to 1871. It is zoned for commercial use and has a frontage of 75 m along Orchard Road and 55 m along Angullia Park.

The site has a permitted gross floor area ratio (GPR) of 4.9 and a maximum height of 30 storeys as per the 2019 Master Plan. The existing gross floor area ratio is approximately 242,145 square feet, which equates to a lot ratio of 6.72. The purchase price of $908 million would equate to a lot ratio of approximately $3,750 per square foot.

Under the SDI program, the gross floor area would increase by 20% to 290,574 square feet and the lot area would increase to 8.06. The purchase price of $908 million equates to approximately $3,350 per square foot based on the increased gross floor area.

“Without the 20% bonus GFA and the increase in lot area under the SDI program, the minimum price per square foot is too high,” says a market observer who wishes to remain anonymous.

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The last successful en bloc deal in the prime Orchard area was Ming Arcade in December 2022. Located at the corner of Cuscaden Road and Orchard Road, the seven-storey freestanding commercial building with 88 condominiums fetched $172 million, setting a new benchmark price in the collective sales market with a land price of $3,125 per square foot.

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

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

Pole in Orchard Road

The Far East Shopping Centre was developed by the Ng family-controlled Far East Organisation, which still owns over 30% of the land. Built 50 years ago in 1974, the Far East Shopping Centre was considered the most significant commercial complex along Orchard Road.

Its transformation into a new integrated project may have to wait until the next collective sale cycle. The recent collective sale attempt was the first by the owners of the Far East Shopping Centre.

The collective sale process began in June 2022, and by June 24, 2023, 80% of condominium owners had pledged their support. The property was put up for sale on July 25 at a price of $928 million. The land had to be sold by the end of 2023 to give the new buyer enough time to submit planning permission for a new integrated development to URA for redevelopment under the SDI scheme. Given the tight timeline, CBRE’s Tay described it as “a collective sale with a short fuse.”

While Glory Property Development has cancelled its purchase of the Far East Shopping Centre, Bright Ruby Resources still has a foothold in Orchard Road through its ownership of the Pullman Singapore Orchard. When Bright Ruby Resources bought the property ten years ago for $1.15 billion, it was the former Grand Park Orchard and its retail location was called Knightsbridge.

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

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