16 freehold terrace houses at Fort Road in the Tanjong Rhu area are close to being sold for around $86 million.
Chip Eng Seng, a construction and property firm, is believed to have been granted an option to acquire the houses. However, the sale is still subject to approval from its shareholders.
The terrace houses have a land area of approximately 37,000 sq ft, and there is a possibility that the purchasing party will buy a cul-de-sac or dead-end road from the state, which has about 11,000 sq ft of land area. This could increase the total site area to 47,900 sq ft, large enough to be redeveloped into a new condo project with some 90 units averaging 1,100 sq ft.
Several parties, who have collaborated for the proposed sale, own the terrace houses, which comprise the Fort Terrace development. The site is intended for residential use with a plot ratio of 2.1 (ratio of maximum potential gross floor area to land area) under Master Plan 2008.
Based on back-of-the-envelope calculations, the price of $86 million could work out to around $1,100 psf of potential gross floor area, including Development Charge (DC), for improving the site and projected payment for the state land.
According to the analysts, such a unit land price could yield a breakeven cost of about $1,450 psf to $1,550 psf for a new condo development on the site.
A property consultant said that the strategy of Chip Eng Seng would probably be to construct a high proportion of smaller units to achieve higher psf selling prices, although the developer would hardly get any profit based on the current selling prices in the area.
Fort Terrace was put on the market in February 2008, with an indicative price of $1,238 psf ppr or $95 million, inclusive of DC prevailing at the time and the estimated cost for buying the state land.
However, it was not sold back then. The fiscal year 2008 was considered a weak year for the real estate market, which was reeling from the impact of the US sub-prime crisis that began in 2007 and developed into a global financial crisis in 2008, culminating in the collapse of Lehman Brothers in September that year.