Mainland Investor Du Shuanghua Backs Out of Singapore’s Biggest Property Deal of 2023 

Chinese-backed investor Bright Ruby Resources has walked away from the largest property deal signed in Singapore during 2023, cancelling its planned S$908 million ($668 million) purchase of a shopping mall on Orchard Road after failing to win government approval to expand the size of a development planned for the site.

CBRE, which brokered the failed sale, on 8 April sent a notice to the owners of the Far East Shopping Centre seen by Mingtiandi notifying them that representatives of Bright Ruby’s Glory Property Developments unit, which had signed the deal to acquire the strata-title property, had sent a notice to lawyers for the collective sale committee (CSC) informing them that the deal had been terminated under conditions of the agreement.

The investment firm backed by Chinese billionaire Du Shuanghua has cancelled the transaction after failing to win approval to expand the allowable gross floor area for a project to redevelop the site under Singapore’s Strategic Development Incentive (SDI) scheme, which expands the permissible size of developments meeting guidelines set out by the city-state’s Urban Redevelopment Authority.

With the deal having disintegrated, CBRE advised the owners that the CSC is moving on. “In light of the above matters, the CSC (collective sale committee) is considering the next steps and we will update on further developments relating to the collective sale as soon as practicable,” the notice read.

Financial Viability Questioned

The URA in January had ruled Bright Ruby’s proposal for the 999-year leasehold site at 545 Orchard Road ineligible for the incentives as it did not involve joint redevelopment of neighbouring sites, as required under the SDI scheme, according to a notice on the regulator’s website.

Had Bright Ruby won approval under the SDI scheme, it would have been eligible to expand the gross floor area of the project by 20 percent, bringing a new complex on the plot to 290,574 square feet (26,995 square metres) and putting the cost per square foot of built area for the acquisition at S$3,125.

Without the additional space, Bright Ruby would have been acquiring the Far East Shopping Centre at a 20 percent higher price – S$3,750 per square foot of the project’s maximum allowable gross floor area of 242,145 square feet.

“Without the bonus GFA, the project’s financial viability came into question, making the reserve price (S$928 million) seem even more prohibitive,” Tracy Goh, PropNex’s head of investment and collective sales department said in a blog post on Thursday.

Bright Ruby’s withdrawal from the sale also signals its failure to link up with owners of neighboring assets for a broader redevelopment plan which would potentially have met the URA’s requirement of amalgamating at least two adjacent sites to qualify for the incentive.

Far East Shopping Centre is flanked by Hotel Properties Ltd’s Voco Orchard Singapore hotel on one side and SGX-listed Bonvests Holdings’ Liat Towers on the other. In August of last year Ong Beng Seng’s HPL had already attained URA approval to redevelop Voco Orchard together with its neighbouring Forum mall and HPL House properties under the SDI scheme.

The program, rolled out in 2019 and set to end this year, offers incentives for developers to transform sets of smaller ageing buildings into larger complexes incorporating residential space as part of the URA’s master plan to rejuvenate Orchard Road.

“Although the URA can make exemptions to this (requirement to merge neighbouring buildings) if the site fulfils some conditions, it appears that the proposed redevelopment did not convince the URA to accede to granting the SDI scheme,” Alan Cheong, research and consultancy head at Savills Singapore, said in response to inquiries from Mingtiandi.

Buyer-Seller Gap

The failed deal casts further gloom over a Singapore collective sale market which earlier this month saw its first successful tender of the year with Apex Asia Development agreeing to buy the Sin Ming Centre commercial and residential building in the Upper Thomson area for S$49 million.

Propnex’ Goh said in her analysis of the scuppered Far East Shopping Centre transaction that the incident highlights the complexities of the en bloc market as well as the regulatory challenges of joint redevelopment projects.

“The aborted deal may prompt a reassessment of expectations and strategies not just for Far East Shopping Centre but for similar properties eyeing redevelopment under the SDI scheme,” she wrote. “[It also] underscores the intricate dance between ambitious redevelopment plans, regulatory approvals and the realities of the market.

In July of last year, developer Wing Tai Holdings also backed out of a collective sale deal to acquire the Holland Tower residentia project as some conditions of the deal were not met, with some neighbours of the residential project in District 10 said to have objected to the redevelopment plan.

Chia Mein Mein, head of capital markets for land and collective sale at Knight Frank, predicted in a recent report that Singapore’s collective sales market will continue to be challenging this year as developers’ appetite for alternative sites remains subdued, and with the gap between seller and buyer pricing expectations remaining broad.

“Realistically priced collective sale sites with positive attributes, such as a favourable location in proximity to MRT stations, sites with non-residential components that are not affected by ABSD, as well as sites with redevelopment parameters that can appeal to developers, have a higher chance of concluding successfully,” Chia said.