SGHOUSING.COM 新加坡房地产网

Collective exchange gives owners an instant upgrade, but it is not without problems

A VARIATION of the popular collective sale called the collective exchange has been in the news lately. First the owners of Paterson Lodge concluded such a deal. And last week it was announced that the owners of Pinetree Condominium are seeking expressions of interest from developers keen on a similar proposal.

Basically, a developer, instead of buying the land outright from the owners, agrees to give them replacement units in the new project to go up on the site.

This has been touted as a ‘win-win solution’, with owners getting a new unit in the same location and the developer not having to pay upfront for the land, thereby saving on costs.

Such deals are not new, says CB Richard Ellis executive director Jeremy Lake. ‘However, collective exchange transactions are few and far in between and not without their own problems,’ he says. ‘For a start, for such deals to work, you must have owners’ unanimous approval, which means there’s a higher chance of success if the number of owners involved is small and they are like-minded.’

Agreeing, Jones Lang LaSalle (JLL) regional director and head of investment sales Lui Seng Fatt does not expect the trend to take root. ‘Traditional collective sales will continue to dominate because these can be done with just the 80 per cent consent level,’ he says.

However, some owners and property consultants are undeterred, as the collective exchange can solve several problems.

In the case of Paterson Lodge, the collective exchange with a subsidiary of mainboard-listed Ace Dynamics was structured as a solution for the property’s owners, who faced the usual difficulty in a collective sale - finding a replacement property of the same size in the same location with their proceeds.

And in the case of Pinetree Condo at Balmoral Park, the collective exchange is mooted as a way to reduce the loss for most owners, who would be out of pocket in an en bloc sale today because they bought their apartments at the peak of the market.

How do the numbers stack up?

A developer doesn’t have to fork out a large amount to buy the land upfront - basically he only has to spend money on construction, so he saves on finance costs and cash outflow. The developer then splits some of this saving with the owners by offering them a higher collective sale premium through a replacement property.

JLL’s Mr Lui, whose firm is marketing Pinetree Condo, estimates the current value of an exchange unit at some 30-40 per cent more than a unit in the existing development would fetch if sold individually today. Owners who want a cash-out option would reap a lower collective sale premium of some 25-30 per cent.

Some of the owners could still make a financial loss, albeit a lower one. Nonetheless, the proposal provides an exit opportunity for those willing to take a haircut and move on.

The developer makes his profit by building more and higher value units than those in an existing project. After giving the owners their exchange units, the developer is free to sell the remaining units for a profit.

But for a collective exchange to work, owners must agree unanimously on the structure of the deal, as Knight Frank executive director Foo Suan Peng, whose firm brokered the Paterson Lodge transaction, explains. This is unlike the typical collective sale, where consent from majority owners controlling at least 80 per cent of share value is sufficient, subject to approval from the Strata Titles Board (STB).

‘Even in a normal collective sale, the 80 per cent that agree to the deal must include all financial loss cases since anyone making a loss will have grounds to block an en bloc sale when it comes up for hearing at the STB under current legislation,’ says Mr Foo.

The same law also provides that in a collective sale where the majority consenting owners are given exchange units in a new development, the minority who object to such an arrangement must be offered a cash payment option.

This is why, in the case of Pinetree Condo, developers bidding for the property will have to provide owners with a choice of a one-for-one exchange or a cash-out option.

And the deal can still be blocked at the STB hearing if the minority argue that the cash-out price is not fair value. As Credo Real Estate managing director Karamjit Singh explains: ‘Therein lies a challenge - what value should be used to determine the fair cash-out compensation for such dissenting owners?’

Knight Frank’s Mr Foo says the most transparent method is to have a tender and use the highest bid as the basis for the cash-out price.

But developers not willing to provide both exchange and cash-out options will not participate in such a tender. To avoid all this hassle, consultants say the most practical way to do a collective exchange is to get unanimous approval from all owners - whether it is for an all exchange deal like Paterson Lodge, or one where there is the option of an exchange unit or a cash-out payment, like Pinetree Condo.

Even then, a host of problems can bedevil what is conceptually a win-win proposition, says Credo’s Mr Singh. ‘The moment owners get down to reviewing the legal paperwork, they can get overwhelmed by the issues they would have to wrestle with, and often then resort back to an outright sale,’ he recounts from a recent case he worked on in the River Valley area.

There are also other issues.

Owners may have to redeem outstanding mortgages with banks when a developer starts work on their site - even if the land is not transferred to that developer until the new project is completed and those owners have received the titles to their new apartments. Owners will also have to factor in the rental expense they will incur while waiting for the site to be redeveloped.

On the other side of the fence, a contractor/developer who participates in such a scheme will have to find a financier willing to give him a construction loan without the security of the land to be developed.

‘One way would be for the contractor, if it’s an established company, to give a corporate guarantee tied to other assets of the company,’ suggests Mr Foo.

Source : Business Times - 4 Apr 2006

$730-740 psf ppr bid works out to $325-$330 million

The tender for Oversea-Chinese Banking Corporation’s freehold residential site at Kim Seng Road has closed on March 30 with a top bid of about $730-740 per square foot of potential gross floor area, sources say. In lump sum terms, the bid works out to $325-$330 million.

BT understands the top bid came from Lippo Group, controlled by Indonesia’s Riady family. In all, the tender attracted six to seven bids, and market watchers suggest OCBC’s reserve price should have been met.

Other parties understood to have taken part in the tender include City Developments, Frasers Centrepoint and United Overseas Land.

Knight Frank, which handled the tender, declined to comment.

The top bid equates to a breakeven cost of about $1,050-1,100 psf for a new condo. No development charge, or DC, is payable by the buyer.

Lippo is also said to be the front runner for OCBC’s stake in blue-chip retailer Robinson.

Lippo’s bid is said to have crossed $7 per Robinson share, and market watchers say what could be holding back an announcement is that OCBC probably wants Lippo to buy its entire Robinson stake of about 36 per cent. This would cross the 30 per cent threshold that would trigger a takeover.

‘And who would want to do a general offer at such a high price,’ said an analyst. Market watchers believe OCBC may be in talks with the Securities Industry Council to try to secure a takeover waiver for Lippo.

As for OCBC’s Kim Seng Road site, the top bid by Lippo is about 60 per cent higher than the $450 psf per plot ratio including DC achieved for the next-door Times House site sold by Singapore Press Holdings in November 2003 to Marco Polo Developments, now known as Wheelock Properties (Singapore). Wheelock is developing the site into a new condo, The Cosmopolitan.

OCBC appointed Knight Frank as marketing agent for the Kim Seng Road site back in February 2003 on the eve of the Sars crisis but did not launch the site then. The property market subsequently went into a Sars-induced tailspin. But sentiment, especially in the high-end segment, has since improved, making it opportune for the bank to finally launch the site on March 1 this year.

The 159,075 sq ft freehold site is off River Valley Road and opposite Great World City.

OCBC is expected to book a nice profit from the sale. Based on the bank’s 2005 annual report, its net book value was $59.15 million at end-December last year.

The site was independently valued at $242 million as of the same date. It is zoned for residential use with a 2.8 maximum plot ratio - the ratio of potential gross floor area to land area.

OCBC said in February this year, when it announced its decision to launch the site, that written permission has been obtained for a full-facility condominium development with 248 units, in two 29-storey blocks. The proposed sale is in line with OCBC Bank’s objective to realise gains on its non-core assets over time, so it can invest in core financial services growth opportunities.

Source : Business Times - 4 Apr 2006

REVERSE mortgages on HDB flats were finally given the green light last month after years of lobbying by MPs, but the immediate response to the idea has not been overwhelming.

Income, the only lender to offer reverse mortgages so far, has signed up just three customers after about a month, as those targeted by these loans feel the terms fall short of their expectations.

A reverse mortgage typically involves an elderly person pledging his property for a sum of money, with which he buys an annuity that provides a regular monthly income.

Elderly flat owners who are interested in the scheme say it is useful to supplement their living expenses, but that current rules are too strict, and the amount of money available is too little.

Retiree Peter Tan, 68, a four-room flat owner who attended an Income public seminar on reverse mortgages on Saturday, said: ‘Based on (Income’s) sums, I will get three, four hundred a month.

‘Nowadays, a bowl of noodles already costs $3. How is that enough money for me and my wife to live on?’

About 300 elderly flat owners had turned up at the seminar, asking questions such as whether the loan amount could be higher, and if Income can relax its requirements.

Currently, Income’s reverse mortgage is available to flat owners aged between 70 and 90, who have paid up more than 90 per cent of their housing loans. The loan amount, which can be up to 70 per cent of the flat’s value, is paid monthly through an advance.

Based on Income’s annual interest rate of 5 per cent on reverse mortgages, an HDB flat valued at $240,000 can generate a monthly advance of about $380 over 20 years.

Various MPs had called for the introduction of reverse mortgages over the years, arguing that as most older Singaporeans have their savings locked up in their flats, such schemes can help them turn their assets into cash.

Mr Chay Wai Chuen (Tanjong Pagar GRC), who first proposed such a scheme back in 1988, felt the lukewarm response to reverse mortgages so far is likely because it is an unfamiliar concept to most of the elderly.

‘I do feel also that the interest rate Income is charging now is too high. If they can reduce the interest rate by half, the monthly payout would be much more attractive.’

Dr Lily Neo (Jalan Besar GRC) agreed, pointing out that $380 a month for a couple may be too little to live on.

Dr Neo added that other rules - such as the minimum age requirement of 70 and requiring at least 90 per cent of the housing loan to be paid up - could be relaxed so more people can apply.

In response, Income CEO Tan Kin Lian agreed the rules can still be tweaked to make them more attractive.

For instance, he said Income is willing to be flexible and approve a loan for a couple if just one person is past 70, while the person’s spouse is in his or her 60s.

Flat owners can also look forward to better offers as more reverse mortgage plans could be offered by three local banks - DBS, OCBC Bank and United Overseas Bank.

A DBS spokesman said it is structuring such plans and ‘will share these soon’.

3 approved cases

INCOME has so far approved three reverse mortgages on HDB flats. They are all fully paid up. Income cannot provide the couples’ names because of customer confidentiality.

CASE ONE

Couple One have no dependants. Their three-room HDB flat in Marine Parade is currently valued at $240,000.

Income approved a monthly advance of $300 over 16 years.

CASE TWO

Couple Two also have no dependants. Their Jurong East three-room flat has a current

Source : Straits Times - 3 Apr 2006

Most homes sold in past year stay below mark: study

Much is being made of the stellar prices of high-end condominiums, but the sparkle could be just an illusion.

An analysis of prices of high-end residential developments over the past 12 months by Knight Frank reveals that only three registered prices have crossed $2,000 per square foot (psf).

These were The Boulevard Residences ($2,199.6) and The Ladyhill ($2,086), both by SC Global, and Cairnhill Crest by Cheung Kong Holdings ($2,002.4).

Other developments in the same vicinity like Grange Residences (Wheelock Properties), The Arc at Draycott (BS Capital) and The Light @ Cairnhill (Wing Tai Holdings) reached highs of between $1,669.7 and $1,996.4.

Although prices have been rising steadily, a big increase of about 20 per cent or $2,600 psf has recently been projected for a new development - St Regis Residences by City Developments Ltd (CDL).

If the projection is accurate, it would confirm the assertion of Knight Frank director of research and consultancy Nicholas Mak that: ‘One project cannot pull up the prices of the whole market, but the whole market can push up the price of that one project.’

Some high-end developments - like CDL’s The Sail @ Marina Bay or Centrepoint Properties’ The Azure - have done well recently, but as Mr Mak notes, ‘the number of buyers in this segment falls exponentially as the price goes up’, perhaps explaining why there is still ample supply of apartments available.

Of course, some developers like SC Global are not in a hurry to sell off their units, preferring instead to wait for their asking price to be met. At the Boulevard Residences, launched in 2003, there are still about 10 units out of a total of 46 available.

The property market, especially the high-end segment which started to recover last year, seems to be sorting out its pricing. But this may take some time.

‘As this is a rising market, developers have not launched all the units in their development. They are reserving some to be launched at higher prices at the right time. In fact, for most of the smaller developments, all units launched have been fully taken up,’ says Tay Huey Ying, associate director (research and consultancy) at Colliers International.

Colin Tan, head of research at Chesterton International, expects CDL to push up the price of St Regis Residences to the upper limit as ‘CDL will probably not be too troubled if sales are not as fast because they will want to maintain the right type of buyer too’.

Wheelock Properties’ Ardmore Park holds the record for the highest-priced condominium - $2,400 psf in the mid 1990s. It is the closest equivalent to St Regis Residences in terms of prestige, and Mr Tan remembers that when Ardmore Park was launched in 1996, sales were initially slow because of the high prices and the government’s anti-speculation measures. Foreign buyers and investors did eventually bite.

Recalling the heydays, Mr Tan says: ‘They had four property marketing consultants working on the launch to drive up interest.’

Interest for St Regis Residences is similarly building up. CDL group general manager Chia Ngiang Hong revealed that its current waiting list of potential buyers outweighs the 173 units available, with many buyers expressing interest in purchasing more than one unit.

Wallace Chu, head of research at Savills Singapore, expects at least half the buyers of St Regis Residences to be foreigners. ‘Already, at least 50 per cent of the buyers at Cairnhill Crest are foreigners.’

Looking at comparable high-end developments like The Arch in Hong Kong and The Knightsbridge in London, which are priced at about $5,600 psf and $4,400 psf respectively, Mr Chu points out that even though high-end property is expensive here, ‘it is still comparatively cheaper than similar developments overseas’.

Property prices are a ‘reflection of what the market can support’, said Mr Chu, adding that The Boulevard Residences has already set the benchmark price of $2,199.6. Interestingly, this was set by a foreign buyer and Mr Chu says: ‘It is unavoidable that a foreigner will set the future benchmark price as well.’

The impact of very high prices for the very high-end developments may, however, have little impact on the property market in general, simply because they are priced out of the reach of most Singaporeans, and are meant for the more voracious global investor known as ‘high net worth individuals’.

‘Depending on market response to St Regis Residences, more of such developments could mushroom and become part of the global property market scene where demand is largely from foreigners,’ says Jones Lang LaSalle head of research (South Asia) Chua Yang Liang.

That Singapore could have a tier of property on a par with other global cities is exciting, but do not expect this segment to proliferate. ‘Not all developers have the capacity or even the desire to jump on this bandwagon. Given the limited supply, the impact on the local market is probably negligible,’ Dr Chua said.

Source : Business Times - 3 Apr 2006

Q MY HOME is currently under joint tenancy between me and my mother.

I am planning to get married next year and my wife-to-be will be helping me repay the mortgage loan, which I am now repaying alone.

My bank has advised it is not possible to include my fiancee’s name in the mortgage documents without her being a tenant/owner of the property. I was told she would be required to purchase a portion of the estate and pay stamp duty on it. How will this affect the joint tenancy arrangement?

Since we are not selling the property but merely putting an additional owner’s name on the land title, why must she pay stamp duty?

What is the cheapest way to achieve our objective of giving her part ownership and allowing her to help with the repayment?

A Your mother and you can transfer a specified share in the property to your fiancee and continue to hold the balance untransferred share as joint tenants. For example, if 1 per cent is transferred to your fiancee, the end result is that your mother and you own 99 per cent of the property as joint tenants while your fiancee holds 1 per cent as a tenant-in-common.

Hence your joint tenancy arrangement with your mother need not be affected except that you become joint tenants of a reduced share in the property. A joint tenancy is a form of ownership where all co-owners have an equal interest in the property regardless of how much each co-owner contributed to the purchase of the property.

A tenancy-in-common is a form of ownership whereby each co-owner holds a separate and definite share in the property.

On the question of stamp duty, according to the Stamp Duties Act, a transfer of any interest (part or whole) in an immovable property is chargeable with stamp duty. Stamp duty is calculated based on the greater of the purchase price or the market value of the share transferred.

The transfer of a nominal share in the property (say, 1 per cent) to your fiancee will attract less stamp duty and enable you to achieve your objective with the lowest cost.

Lie Chin ChinPartner Lie Kee Pong Partnership

Changing hands

Types of home ownership

A joint tenancy is a form of ownership where all co-owners have an equal interest in the property regardless of how much each one paid.

A tenancy-in-common is a form of ownership whereby each co-owner holds a separate and definite share. Stamp duty A transfer of any interest in an immovable property is chargeable with stamp duty. It is calculated based on the greater of the purchase price or the market value of the share transferred. The transfer of a nominal share in the property will attract less stamp duty.

Q I AM currently living with my mum. After my dad died, my elder brother became the joint owner of the flat with my mum. He has since gotten married and moved out and I am now the joint owner of this flat with my mum. All my elder siblings are married and have bought their own houses.

My mum is in her 80s. When she dies, will I become the sole owner of the flat? Can HDB allow a flat to be owned by only one person? Do my siblings have legal rights to force me to sell the flat since I became the joint owner by way of a ‘gift’ (as stated in the house deed) from my dad?

A Co-ownership of property can be either as a joint tenancy or as a tenancy-in-common. In the latter case, each co-owner’s share in the property is predetermined and known from the very start.

The most significant and important difference between these two types of co-ownership is that in a joint tenancy, after the death of a co-owner, the remaining survivors take the dead person’s share and eventually the last and sole survivor takes all.

For a tenant-in-common, he can pass on his share by way of a will or according to the rules of intestacy. A co-owner who wants to pass on his interest in the property and not let the surviving co-owner take all, should therefore sever the joint tenancy, converting it into a tenancy-in-common.

You will first of all have to ascertain from the HDB lease whether you are a joint tenant or a tenant-in-common with your mother. I take it that when you use the word ‘joint owner’, you actually mean co-owner. If you are a joint tenant, you will become the sole owner upon her death.

If you are a tenant-in-common and it is your mother’s wish that you should be the sole owner upon her death, then your mother should make a will to that effect, so that there is no room for future ambiguity or dispute.

As you became an owner by way of a gift, that does not weaken your ownership. So long as there is an outright intention to make a gift together with delivery of the property, then that is an outright gift in every sense of the word unless there was an agreement behind the making of the gift to you.

In law, it is possible to make a gift to someone on the face of it but at the same time, if the recipient is told of a purpose or of some beneficiaries whom the maker of the gift really wants to benefit, you would then be said to be holding the property on trust. As this property is an HDB flat, no trust can be created without HDB’s prior approval and if so created, such a trust is void.

The HDB Act says there shall be no resulting or constructive trust of an HDB property as would arise if money is, say, contributed by one person but someone else is the owner of the HDB flat. This is understandable because the objective of the HDB is to provide affordable public housing and not to allow those with money to ‘invest’ in HDB flats behind a trust by using other people’s names.

Finally, although there has been a significant relaxation of HDB’s rules for singles to own flats, you should check with HDB about your eligibility to hold the flat as a single lessee. Much would depend on such factors as your age and the type of flat.

Source : Sunday Times - 2 Apr 2006