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The firm retains 800 workshops, puts off decision on future of two subsidiaries

JTC Corporation will choose a mix of trade sales and a real estate investment trust (Reit) to sell a sizeable chunk of its industrial properties earmarked for divestment.

But 800 workshops housing car repair shops and other small businesses will be retained by JTC, much to the relief of the firms, which feared that having private-sector landlords could lead to rent hikes and unfavourable lease terms.

JTC also put off a decision on the future of two JTC subsidiaries - business park developer Ascendas and project consultancy Jurong International Holdings. It said these were more complex, given their regional operations.

The announcement yesterday comes almost a year after JTC announced plans to divest itself of half its portfolio of factories and warehouses.

The move, which involves assets worth billions of dollars, is part of efforts by the Government to get out of market segments in which there is active private-sector participation.

Property firms welcomed the sale as they reckon it will lead to a more open and vibrant market.

But small businesses expressed concerns that rental and business costs may rise as private-sector landlords are less likely to offer special rebates to help them in bad times.

Companies in the JTC workshops, initially slated for sale, were particularly worried.

These outfits, many of which are sole proprietorships, own the premises in which they operate but not the land the workshops are built on.

This gives them little bargaining power with their landlords as it is hard for them to move their operations, said Mr Lawrence Leow, president of the Association of Small and Medium Enterprises.

Being generally smaller, companies in the workshops are more vulnerable to rental hikes, said a Knight Frank spokesman.

Alternative locations, he said, are also hard to find as the firms - many are car workshops - need a drive-in facility.

‘Also, the customers of many of these workshops often remember only the location and not the name of the company,’ he added.

Said Mr Leow: ‘This is really good news and I’m glad that JTC really looked into our inputs very positively and has made changes.’

He said the association has been voicing its concerns to JTC, culminating in a dialogue session in mid-July.

With the workshops excluded from the sale, JTC said the properties it is divesting have a total net floor area of 1.7 million sq m.

They consist mainly of flatted factories, ramp-up and stack-up factories, a warehouse building and three office blocks in the International Business Park and the Changi Business Park.

JTC gave little further detail of its plans except that it will take at least another 18 months to complete.

It said it had decided on a combination of trade sale and Reit after consulting with experts who proposed the mixed approach.

The company added that it will engage investment bankers and real estate firms to work out the details of the deal.

JTC declined to comment on earlier reports quoting sources that said $1.5 billion to $2 billion of the assets will be put into a Reit which will be launched in an initial public offering next year.

Industry watchers said a Reit makes a lot of sense when JTC is divesting so many assets.

But the trade sales may be due to firm offers received by JTC for some of its more valuable properties.

Mr Leow said the JTC properties should not be sold to an existing Reit but a new one, to ensure competitive rentals.

Source : Straits Times - 14 Oct 2006

Success could spur other ageing malls to do the same, say property experts

GOLDEN Mile Complex - once described in Parliament as a national disgrace - could soon be redeveloped into a spanking new building if collective sale plans work out.

Some owners of the 705-unit strata-titled mixed development are keen on launching such a sale.

Their success could motivate the owners of other ageing strata-titled malls to follow suit, consultants said.

Malls such as Lucky Plaza, Far East Plaza and People’s Park Complex are seen as prime candidates for redevelopment as they sit on valuable land.

The difficulty, however, is getting at least 80 per cent of the hundreds of individual owners to agree to a sale.

The 16-storey Golden Mile Complex in Beach Road, for example, has 411 shops, 226 offices and 68 residential units. The building’s 99-year lease started from 1969.

‘Because there are so many units and different uses, the sale process will be a very complex and lengthy one,’ property consultancy Colliers International’s director for investment sales, Mr Ho Eng Joo, said.

‘But if the sale goes through, it will be a record for a mixed development with the most number of owners.’

The shops in Golden Mile Complex - housing a mix of travel agencies, eateries and sundry shops selling Thai products - are estimated to be worth $360 per sq ft (psf) to $530 psf if the units are sold individually.

The offices on the fourth to the ninth floors are worth $250 psf to $270 psf, while the residential units on the 10th to the 16th floors are worth between $230 psf and $250 psf.

Developer City Developments owns some strata-titled units in the complex, which were part of an aborted $788 million sale to Suntec Real Estate Investment Trust last year.

This is not the first time the owners of Golden Mile Complex are considering selling en bloc.

Almost three years ago, some owners tried for a collective sale but found that property prices then were not attractive, said a source.

This time round, however, property prices may have risen enough to convince owners such as Mr N.P. Tan, who occupies a third-floor unit selling office supplies.

His decision on whether or not to sell will depend solely on the price he is offered, he said yesterday.

About 200 Golden Mile Complex owners met a property agent last night for preliminary discussions and appointed a sales committee to take charge of matters.

The agent is said to have estimated that a collective sale could reap the owners a 120 per cent premium over current market values.

However, for such a large mixed development, apportionment - or dividing the spoils - is usually a major headache, consultants said.

‘It is comparatively easy to get a consensus on apportionment for residential and office uses, but it may not be so straightforward for other uses such as strata-titled carparks and particularly, shops,’ said property consultancy Knight Frank executive director Foo Suan Peng.

A retail unit’s value is affected more by location - whether it is facing the street or in a quiet corner - than residential units, for example.

Still, the potential windfall from a collective sale has proved to be a draw not just for Golden Mile Complex owners.

Owners of other malls such as Ming Arcade in Cuscaden Road and Upper Serangoon Shopping Centre are already working towards collective sales.

Mr Foo said that a successive sale of Golden Mile Complex will prove that too many cooks do not always spoil the broth.

‘If it is sold, it will show other mall owners that where there is a will, there is a way,’ he said.

joyceteo@sph.com.sg

NEW HOPES FOR OLD BUILDING

‘Because there are so many units and different uses, the sale process will be a very complex and lengthy one.

But if the sale goes through, it will be a record for a mixed development with the most number of owners.’ MR HO, on issues in launching a sale for Golden Mile Complex. The 16-storey building in Beach Road has 411 shops, 226 offices and 68 residential units

Source : Straits Times - 14 Oct 2006

It intends to divest some of its high rise ready-built industrial property

JTC Corporation said yesterday that some of its high-rise ready-built industrial property will be divested into a real estate investment trust (Reit), making it the first statutory board to go down the Reit route.

The announcement confirms an earlier report in The Business Times quoting market sources saying that JTC would divest properties into a Reit.

JTC said properties with net floor area of about 1.7 million square metres - comprising mainly of flatted factories, ramp-up and stack-up factories, three multi-tenanted business park buildings and a warehouse building - will be sold via a combination of a Reit and trade sale.

‘The decision to go for a combination of a Reit and trade sale is to ensure competitiveness of the industrial property market post-divestment,’ JTC said.

It also wants to ‘ensure price stability while achieving fair market value for the properties divested’, it said.

JTC will look to hire consultants and market analysts over the next few months to assist with the divestment process. It envisages the divestment exercise will take at least 18 months to complete.

As to which properties will go where, a JTC spokesman said: ‘The eventual portfolios to be divested via a Reit and trade sale have yet to be finalised.’

But JTC, which first announced plans to consider selling chunks of its property portfolio and two subsidiaries last November - business park developer Ascendas and project consultancy Jurong International Holdings - so it can focus on more of a strategic role, will not be selling 800 workshops.

The statutory board will retain these workshops, which are located all over the island and mostly occupied by small and medium enterprises in engineering-related trades, ‘to facilitate long-term estate planning’. The JTC spokesman said: ‘At this stage, we do not have definite plans for the workshops.’

As to the fate of Jurong International and Ascendas, JTC says it is ’still studying the future plans and divestment options’ and details will be announced once a decision is made.

The JTC spokesman told BT: ‘Given the large and complex portfolios of the two companies, more time is needed to study the options.

‘The divestment decision needs to be carefully considered to ensure that the two companies continue to have long-term strategic value as well as to be able to expand and grow their capabilities.’

Foreign banks UBS and JP Morgan and property consultants Colliers International and Chesterton International advised JTC in the first phase of its divestment exercise.

Competition to advise JTC for the second phase of the exercise will be intense, market players say, as the parties involved stand to earn substantial fees from a successful initial public offer of a Reit and trade sale.

Singapore’s Reit market is seen as a major success in Asia, with 13 Reits, owning assets across various property classes, currently listed.

Market players see a listing of a Reit by JTC, which could have properties worth more than $1.5 billion, as competing for investor attention and funds against existing industrial Reits.

These industrial rates are namely, Ascendas Reit, Mapletree Logistics Trust and Cambridge Industrial Trust.

Source : Business Times - 14 Oct 2006

Last owner who held out for more compensation for Circle Line relocation drops case

THE dust raised over the demolition of an unsafe building near the MRT Circle Line has finally settled as the last of the displaced owners who held out for more compensation threw in the towel.

Mr Michael Ng, co-owner of a residential unit in Hock Kee House, said he had decided to drop his claim on the advice of his lawyer, Mr Peter Ong.

‘I felt I’d a slim chance of winning, and the cost of fighting to the end could be fantastically high,’ said Mr Ng who, with a partner, had bought one of the building’s 28 units for $490,000 in 1997 through their company, Challenger Investment.

They had received $269,000 in compensation but wanted about $45,000 more to cover the balance of the bank loan taken to buy the property. But, said Mr Ng, ‘I remain unsatisfied’.

The withdrawal of this last outstanding case brings an end to a saga that started last August, when the occupants of Hock Kee House - which also includes seven commercial units - were given four weeks to move out as the building had to be torn down because of the MRT Circle Line works.

It stood just two car lengths away from the site. As the building was not constructed on piling, it could collapse when deep excavation resumed for the MRT line.

Owners and tenants chafed at having to uproot from a community in which many of them had lived and worked for four decades. They were also disturbed by the short notice and questioned the amount of compensation offered.

The deadline was later extended by three weeks. Each shophouse owner received between $900,000 and $1 million, while the residents were offered between $250,000 and $365,000 each.

But many, though they understood they had to move, felt they deserved more cash.

One resident took his case to an appeals board and won an extra $10,000 from the authorities last December. Following this decision, the Singapore Land Authority increased the compensation to the other home owners by an average of 1.5 per cent to 5.5 per cent each.

For the owners and tenants of Hock Kee, life after the loss of their homes and business premises has been a mixed bag.

A property consultant who advised Hock Kee owners and helped them negotiate their compensation felt the shop owners got a better deal than the residents.

‘The gap between the valuation of the residences and that of the shop units is too wide,’ said Ms Angela Lee, the managing director of Lianco International Property.

She helped owners like Mr Tan Boon Piow, 68, who had rented out his Hock Kee shop to a karaoke pub, buy a two-storey Bedok Reservoir shophouse for about $700,000 with his roughly $1 million compensation.

The monthly rent he collects from his tailor tenant is about $1,500 lower than the amount he had received at Hock Kee, but he said his new unit was ‘not bad’.

‘No loss… but no win either,’ he said of the relocation.

Some of the Hock Kee residents now live in flats in Eunos, which they bought from the Housing Board after receiving a waiver because of their ‘extenuating circumstances’. They were exempt from the mandatory 30-month waiting period before former owners of private homes can buy flats from the HDB.

One displaced resident, a 52-year-old teacher who wanted to be known only as Madam Chong, told The Straits Times that her mother and brother were ’satisfied’ with their new four-room HDB flat.

‘The location is not bad, it’s near the MRT station. But it’s much smaller than the old unit,’ she said in Mandarin.

But her 80-year-old mother had complained that she was lonely, as she hardly saw her old neighbours, who are ’scattered’ across several blocks in Eunos.

‘My mother said she bumped into them only at the coffee shop or market. Back in Hock Kee, when you went downstairs, she knew everyone.

‘Now, everyone she meets is a stranger,’ she said.

COST OF FIGHTING CASE TOO HIGH

‘I felt I’d a slim chance of winning, and the cost of fighting to the end could be fantastically high.’

MR MICHAEL NG, co-owner of a residential unit in Hock Kee House, on dropping his claim for more compensation on the advice of his lawyer

Source : Straits Times - 13 Oct 2006

Accused of helping client make false claim, he may file High Court application

THE lawyer charged in a ‘cashback’ property deal has failed to persuade a judge to throw out the case against him.

Bachoo Mohan Singh, 58, has been on trial for 36 days for allegedly helping a client make a false claim before a court two years ago.

The lawyer had represented an aggrieved flat owner, Mr Koh Sia Kang, 52, when he sued the buyers of his flat over a botched sale. Singh is said to have instructed law firm K.K. Yap & Partners, where he worked as a consultant, to file the suit containing a false claim against the buyers.

The cashback scam involves declaring a higher price for a property than its actual sale price in order to secure a higher loan for the buyer. The cash difference between the real and declared price is then kept by the buyer, or split between buyer and seller.

Reports of illegal cashback deals prompted the Government to introduce regulations to ban the practice.

Mr Koh’s case went to court after he claimed he was cheated of money in the transaction. He also sued the property agent who had arranged the aborted sale to a couple.

Property agent Kereen Teo Pei Pei, 28, was the first person to be convicted in a cashback deal. She was fired from real estate company PropNex after she was fined $8,000 last year for trying to cheat DBS Bank by inflating the selling price of Mr Koh’s $390,000 five-room Redhill flat by $100,000. Her manager was given a similar fine.

On July 7, Deputy Public Prosecutors Lee Sing Lit, Vincent Leow and Tan Wee Soon closed their case against Singh after calling 10 witnesses.

They argued that the evidence clearly showed that the $490,000 sale price of the flat was solely to enable the buyers to take a higher loan from the bank in a cashback. They said both Mr Koh and Singh knew of this before the suit was filed.

Singh’s lawyer, Senior Counsel K. Shanmugam, had argued that the prosecution had failed to prove that the claim was false, or that Mr Koh was dishonest in making the claim. He also argued that Singh did not know that Mr Koh was dishonest in making the false claim.

But yesterday, District Judge Bala Reddy found that the prosecution had made out a case and called on Singh to enter his defence.

Mr Shanmugam subsequently told the court that Singh is considering filing an application to the High Court to rule on a legal point related to his case.

The case was adjourned to next Monday to give Singh time to decide his next course of action.

Source : Straits Times - 13 Oct 2006