Neptune Court privatisation surprise

Source : The New Paper – 8 Jun 2009

TWO YEARS ago, when Neptune Court residents thought of privatising their estate, they faced a daunting $144 million hurdle.

That was the estimate for what they would have to pay the Ministry of Finance (MOF), which owns the land.

That price – believed to be one of the highest privatisation fees – meant that each apartment owner would have to fork out more than $190,000 for the deal.

Privatisation would not only let them sell en bloc but would enhance the value of each unit as well.

But the plan was derailed.

Now the Marine Parade Road estate is again trying for privatisation.

And the new quote from the Finance Ministry? About $40 million – 70 per cent less than what it was about a year and a half ago.

Like many Neptune Court residents, retiree Shamsuddin Akib, 76, is stumped by the disparity between the two figures.

At that price, each home owner would have to pay only about $50,000 – not much more than a fourth of what they would have had to pay in November 2007.

He said: ‘It’s absurd that the price difference is so big. How did they (the Ministry) value the land in both cases? And how can the price drop be so big?’

The retiree has been living at the 99-year leasehold estate with his family since 1975. His wife was a civil servant, and they bought the 1,600 sq ft unit for about $55,000 then.

Recent URA transaction figures suggest the unit is now worth about $800,000.

Mr Shamsuddin is undecided about voting for the privatisation. ‘I’ve lived here for so long. I like it and it doesn’t make sense for me to pay for privatisation if I am not going to sell it,’ he said.

Will retirees sell?

At least 75 per cent of the owners must agree to the privatisation. There are 752 units in the estate which, at 780,000 sq ft, is about the size of 15 football fields.

Another estate nearby – Lagoon View – is also thinking of privatisation.

The conversion of these estates to strata-titled ones (meaning owners hold the title to their units and the common property) would clear the way for a potential collective sale.

The privatisation fee covers the cost of the common property being transferred to the owners, legal costs, survey costs and other processing fees.

Another Neptune Court resident, who declined to be named, said a committee was set up in March during the annual general meeting to look into the privatisation.

The $40m privatisation fee was mentioned during that meeting and a circular was sent to residents last month saying the Ministry is open to selling the land and common areas to the residents at that price.

He said: ‘The current estimated amount is definitely more reasonable than the $190,000 then. But how it suddenly dropped to this level is something surprising for the residents.

‘Many residents here are retirees who have no plans to sell their property either individually or via an en bloc (sale). So, what’s the point of privatisation then?’

The Neptune Court Owners’ Association (NCOA) declined to comment on the privatisation issue.

When contacted, the Ministry would only say that market conditions have changed from two years ago and the NCOA has been informed of a more recent indicative value for the land and common areas.

Lagoon View and Normanton Park owners associations have also been told of indicative values. The Ministry did not elaborate on these values.

It said that when Neptune Court was first told of the indicative value of the land and common areas in 2007, a survey was done to get detailed information about the estate.

‘In general, when a significant majority of owners in any of these estates indicate that they wish to purchase the land and common areas in their estates, MOF will be prepared to sell them to the owners collectively, at fair market value,’ it said.

HSR Property Group executive director Eric Cheng said the drop in privatisation fees may seem steep, but one has to consider current market conditions and sentiments.

The property market has cooled considerably since the en bloc fever two years ago. Private property prices in that area (Marine Parade) have dropped by up to 35 per cent since then, he explained.

‘The Government is doing the right thing. If the privatisation fee is too high, the residents won’t pay for it and there’s no chance of an en bloc (sale),’ he said.

‘But with privatisation, developers are more inclined to buy the estate and redevelop that piece of land to maximise the plot ratio. In this way, the usage of the land is intensified.’