Source : Straits Times – 19 Sep 2009
They hope 20 per cent of units will be sold to single buyer so there would be fewer parties to deal with
PROPERTY owners at the Golden Mile Complex who have failed twice to sell the property collectively are trying again – using a novel but risky backdoor approach.
A group of them have chosen, for now, to avoid obtaining the usual approval from owners of 80 per cent of the 705-unit mixed development in Beach Road required in collective sales.
Instead, they hope to persuade a number of owners there, as well as those at the Golden Mile Tower next door, to appoint a property agent to sell their individual offices, apartments or shops.
The group is dangling exceptionally high reserve prices to tempt owners into selling. The property agents it has roped in are promising to scout for offers of no less than $1,300 per sq feet (psf) for apartments and offices, which is double what they are fetching now.
Their plan is to pull together enough sellers to make up 20 per cent of owners in the two developments. The agent would then announce a public tender to sell those units jointly.
Once a single buyer picks up all these units, there would be fewer parties to deal with when negotiating over a future en bloc deal.
Still, even if they were able to consolidate 20 per cent of the ownership, they would face a significant hurdle in any eventual collective sale bid to secure the additional 60 per cent approval needed.
The secretive group behind this scheme has so far refused to say who the potential buyers are, or if, in fact, there are willing buyers prepared to pay a premium for the units
Property agents from C.H.Tan Associates, a team under PropNex, have been approaching owners in these two complexes to persuade them to sell. Its team leader, PropNex group division director Tan Chee Hwang, declined to comment when contacted by The Straits Times.
When The Straits Times contacted Ms Jessie Ong, a businessman who had earlier this year circulated pamphlets proposing both developments be torn down to make way for the tallest building in Asia, she acknowledged that she was one of the owners behind the proposal.
Ms Ong, who is in her mid-50s, said this first phase of the scheme will ’save (us) the trouble’ of going through the full work of a collective sale.
Unlike an en bloc sale, ‘we will not have any steering committee’, she said. ‘The agent talks to the owner direct.’
She would not say how big the group of owners is nor how many properties she owns in the two developments. But she revealed that the property brokers have been instructed to set a reserve price of $1,300 psf for apartments and offices, and $1,500 psf for shops. The group is hoping eventually to sell both buildings – which she says stand on 300,000 sq ft of land – for an estimated $2 billion.
The reserve prices for individual units have raised eyebrows, given that a 926 sq ft Golden Mile Complex apartment changed hands in June for just $565,000, or about $610 psf.
Properties sold through en bloc deals could attract double the price of properties sold individually, but consultants contacted doubt that the premium would apply in the Golden Mile case given the uncertainty of when – if at all – an en bloc sale would take place.
The collective sale market is also barely out of the doldrums after being battered in last year’s financial storm.
Golden Mile’s most recent bid at a collective sale was mounted in 2006.
A commonly cited objection was the fear the sale proceeds would not cover similar replacement units – some with sea views. Another objection involved its feted design, which conservationists wanted to be preserved.
Commenting on this latest attempt, Mr Ho Eng Joo, Colliers International’s executive director for investment sales, said: ‘I think it is quite ambitious. It is a lot of risk for investors.’
Complicating the situation: Both Golden Mile Complex and Tower stand on sites with 59 years left on 99-year leases.
A developer who buys the sites will have to pay millions to top up the leases if his plans are approved by the Government.
Mr Shaun Poh, a senior director at property consultancy DTZ Debenham Tie Leung, wondered how the balance of power would swing should the first stage of the Golden Mile plan result in a sale.
The investor who ends up owning a major chunk of the developments, he said, could be held to ransom by other owners who might refuse to allow redevelopment to take place unless they are paid sky-high prices for their units.
Conversely, that investor could demand a disproportionate share of proceeds in a future en bloc deal in return for his approval of the sale.
For the time being, however, the secretive approach of the group has made some owners there uneasy.
Golden Mile Complex apartment owner Dinesh Naidu, 35, said the PropNex agents seemed evasive when they approached him last week.
When he asked them who were behind the plan, ‘they said it was a group of investors’.
‘When I asked them who they were, they said it was confidential.’
But Ms Ong was optimistic: ‘Every owner here is very keen to sell.’
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