Bulk sales race to the finish line

BESIDES Sing Holdings' Robin Residences, at least two other bulk transactions were done late on Friday night to avoid a new stamp duty that took effect the following day.

Sources tipped the two projects as TwentyOne Angullia Park and The Lumos in Leonie Hill - both freehold district 9 projects. A bulk sale is also believed to have been done at The Line @ Tanjong Rhu

In the TwentyOne Angullia Park deal, Tower Capital Asia founder Danny Koh and Ben Yeo, formerly of Guthrie GTS, are understood to have set up a consortium that is buying into the company that developed the 54-unit condo project along Orchard Boulevard. The deal is subject to various conditions, including regulatory approvals.

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The 36-storey project, developed by a unit of China Sonangol, received Temporary Occupation Permit (TOP) in April 2014. Under the government's Qualifying Certificate (QC) rules for foreign housing developers sales of all units in the condo were required to have been completed by April 2016, or two years after the TOP date.

A foreign housing developer - defined as one that has even a single non-Singaporean shareholder or director - that comes under QC rules may seek more time to finish selling its project in exchange for paying hefty extension charges to the state. The company that developed TwentyOne Angullia Park paid the first year of extension charges, prorated to unsold units at the time, estimated at S$18 million. A second year of extension charges of around S$34 million would have been due next month. A foreign housing developer in this situation would have had to keep paying extension charges until it sells out all the units in the development.

To come out of such a predicament, what a number of affected developers under QC rules have been doing is to effect bulk sales of balance units in the project via a sale of shares in the development company - to a Singaporean buyer or a group of all Singapore buyers. The company may then apply to the authorities for a clearance certificate, upon issuance of which it may then apply to cancel the QC.

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Until last Friday, the incentive for these Singaporean investors to participate in such an indirect method of buying unsold units in a residential development, instead of buying the units directly, was a substantial saving in stamp duties on their purchase price due to a tax loophole.

But not any longer. Late Friday morning, the government announced a new rule that took effect the following day, March 11. It introduced the additional conveyance duties or ACD, which is a new stamp duty imposed on residential property transactions involving significant changes in equity interest in entities that primarily hold residential properties. This closed the previous differential in stamp duty treatment between such indirect property transactions and direct property deals.

The announcement incentivised some of the parties who were in advanced stages of bulk residential deals to swiftly wrap up their transactions by midnight Friday.

Back in early November, BT had already reported that CS Land, formerly China Sonangol, was in talks for the sale of TwentyOne Angullia Park's balance units and that one of the parties is a consortium led by Mr Yeo, the former managing director of engineering and property group Guthrie GTS. He could not be contacted yesterday. Mr Koh of Tower Capital declined to comment. CS Land too said it was unable to comment at this point in time.

Based on URA Realis data, caveats for the purchase of 13 units in the development have been lodged. The earlier BT article cited sources saying that the balance units could be worth about S$2,700 psf. The 13 sold units have a total saleable area of 42,399 sq ft, leaving a saleable area of 109,601 sq ft for the remaining 41 units. A price of S$2,700 psf translates to S$295.9 million.

As for The Line @ Tanjong Rhu, where a bulk sale is also said to have been inked, 84 of its 130 units had yet to be sold as at end-January, based on government data. The project is understood to have received TOP recently.

Along Leonie Hill, a joint-venture between Koh Brothers and Heeton is understood to have sold its shares in the company that developed The Lumos, to a group of Singaporeans.

In the Robin Residences deal, Sing Holdings is said to have sold its 100 per cent stake in the company that developed the project to the co-founders of Evia Real Estate, Leslie Lim and Vincent Ong. They acquired the remaining 29 strata units based on an agreed property value of S$72.7 million.

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However, there were also some deals that could not be inked on Friday and thus missed a bulk sales opportunity.

An example would be Alpha Investment Partners' proposed sale of 22 units at Draycott Eight to Angelo Gordon, an American alternative investment manager.

The deal was in the exclusive due diligence period when the government made its announcement. Apparently, the price being negotiated for the 65,401 sq ft of strata area is around S$1,900 psf on a net basis after factoring in some income support.

On a more positive note, Alpha recently sealed a deal to sell its balance 22 units at Cityvista Residences in the Peck Hay Road area. The units - each held by a separate special purpose vehicle - are understood to have been bought by an Indonesian. The price is understood to be around S$1,800 psf and the units are part of a portfolio of units in the development that Alpha bought from the project's developer, a joint-venture involving Chip Eng Seng, some time ago.

This article was first published on Mar 14, 2017.
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