Hiap Hoe Purchases Surplus Unsold Units at Luxury Condo to Avoid Large Fines
To evade paying extra extension charges for the 50 left over units at Waterscape at Cavenagh, the developer of the 200-unit freehold residential project in District 9 had only one choice. That was to be acquired by its controlling shareholder. Obviously, a very major decision for any company. According to an SGX filing last week, Hiap Hoe Holdings bought the entire share capital of Cavenagh Properties for a whopping $31.08 million in cash. This is the revalued net asset value of the unsold units.
Nonetheless, the assets were evaluated by property consultancy Knight Frank. They determined that the properties held a market value of $95.47 million on an en bloc basis as of 30th September of this month. Various marketing agents put together different marketing strategies but Cavenagh Properties stated that it had not been able to make any fruitful efforts in disposing the remaining units to external buyers in the midst of the government’s property cooling procedures, such as the Total Debt Servicing Ratio (TDSR) and Additional Buyer’s Stamp Duty (ABSD).
In fact, things took a further downward spiral when they found out that the company has to comply with the Residential Property Act’s Qualifying Certificate (QC) rules which state that all developers with non-Singaporean directors or stockholders must obtain Temporary Occupation Permits (TOP) for their private housing projects and that too within the course of five years and then go on to sell all units within two years afterwards.
If a developer wishes to extend the sales deadline, they must pay the government an extra eight percent, 16 percent and 24 percent of the land acquisition price for the first, second and subsequent years, correspondingly.
“As the project obtained its TOP in September 2014, the group is guided by the deadline of 23 September 2016 to achieve 100 percent sales. It has since paid a fee of $1.19 million to extend the sales period by six months to 23 March 2017,” said the statement.
Nevertheless, Waterscape at Cavenagh went forward with being acquired by its supervisory shareholder as Singapore’s housing market, as predicted by experts, is expected to remain slow over the course of the next few months. The government has not been cooperative in providing any sure shot assurance that the cooling measures will be lifted anytime soon.
According to the statement, “The proposed disposal will enable the group to realize a gain of $23.99 million over the carrying value of the properties as at 30 September 2016, while avoiding future additional extension charges of about $1.19 million, $4.75 million and $7.13 million.”
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