Straits Times: Tue, Feb 28
ONE of the largest residential sites in Grange Road could hit the market if talks between home owners and the United States Embassy are successful.
Spring Grove - on the site of the former residence of the US ambassador - is being considered for collective sale, although the process is likely to prove difficult due to the complex nature of the estate's ownership.
The 24,481 sq m plot was acquired from the US government by City Developments more than 20 years ago and developed into a 325-unit condominium.
It has a 99-year lease that started on Dec 1, 1991. Ownership will revert to the US government - which has freehold rights to the estate - at the end of that period.
This is unusual as it is the Government that usually sells 99-year leasehold sites in its land sales programme while holding its freehold interest.
In November, the embassy told a committee hoping to have the estate converted to freehold status that the 'most appropriate way forward' for both parties would be through open bidding for their respective rights.
This would typically mean that the MCST subsidiary proprietors - or home owners - consider the potential of a collective sale, said the notice obtained by The Straits Times.
'The combined offer of vacant possession of land along with either long-term leasehold or freehold rights would be quite compelling given the location and size of the estate in prime district 9 and is likely, in our view, to offer the best possible returns to both parties in an open and transparent manner.'
The notice also requested that home owners consider forming a sales committee for the estate.
The chairman of Spring Grove's management committee, Mr Parag Goradia, said the sales committee will be formed after the estate's extraordinary general meeting in April.
The block is expected to fetch 'over a billion dollars' and is likely to come onto the market in the next six to 12 months, he added.
Mr Goradia noted that most residents want to sell en bloc while the US government is still keen to divest its interest.
However, there are concerns from those who recently bought units there, as they would have to pay the sellers' stamp duty on a sale. Other owners want to continue to stay at Spring Grove.
'I'm fairly confident that we can achieve the 80 per cent because most of the owners are investors renting out the units... We are hoping to target foreign developers who might be looking for a project to establish their name here since this is one of the biggest plots of prime land,' Mr Goradia added.
Experts say a possible collective sale will involve a more complicated process.
Credo Real Estate managing director Karamjit Singh said home owners and the US government must first enter into a joint sale agreement to sell the freehold land and building and agree on the total sale price and how they would share the proceeds.
'While there are no precedents on sharing formulas - between the home owners and the freehold interest owner in an en bloc sale - there could be parallels drawn from how leasehold en blocs are priced against the top up premium payable to the state,' he added.
Examples of these include Farrer Court and Amberville, where developers paid the Government to have the lease for the redeveloped project wound back to 99 years.
Law firm Rodyk & Davidson partner Norman Ho said two separate tenders could also be conducted simultaneously: one for home owners collectively for the remainder of their 99-year lease and another on behalf of the US Embassy, either for an additional leasehold interest or the sale of the estate's freehold right.
'The bids for both tenders would likely be evaluated together, as winning one tender is likely to be conditional on winning the other,' he said.
'It doesn't make sense for a developer to win just the remaining 80 odd years left on the estate or just the use of the freehold land after the expiry of the present lease term.'
99-year-lease homes on freehold land 'harder to sell en bloc'
Straits Times: Tue, Feb 28
HOMES with 99-year leases that have been built on freehold land will be harder to sell en bloc, experts say.
This is because, with an estate where the freehold rights are not held by either the Government or the home owners, a collective sale can only be explored with the agreement of the land owner.
The land owner has power over whether the lease tenure can be topped up, or the freehold rights to the estate sold.
When the lease runs down for 99-year projects on land owned by the Government, developers which redevelop the site in a collective sale pay the Government to have the lease rewound to 99 years.
This is a fairly routine matter but not so when a non-government owner is involved.
The owner can either grant a lease top-up, buy back the land, sell the freehold tenure, or do nothing.
SLP International research head Nicholas Mak noted that while collective sales are still possible, the price for a lease top-up will be set by the land owner, who may ask for 'a king's ransom'.
'Home owners might be caught in a bind in the future... The land owner can seek an exorbitant price, to the extent that it is unattractive to other developers, and in the end, as the lease runs out and the property loses its resale value, it will be sold back to the land owner instead.'
Credo Real Estate managing director Karamjit Singh said: 'A collective sale is only feasible if the land owner says 'yes', and they can't be forced to do so.
'If the land owner wishes to repossess the land upon the expiration of the lease, the (home owners) would not be able to en bloc it and would have to see out the remainder of their lease.'
Selling a lease term on freehold land is rare, but privately-owned developer Far East Organization has done it: The Shore Residences, on freehold land in Katong, is being sold with a 103-year lease.
While Far East had to settle for lower prices for the leasehold units, this move will allow the family-owned firm to hold on to the site for the benefit of future generations, experts say.
Far East also launched Cabana in Sunrise Terrace and The Greenwood in Greenwood Avenue on freehold land with 103-year leases.Source: The Straits Times