The Straits Times | MARCH 22, 2013
Resolution of ownership issues allows collective sale decision to be tackled
The huge Spring Grove condominium in plush Grange Road could hit the market at a reserve price of $1.045 billion, now that complex ownership issues have finally been ironed out.
The 325-unit estate is on the site of the former residence of the American ambassador and has been tipped for a collective sale since owners were asked to consider forming a sales committee in February last year.
But the tricky nature of the estate's ownership threw up hurdles. The site has a 99-year lease, which started in 1991 and reverts back to the United States government at the end of the tenure as freehold land.
This threw up a number of legal issues but The Straits Times understands that these have been sorted out, with the US government working together with home owners in a collective sale bid.
If the $1.045 billion - or $1,888 per sq ft (psf) per plot ratio - land price is met, $924 million will be earmarked for owners.
The remaining $121 million will go to the US government for it to top up the lease to a new 99-year one, according to the draft collective sale agreement obtained by The Straits Times.
City Developments bought the 24,481 sq m plot from the US government in 1991 and built the 325-unit Spring Grove on it.
With the ownership issue resolved, the next step occurs on Sunday when the sale committee will ask owners at an extraordinary general meeting to give the green light for the collective sale to proceed under these terms. An 80 per cent consensus is required to mount a sale attempt.
The reserve price of $924 million for the home owners works out to a 21 per cent premium, compared with its current market value of about $727 million, the sale documents stated.
Owners of two- to four-bedroom units and penthouses can expect a reserve price of between $2.19 million and $5.6 million for each apartment or average psf prices of $2,100.
Resale prices of 14 units sold since the start of last year averaged $1,610 psf.
Sales committee chairman Joseph Chia said the collective sale presents a window of opportunity as the US government is willing to explore a top-up of the lease after negotiations with the sales committee over the past year.
"Some owners are happy while others are undecided because they like the place and are unsure if they can get something comparable if they sell."
Mr Chia added that the site will be marketed globally.
But experts say a sale is likely to be an uphill task as the premium of 20 per cent might be insufficient to entice owners to part with their homes.
Even if the development makes it to the market, the lacklustre high-end segment, the pressures of the additional buyer's stamp duty and the risk of more cooling measures have also affected developers' sentiment, they add.
Mr Lee Liat Yeang, a partner at Rodyk & Davidson's real estate practice group, said average premiums for collective sale sites ranged from 30 to 50 per cent over the past two years.
They were higher during the en-bloc boom in 2006 and 2007 but have moderated as home values surged.
"Developers' appetite for large value en-bloc sites is unlikely to be big in the real estate market today in view of the challenges such as rising construction costs and the recent cooling measures," he said.
"No collective sale deal has been done past that billion-dollar level since Farrer Court in 2007."
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