Golden Mile's Hostile Takeover attempt

Golden Mile owners try backdoor route to en bloc sale
Straits Times – 19th Sep 2009
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Skulduggery, secretive investors, evasive property agents ... what a whole new angle this pseudo-en bloc is opening! This is a 'hostile takeover bloc' and should yield some questionable results. In effect, the owners would be selling the 'en bloc potential', so beloved by property agents, to one possible buyer who would then take on the mantle of bringing the process to completion. This 'possible buyer' could theoretically amalgamate all the units and either eventually own the whole complex or at least a controlling interest . The risk is enormous but the site's choice location could be the sway factor for them to even attempt such an approach. As with a listed company, a buyer could buy up a controlling number of shares (or share values in this case) and force an end result in their favour. Minority owners be damned! Bulldoze the lot over the edge as usual.

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Of course he could also end up holding a large number of expensive units if the en bloc gamble fails for the third time.

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The group is dangling exceptionally high reserve prices to tempt owners into selling.

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.

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My guess is it will not be much of a problem getting 20% to jump on the bandwagon early, as these owners would be selling their units on the open market at double the present market rate and would receive their proceeds in the same market as they sell - ie, they would not have to wait 2 to 3 years for the sale to go through the convoluted, statutory process of en bloc sale and find once again that their perceived windfall has turned into a pittance. Indeed they could very well garner 50% with this trick. But would they have to sign a mini-CSA amongst themselves, agreeing to a single RP? Probably not Since they aren't out to sell the estate, only their individual units, iand it isn't technically an 'en bloc'. and so wouldn't need to adhere to the LTSA rules regarding en bloc.

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Point to ponder: Since no valuation on the entire property has been done (I presume), how can these owners be sure that even double the market unit price is a suitable en bloc price? An en bloc price is determined by doing a formal valuation on the entire property (taking into account the new plot ratio) and not just an individual unit market value. Is it enough to buy a replacement unit in the area? Of course, selling individually and under no pressure is infinitely preferable to a forced sale, so no tears split if it later transpires they undersold. But perhaps owners should get a proper valuation done - just to be on the safe side.

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Unlike an en bloc sale, ‘we will not have any steering committee’, she said. ‘The agent talks to the owner direct.’

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So it is NOT an en bloc sale!

But if the number garnered is anything less than 100%, then an application for sale has to be made to the STB in order to force the remaining units into selling. Only the STB has the power to take away individual property rights in this way. At that point, a sale committee has to be formed and it has to show it complied with the statutory requirements laid down in the LTSA. But the 80% had not been secured via the en bloc route and none of the statutory requirements were fulfilled.. so how?

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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.

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'Held to ransom' or bargaining power - depending on which end of the telescope you are looking through. This is obviously a risk the investor would have taken into account before plunging in - so he cannot later cry foul on this matter. The buyer went on a buying spree hoping for a hostile takeover - and if his attempt failed then so be it- a gamblers loss only. By embarking on this route of sale, they are guaranteeing that there be no uniform selling price, another group of owners (who haven't sold out individually) might band together and feel just as justified for getting what they want for their units!

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Other possible groupings a): single buyer securing 20%+1

b): 20%+1 of present owners wanting 1-for-1 exchange

c): 20%+1 of present owners wanting $2 million each (maybe after doing a valuation!)

d): 20%+1 demanding something else

Remaining owners are die-hard stayers who will take the matter to the STB

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Conversely, that investor could demand a disproportionate share of proceeds in a future en bloc deal in return for his approval of the sale.

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So, the owners above who refuse to sell are holding others to 'ransom' (common blackmailers) and the investor-buyer doing the same thing is just 'demanding'! When the shoe is on the other foot, it seems........

Of course, I am assuming that the 'investor' is non other than the future developer and not just a consortium of investors looking to rape an estate and bring it to it's en bloc knees. I am sure there might be such consortium out there - a  group of rich boys pooling their resources and keeping their eyes skinned for small estates ripe for the picking. But GMC is too big for them, methinks, unless they are content with a smaller share.

Further ponderings:
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If a single buyer (or a consortium) manages to secure 99% without a CSA and without forming a sale committee by mopping up individual units in the open market (in property agent arranged blocks of 20% or in dribs 'n drabs) - they would still have to form a sale committee and draft a CSA/method of of proportionment of sale proceeds and go through the motions etc before application for sale to the STB. Without 100% approval  LTSA rules apply. Everything can be done post-haste and there is no real need for  strict adherence to the statutory requirements laid out in the Schedules (there is no penalty involved if done in good faith).

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After securing a large number of units for an sky-high price, can the 'majority' by share value then decide to state a lower RP in the CSA in order to attract more bids in an open tender or simply sell low to a private buyer? In other words, can the reserve price stated in the CSA be lower than the market price which had been previously set by the single buyer and can he sell cheap? Logically, why would he sell for less than he bought - unless he was selling the property to himself by proxy. Think NUS and GILLMAN HEIGHTS......

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hmm...

What if the Valuation does not support the RP? Could the 'sale committee' (ahem) be then justified in selling the remaining minority units at a lower price psf?

What if the buyer(s) hold off and waits for the market to drop before forcing their hand and push the minority out with an offering of peanuts?

What if the majority shareholder takes over the MC and intentionally runs the estate down,
perhaps driving the resale price down, too?


What protection does the LTSA offer in such a hostile takeover of the 'share value' of an estate?
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Since there is nothing collective about the sale via this route, it should not be allowed to proceed to the STB. Either the buyer secures 100% by this hostile takeover method or he doesn't. The LTSA should not be complicit in this kind of action ; shame on them if they are.