SC LETTER Dated 3rd Oct

This letter was sent to all SPs in defence of their RP1 at $739,200,000 (approx $1.32m/unit)

There was a letter in the post box today. I read it and thought it came from the Marketing Agent and was unsurprised to see that it actually came from the Sale Committee. When they are both singing from the same hymn sheet then you know it is game over. A total put-down of our centrally located, convenient and highly prized plot of land. The letter is just one scare tactic after the other and smacks of desperation

It begins by talking about the last GLS in Tampines

First scare tactic:- that redevelopment "is an expensive procedure that takes time away from the 5 years any developer is given to sell the developed estate before hefty fines and penalties come into force."  

Not quite.......  Under the Residential Property Act’s Qualifying Certificate (QC) rules, the sale of any new project within 5 years does not apply to local companies which are 100% owned by Singaporeans. Only developers with non-Singaporean shareholders or directors are required to obtain the Temporary Occupation Permit (TOP) for their housing developments within 5 years and to sell all dwelling units within 2 years from the date of TOP. What are these QC penalties? 

• "To extend the deadline, developers will have to fork out an additional 8 per cent, 16 per cent and 24 per cent of the land purchase price for the first, second and subsequent years respectively. The amount is pro-rated accordingly to the proportion of unsold units. Should developers fail to comply with the QC rules, their banker’s guarantee of 10 per cent of the land purchase price that they put up will be forfeited" 

But relax, developers have found loopholes in the law which allows them to bypass the QC penalties by doing one of two things: 

1. Bulk Sale: sell the remaining unsold units in bulk. A bulk sale, even if it is to the parent company of the developer, is also considered a “sale”. In that way, developers avoid paying the penalty as units are considered “sold”. They would still have to pay the ABSD tax but the total amount paid is still lower than the QC penalty they would have had to incur.  Developers can do the maths. 
2. De-list the company from the stock exchange. Any publicly listed company would automatically be considered to have foreign ownership (exceptions being FEO and Sentosa Cove projects for some reason) so by de-listing the company from the stock exchange and taking the company private, the developer would be able to apply for exemption from the QC rule.

The Government sees nothing wrong in these clever loopholes as can be seen from the SLA response in the REACH forum:

Next:

They talk about the RP being a win-win price for both SPs and Buyer.

The SC have set their sights low - the RP is the lowest minimum price worked out by Huttons (see 5th SC Minutes) and the SC are happy with that. They have a duty to get the best price but have settled for the first lowest recommendation and will not budge from that. If the task seems 'impossible' to them then they should resign. 

Next:

SPs have been denied copies of the RLV for inspection and we are expected to swallow ballpark figures without the benefit of their computations. Here we have 4 such ballpark figures:

Item 2 on the list is easily computed. There are government tables online and examples to follow. I do not understand how they managed to be $35 million off the mark. My calculation for the Development Charge for Tampines Court is $214,022,950. (SEE MY WORKING HERE) Did they use the correct land area and restriction in title to find the Base GFA? Did they use the correct Leasehold value as % of Freehold to calculate the Proposed DC Amount? Who knows, they keep their calculations out of reach.

Item 3 on the list  is incalculable as it is the Gov. Chief Valuer who will assess the market value of the new 99yr lease based on the residential use at GPR 2.8. The figure given is very close to my own estimation.

Item 4 on the list is also reasonable. Again it is actually LOWER than my own estimated costs. But what are they including on this 'other development costs'? Where is the much needed breakdown?

Please see my Residual Land Calculation and wonder where their numbers might vary. I think they have some very basic figures wrong, such as land area ....

The next item on the menu is a bald '$1.X Billion the developer will have to fork out'.
They seem to have done an easy tot up of the 4 items above to come to this number. They have conveniently left out how much profit the buyer will make by not telling us the Gross Development Value ( $2.5 Billion by my estimate). A sweetener for any deal, and big developers are savvy businessmen with deep pockets who know how to finance large projects when massive profit is to be made. 

Next, the old 50% premium chestnut. When will they ever stop pushing this unethical way of relating the single unit price with an enbloc land price?

The Sale Committee have no faith in Tampines Court. The minimum price has become their proposed sale price because they feel the estate is 'too big to swallow' . May I remind them of the equally huge ex-HUDC Waterfront View which was nicely devoured by the big developers and split into 4 highly profitable new condominiums. The profit there was astronomical.  

Next: comes the threat of what will happen in the future if we do not swallow their low RP:

Where there is money to be made, there will always be marketing agents and lawyers willing to try. The next SC (and there will be another for sure) hopefully will not start at the bottom and threaten, whine and fabricate their way to the 80%.  Start with what the 80% want and work hard to get it. Simple.

Next: They implore SPs not to expect to buy a new condo with their sales proceeds.

Next comes a list plucked from the air- according to them, SPs will have to shoulder a total of ~$11 million dollars in maintenance costs! I am not going to go down that ridiculous list as I was on the management committee for many years and know balderdash when I see it. The sale committee has sunk to a new level with the sole aim of frightening SPs into signing.

Their sign off:-

They think very little of TC. It is true that the last unit sale was $845k but they do not tell you that it  was an anomaly; a rental unit, 3rd floor walk-up facing the PIE slip road - the worst possible location in TC. The sellers bought pre-2002 (privatisation) so could be original owners and that they owned a unit in another condominium. This is akin to the MA hawking Hougang HUDCs as possible replacement units without first checking on the reason for the low sale prices there (see my post Hougang and the MAs 'extensive research').  Tampines Court units can demand up to $1.25m, that is a  fact conveniently ignored by this SC who choose to look for the worst in everything. 

Do they have a crystal ball on how the development charge will move over the next 5 years. Do they know that it is revised twice a year and sometimes it goes down, not up? It went down between 2008-2009 (twice), down between 2011- 2012 and again down 2014-2015. It has remained steady for 4 consecutive terms. The lease top-up is a minor item on the list and goes up slowly according to the URA Gov table. 

All in all, the whole tone of the letter is an insult to subsidiary proprietors. Full of negativity, prophesying doom and gloom if we don't sign.  A siege mentality showing with choice of words such as  'hefty fines, penalties, impossible, too big to swallow, TOO MUCH, THANKLESS, NO, heavy costs, DECLINING, NOT UPGRADE'

The choice is yours