Tuesday, August 5, 2008

Stalemate Threatens Thomson Collective Sale

Source : The Straits Times, Aug 5, 2008

KSH Holdings seeking more time to close property deal, say sources

THE collective sale of five small estates near Thomson Road seems to have hit the rocks, with the owners of 88 units set to walk away - taking the $12 million deposit with them.

ROADBLOCK: KSH reportedly had to delay the purchase as it had trouble acquiring from the SLA part of a road that divides one development from the other four.

Unlike in recently aborted sales, where the developers appeared to have changed their minds because of the property slide, this deal may likely become a victim of a three-way stalemate among the buyers, sellers and the Singapore Land Authority (SLA).

The deal was inked last November, when a unit of listed developer KSH Holdings signed up to buy Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui for $120 million.

It also paid a 10 per cent deposit.

The buyers, however, have failed to close the sale despite a two-month extension.

One owner, who declined to be named, told The Straits Times yesterday that KSH offered to stump up $3 million as additional deposit if the sellers would agree to a further three-month extension.

It is understood the sellers are considering the offer.

KSH declined to comment yesterday, but sources said the deal hit problems when the firm tried to buy a 1,000sq m section of a road from the SLA.

The land is needed so the five estates near Rangoon and Moulmein roads can be combined and developed into one large project.

This will give a land area of 74,355 sq ft and a gross floor area of 208,196 sq ft. It will allow a high-rise block with about 142 luxury flats each measuring 1,250 sq ft on average.

Industry sources told The Straits Times that the SLA had priced the land at $16 million - double what KSH and industry experts expected.

The property firm has appealed to the SLA to review the price.

The deal now seems to hinge on whether the sellers and buyers can reach an agreement.

The owners are said to be considering the offer and have requested a specific date when the sale can be completed from the buyers.

If no consensus is reached - and the sellers reject the $3 million sweetener - the deal will be off, but the flat owners will keep the $12 million deposit. That works out to about $136,000 on average for each of the 88 units.

If the deal goes through, on the other hand, each unit stands to receive between $906,856 and $1,908,491.

There has been a string of failed collective sales since sentiment in the property market turned sour.

Bravo Building Construction withdrew from a series of purchases earlier this year.

It forfeited deposits of $1.6million for Makeway View, $25.8 million for Tulip Garden and $12 million for Pender Court rather than go ahead with the deals.

Property giants Far East Organization and Frasers Centrepoint walked away from a $405 million deal to buy Tampines Court when the Strata Titles Board dismissed their sale application.

Analysts said the failed deals could be indicative of the wider credit crunch, with developers finding it difficult to find financiers to complete their purchases.

'Even if the developers can complete their projects, they will be wondering if they can achieve their desired prices in this market,' said Mr Colin Tan, the head of research and consultancy at Chesterton International.

Savills Singapore's director of business development and marketing, Mr Ku Swee Yong, agreed: 'Buyers face quite high levels of risk now to go ahead with projects inked at last year's prices.'

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