Glitches At Grangeford

Source : The Business Times, April 15, 2009

Sub-dividing of 140 apartments into 600 units runs into issues with URA

A mild controversy of sorts is developing at the Grangeford condo at Leonie Hill.

A fully owned subsidiary of Overseas Union Enterprise has signed a two-year lease with a master tenant for 170 apartments at the condo which OUE clinched through an en bloc sale.

The view inside: The sub-divided units at Grangeford condo have the distinct feel of a dormitory, leading to complaints being made to the authorities

Of the 170 apartments, master tenant Ideal Accommodation has just completed sub-dividing 140 apartments into a total of 600 units. It has found takers for about half of the units. Ideal Accommodation is asking monthly rents of $900 to $1,400 per unit. Each unit comes furnished with a bed, washing machine, an LCD TV and Internet connection.

However, the sub-division has left most of the units with unventilated corridors and without access to rubbish chutes. Owners of some units have to share toilets. The sub-divided units have the distinct feel of a dormitory, leading to complaints being made to the authorities.

When contacted, a spokeswoman for Urban Redevelopment Authority (URA) said: 'We have recently received feedback on an unauthorised change of use of the residential apartments (at Grangeford Apartments) to boarding house/dormitory use. This cannot be allowed as the Master Plan zoning for this site is for residential use only.

'URA has not received any application for the conversion of Grangeford Apartments to other non-residential use.'

The planning authority also said it has contacted the owner to seek clarification. 'URA (and) other government agencies will take the necessary enforcement action against the person responsible on any unauthorised use and for not complying with the requirements,' she added.

OUE's CEO Thio Gim Hock said: 'If URA says this cannot be done, we will comply with their requirements. If instructed by the authorities, Ideal may then have to remove the partitions and restore the units to their original apartment condition and they are then still free to rent out the entire apartments if they choose to do that.

'Alternatively, we may dissolve our master tenancy agreement with Ideal, take back the apartments and rent them out ourselves.'

Addressing the issue of sub-divided units not having access to rubbish chutes, OUE's executive vice-president (investor relations) Clement Wang said: 'Units without rubbish chutes will be provided with bins outside the units and these will be cleared once a day.'

BT understands that owners of apartments in other developments have also done similar sub-divisions. But the difference is one of scale - Grangeford now has 600 smaller units carved out of 140 apartments. Two-bedroom units were split into either three or four smaller units while the three-bedroom units were sub-divided into five to six units, Ideal Accommodation managing director Tang Yong, a Chinese citizen and Singapore PR, told BT.

The company provides rental housing accommodation, including student housing and serviced apartments.

It currently has more than 400 units/apartments for lease in 60 locations in Singapore. Its portfolio includes backpacker hotels in Geylang and the Lavender area.

Existing tenants of sub-divided units at Grangeford include expats and foreign students looking for lower-cost accommodation in District 9.

The $625 million collective sale of Grangeford to OUE was struck during the market peak in 2007. With the property downturn, OUE decided against redeveloping the project for the time being and opted to lease out the existing 193 units instead. It managed to rent out 22 apartments before it signed a master lease with Ideal Accommodation for 170 apartments.

Analysts say OUE will enjoy a significant saving in its property tax bill on Grangeford by sealing a master lease with Ideal Accommodation. Once it has leased at least 25 per cent of the apartments in Grangeford on tenancies of at least a year, Grangeford's annual value (AV) will be based on the estimated total annual rent that can be fetched by all the apartments in the development - which is a much smaller sum than if the AV were to be based on 5 per cent of the estimated freehold market value of the land. Property tax is calculated at 10 per cent of AV.