CAPITALAND on Monday said it has sold its 100 per cent stake in Nassim Hill Realty (NHR) to an unrelated private company, Kheng Leong, for S$411.6 million.
Included in the sale are also 45 unsold units in The Nassim, a luxury freehold boutique condominium project in Nassim Hill which has sold only 10 units since 2015.
CapitaLand said it is doing this to avoid paying extension charges which would kick in from August 2017.
NHR, which developed The Nassim, is subject to the qualifying certificate (QC) condition to sell all the units in The Nassim within two years from August 2015, which was when it obtained its temporary occupation permit.
Should the developer still have 45 unsold units by August 2017, it would have to pay extension charges of S$9.3 million to extend the deadline by another year.
Should CapitaLand still require further extension after the first year, it would have to pay extension charges of S$18.6 million and S$27.9 million for the same number of unsold units in the second and third year respectively.
The developer said yesterday: “With this transaction, CapitaLand will avoid the extension charges payable if these 45 units remain unsold by the sell-by-date.
“In addition, CapitaLand will not need to incur additional marketing and sales expenses, maintenance fund contribution, property taxes and other maintenance and up-keeping cost for the unsold units.”
The QC rule is aimed at preventing foreign developers from hoarding or speculating in residential land in Singapore. Effectively, all listed companies are considered foreign developers.
The consideration is subject to a post-completion adjustment. The price tag comprises the estimated net tangible assets value of S$138.7 million as of yesterday.
It also takes into account the agreed property value of the 45 units in The Nassim of S$407.2 million, and an assignment of a shareholder’s loan of S$272.9 million. The consideration was paid entirely in cash.
CapitaLand admitted that the agreed property value at S$2,300 per square foot on the strata area represented a bulk sale discount of about 18 per cent from the current individual unit sale price of these 45 units.
But it said that the discount is in line with the range of discounts of 16 per cent to 23 per cent for bulk sales of residential units done in recent transactions.
A number of other developers have been making similar bulk sales of their unsold units to escape the punitive extension charges.
For example, Tiong Aik’s Meadows Property sold 23 units of Starlight Suites in River Valley Close to Evia Capital in May 2016 for S$48 million. This was done via a share sale of the development company.
Last July, a joint venture between Wing Tai and City Developments (CDL) also sold 156 units of Nouvel 18 in Anderson Road to CDL for about S$411 million. In October, CDL then offloaded Nouvel 18 to a group of high net worth Singaporean investors via a S$977.6 million profit participation securities platform.
Heeton Holdings in September sold all 30 unsold units of iLiv@Grange to a group of Singaporean investors for S$95 million.
The Business Times also reported last November that CS Land, formerly known as China Sonangol, was in talks with several parties for the sale of 38 unsold units in its flagship project TwentyOne Angullia Park in Orchard Road, likely also to avoid extension charges.
Before the news was out, CapitaLand shares ended two cents lower at S$3.15.