Bulk deal of 23 units at Draycott Eight close to being sold

A deal for the bulk sale of the Draycott Eight units owned by a German core fund managed by Morgan Stanley is said to be nearing conclusion, according to Business Times.

The 22 four-bedders and a penthouse deal is via the sale of shares in a company that owns it. It is expected to fetch slightly above S$150 million, or around S$2,200 psf based on the total.

Draycott Eight, developed by Wing Tai, embodies 136 units in three blocks of 24 storeys each. The 23 units owned by the Morgan Stanley-managed fund are in the same block that also has another 23 units owned by a fund managed by Alpha Investment Partners. 

In 2010, Alpha purchased the 23 units for slightly over S$157 million or about S$2,300 psf from another Morgan Stanley-managed fund. The two funds bought their respective stacks of units at S$2,600 psf in 2007.

Bulk transactions of apartments:
Towards end of last year Blackstone purchased en bloc 21 Anderson Royal Oak Residence, a 34 units, 10-storey property at S$164 million, or S$1,917 psf - based on the total strata area of 85,552 sq ft. Owned by Arch Capital, under the Ayala Group, the S$164 million price tag is below the S$200 million or S$2,337 psf that Arch paid for the asset in 2010. Anderson 21 underwent a major revamp in 2009.

Blackstone has also picked up 17 freehold units at Paterson Suites for S$2,100 psf or close to S$80 million from a fund in the Real Estate Capital Asia Partners (Recap) series managed by SC Capital Partners. 

The sale of the last 16 units at 111 Emerald Hill, a 40-unit completed freehold condo project.
Divestment of 14 units at The Holland Collection for S$53.8 million by Straits Trading to Haiyi Holdings.

Typically these bulk sales are executed through a change in ownership of shares in a special purpose vehicle (SPV) that owns the apartments or which developed the project. Purchases done this way do not entail payment of the up to 15% additional buyer's stamp duty said tax experts and conveyancing lawyers. Even the regular buyer's stamp duty of up to 3% does not apply to such share purchases; instead the stamp duty rate payable is 0.2% of the net asset value or the market value of the company, whichever is higher.

However there is a catch in buying a property through a company because one would have to do due diligence to make sure there are no hidden liabilities. Moreover when an investor that acquires a property through the purchase of shares in an SPV or property development company, subsequently sells the property, he may end up paying more tax based on the profit from the transaction because of the lower cost base for the property.

Knight Frank's latest Prime Global Cities Index tracking luxury residential property prices released on Wednesday showed Singapore posting the biggest year-on-year fall of 15.2% as of June 2015, among the 35 cities covered by the index. For the first half of this year (June 2015 vs December 2014), the drop for Singapore was 7.9%.

On a three-month basis (June vs March this year), the decline was 2.2%.

Source: Business Times