The real value of your home/asset now - the Residual Land Value
(Applies to both owner/occupier and owner/investor)
Residual Land Value (RLV) = Gross Development Value (GDV) minus Reasonable Profits (incl. Tax/Fees & Overheads etc.) minus Construction Cost minus Development charges
New Dev. Area of The Atria (DA) = 365949.8sqft @ Plot Ratio 2.8, therefore;
[a] Projected GDV in 3 years' time = $2500psf X (DA) = $914.9 mil
[b] Construction Cost = $350 X (DA) = $128.1 mil
[c] Reasonable Profit = 20% X (GDV) = $183.0 mil
[d] Development Charges for The Atria based on current DC rates = $50.3 mil
Hence, RLV of The Atria = $553.5 mil = [a]-[b]-[c]-[d]
Our current CSA Reserve Price = $500 mil. Therefore, we lose $53.5 mil.
We would also like to point out that, with the excellent state of The Atria and it being a 15year old freehold residential and sea-fronting building, premiums should be added to its Land Value as it can command at least a rental revenue of $10 mil per year, if the developer/buyer decides to Land Bank. This works out to be another $40 mil.
Therefore, $53.5 mil + $40 mil = $93.5 mil which works out to be 18.7% less than what we should receive.
The current/future potential value of The Atria
(1) One and only 1.5km long strip of high-rise/high-dense freehold residential in the east, with both sea and city view, in a private residential district with East Coast Park a stone throw away.
(2) Eastern Region Line (MRT) serving from New Downtown to Changi Airport, with locations of the stations to be announced very soon.
(3) Very likely an MRT Station at Katong Park, which is less than 400m away from The Atria. (Recent announcement of stations along DTL3 has caused the values of properties nearby to jump by 20%)
(4) Kallang Sports Hub in construction, completion expected in April 2014.
(5) Planned Kallang Riverside lifestyle precinct, Paya Lebar Commercial Hub and evolving Joo chiat Heritage district all within 2-3km radius.
http://www.iproperty.com.sg/news/1077/Singapore-East-region-development-blueprint
All the above points are huge and solid property value-triggering factors that we believe to push the value of this strip to at least 50% to 80% in 10years' time.
The Atria, being such a young building, with up-to-date condo amenities, good design and excellent building conditions, there are advantages to hold and allow other sites along the Strip to be developed first, than reap the maximum value in 10 years. (From Belvedere to Seafront, to Aalto, each project increased 20% in their average selling price when launched.)
Why should we short-change ourselves by giving away this huge potential gain, which we have invested for, to the developer and en bloc raiders? We firmly believe that it is not the best time to harvest this golden fruit, which is now rightfully ours.
Immature and Unjust current En bloc laws/process
Even with the recent 2007 and 2010 amendments to the LT(S)A, there are still loopholes in the en bloc process, which can be exploited by speculators, and does not protect the real long-term homes/assets holders.
These can be reflected in the numerous court cases, huge developers' profits and complaints from displaced home- owners of various "successful" collective sales and the inability of getting comparable replacement properties.
Most of the time, these processes translate to Minority Vs Majority, rather than Sellers Vs Buyers, due to the authorities' unclear guidelines, especially in the issue regarding the Methods of Apportionment of Sales Proceeds.
Due to these mismanaged process of en bloc exercises, lack of development knowledge of the CSCs and the conflict of interest of the marketing agents; all owners/sellers, especially Home owners (occupiers who have no other properties)*, are disadvantaged in most incidents.
There are fairer ways this can be explored, for example, in the case of Paterson Lodge en bloc exercise, owners were given the option of 1-for-1 exchanges for their home, requiring no homeowners to be displaced. Further away, in South Korea's Urban Renewal Model (Hapdong Redevelopment), it is legislated in the law, that "en bloc" must only be done in a 1-for-1 manner, to safeguard the homeowners’ interest and to protect the social and cultural capitals of the city.
http://lushhomemedia.wordpress.com/2007/07/19/paterson-lodge%E2%80%99s-answer-to-en-bloc-blues/
* Ordinary homeowners will face financial risk as they will have problem finding a replacement home. They only receive full payment for their units some time after they agree to the sale, given the long drawn out en bloc process. Decisions made by owners about the attractiveness of the sale are invariably based on the cost of comparable replacement properties. But with runaway property prices, they may find their windfall is barely enough to buy a property of similar size and location, leaving little if any profit left over. Furthermore, owners may only block a sale if they can prove financial loss, which is deemed by the Strata Title Board as occurring when the en bloc sale price is lower than the original purchase price, plus stamp duties and legal fees. Owners may not make reference, for example, to the amount of money paid out of their Central Provident Fund accounts towards the purchase of their home, which would include the cost of their home loan.
ALL Owners (whether Majority Consenters or Minority Dissenters) have to pay commission to HSR Realty (the appointed Marketing Agent) ONLY IF the en bloc sale is successful.
ReplyDeleteSurely before taking on this job, HSR Realty would have already assessed the Residual Land Value (RLV) that you mentioned. Eg, if RLV is low, then there would be little interest from potential developer-buyers and if there is no sale, there is no commission for HSR Realty - correct?
So RLV must have been PRE-assessed by HSR Realty.
Since HSR Realty will be paid by ALL Owners, why isn't the Sale Committee requiring HSR Realty to send a copy of such RLV to all owners BEFORE collecting signatures of the Collective Sale Agreement?
Let us have more transparency from the Sale Committee members who owe a fiduciary duty to ALL owners (not just those who sign the Collective Sale Agreement).
I agree. If there was an assessment done before, the info should be made available.
ReplyDeleteHaving said, a property should gain value over a 10 year period. If you investment in the stock market or any reasonably safe investment, over a 10 year period, year on year @5%, one's investment should gain >50% in value. It is a given.
What is intrinsic though, is the value of Atria as a home. For many, this may be the only home and for some, they treasure it dearly.
Yes besides the insufficient transparency in proceedings so far, the most compelling reason would be that as a home owner I would not be able to find a replacement home of equal standard in this area.
ReplyDeleteI have properties in other areas with less future value than here, and even then I would have to assess carefully before agreeing to a collective sale. To me the Atria is a no brainer for now, no point selling.
I hope more people would consider this carefully!
Actually, to calculate RLV properly, you would have to take into account, the building's value, on top of the land value, which I gather, should add another 100 million to the calculation?
ReplyDeleteThis topic is certainly proving controversial and not nearly so clear-cut as previously suggested by the ‘pro’ lobby: I am not surprised everybody is being pressured to sign quickly. The whole en bloc process seems fundamentally malign. First, it seems to provide an incentive for a perfectly serviceable building to be knocked down before even reaching its prime – purely for short-term gain. That cannot be in our nation’s economic or environmental interests. It also says something about our moral values. Second, it is hardly surprising that high-floor/sea-facing unit owners object. We are all accustomed to buying and selling properties based exclusively on their market value – but that does not seem to apply to en blocs, where a one-size-fits-all approach prevails. Third, there is no attempt to gauge all shareholders’ views until the process is well under way – by which time costs have been incurred, ‘interested’ third parties have been engaged to provide pressure and opinions have become entrenched. Since none of the EOGMs seems to have attracted interest from anything like 80% of the shareholders, it seems that any partisan minority can start this ball rolling and then impose all these uncertainties on the rest.
ReplyDeleteWhen The Atria is truly ripe for re-development – in maybe 10-15 years’ time – I really hope that a better process than this blunt axe will have been developed and enshrined in law.
I agree that Atria holds very good long term value. Bear in mind that Meyer road is the ONLY freehold seafront residential site in the whole of Singapore. No where else can you find freehold seafront property.
ReplyDeleteWhatever happen, just don't sign your home away!
ReplyDelete