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Thread: Property firms scramble to close deals before new stamp duty takes effect

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    Default Property firms scramble to close deals before new stamp duty takes effect

    http://www.straitstimes.com/business...y-takes-effect

    Property firms scramble to close deals before new stamp duty takes effect

    Mar 14, 2017

    Lee Xin En


    Property firms scrambled to close some large residential deals last Friday, after a sudden government announcement on the stamp duty rate, effective last Saturday.

    The move was aimed at bringing the rate applying to the transfer of shares in property-owning companies in line with the rate applied to regular property deals.

    At least three such deals were completed at the eleventh hour last Friday, The Straits Times understands.

    First, a consortium led by Mr Ben Yeo, former managing director of engineering and property group Guthrie GTS, reportedly purchased 28 units at TwentyOne Anguilla Park for around $160 million.

    Second, in a filing to the Singapore Exchange last Friday, Sing Holdings said it had sold its 100 per cent stake in Sing Holdings (Robin). The buyer, a Singapore entity not related to the firm, paid $72.7 million for 29 units at Robin Residences condominium.

    Third, more than 80 units changed hands through a transfer of shares at The Line@Tanjong Rhu for an undisclosed price.

    Developers and buyers scrambled to avoid the newly introduced additional conveyance duty (ACD). For buyers, on top of the 0.2 per cent share duty tax, they must pay ACD comprising 1 per cent to 3 per cent on the value of underlying residential properties and a flat 15 per cent on the value of those assets.

    Sellers, who are significant owners, disposing of their equity stake within three years of acquisition will have to pay a flat 12 per cent levy.

    The Government was moving to align the rates imposed on direct purchase of residential properties and the transfer of shares in property- owning companies.

    A direct purchase of residential property attracts buyer's stamp duty of 3 per cent and, depending on the buyer's citizenship, up to 15 per cent additional buyer's stamp duty. In contrast, acquiring shares of a holding company that owns the property incurred a share duty tax of just 0.2 per cent of the firm's net asset value, prior to the introduction to the ACD.

    A Finance Ministry spokesman said: "As the ACD came into effect on March 11, 2017, it applies only to transactions on and after March 11. We do not comment on the tax obligations of individual taxpayers for confidentiality reasons."

    Mr Ian Loh, executive director and head of investment and capital markets at Knight Frank, brokered the Sing Holdings deal, and said the parties began viewings last year and were discussing pricing over the past two months.

    "The sudden announcement helped to speed things up. Unless you have been in discussions, it is virtually impossible to seal a deal in less than a day," he said.

    Several lawyers told The Straits Times they fielded more calls from interested parties than they could handle and were hammering out agreements in five to six hours, in a process that usually takes weeks.

    Mr Norman Ho, corporate real estate partner at Rajah & Tann, said such agreements take weeks as liability and indemnity issues are involved in the purchase and sale of an entity, and cannot be "one-page documents, which would be seen as an arrangement to avoid tax".

    Mr Kenneth Szeto, a partner at Colin Ng & Partners, said "it is unlikely that developers will still find it worthwhile to engage in the transfer of shares, as the total transaction cost is likely to exceed the potential qualifying certificate penalties".

  2. #2
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    Default Bulk sales race to the finish line

    http://www.businesstimes.com.sg/real...he-finish-line

    Bulk sales race to the finish line

    TwentyOne Angullia Park, The Lumos among them; some deals miss the boat including 22 units at Draycott Eight

    Tuesday, March 14, 2017

    by Kalpana Rashiwala
    [email protected]
    @KalpanaBT


    BESIDES Sing Holdings' Robin Residences, at least two other bulk transactions were done late on Friday night to avoid a new stamp duty that took effect the following day.

    Sources tipped the two projects as TwentyOne Angullia Park and The Lumos in Leonie Hill - both freehold district 9 projects. A bulk sale is also believed to have been done at The Line @ Tanjong Rhu

    In the TwentyOne Angullia Park deal, Tower Capital Asia founder Danny Koh and Ben Yeo, formerly of Guthrie GTS, are understood to have set up a consortium that is buying into the company that developed the 54-unit condo project along Orchard Boulevard. The deal is subject to various conditions, including regulatory approvals.

    The 36-storey project, developed by a unit of China Sonangol, received Temporary Occupation Permit (TOP) in April 2014. Under the government's Qualifying Certificate (QC) rules for foreign housing developers sales of all units in the condo were required to have been completed by April 2016, or two years after the TOP date.

    A foreign housing developer - defined as one that has even a single non-Singaporean shareholder or director - that comes under QC rules may seek more time to finish selling its project in exchange for paying hefty extension charges to the state. The company that developed TwentyOne Angullia Park paid the first year of extension charges, prorated to unsold units at the time, estimated at S$18 million. A second year of extension charges of around S$34 million would have been due next month. A foreign housing developer in this situation would have had to keep paying extension charges until it sells out all the units in the development.

    To come out of such a predicament, what a number of affected developers under QC rules have been doing is to effect bulk sales of balance units in the project via a sale of shares in the development company - to a Singaporean buyer or a group of all Singapore buyers. The company may then apply to the authorities for a clearance certificate, upon issuance of which it may then apply to cancel the QC.

    Until last Friday, the incentive for these Singaporean investors to participate in such an indirect method of buying unsold units in a residential development, instead of buying the units directly, was a substantial saving in stamp duties on their purchase price due to a tax loophole.

    But not any longer. Late Friday morning, the government announced a new rule that took effect the following day, March 11. It introduced the additional conveyance duties or ACD, which is a new stamp duty imposed on residential property transactions involving significant changes in equity interest in entities that primarily hold residential properties. This closed the previous differential in stamp duty treatment between such indirect property transactions and direct property deals.

    The announcement incentivised some of the parties who were in advanced stages of bulk residential deals to swiftly wrap up their transactions by midnight Friday.

    Back in early November, BT had already reported that CS Land, formerly China Sonangol, was in talks for the sale of TwentyOne Angullia Park's balance units and that one of the parties is a consortium led by Mr Yeo, the former managing director of engineering and property group Guthrie GTS. He could not be contacted yesterday. Mr Koh of Tower Capital declined to comment. CS Land too said it was unable to comment at this point in time.

    Based on URA Realis data, caveats for the purchase of 13 units in the development have been lodged. The earlier BT article cited sources saying that the balance units could be worth about S$2,700 psf. The 13 sold units have a total saleable area of 42,399 sq ft, leaving a saleable area of 109,601 sq ft for the remaining 41 units. A price of S$2,700 psf translates to S$295.9 million.

    As for The Line @ Tanjong Rhu, where a bulk sale is also said to have been inked, 84 of its 130 units had yet to be sold as at end-January, based on government data. The project is understood to have received TOP recently.

    Along Leonie Hill, a joint-venture between Koh Brothers and Heeton is understood to have sold its shares in the company that developed The Lumos, to a group of Singaporeans.

    In the Robin Residences deal, Sing Holdings is said to have sold its 100 per cent stake in the company that developed the project to the co-founders of Evia Real Estate, Leslie Lim and Vincent Ong. They acquired the remaining 29 strata units based on an agreed property value of S$72.7 million.

    However, there were also some deals that could not be inked on Friday and thus missed a bulk sales opportunity.

    An example would be Alpha Investment Partners' proposed sale of 22 units at Draycott Eight to Angelo Gordon, an American alternative investment manager.

    The deal was in the exclusive due diligence period when the government made its announcement. Apparently, the price being negotiated for the 65,401 sq ft of strata area is around S$1,900 psf on a net basis after factoring in some income support.

    On a more positive note, Alpha recently sealed a deal to sell its balance 22 units at Cityvista Residences in the Peck Hay Road area. The units - each held by a separate special purpose vehicle - are understood to have been bought by an Indonesian. The price is understood to be around S$1,800 psf and the units are part of a portfolio of units in the development that Alpha bought from the project's developer, a joint-venture involving Chip Eng Seng, some time ago.

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