Dissidents of the Chuan Park en bloc sale have lodged objections with the Strata Titl

Dissidents of the Chuan Park en bloc sale have lodged objections with the Strata Titles Board

The minority owners have a number of issues, one of which is that the condo's higher baseline, which amounts to S$94 million in'savings' for buyers, was not disclosed.

Sep 16, 2022

The dissenting owners of the Chuan Park en bloc sale have filed their objections with the Strata Titles Board (STB), alleging that the Collective Sale Committee (CSC) and marketing agent ERA Realty failed to disclose material facts relating to a higher development baseline for the condominium, which translates into a "deep discount" for the buyers, among other issues. The dissenting owners are alleging that the Collective Sale Committee (CSC) and marketing agent ERA Realty failed to disclose material facts

According to the dissenters, who are part of a group of 10 dissenting subsidiary proprietors (SPs), the owners of Chuan Park were informed that the plot ratio for the 37,215.6 square metre (sq m) site is 2.1 under the Urban Redevelopment Authority's (URA) Master Plan 2019, which translates to a maximum gross floor area of 78,152.76 sq m. This, the dissenters say,

However, a letter from the URA dated 2017 that was obtained during an earlier attempt to sell the site as en bloc reveals that a development charge (DC) for the site becomes applicable for development that exceeds the maximum gross floor area of 89,824 square metres, which corresponds to a baseline of 2.4. This charge is levied on the site.

The information that is obtained from a baseline inquiry is valid for a period of six months, after which a new inquiry has to be conducted.

Dissenters argue that "it is clear that a higher baseline would be of crucial importance to the value of Chuan Park." They point out that if the baseline ratio of 2.4 were used instead of the plot ratio of 2.1 that was used in the valuation, the buyer would be able to build an additional 11,671 square metres of built-up area, which could then be sold for higher profits. "It is clear that a higher baseline would be of crucial importance to the value of Chuan Park."

When deciding whether or not to approve the current deal for S$890 million, the owners of Chuan Park would have found this information to be materially important to consider.

They also calculated that the buyer of Chuan Park would save almost S$94 million in DC if it builds up to the baseline of 2.4, rather than the lower plot ratio of 2.1, because the DC is only levied when a developer develops beyond the baseline. This is because the DC is only levied when the developer develops beyond the baseline.

"This is on top of the additional profit that they would gain should they win clearance to rehabilitate Chuan Park up to the 2.4 baseline," they claim. "This is on top of the additional profit that they would get should they obtain approval to redevelop Chuan Park."

The dissidents claim that the CSC and ERA did not inform the owners of this key information and were dismissive when questions were raised during meetings because they were pursuing "a speedy sale." Neither the CSC nor the ERA "followed up on the 2017 letter to determine if the 2.4 baseline was still valid." Neither of these organisations did so.

However, they claim that this information was used when marketing the site to potential buyers, as the buyer had stated in its offer to purchase (OTP) that the deal was subject to obtaining outline planning permission for developing the land "with a minimum floor area of 89,824 sq m for development baseline as reflected in the reply dated 30 Aug 2017 from the URA." The buyer had stated that the deal was contingent on obtaining outline planning permission for developing the land "with a minimum floor area of 89,824

According to those who disagree with the majority opinion, it is abundantly obvious that "an essential condition of the transaction" is that the minimum floor space be at least 89,824 square metres or 2.4 baseline.

"In short, the CSC and ERA had concealed this significant and substantial fact (which had a direct impact on the value of Chuan Park and its final selling price) from the owners of Chuan Park," they claim. "This had a direct influence on the value of Chuan Park and its eventual selling price." "This would mean that for the majority of the owners, who are not well versed in the technicalities of redeveloping properties, this key indicator of value of their homes was overlooked and/or not fully explained to the owners," the author writes. "This would mean that for the most of the owners, who are not well versed in the technicalities of redeveloping properties."

On July 5, the 99-year leasehold apartment was sold to purchasers with connections to the developers Kingsford Group and MCC Singapore for a price of S$890 million. The owners of the 444 residences have the potential to collect gross revenues ranging from around S$1.16 million for a unit measuring 710 square feet (sq ft) to up to S$2.53 million for a unit measuring 2,045 sq ft. For the two commercial apartments, the owner will receive $1.09 million Singapore dollars for one that is 474 square feet and $2 million for one that is 1,238 square feet.

The objections brought up two other major concerns as well.

One of these is the method of apportionment (MOA) of sales proceeds, which they claim is unfavourable to 11 out of 13 unit types in comparison to the en bloc attempt that took place in 2017. This is due to the fact that it is predicated primarily on valuation, rather than on strata area and share value. Specifically, they say this makes the method disadvantageous.

As a further consequence of the MOA, two of the units, measuring 1,959 and 1,981 square feet, realised lesser sales revenues than the units measuring 1,851 square feet.

The second problem relates to "irregularities" in the process of getting the owners' approval for the en bloc sale.

They pointed out that notices, which are required to be put up in order to show the progress in the number and percentage of SPs who signed the Collective Sale Agreement (CSA), did not indicate the reserve price that owners had agreed to, which caused "a great deal of confusion." This was one of the requirements. This is due to the fact that there were three separate reserve prices that were being floated: the initial price was 938 million Singapore dollars, the lowered price was 860 million Singapore dollars, and the final price was 890 million Singapore dollars.

"This raises severe concerns as to what the actual sign-ups are and at what reserve price," they add. "This raises serious doubts as to what the actual sign-ups are." "These update notices did not serve the purpose of informing owners of the actual sign-up status in relation to the reserve price, at the crucial time when (the) CSC was canvassing to achieve 80 per cent sign-up to accept the buyer's offer to purchase Chuan Park at S$890 million," said the author of the article. "These update notices did not serve the purpose of informing owners of the actual sign-up status in relation to the reserve price."

The dissident shareholders claim that their primary worry is not an en bloc sale in and of itself, but rather that it must be carried out with the appropriate level of due diligence and in good faith.

The ERA agent who was engaged in the en bloc sale responded to our inquiry by stating that he had not seen the complaints and hence could not comment. We have attempted to make contact with the CSC.