Private funds sue condo developer

[mr funny]

http://www.straitstimes.com/Money/St...ry_693670.html

Jul 23, 2011

Private funds sue condo developer

Misrepresentation and breaches of contract over bulk deal alleged

By Esther Teo, Property Reporter


A total of 53 units at the high-end Grange Infinite, jointly developed by Chip Eng Seng and Citadel, were bought by ARA Asia Dragon Fund. -- PHOTO: KAOLEE.COM

PRIVATE funds that bought a bulk lot of units at the high-end condo Grange Infinite are taking the developer to court over what they claim were misrepresentation and contract breaches.

The funds, which are managed by ARA Asset Management, have issued a writ of summons against Grange Properties, an associated company of developer Chip Eng Seng.

They allege breaches of certain terms in the sales and purchase agreement and misrepresentations in relation to the bulk sale. No further details were provided in the statement posted on the Singapore Exchange website yesterday.

Chip Eng Seng said in the statement that the 'allegations are unmeritorious and that Grange Properties has the intention to vigorously defend (itself against them)'.

One of the directors of Pearl Properties - a collection of funds which have issued the writ - is Mr Ng Beng Tiong, who is the fund manager of the ARA Asia Dragon Fund.

The details of the dispute are not clear but the ARA Asia Dragon Fund bought 53 units at the Grange Infinite condo on Grange Road in early 2008 for $388 million - said at the time to be at a price of $2,600 to $2,700 per sq ft (psf).

This meant the apartments cost less than separate flats sold earlier. Most of these changed hands at more than $3,000 psf.

Units in the bulk deal included three-bedroom units, four-bedroom units and penthouses.

The fund was reported to have put all 53 units back on the market in January last year as activity in the high-end residential sector had picked up.

It was reported to have sold units at an average price of $3,200 psf individually in September last year.

The 36-storey upmarket condo is on the former Grange Tower site next to the Indian High Commission. It was jointly developed by Chip Eng Seng and Citadel and completed this year. There are 68 units.

A 2,702 sq ft unit was sold in September 2009 for $9.2 million - or $3,400 psf - according to caveats lodged with the Urban Redevelopment Authority.

The average psf price of the 11 sale transactions from the beginning of last year until June this year was $2,920 psf.

High-end homes are the only segment of the property market yet to surpass their 2007 peak prices.

Experts say that demand remains soft as uncertain global economic conditions such as concerns over the European sovereign debt crisis and the patchy United States recovery have dampened sentiments.

The recently implemented sellers' stamp duty of as much as 16 per cent is also keeping foreign investors - who make up a sizeable portion of the high-end market - at bay.

ARA Asia Dragon Fund had a committed capital of about US$1.1 billion (S$1.3 billion) as of the first quarter this year.

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[stalingrad]

another sign that CCR properties are going to die a slow death.

[kane]

I think it's useful to know what was misrepresented and what constituted the breach of contract.

[Wild Falcon]

If the fund bought at $2700psf, they hardly breakeven or incur losses after transaction costs. Maybe the agents/developer painted a rosy picture on rentals and capital gains in the area which clearly did not materialise. Having said that, the fund should have conducted its own due diligence. During the peak in 2007 and early part of 2008, most of the property experts were recommending purchase of high end luxury property. I still recall in this forum, many forummers (just like the experts) actually predicted Paterson area to hit $5000psf soon because they benchmark against Hong Kong/London blindly which was a stupid thing to do. I have a few friends who dispose off their luxury property purchased during the 2007 peak recently (gg to TOP soon) at a loss because rental yields is pathetic with no guarantee of significant capital gains in sight. So lesson learnt? Sometimes, its better to seek advice from laymen at forums than those experts who have vested interest

[hopeful]

If the fund bought at $2700psf, they hardly breakeven or incur losses after transaction costs. Maybe the agents/developer painted a rosy picture on rentals and capital gains in the area which clearly did not materialise. ......

buy at $2700psf and sell at average $3200psf. Looks like profit to me (on an individual units basis).

Why do you mention "hardly breakeven or incur losses after transaction costs"? how do you calculate the sums?

[stalingrad]

buy at $2700psf and sell at average $3200psf. Looks like profit to me (on an individual units basis).

Why do you mention "hardly breakeven or incur losses after transaction costs"? how do you calculate the sums?

Read between the lines!!!. If the fund could make money on the units they hold, you think they will sue?

they could only sell a few units at those prices. the remaining units are going to be hard to sell, and losses are likely.

[Jadey]

many forummers (just like the experts) actually predicted Paterson area to hit $5000psf soon because they benchmark against Hong Kong/London blindly

And some say that in 10 years time average Singapore apartment size will be like HK and Tokyo. Heard that 10 years ago, and I bet we will hear it 10 years later.

[fclim]

ARA Asset Mgt owned by Cheong Kong Group. Not small fry or ignorant property player.

[stalingrad]

ARA Asset Mgt owned by Cheong Kong Group. Not small fry or ignorant property player.

then, it is even scarier for owners of CCR properties.

[hyenergix]

If it is successful, then all the investors who buy for renting out can sue the developers successfully if rental yield is below expectation. Ridiculous.

[Jadey]

buy at $2700psf and sell at average $3200psf. Looks like profit to me (on an individual units basis).

Why do you mention "hardly breakeven or incur losses after transaction costs"? how do you calculate the sums?

There are 68 units in this development and ASA bought 53 of them.

When they said they sold average price of $3200psf last sep, it could possibly mean they only managed to sell 2 high floor good facing units for $3200psf.

Maybe the problem with this development is the India Embassy right next to it. Which I presume will be very crowded most of the time.

There are only 68 units in this development, but there are 140+ units for sale on propertyguru.

[teddybear]

Well, didn't some property in Paterson area already transacted at >$5000 psf already in 2011? Wow! These forumers do have great foresight!

Why your friends need to sell luxury properties at a loss? Rental pathetic? You friend need to depend on the rental to pay instalments & slightly less rental income also cannot stand anymore? Then they shouldn't be buying the property (regardless of luxury or mass market)!
CCR properties are for people with long term view. In 1997, luxury peak peak price may be just $2xxx psf. In 2011, peak price now $5xxx psf! Let me make a prediction: In 2020, peak price $7xxx psf?

Do you think your OCR can hit peak price >$2xxx psf in 2020?

If the fund bought at $2700psf, they hardly breakeven or incur losses after transaction costs. Maybe the agents/developer painted a rosy picture on rentals and capital gains in the area which clearly did not materialise. Having said that, the fund should have conducted its own due diligence. During the peak in 2007 and early part of 2008, most of the property experts were recommending purchase of high end luxury property. I still recall in this forum, many forummers (just like the experts) actually predicted Paterson area to hit $5000psf soon because they benchmark against Hong Kong/London blindly which was a stupid thing to do. I have a few friends who dispose off their luxury property purchased during the 2007 peak recently (gg to TOP soon) at a loss because rental yields is pathetic with no guarantee of significant capital gains in sight. So lesson learnt? Sometimes, its better to seek advice from laymen at forums than those experts who have vested interest

[Jadey]

Well, didn't some property in Paterson area already transacted at >$5000 psf already in 2011? Wow! These forumers do have great foresight!

Why your friends need to sell luxury properties at a loss? Rental pathetic? You friend need to depend on the rental to pay instalments & slightly less rental income also cannot stand anymore? Then they shouldn't be buying the property (regardless of luxury or mass market)!
CCR properties are for people with long term view. In 1997, luxury peak peak price may be just $2xxx psf. In 2011, peak price now $5xxx psf! Let me make a prediction: In 2020, peak price $7xxx psf?

Do you think your OCR can hit peak price >$2xxx psf in 2020?

I honestly dont think it make any sense to use a single transaction of the Marq at 5800psf as benchmark for super luxury apartment price.

If we exclude those <1000sqft apartment (as I dont classified them as luxury apartments due to their size), there are only 7 apartments on URA listing that transacted above $4000psf, and only 1 units that is above $5000.

[SpinCity]

It is very unlikely that the misrepresentation is related to "future price" or "rosy picture" or "minimum yield" in any way, as no vendor would warrant or even mention such things. If any of those were in the bulk purchase SPA or side agreement and the vendor failed to deliver, it shouldn't be a litigation over "misrepresentation".
If there were guarantees of any sort, it would had been disclosed as Chip Eng Seng is a SGX listed company

[Jonathan0503]

And some say that in 10 years time average Singapore apartment size will be like HK and Tokyo. Heard that 10 years ago, and I bet we will hear it 10 years later.

What is the average apt size in HK and Tokyo 10 years ago and what's the average size now?

[teddybear]

Most likely cause that I can think of: - What you finally got is not what you see in show-room (very common problem - there lies the peril of buying new launch or under construction properties!).
How about the show-room shows very high quality expensive marbles in living, dinning, kitchen, bathrooms flooring and walls etc, high quality big piece sold woods for bedrooms, Miele appliances for fridge, hob, hob, microwave oven, conventional oven, AXOR/Hansgrohe taps, integrated washer-dryer; TOTO / Ideal Standard / Duravit WCs but all changed (obviously to cheap items) in final product?
As far as I know, few developers guarantee and wrote the brands of these items into their S&P agreement (and hence they can change as they wish). Are there legal recourse? Think quite difficult unless they put these in their official brochure handed out.

It is very unlikely that the misrepresentation is related to "future price" or "rosy picture" or "minimum yield" in any way, as no vendor would warrant or even mention such things. If any of those were in the bulk purchase SPA or side agreement and the vendor failed to deliver, it shouldn't be a litigation over "misrepresentation".
If there were guarantees of any sort, it would had been disclosed as Chip Eng Seng is a SGX listed company

[devilplate]

Most likely cause that I can think of: - What you finally got is not what you see in show-room (very common problem - there lies the peril of buying new launch or under construction properties!).
How about the show-room shows very high quality expensive marbles in living, dinning, kitchen, bathrooms flooring and walls etc, high quality big piece sold woods for bedrooms, Miele appliances for fridge, hob, hob, microwave oven, conventional oven, AXOR/Hansgrohe taps, integrated washer-dryer; TOTO / Ideal Standard / Duravit WCs but all changed (obviously to cheap items) in final product?
As far as I know, few developers guarantee and wrote the brands of these items into their S&P agreement (and hence they can change as they wish). Are there legal recourse? Think quite difficult unless they put these in their official brochure handed out.

So far those projects tat i bot dun hf such problems.....i will take tons of pictures whenever i buy from developer including the appliances n fittings

There is only once tat the marble flooring looks abit diff from showflat....

Mabe those small small hit n run developers may cheat on these stuff lor...but dun tink big players will stoop so low la....

[Condo Kaiser]

confirm not because of pricing or rental prospect la.... the nature of any transaction is price is something that is mutually agreed...

i am guessing it will be along the lines of certain terms in their transaction... the developer could have agreed to a clause embedded in the contract but didn't carry it out...

if can sue just because the fund think it has over paid.. then who will still lose money?

[Condo Kaiser]

people will latch onto anything to twist into a horror story that CCR is going down....

don't even bother to argue anymore... let you win... JLD / Bedok waterfront / Serangoon will all become 3000 psf and overtake paterson / robertson / grange / ardmore.....

[SpinCity]

people will latch onto anything to twist into a horror story that CCR is going down....

don't even bother to argue anymore... let you win... JLD / Bedok waterfront / Serangoon will all become 3000 psf and overtake paterson / robertson / grange / ardmore.....

Hahahhahaha

By the way, just a wild guess, could it because that there are unit which are not part of the bulk purchase deal and now are put up for sale by the developer and undercut the bulk purchaser?
Just checked propertyguru and found the asking psf varies by a wide range
By the way, now there is a pop-up ad by FEO when entering the propertyguru website! FEO is really everywhere

[bargain hunter]

the fund bot 53 units. sueing for 41 units means they likely sold 12 units. there are 11 caveats since their reported sale started last jan. the average is most definitely NOT 3200psf based on the caveats. look them up, only 2 of 11 caveats are at 3200psf. the rest are below 3000psf. In fact, 9 units are sold between 2750 to 2901psf. they are hardly breaking even.

buy at $2700psf and sell at average $3200psf. Looks like profit to me (on an individual units basis).

Why do you mention "hardly breakeven or incur losses after transaction costs"? how do you calculate the sums?

[bargain hunter]

i agree. hope we can get some detailed info on what reasons we can sue developers for misrep.

i also think its the finishing that is not up to what they thought they would get.

It is very unlikely that the misrepresentation is related to "future price" or "rosy picture" or "minimum yield" in any way, as no vendor would warrant or even mention such things. If any of those were in the bulk purchase SPA or side agreement and the vendor failed to deliver, it shouldn't be a litigation over "misrepresentation".
If there were guarantees of any sort, it would had been disclosed as Chip Eng Seng is a SGX listed company

[bargain hunter]

in fact, the june 2011 caveat is the lowest psf recorded for this project in the past 2 years at 2750psf.

the fund bot 53 units. sueing for 41 units means they likely sold 12 units. there are 11 caveats since their reported sale started last jan. the average is most definitely NOT 3200psf based on the caveats. look them up, only 2 of 11 caveats are at 3200psf. the rest are below 3000psf. In fact, 9 units are sold between 2750 to 2901psf. they are hardly breaking even.

[bargain hunter]

it is not correct to say ARA is owned by CK. CK owns between 15.62% of ARA and is a passive investor. John Lim who owns a deemed interest of 36.59% is the one running the show.

Agree with you that they are not ignorant. I am really curious what sort of misrep they are suing for.

ARA Asset Mgt owned by Cheong Kong Group. Not small fry or ignorant property player.

[amk]

in fact, the june 2011 caveat is the lowest psf recorded for this project in the past 2 years at 2750psf.

Why I get a feeling it's CES who's been selling all this while at these low psf numbers undercutting the fund. The fund probably has a clause that says developer cannot sell lower than x for remaining units...

[bargain hunter]

no leh. during the last peak, CES sold 15 out of the 68 units at 3xxxpsf. then just after the bubble burst, ARA's dragon fund came in and bought the remaining 53 units at 2700psf average. so the project was already fully sold after early 2008.

Why I get a feeling it's CES who's been selling all this while at these low psf numbers undercutting the fund. The fund probably has a clause that says developer cannot sell lower than x for remaining units...

[bargain hunter]

the dragon fund then put the 53 units back on the market in early 2010 and seems like they have successfully sold 12 units. hence they are suing for 41 units as per CES announcement:

http://info.sgx.com/webcoranncatth.n...df?openelement

so it is more likely that the 11 caveats since early 2010 is for the 12 units sold by the dragon fund.

[devilplate]

the dragon fund then put the 53 units back on the market in early 2010 and seems like they have successfully sold 12 units. hence they are suing for 41 units as per CES announcement:

http://info.sgx.com/webcoranncatth.n...df?openelement

so it is more likely that the 11 caveats since early 2010 is for the 12 units sold by the dragon fund.

Shd let us manage the fund? Hehe

[bargain hunter]

lifted from http://singaporestockmarketnews.blog...reit-time.html

"The fund bought 53 luxury apartment units at the Grange Infinite in 2008 costing $388 million, under a deferred payment scheme from developer Chip Eng Seng."

"However, Lim waves off questions about how these investments are doing. “I’m not too keen to talk about it because it’s irrelevant,” he says. “I’m not a developer. The project I bought in Singapore, whether it makes $10 million or $100 million, will not improve ARA’s bottom line. We just get an incentive fee.” "



ok, i agree, we can do a better job. LOL.

[SpinCity]

Why I get a feeling it's CES who's been selling all this while at these low psf numbers undercutting the fund. The fund probably has a clause that says developer cannot sell lower than x for remaining units...

That's what I think. Maybe the 15 unites sold earlier by CES were returned to the developer before the completion of the bulk purchase and CES rep it as all the 15 units are sold. Anyway, let's see how this will turn out but I guess at the end there will be no case