Sycamore Tree saga: trade creditor throws spanner in the works

Winding up application against Astoria also carries implications for buyers of Laurel Tree project

Wed, Sep 11, 2019


A TRADE creditor has thrown a spanner in the works for the Sycamore Tree residential project, potentially dragging 180-odd jaded home buyers including those of a related project at Laurel Tree into a protracted nightmare delay just when progress is being made to complete the units.

On Aug 20, unsecured creditor, Jay Machinery Pte Ltd filed a winding up application in Singapore's High Court against Astoria Development, the developer of the 96 residential units and 17 shops in the Sycamore Tree project in Joo Chiat which went bust. Astoria owes Jay Machinery S$1.3 million. The court hearing is scheduled to be heard on Friday, Sept 13, 2019.

When a company is being liquidated, its assets are collected and sold off to pay debts by an independent liquidator whose powers and duties are regulated by the Companies Act (Cap 50).

The rights of unsecured creditors (home buyers included in this case) over the company's assets are virtually "frozen" upon the commencement of the liquidation to avoid a further deterioration of the company's financial position and proliferation of its liabilities. Unsecured creditors and home buyers are paid on a pari passu basis; that is, they are paid out of the company's assets equally.

"There is no precedent to this case at all. It is not a foregone conclusion that we buyers can get our units because in the event of an liquidation, other unsecured creditors and us are treated equally," lamented one buyer who asked not to be named. "It depends on whether the court will follow strictly the insolvency law or the Housing Developers Rule which is designed to protect buyers, when residential projects go bust before completion.''

When a liquidator is appointed, the project account - where buyers' payments are meant to be safeguarded when they buy from licensed developers - is vested with the liquidator. The rule remains unclear in cases where there is a liquidator and a receiver in place.

In Singapore, a developer has to open a project account to ensure that buyers' monies collected and any loans disbursed for the construction of the building project are deposited into the project account and used specifically for the housing project.

On Tuesday, receivers for both Sycamore Tree and Laurel Tree - partners at KPMG in Singapore, led by Bob Yap, Partner, Head of Restructuring, Singapore and Head of Deal Advisory, ASPAC - told buyers at the respective townhall meetings that they remained committed to their plan to complete both developments.

The receivers intend to file an application to the Court to seek consent to proceed with their plan to complete the project and to hand over the units to the buyers. They intend to ask the Court to regard affected home buyers differently from other unsecured creditors.

Buyers of the two projects were given updates on the progress of a tender process to identify financially sound and quality main contractors and negotiations to determine the cost to take over and to complete the construction.

"Since the last townhall meetings in April, the receivers have reviewed the tender offers from prospective replacement main contractors, shortlisted selected tenderers and are currently engaging them in price negotiations,'' receivers said.

While the buyers of Laurel Tree are not directly affected by the winding up application against Astoria, receivers warned that there might be potential implication to them as the same difficulties would apply if any creditor applies to wind up Lerida, the developer of Laurel Tree, a 70-unit condo in Hillview Terrace.

Like Sycamore Tree, Laurel Tree was supposed to get its TOP in 2016, but the project was abandoned and left uncompleted. Both Astoria and Lerida are linked to Tan Hock Keng, a former known property player and one of the "Geylang Kings" before the Asian Financial Crisis wiped out his property portfolio.

The Business Times understands that the Controller of Housing (COH) is still in the midst of examining the project accounts of both Laurel Tree and Sycamore Tree developments to ascertain if there are any breaches of the statutory rules regulating the operations of the project accounts.

Any breach of the regulations governing the operations of the project accounts is an offence, and offenders may be fined up to S$50,000 and/or imprisoned up to 1 year upon conviction.

The last time Singapore witnessed a case where a developer ran into financial difficulties before project completion was when the developer of office and residential skyscraper Springleaf Tower, a subsidiary of the now defunct Ban Hin Leong Group, faced problems in the late 1990s.

But unlike the Springleaf case, the Laurel Tree and Sycamore Tree projects involved HDB upgraders, some of whom had sold their flats and are incurring rents while waiting for the completion of their new homes.