Is it worth signing this CSA ? Reflection on EOGM on Feb 28, 2021

 

EOGM on Feb 28, 2021

Contribution from one of the fellow owners of Teresa Ville

Dear Fellow owners of Teresa Ville,

Like many of you, I attended zoom EOGM on Sunday, February 28, 2021. I would like to share some of my reflections and observations.

1.      Unproductively long Meeting and Leaving things to the Last day:

 While the meeting was well organized with almost no technical glitch, it went on for too long (5 + hours ). Some owners proposed amendments to the fee structure and terms of Collective Sale Agreement (CSA), but the CSC chairman refused to adopt any of the suggestions and proposals from the owners.

It would have saved our time, if the CSC chairman could have clarified in his opening remarks, that since Feb 28, 2021 was the last date of the mandate of Collective Sales Committee, there was no time and scope to make any amendments to the CSA, and the engagement of the property agent and law firm. Hence, any discussion, suggestions and proposals were pointless. We should have just voted Yes or No, and the meeting would have been over within 30 minutes, which was what many attendees would have wanted.

 

2.      Giving owners no chance to negotiate terms of appointment of Property and Legal Agents:

The CSC chairman told the owners in the meeting that the property agency, Edmund Tie & Company (ETC) and the law firm, Wee Swee Teow LLP (WST) were selected because they were not “mass market” consultants, implying that these consultants were high class companies. But it was clear from his own presentation that the only reason for the CSC to select ETC and WST was that they were the only candidates to submit a bid in the selection process. Hence,  the CSC did not obtain at least three quotations from different consultants for each of the two categories of services.

In their desperation to appoint the consultants before the expiry of the CSC’s mandate on Feb 28, 2021, the CSC did not negotiate for the lowest fees and best terms from these two consultants.

 

3.      Why are we appointing an agent who is not confident to achieve our Reserve Price? It is a ploy to get the owners sign the CSA?

The representative of Edmund Tie made it very clear in the meeting that in their view, the valuation of Teresa Ville was $880 million and they agreed to ‘try’ to sell it at the reserve price of $1.1 billion only on the insistence of the CSC. The $1.1 billion reserve price was already proposed by the previous CSC two years ago.

This means that this 2021 enbloc sale attempt is in the hands of a property agency which does not believe that they could achieve the sale of Teresa Ville at the reserve price of $1.1 billion. Therefore, it seems ETC (with or without consulting the CSC), has accepted this assignment with the purpose of using the $1.1 billion reserve price to lure at least 80% of the SPs to sign the CSA. However, in all likelihood they would come back at a later date to advise the CSC to lower the reserve price, claiming that the could not achieve the $1.1 billion.  The Question mark on the $1.1 billion figure in their presentation slide tells it all.

 

Furthermore, as pointed out by a fellow SP in the meeting, clause 4.4 in the CSA states that, the CSC has the full discretion to reduce the Reserve Price and ask the SPs to sign the supplemental agreement after informing the SPs that the $1.1 billion price was not achievable. This appears to be their plan. 

4.      Choices of Replacement homes

For the resident owners like myself, the main reason to sell our home in an enbloc sale is to get enough money from the sale to buy a replacement property of equivalent size, land tenure, comparable location, and still have enough remaining profit that is high enough to attract us to undertake this enbloc sale. But from the following slide presented by Edmund Tie, the nearest FREEHOLD development seems like Sky Everton  with average selling price of $2,564 PSF (per square foot).

 

At this price, a 1980 square feet apartment, which is the size of a 4 BR apartment in Teresa Ville, would cost $5.1M. Gross Floor Area may be less than one pays for and price could increase further in the next 2 years,

Therefore, this en-bloc sale does not look like a great deal for resident owners.

For example, according to the EOGM document, an SP who has a unit of 4 share value in Teresa Ville, may get about $4.2 million, if the $1.1 billion reserve price is achieved or $3.36M (if the reserve price is lowered to Edmund Tie’s estimation of $880 million). The SP shall have Little choice but to

·        Downgrade the size of their replacement apartment in another freehold estate or

·        Settle for a 99-year leasehold property or

·        Move away far from this city fringe location to locations further from the prime areas.

It is unlikely that there will be any attractive profit.

Therefore, is it really worth signing this CSA for those of us who live in Teresa Ville and do not wish to compromise on quality and size of our homes? Think….

 

Your Sincerely,

Your fellow resident owner of Teresa Ville