While developer CapitaLand had to give veteran banker Wee Cho Yaw an attractive discount when he bought 45 of its plush condominium units, analysts say it was a win-win deal for both parties.
On Monday, it was announced that Mr Wee, chairman emeritus of United Overseas Bank, had bought the remaining unsold units at The Nassim luxury condo for $411.6 million.
While he reaped a bulk sale discount of about 18 per cent, CapitaLand avoided having to pay Qualifying Certificate (QC) penalties that would have hit $9.3 million if the 45 units had been left unsold by August.
A QC deems that developers that buy private residential land must sell all units within two years of obtaining a temporary occupation permit.
If they do not do so, they must pay extension charges pro-rated to the proportion of unsold units.
Credit Suisse analyst Louis Chua said the Wee deal, which was through the family real estate arm Kheng Leong, was a good business decision for CapitaLand.
"We believe it enables CapitaLand to de-risk its residential portfolio... while enabling it to reap a healthy profit of $161 million (from the bulk sale)," Mr Chua wrote in a report.
CapitaLand president and group chief executive Lim Ming Yan told The Straits Times yesterday that the bulk sale was "an excellent opportunity to unlock the value of the property".
"This transaction is part of CapitaLand's robust capital recycling strategy to redeploy capital to ventures that will generate higher returns for our shareholders.
"An example would be our recently announced plans to develop our first Grade A office tower in Ho Chi Minh City," he said.
On the other side of the coin, property analysts said that Mr Wee got a good deal out of it.
Ms Tang Wei Leng, managing director of Colliers International, Singapore, noted that recent comparable transactions in the area had a median price of about $2,580 per sq ft (psf) based on strata area, about 12.2 per cent above the $2,300 psf price Mr Wee paid, she said.
Ms Tang added that while the rental market is soft, with yields at about 2 per cent, the property has excellent long-term prospects.
The Nassim sale is the latest in a series of deals that have seen developers save on paying QC charges, but Gibson Dunn partner Robson Lee said that the Controller of Residential Property exercises control over such transactions.
"It is not a blanket exemption. Every proposed transaction requires the prior written approval of the Controller," he added.
Ms Jennifer Chia, head of corporate real estate at TSMP Law, said her firm has been doing more deals in which Singapore shareholders buy the corporate vehicles holding the remaining units in projects that developers have to offload.
There will be even more of such transactions this year, she said, adding: "I believe savvy investors think that the market may have bottomed out and that there is value waiting to be unlocked."