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IN ANOTHER major collective sale transaction, a joint venture company owned by UOL Group and a subsidiary of Kheng Leong Co Pte Ltd has signed a deal to buy Nassim Park for $380 million.

Prime location: Nassim Park sits in an exclusive residential area surrounded by embassies, good class bungalows and high-end developments

Including an estimated development charge of $8 million, the price works out to around $388 million or about $1,131 per square foot (psf) of potential gross floor area.

The breakeven cost for a new development on the Nassim Park site is estimated to be between $1,600 and $1,700 psf of gross floor area.

The joint venture company, Park Developments, is 70 per cent owned by UOL and 30 per cent owned by Kheng Leong's subsidiary, Russville.

Kheng Leong is considered as an associate of UOL's directors Wee Cho Yaw, Wee Ee Lim and Wee Ee Chao under the listing rules.

UOL and Russville are currently in negotiations with an unrelated third party for equity participation in Park Developments.

Completed in 1992, Nassim Park sits on a 245,135 square feet site which is zoned for residential use with a 1.4 plot ratio (ratio of potential maximum gross floor area to land area) and a maximum height of four storeys under Master Plan 2003.

Market players note that the price psf for such a choice location would have been steeper if the height restriction was higher as developers can sell units on upper floors at a higher price psf.

Located along Nassim Road, Nassim Park sits in an exclusive residential area surrounded by embassies, good class bungalows and high-end developments. The site is the largest condominium site on Nassim Road.

Michael Ng, managing director of Savills Singapore, which brokered the sale of Nassim Park, said the sale price achieved 'reflects strong demand for quality sites in prime area'.

He added: 'Confidence in the luxury condominium segment is robust.'

The existing Nassim Park has 104 strata-titled apartments and townhouses. The conditional agreement to sell Nassim Park to Park Developments was entered into with subsidiary proprietors of strata lots with not less than 80 per cent of the share values in Nassim Park.

Singapore's residential property market is currently in the midst of an upcycle led by the high end of the market.

(SINGAPORE) The Court of Appeal has delivered a landmark judgment against the Inland Revenue Authority of Singapore (Iras), allowing a property developer tax deductions of $4.3 million for borrowing and refinancing expenses.

Decision will also affect traders who obtain loans to finance the purchase and development of trading stock.

BT understands that several cases involving property developers were held pending the outcome of this case. And the decision affects not just property developers but all traders who obtain loans to finance the purchase and development of trading stock.

Previously, Iras did not allow deduction of borrowing expenses, saying they were capital and not revenue in nature.

Lawyers say this will change now that the court has decided that the deductibility of borrowing expenses depends on the purpose of the taxpayer in getting the loan.

As for refinancing expenses, Iras previously allowed deductions on a concessionary basis. But lawyers say such expenses will now be deductible by law if the original loan is a revenue loan.

They also say that after this case, the way loans are structured will have a bearing on whether expenses incurred in connection with them are tax deductible.

'Often businesses take large general purpose loans because they want to have the flexibility to use the money,' said Teoh Lian Ee, head of tax at Drew & Napier.

'But this flexibility to use the loan means they cannot get tax deductions under the new ruling which only allows tax deductions on loans which have the specific purpose of funding revenue purchases.'

This means that companies that are certain that a loan is to fund revenue purchases or to develop trading stock should make sure this is stated in the agreement, and that amounts drawn down are only used for such a purpose.

According to Mrs Teoh, they should then be able to enjoy tax deductions on expenses incurred in connection with the loan.

Mrs Teoh represented the developer with team members Stacy Choong and Seah Ching Ling in the long-drawn appeal, which took more than four years from the date of filing the petition of appeal to the delivery of judgment.

In the case, the property developer obtained a syndicated loan of $113 million to finance a major condominium project. The developer was able to repay the loan from progress payments received from the sales of the condo units before it was due, but had to furnish a bank guarantee to the Urban Redevelopment Authority to withdraw the sum.

The identity of the property developer was not disclosed.

The issues before the court were whether expenses of $4.3 million incurred in connection with the syndicated loan and the bank guarantee were revenue expenses and deductible against the developer's taxable income.

Under the Income Tax Act, revenue expenses are generally deductible if they are wholly and exclusively incurred in the production of income, but capital expenses are generally not deductible.

The expenses incurred in connection with the syndicated loan included underwriting and agency fees, and expenses associated with the bank guarantee included bank commissions and agency fees.

The court, which looked at cases from various jurisdictions, held that whether an expense is capital or revenue in nature depends on the purpose of the taxpayer in obtaining the loan.

The court, which comprised judges Andrew Phang, Judith Prakash and VK Rajah, found that the loan was obtained for a revenue purpose because it was to develop the condominium project for sale.

Because of this, the borrowing and refinancing expenses in connection with the loan were also revenue in nature and deductible.

However, developers who develop projects not for sale but for lease will not enjoy tax deductions on borrowing and refinancing expenses connected to a loan, as this will be considered a capital investment.

THE collective sale of Silver Tower has yet to be concluded, but a penthouse in the freehold development in Cairnhill Road was sold yesterday for $6.12 million at an auction by Colliers International.

Silver Tower: Without factoring in en bloc potential, the penthouse is said to be worth $4.5m or $750 psf

The price works out to $1,020 per square foot based on the 5,995 sq ft strata area of the three-level penthouse - a price market watchers said reflects a premium for the property's en bloc potential.

A source suggested that based on its individual sale value, without factoring in potential for an en bloc deal, the penthouse could have fetched about $4.5 million or $750 psf. Silver Tower is about 20 years old.

BT understands the penthouse had been on the auction circuit for at least three years. It was sold by its mortgagee, understood to be Hong Leong Finance. Three years ago, the mortgagee was said to be asking for $3.8 million for the unit.

The buyer is said to be a Chinese individual from the region. The unit, #08-04, has a private pool and is tenanted until May 2007 at $4,000 a month.

BT understands that despite paying a hefty premium for the penthouse, the new owner stands to reap a further $1 million or so if an en bloc sale of Silver Tower proceeds at the target price of $168 million. Based on this price, the owner would be able to collect about $7 million-plus for his unit.

Savills Singapore, which is marketing the en bloc sale of Silver Tower, declined to comment yesterday except to say the collective deal is still under negotiation.

Colliers also sold three other properties at yesterday's auction. One was a single-storey, freehold detached house with a land area of 6,183 sq ft in Sommerville Road off Upper Serangoon Road. It fetched $1.7 million. Another was a third-storey walk-up apartment in Lorong 15 Geylang. The 999,999-year leasehold property with 1,517 sq ft strata area fetched $310,000.

Colliers also sold a three-storey JTC detached factory at 6 Woodlands Loop for $4.88 million. The property is on a site with 30 years' lease starting September 1994 with an option to renew for 30 years. All four properties sold yesterday were mortgagee sales.

However, marketing agent Savills Singapore says that there is potential for the NLA to be increased to 75,227 sq ft, assuming one tenant per floor which would allow some of the common areas to be converted to lettable area. Based on the enhanced potential NLA, the guide price reflects $1,063 psf.

Eight-year-old Anson House, at the corner of Anson and Bernam streets, has a gross floor area of 96,734 sq ft. According to Savills, it will appeal to buyers looking for a corporate headquarters building, as well as to investors eyeing the upside in office rentals as new leases are signed and existing leases renewed. 'The supply of office space is presently very tight, further aggravated by the conversion of some of the older commercial buildings into inner-city residential apartments,' says Savills director of investment sales Steven Ming.

Anson House is 13-storeys high and, besides offices, has ground-floor retail space and 103 car parking lots. 'Being 100 per cent occupied, the building is generating strong cashflow both from rental collections and fees from its generous car parking facilities,' Mr Ming says. The tender for Anson House closes on Oct 5.

FORMER Singapore Land chairman SP Tao's Shing Kwan Group has bought St Martin's Lodge in St Martin's Drive for $29.25 million in a collective sale.

St Martin's Lodge: The site can be redeveloped into a new project with about 15 units averaging 1,800 sq ft

The unit land price of the 19,335 square feet freehold site works out to $1,154 per sq ft of potential gross floor area including an estimated $2 million development charge.

The site is zoned for residential use with a 1.4 plot ratio and a maximum height of five storeys.

It can be redeveloped into a new project with about 15 units averaging 1,800 sq ft. Analysts estimate the breakeven cost could be $1,550 to $1,650 psf

A company owned by Mr Tao's Shing Kwan Group was the highest bidder in a tender closed on Aug 22. CB Richard Ellis brokered the deal.

Garden Estates, part of Singapore's Hong Leong Group, developed the 12-unit St Martin's Lodge, which was completed only in 1994. Owners of 11 of the 12 units have so far agreed to a collective sale.

They will walk away with handsome gains, receiving $2.3 million if they own a 1,248 sq ft apartment or $2.6 million for a 1,668 sq ft unit - between 60 per cent and 100 per cent more than the units would have fetched if sold individually.

Shing Kwan Group is looking primarily at boutique residential developments in Singapore with an all-up investment of about $50 million each.

Cosmopolitan Development - Shing Kwan's joint venture with Mackmoor Pte Ltd, which is controlled by parties linked to Indonesia's Metropolitan group - developed 11 Amber Road, a 40-unit apartment block in Katong that is fully sold. It also developed The Quayside apartments and retail outlets along the Singapore River, and Anson House.

Shing Kwan also has interests in China and Sri Lanka - including Shanghai Mart, Landmark Towers complex in Beijing, Mandarin Garden Hotel in Nanjing and The World Trade Center in Colombo.