I REFER to the recent letters on en-bloc sale issues.
My relatives are apartment owners in a mixed development comprising commercial and residential units. The complex, which is more than 20 years old, is now undergoing an en-bloc sale.
The situation is grossly unbalanced: all the residential units combined make up about 40 per cent, both in terms of floor area and market valuation, and yet their share values make up less than 15 per cent of the total development. Hence, even if all owners of the residential units oppose the terms of the sale distribution, it would not make any difference as at least 20 per cent is needed.
Minority owners have not signed the collective-sale agreement because the method of distribution of the proceeds is based on a combination of share value and market valuation. This method results in a huge difference in the distribution of 'premium' between commercial and residential units. The argument that commercial units are valued higher than residential units is already taken into account by distributing the proceeds through market valuation. Using share value on top of that skews the distribution in favour of commercial units at the expense of residential units.
The value of the complex is in the land with its redevelopment potential. The developer who won the tender is effectively paying a certain price per square foot per plot ratio. The bid is in turn determined by the size of saleable area after redevelopment and the expected selling price. Therefore, the correlation between the land and existing floor area and valuation is direct and distinct.
Allowing share value alone to determine voting rights in an en-bloc sale in the present day, knowing fully well that the method and assumptions used in assigning share value in the past may already be outdated, is flawed.
Using share value in any part to determine the distribution of the proceeds is worse.
This is especially so in the case of an old mixed development where the situation is inherently unbalanced.
The repercussion of using share value alone to determine voting rights is severe: it discriminates against a group of people who are condemned to accept any fate handed down to them just because the system may not be able to address differing situations.
A few apartment owners in the development have thrown in the towel and signed the collective-sale agreement. The rest are left wondering how a system that was supposedly put in place to protect their interests let them down so badly.
Tan Koh Young
