The
sale, which is likely to cost Wachovia a loss of $55 million, underscores the
continuing weakness in the high-end residential property market, despite
hopeful talk of a recovery next year.
It
is also a sign that Wachovia does not believe it can recoup its investment in
Cliveden at Grange in the short to mid-term, after making a big bet on the
property at the height of the high-end rally five years ago.
Wachovia
teamed up with CDL in November 2007 to acquire 44 Cliveden homes for $432.4
million. Under the deal, which worked out to an average price of $3,750 per sq
ft (psf), Wachovia's real estate arm, Wachovia Development, took a 60 per cent
stake in the joint-venture company, Grange 100.
Grange
100 is the vehicle which owns the 44 units - a mix of three- and four-bedroom
apartments and penthouses in two of the four towers at Cliveden.
Based
on its equity share, a back of the envelope calculation puts Wachovia's
investment at $259.4 million. In selling its 60 per cent stake in Grange 100 to
CDL for $204.5 million, the average price works out to $2,956 psf.
That
is a drop of 21.2 per cent from the price it paid in 2007.
Analysts
reckon the size of this sale at such a steep price drop will have an adverse
impact on the Urban Redevelopment Authority's (URA's) private home price index,
particularly the sub-index for the central core region.
Wachovia's
actual loss may vary as the $204.5 million price tag includes advances it had
extended to Grange 100.
CDL
said in a statement that, in acquiring Wachovia's stake, it has taken a medium-
to long- term view of Cliveden and has confidence in the project.
"The
consideration was arrived at on a willing buyer, willing seller basis, taking
into account the net asset value attributable to the Wachovia shares based on,
inter alia, the financial statements of Grange 100 and outstanding shareholder
loans," it said.
A
search with the Accounting and Corporate Regulatory Authority shows that Grange
100 has accumulated losses of $121.8 million as of 2011, since it was set up in
2008.
The
last time Cliveden saw any transaction, based on caveats lodged, was in April
2008, when a 2,842 sq ft unit was sold for $11.1 million, or $3,914 psf.
The
110-unit Cliveden was completed last year. URA data shows that the condominium
is 80 per cent sold, at prices ranging from $3,265 psf to $4,313 psf.
Source: The Straits Times –25 December 2012
<View Typical Floorplans in Cliveden @ Grange>
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