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Issue 225

Copyright 2011-2014 www.Propwise.sg. All Rights Reserved.

CONTENTS
p2

FROM THE

EDITOR

10 Questions You Must Ask Before Entering


into a Property Deal

Welcome to the 225th edition of the


Singapore Property Weekly.
Hope you like it!

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Singapore Property News This Week

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Resale Property Transactions

Mr. Propwise

(August 26 September 1 )

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SINGAPORE PROPERTY WEEKLY Issue 225

10 Questions You Must Ask Before Entering into a Property Deal


By Gerald Tay (guest contributor)

Five years ago, I was invited to co-invest in


the joint-development of a hotel in Singapore.
Investors would fund the development costs
and share profits after selling the hotel to a
potential buyer when it was completed. The
equity share was 51% for the principal deal
finder (finds the deal and raises the money),
and 49% for the remaining joint investors.
The returns promised were as high as 15%
per annum. I rejected the deal outright.
Why did I reject the deal?
1. Having an only 49% equity shareholding
for the joint investors mean they would have

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SINGAPORE PROPERTY WEEKLY Issue 225


no say in the operations, finances and other
major decisions involved in the investment.
From the investment contract: Management
reserves the right for every say and decisions
made without having to consult with coinvestors.
2. The deal finder appeared more interested
in my money than answering the many
questions and doubts I had.

3. The deal finder avoided any personal and


conference calls with investors. There was
only one scheduled investor meeting. Email
questions were not answered or answered
vaguely. I perceived the deal finders mindset
as follows: If you want to invest and make
money, put your money in and dont ask too
many bothersome questions. Youre not the
only investor I can raise money from as there
are many other keen investors who dont ask
as many questions as you.
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4. The 49% equity shareholding was split


among too many investors. Theres a
saying:Too many cooks spoil the broth.

5. The deal was structured to benefit the deal


finder far more than was reasonable.
6. The deal felt and smelt wrong.
7. There were too many unsophisticated
investors with a low entry investment
quantum in the deal (as little as $10,000 to
participate).
Its not about whether a deal can make
money or how much can be made
One must look beyond promised investment
returns. Examples of things investors should
pay attention to are issues like the complexity
of managing the project or property, available
key experienced people to manage the
project, having a strong support network, indepth knowledge of industry trends,
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SINGAPORE PROPERTY WEEKLY Issue 225


markets and the economy.
The crucial question you need to ask before
entering into investment deals with anyone is:
Will the deal or investment remain
sustainable even if projections dont go well
as expected?
If the joint-investment hotel deal goes well,
investors will happily walk away with profits
by a stroke of good luck. But if the deal goes
awry
due
to
unforeseen
events,
unsophisticated investors will be filing lawsuits. This is not the kind of investment you
want to be involved in no matter what exciting
returns are promised to you initially.
Its fine if you like to remain a passive investor
in a deal, but do understand the difference
between taking advantage of and being
taken advantage of.

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10 Questions You Need to Ask Your Deal


Finders
Over the last five years, my USA partners and
I have structured and jointly invested in largescale USA Commercial Real Estate (RE)
deals with our investors. These properties are
priced between US$2 million to US$5 million
apiece. A typical American Single Family
Home costs US$150,000.

In your interview with your deal finders, ask


them these ten questions. These are great
questions I always encourage my investors to
ask or Ill personally ask them when
considering any co-investment deals myself.
1. Who exactly are they?

Whats their investment experience?

What previous deals have they done in


the market of deal origin?
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SINGAPORE PROPERTY WEEKLY Issue 225

How successful were they?

Who were their investors?

Any proven track records?

Whats their
background?

Any expertise in the market of deal


origin?

real

estate

4. What legal documents are you required


to sign?
There should be a minimum of two legal
documents
for
signing
by
all
investors/shareholders/managers The
Management and Partnership Agreement.

What are their terms and underwriting


criteria?

investment

2. Do they have any equity stake in the


same deal with you?

5. What is the structure of deal?

Roles
and
responsibilities
of
management, and voting rights by coinvestors

Who decides on major decisions?

How are decisions settled among all


shareholders?

Who is involved in the management and


who is passive?

If not, why?

3. Any Finders fee or Management fee?

One-time or yearly?

How much if yearly?

Fair compensation value?

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SINGAPORE PROPERTY WEEKLY Issue 225

What is the shareholders profit sharing


arrangement?

size investors, the more risky and


problematic the deal will become. Too
many amateur cooks spoil the broth

6. Who decides on the investment exit?

Time-frame and penalties if any

7. What is the minimum investment equity


and number of investors?

Smaller investment quantum deals will


attract
more
unsophisticated
and
immature investors
Higher investment quantum deals will
attract more mature and sophisticated
investors

Investment success or failure will depend


greatly on who your investment partners
are, their attitude and thinking, investment
sophistication and maturity

Only consider investment deals that have


a higher entry barrier with no more than
10 investors per deal including yourself.
Know who your co-investors are

8. What is the holding structure for the


property?

Is the property held under a corporate


entity or individual liability?

Is the loan non-recourse, or does it have


to be personally guaranteed and by
whom?

What extra profit sharing percentage is


allowed for the investor who shoulders
more risk with a personal guarantee?

The more the number of small quantum-

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SINGAPORE PROPERTY WEEKLY Issue 225


9.What kinds of returns are promised to
you?

If guaranteed or high returns are


promised, you should question the risk of
the deal

Never invest in promises

Instead, always think sustainability and


stability of the investments future

Remember the credibility and expertise


of the people managing the property is
more important than the property itself

10.Is there any strong support network


available/accessible
for
maintaining
operations and management of the
project?

These include relationships with known


local vendors, property managers,

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lawyers and others to ensure smooth


operations.
Conclusion
Never invest in deals that benefit the other
guy
(deal
finder/seller/developer)
far
more than is reasonable.Before you put your
money into any deal under contract, you
should clearly understand your investment
terms, underwriting criteria and investment
objectives.
Imagine this: You put money into a deal under
contract. You later find that the guaranteed
return promised by the seller has not been
fulfilled. Or that the deal finder had inflated
the price and you end up with a lemon. Or
that the deal finder/platform makes plenty of
money from you from the start leaving you
with scraps at the end.

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SINGAPORE PROPERTY WEEKLY Issue 225


Or worse, your overseas property gets into
trouble with a neighboring property and
theres no one to assist you with the legal
issues.

He is a full-time investor with over 13 years of


solid experience in building his wealth
through Property Investment and is financially
wealthy today.

While ignorance is sometimes bliss, in this


case these kinds of surprises could cost you
plenty of your hard-earned money. And when
youre doing a deal, you dont want surprises
like these.

The lesson learned is this: clearly understand


the terms of the deal and how the deal
finder/seller will underwrite the deal.
You want to benefit fairly, and not be taken for
a sucker.
By guest contributor Gerald Tay, who is the
founder and coach at CREI Academy Group
Pte Ltd, an organization dedicated to
empowering retail property investors with
smarter investing philosophy and strategies.
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SINGAPORE PROPERTY WEEKLY Issue 225

Singapore Property This Week


Residential
Condo resale prices in rest of central
region up by 1.8% in August
The overall resale prices of non-landed
private homes increased by 0.2% month-onmonth in August. In the rest of central region,
resale prices of condos increased by 1.8%
month-on-month in the same period.
However, prices slipped by 0.5% and 0.2% in
the core central region and outside central
region respectively. According to SRX, resale
volume of non-landed private homes fell by
16.8% to 466 units in August from 560 units in
July. Wong Xian Yang from OrangeTee.com
said that buyers may have perceived
increased value in the resale market as there
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was more room for price negotiation as


compared to the primary market. Ong Kah
Seng from RST Research expects that the
increase in household income ceilings for
those buying executive condominiums will
negatively affect the demand for resale
private condos.
(Source: Business Times)
Condo rents in August fell by 0.4% monthon-month
According to data from SRX, private
condominium and apartment rents have fallen
by 0.4% month-on-month in August. Year-onyear, the rents in August had fallen 5.7% from
August 2014.
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SINGAPORE PROPERTY WEEKLY Issue 225


Particularly, private residential rents in the
suburbs have fallen by 1.3% month-on-month
in August this year while rents in the city
centre fell by 0.7%. On the other hand, rents
in the city fringe increased by 0.8% during the
same period of time. Ong Kah Seng from
RST Research believes that the increase in
private home completions had affected
rentals. According to Ong, 13,150 private
residential units were launched in 2012. This
increased to 19,941 units in 2014. A total of
21,563 units are expected to be completed in
2015, he said. As more private condos are
completed, market experts predict that there
will be an increase in the supply of HDB flats
that are put up for lease. This is because
HDB upgraders may rent out their flats after
moving into the new condo units. As such,
Ong expects the HDB flat rents to fall in 2015
by a total of 5%.
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(Source: Business Times)


Overall home prices expected to fall by
30% by 2040
According to a survey by the NUSs Institute
of Real Estate Studies, home prices are
expected to come down by 30% by 2040 as
the old-age dependency ratio increases. The
old-age dependency ratio is defined as the
proportion of elderly to working-age
population. As this ratio is expected to
increase in Singapore due to an ageing
population, home prices are expected to
come down as there will be a fall in demand
from an aged population. According to a
working paper written by a team led by
Chihiro Shimizu, working-age adults tend to
have a higher demand for housing as most
people will build up assets during their prime
years.
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SINGAPORE PROPERTY WEEKLY Issue 225


Nonetheless, experts believe that investment
and immigration flows would mitigate the
effect of an ageing population on the property
market.
(Source: Business Times)
Commercial
Duxton Hill shophouses sold for $19.6
million
Two separate land lots at Duxton Hill have
changed hands for $19.6 million or $2,200
psf. The shophouses have a total land area of
about 2,540 sq ft and a balance tenure of 72
years. The properties, which are linked,
consist of three storeys and an attic. The
upper levels of the shophouses have been
leased to office tenants while the space on
the street level has been rented out to food
and beverage outlets.
(Source: Business Times)
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SINGAPORE PROPERTY WEEKLY Issue 225

Non-Landed Residential Resale Property Transactions for the Week of Aug 26 Sep 1
Postal
District
1
1
1
3
3
4
5
5
7
8
9
9
9
10
10
10
10
10
10
11
12
12
14
14
14
14
15

Project Name
MARINA BAY SUITES
THE SAIL @ MARINA BAY
PEOPLE'S PARK COMPLEX
MERAPRIME
EMERALD PARK
THE PEARL @ MOUNT FABER
DOVER PARKVIEW
MONTEREY PARK CONDOMINIUM
THE 101
KERRISDALE
VIDA
ASPEN HEIGHTS
NIVEN LOFT
NASSIM PARK RESIDENCES
BISHOPSGATE RESIDENCES
THE FORD @ HOLLAND
THE MERCURY
MONTVIEW
DUCHESS CREST
SUFFOLK PREMIER
TREVISTA
THE ABERDEEN
CASCATA
GOODVIEW APARTMENTS
THE MIDAS
N.A.
38 I SUITES

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Area
(sqft)
2,691
1,184
409
1,098
1,238
1,163
969
1,249
840
1,485
850
1,324
1,033
3,477
6,082
506
1,044
1,507
1,884
1,076
1,701
1,302
1,141
1,216
1,561
1,701
495

Transacted
Price ($)
6,900,000
2,320,000
508,000
1,550,000
1,461,000
1,236,000
1,080,000
1,385,000
1,500,240
1,500,000
1,560,000
1,950,000
1,380,000
13,500,000
21,071,994
900,000
1,810,000
2,130,000
2,200,000
1,400,000
2,150,000
1,350,000
1,080,000
900,000
1,150,000
700,000
730,000

Price
Tenure
($ psf)
2,564
99
1,959
99
1,242
99
1,412
99
1,180
99
1,063
99
1,115
99
1,109 999
1,787 999
1,010
99
1,835
FH
1,473 999
1,335
FH
3,883
FH
3,465
FH
1,779
FH
1,734
FH
1,413
FH
1,168
99
1,301
FH
1,264
99
1,037
FH
947
FH
740
FH
737
FH
412
9999
1,474
FH

Postal
District
15
15
15
15
16
16
16
16
16
18
18
18
18
18
18
19
19
21
21
21
22
23
23
28

Project Name
THE SEAFRONT ON MEYER
COTE D'AZUR
LE CONNEY PARK
D' FRESCO
COSTA DEL SOL
THE SUMMIT
EASTERN LAGOON
PARBURY HILL CONDOMINIUM
TROPICANA CONDOMINIUM
WATERVIEW
RIS GRANDEUR
SAVANNAH CONDOPARK
CHANGI RISE CONDOMINIUM
ELIAS GREEN
TAMPINES COURT
KENSINGTON PARK CONDOMINIUM
THE MINTON
FLORIDIAN
FLORIDIAN
HILLVIEW GREEN
THE LAKESHORE
REGENT HEIGHTS
REGENT GROVE
SELETAR SPRINGS CONDOMINIUM

Area
(sqft)
2,293
1,367
1,163
1,141
1,238
1,668
1,066
1,033
1,636
926
1,292
1,453
1,023
1,507
1,722
1,668
1,109
840
1,292
1,528
1,119
1,173
1,259
1,302

Transacted
Price ($)
3,230,000
1,810,000
1,160,000
1,100,000
1,650,000
1,820,000
1,150,000
1,050,000
1,300,000
950,000
1,160,000
1,200,000
808,000
860,000
933,000
1,836,000
1,150,000
1,460,000
2,238,000
1,438,000
1,245,000
950,000
930,000
938,000

Price
Tenure
($ psf)
1,409
FH
1,324
99
998
FH
964
FH
1,333
99
1,091
FH
1,079
FH
1,016
FH
795
999
1,026
99
898
FH
826
99
790
99
571
99
542
101
1,100 999
1,037
99
1,739
FH
1,733
FH
941
999
1,112
99
810
99
738
99
720
99

NOTE: This data only covers non-landed residential resale property


transactions with caveats lodged with the Singapore Land Authority.
Typically, caveats are lodged at least 2-3 weeks after a purchaser
signs an OTP, hence the lagged nature of the data.
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