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Heeton divests iLiv@Grange en-bloc

Deal values asset at S$95m; S'porean buyer group includes Straits Trading's Chew Gek Khim, KSH's Choo Chee Onn

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The 16-storey freehold tower, which received its TOP in October 2013, comprises 30 units.

Singapore

HEETON Holdings has finally sold its entire interest in the completed iLiv@Grange project.

This was through a sale of shares in a wholly-owned subsidiary of Heeton which in turn owns 100 per cent interest in the company that developed the 30-unit freehold project.

The deal values the entire 16-storey project (on an en-bloc basis) at S$95 million, which works out to S$1,623 per square foot based on the total strata area of 58,534 sq ft.

The transaction will result in a loss for Heeton for the third quarter ended Sept 30, 2016, the company said in a regulatory filing with the Singapore Exchange late Friday night (Sept 30).

In another filing also on late Friday night, the mainboard- listed property and hotel group said it had completed the disposal of its entire shareholding interest in Heeton Residence on Sept 30, 2016, to a group of Singaporean private investors whom it said are not related to Heeton, its controling shareholders and directors; it did not name these investors.

Heeton Residence is the sole shareholder of Heeton Realty, the developer and owner of the iLiv@Grange project at 74 Grange Road.

An ACRA (Accounting and Corporate Regulatory Authority) search showed that Heeton Residence's new shareholders are Chew Gek Khim, executive chairman of The Straits Trading Company; KSH Holdings' executive chairman Choo Chee Onn; Michael Tan Wee Chong and Diana Goh Yan Ching. All are investing in their private capacities and have equal stakes.

Heeton's chief executive Eric Teng Heng Chew, prior to joining the company on Jan 4 this year, had been adviser at The Straits Trading Company. He was also previously CEO of Straits Trading's property and hospitality divisions from 2010 and 2011 respectively until 2013. Mr Teng had also served as CEO of the Tan Chin Tuan Foundation and still remains an adviser to the foundation.

Heeton and KSH Holdings have been co-investors in property ventures in Singapore and abroad.

When contacted by The Business Times on Wednesday, Mr Teng declined to provide an estimate of the loss that Heeton will book for the third quarter ended Sept 30 as the company is still in the process of finalising its unaudited result for the quarter, but said that the project had been valued at about S$108 million (on an en-bloc basis) at end-2015.

The development received Temporary Occupation Permit (TOP) in October 2013 and under Singapore's Qualifying Certificate (QC) rules, had two years after the TOP date, that is, until October 2015, to finish selling all the units in the private housing development.

Housing developers that come under QC rules may seek permission from the authorities for more time to dispose of the units subject to paying extension charges to the state.

Heeton already paid extension charges for the first year of extension to the tune of 8 per cent of the purchase price of the site.

Based on the S$72.8 milion land cost, the charge would have been around S$5.82 million. Had the group decided to hang on to the project and pay extension charges for the second year, the amount would have been higher at 16 per cent of land cost or S$11.65 million (assuming no units in the project had been sold).

Factoring this in, the consideration offered by the buyers seemed "reasonable and offered a viable exit option for the company - given current market conditions", said Mr Teng.

Heeton noted that the residential property market is not recovering due to various factors, including cooling measures, new supply and macro-economic conditions.

Mr Teng also revealed that 20 of the 30 units at iLiv@Grange have been leased; the average gross monthly rental is S$3.50 psf.

Heeton had in the past attempted with the help of property consultants to find an en-bloc buyer for iLiv@Grange - but to no avail.

BT reported previously that iLiv@Grange comprises one, two and three-bedroom apartments as well as two penthouses. Many of the two-bedders have substantial void areas.

Heeton said on Friday that the consideration for the disposal comprised a nominal amount of S$4 for the purchase of all one million ordinary shares in Heeton Residence as well as S$21 million for the transfer of the shareholder's loan owing from Heeton Residence to the listed Heeton Holdings. "The consideration was arrived at on a willing-buyer, willing-seller basis after taking into account the adjusted net asset value of Heeton Residence and Heeton Realty as at date of completion, and the agreed property value at S$95 million...".

On completion, the buyers paid S$4 for the sale shares as well as S$4 million for the subscription of junior notes in Heeton Residence which was used to partially discharge the consideration with the balance of S$17 million to be paid in in a year's time on Sept 30, 2017.

The remaining sum of S$74 million would appear to be bank borrowings in Heeton Residence that will be taken over by its new shareholders.

On Friday, Heeton Holdings also said that as part of the transaction, it subscribed for $4 million senior notes in Heeton Realty due 2019, which bears interest at 5 per annum. The unaudited net tangible assets at the consolidated financial statement level of Heeton Holdings attributable to the disposal as at Aug 31, 2016 is about S$32 million.

The QC rules are aimed at preventing hoarding and speculation of private-sector residential land by foreign developers - defined as any company that has even a single non-Singapore citizen director or shareholder. This effectively covers all listed companies - including Heeton Holdings.

The iLiv@Grange transaction will see Heeton Residence's equity ownership change from being 100 per cent owned by listed Heeton Holdings to a private structure, with full ownership by Singaporeans.

This would set the stage for Heeton Residence (which will be renamed following the change in ownership) to seek a clearance certificate from the authorities, followed by a further application to cancel the QC, say market watchers.