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"I am a BLOGGER NOT an expert. This is a BLOG not a 'go-to' website for official information. I represent no one's view save my own. I have neither legal nor financial training, nor do I have anything to do with the real estate industry. My understanding of the Collective Sale Process is from a layman's position only. My calculations, computations and tables are homespun and may contain errors. Please note that nothing in this blog constitutes any legal or financial advice to anyone reading it. You should refer to your lawyer, CSC or financial adviser for expert advice before making any decision. This disclaimer is applicable to every post and comment on the blog. Read at your own risk."
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There is one thing worse than an Enbloc ----- and that is an Enbloc done badly. Since the majority have the necessary mandate to sell, then they owe it to all SPs to make a success of it. Minority SPs can only watch and wait, if they sell then lets pray it's at a price we can move on with, if they don't sell, then we are happy to stay for a few more years.

1-4-1-exchange

The pariah said:

Unless you are desperate for cashflow (ie, need cash immediately because of debt or health issues), a 1-4-1 en bloc exchange also offers an option for FUTURE CASH-OUT.


Example 1: After TOP of the redevelopment, the en bloc owner who opted for exchange could sell new unit in resale market. Whilst the property market may go further up or slide down between (i) en bloc vacant possession and (ii) redevelopment TOP, the risk is a calculated one based on the en bloc owner's market view.


Example 2: After moving back to the redevelopment and staying there for another decade or two, the en bloc exchange owner could then monetize a more valuable asset for eventual retirement whilst retaining the inflation hedge offered by such asset. Eg, by 2030, the value of a redevelopment on this choice location would have kept pace with inflation index.


If you know how to do your sums AND you are not desperate for immediate cash, 1-4-1 exchange would be a BETTER DEAL based on:

- (a) SAME floor level,
- (b) SAME strata title area, and
- (c) SAME geographic orientation of living room main window.



Terms and conditions for en bloc 1-4-1 exchange are documented in a BACK-TO-BACK Sale & Purchase Agreement (complete with architectural lay-out plan) BEFORE you sign the Collective Sale Agreement.


Think thrice BEFORE you agree to any en bloc offer because you stand to lose the crown jewel of your asset portfolio. No point crying over spilled milk afterwards.


As Homer Simpson said: "Beware of the power of stupid people in large groups!"

5 comments:

  1. 1-4-1 exchange is an interesting option but until I see a proposal that caters to all the varied needs to enbloc sellers, I will hold my conclusion on this.

    When buying land, developers will factor 1-4-1 as cost and they will have their own view of the market ups-and-downs. This will affect their offer price.

    Same floor, area and orientation may not be practical as some may wish to downgrade or move to higher level. We should not expect the penthouse of a 10 storey development move to the 10 floor of a 36 storey re-developed condo.

    HDB uses the ballot system for replacement. Maybe this is an option.


    Getting the terms and conditions acceptable to all will be challenging.

    Cash, in my opinion, is still the best option.

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  2. Mathematically, it would be difficult.
    Based on 2million sq ft at $300psf for construction cost, it would come up to be $600m and plus $311m for DC and DP, the developers cost wld be an enormous $911m. If we use 141xchng, 560units x 1700sf avg =952,000sf, he will left with 1,048,000sf. If he sells at $850psf, he suffers loss ($890.8m - 910m). Unless we accept 1500sf unit each? Then 1500sf x 560 units =840,000sf, he will have 1,116,000sf to sell. At $850psf, he gets $986m, a profit of $76m (986m-910m), a mere 6% profit margin.Then we can hope for gung-ho overseas developers who dare gamble on 'forward pricing' where they hope the rising market will widen his margin.
    What abt 1300sf per unit?, 1300sf x 560 units=728,000sf, leaving him with 2m -728,000=1,272,000sf to sell. At 850psf, he profits $171.2m, about 20% margin for 2-3 years effort and development loan, cost etc.

    My conclusion is unless we accept 1300-1400sf of BRAND NEW & new 99 years lease, for our old derelict 1700sf flat and 75 years lease left, no developer in his sane mind wld go for it.

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  3. right, no use shouting 1-4-1 w/o proper justification. take the cash n manage the replacement yourself.

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  4. Mathematically, we can now get a better estimate by using new launches from en blocked estates and work backwards.

    I am in the process of doing just that. Though I will need some help in breaking down developer costs.

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  5. even if the calculation works out, it is unlikely developers are willing to be tied down to built similar size units as those in the original development.

    Even HDB are building smaller flats than before.

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