Chinese investors that purchase 20 units of MCL Land’s Fernhill condo had failed to pay the approximately $30 million, which became due when The Fernhill received the Temporary Occupation Permit.
MCL Land sent out the notice 14 days ago, asking payment to its buyer the Concordia Overseas Pte Ltd. The said notice was already due and payment was unsettled until the time.
The development in the deferred payment scheme (DPS) is closely monitored. Last October of 2007, the said scheme was stopped.
Under the Sale and Purchase Agreement (SPA), MCL Land will have to wait for another 14 days. However, if the payment is not made during that time, they can provide a 21-day notice to revoke the SPA. After then, if payment is still impossible, MCL is entitled to forfeit 20 percent of the unit from Concordia and is able to resell it.
Concordia, managed by Hong Kong national Chan Ki, had purchase 25 apartment units in The Fernhill last January 2007 for $1,410 per square foot. Five of the units were flipped to foreigners at an average selling price of $2,200 per square foot on the same year. The JTResi brokered and set deals for both the five-storey estate at the corner of Fernhill roads and Orange Grove.
The Concordia purchased the units from MCL Land on DPS and was able to pay 20 percent of the selling price in 2007. It purchased the units for $47 million and was asked to give at least 60 percent of the remaining balance or approximately $30 million after the project received the TOP last month.
If there is any delay in giving payments, analysts noted that MCL Land is well covered as they can take away 20 percent of the down payment from Concordia. It is a breakeven cost for the 20 units at a selling price of $1,128 per square foot.
Based on the recent transaction for Gallop Gables and The Verdure, MCL Land can easily resell the units individually more than its original price for an average of $1,250 per square foot.
While MCL Land shows good performance, other developers that sold their project on DPS in the previous years may be worried just in case buyers are unable to pay once their project is completed. This may due for the unit value to decrease up to 20 percent from the initial payment, and developers may lose their money if they have to get the SPA. These developers must sue their buyers for specific reason: to complete the SPA in a reduced market price.
Developers find it hard to sue legal actions against foreign buyer who walks away from purchases. “The practical thing to do may be to treat the SPA as repudiated, take possession of the units and try to resell them or lease them out. Once you go down the route of suing defaulting buyers for specific performance, it will be some time before you can take possession of the units”, one developer said.