A new, innovative means of selling condo units in Singapore has emerged amidst the property market’s recent revitalization.
Registered in June 2009, Primespace Investments Private Limited is selling apartment “shares” to investors who have at least $62,000.
Primespace has two available studio units – one is located One Shenton near Singapore’s Raffles Place and the other is located at One-North Residences in the neighborhood-and-subdivision town of Buona Vista.
Whilst the firm says it is marketing “fractional ownership,” the investors will not directly own the condo units. Instead, the units will be purchased by other private limited firms that will then also hold the properties. What the investors will pay for are only shares in those apartments. Apparently, investors will not be lodging caveats on the condo units.
Each of the purchasing firms’ share capital will be divided into 15 lots. An investor will then have to pay $110,000 per lot to the firm that owns the unit at One Shenton, or $62,000 per lot to the firm that owns the unit at One-North.
Once the share capital has been allocated to the investors, the properties will remain to be managed and rented out by Primespace. The firm says it will administer the rental income among the investors yearly with a guaranteed 5 percent yield for the first 12 months of the investment. If the value of a particular apartment grows by “a certain level (usually 40 per cent),” Primespace will put that property up for sale and the proceeds of which will be distributed among the investors.
Investors who intend to cash out prior to the sale of an apartment can transact their shares to interested buyers. As an alternative, they contact Primespace whose website says that the firm guarantees a shares buyback “after a minimum commitment period (two years for most projects)… at fair market value less a re-marketing fee.”
Primespace stresses that its sales model allows people who “could not otherwise afford or choose to purchase” apartments to still invest in them. Some property consultants agree that this may be an advantage given the current downturn. However, there may also be drawbacks in investing via this model. For example, investors might not have as much say with regard to the properties’ management, maintenance and leasing as they would normally have with properties they directly own. Furthermore, they may also find it difficult to sell their shares.
Market analysts urge investors to conduct thorough research before investing. “Reputation, years of related experience and the track record of the offering company is critical,” says Donald Han, the managing director at Cushman & Wakefield Singapore. “Investors are depending on its capability and experience to generate maximum returns.”