High Court allows S$80 million sale of GSM Building to LHN’s Coliwoo

The High Court has granted the sale of GSM Building to LHN unit Coliwoo for S$80 million, after finding there was no evidence that the transaction lacked good faith. 

In a written judgment released on Friday (Apr 19), Judicial Commissioner Christopher Tan dismissed the objections from the minority owners who had objected to the sale as they felt the price was too low. 

According to Tan, the minority owners claimed that the Collective Sales Committee (CSC) had given Coliwoo an unfair preference over other potential buyers and failed to get the best price for GSM Building. 

One of the claims made was that the committee had favoured Coliwoo by granting the latter “special” permission to apply to the Urban Redevelopment Authority (URA) for change of use, even before GSM Building was relaunched for tender in January 2023. 

Tan said: “I saw no impropriety in the pre-tender dealings between the CSC and Coliwoo. There is nothing wrong with a collective sales committee taking steps to either remove obstacles that potential purchasers may face in making a bid or make it more conducive for interested bidders to put up better offers.”

He added: “Such steps are no less proper just because they are taken before the tender opens. If impediments to more attractive bids can be removed earlier rather than later, so much the better.”

In a previous tender which closed in September 2022, GSM Building had two potential buyers, Amberdale Properties and Keaf Investments. Keaf had submitted a letter of interest proposing a price range between S$80 million and S$85 million.

However, negotiations with Keaf fell through even though it indicated that it would be open to taking part in the next tender exercise.  

The minority owners claimed that the committee failed to follow up with Keaf during the new tender launched in January 2023. 

Tan said: “The defendants were particularly aggrieved, as Keaf had indicated that it was willing to pay (between) S$80 million and S$85 million for the property – exceeding Coliwoo’s price by a margin of up to S$5 million.”

In Tan’s view, the committee should have reached out to Keaf to invite it to participate in the tender. However, he was “not convinced that the omission to reach out to Keaf sufficed to constitute a lack of good faith”.

The committee had “no certainty” whether the owners would have to pay Goods and Service Tax charged on the sale, if an exemption from GST could not be secured. 

In light of this, the committee’s decision to go with Coliwoo’s S$80 million offer, which was “free of any strings pertaining to deduction for GST” was not without justification, Tan said. 

The minority owners had also complained that the tender period was too short, lasting only 17 days including the Chinese New Year holiday.

“The defendants suggested that this could be explained by the fact that negotiations with Coliwoo were already underway and, to secure what was thought to be a bird in hand, the CSC decided to shorten the tender period to facilitate a successful bid by Coliwoo,” Tan said.

However, Tan said this did not indicate the committee’s lack of good faith in securing the best price.   

He noted that there was some time pressure on the committee if they wanted to close a deal within the collective sale exercise, but there was a “sufficient buffer” to hold a third tender if the second tender failed to yield any credible bids. 

Another shortcoming the minority owners had raised was that the tender documents failed to stipulate that GSM Building’s existing gross floor area (GFA) and gross plot ratio (GPR) were higher than those provided for in URA’s Master Plan 2019. 

Under the Master Plan, GSM Building had an allowable GPR of 4.2, which was lower than its existing GPR of 5.2. According to the claimants’ lawyers, the existing GPR was said to be higher because portions of the site may have been compulsorily acquired by the authorities in the past, resulting in a smaller site area and thus a higher GPR. 

The minority owners claimed that had the valuation of GSM Building taken into account the existing GPR and a proposed change of use of the building from commercial to serviced apartments, the building would have received a valuation higher than S$77 million. 

They said that the committee should have obtained a fresh valuation report to account for the change of use. 

On Friday, Tan said that the committee’s failure to procure a fresh valuation report did not amount to a lack of good faith. The defendants were unable to show how a fresh valuation would been so “great as to compel rejection” of Coliwoo’s bid, he said.

Tan also said that Coliwoo’s strategy of not redeveloping a building after acquisition and simply retrofitting it was “very rare”, which led him to accept the claimants’ contention that most purchasers would want to redevelop the property. 

“Following from this, it was undisputed that a purchaser redeveloping the property would have to abide by the (lower) GFA and GPR in the Master Plan,” Tan said. 

“The CSC could thus not be faulted if they had taken the position that the existing GPR and GFA figures were not material, given the evidence that these figures would generally not have been the focus of en bloc purchasers.” 

While Tan granted the sale order sought by the committee, he noted that there were instances when the committee failed to properly discharge some of its duties.

There was evidence the committee failed to disclose past valuation reports, despite those being sought by the subsidiary proprietors, Tan said. 

“It just so happened that in this case, the failure to disclose the valuation reports promptly did not turn out to be material, given that the requests for the reports were made only after Coliwoo’s offer had been formally accepted.” 

“Although the CSC was guilty of various missteps, a holistic assessment of the CSC conduct led me to conclude that these ultimately failed to tip the balance towards a finding that good faith was lacking,” Tan said. 

In response to queries from The Business Times, Mount Everest Properties, the marketing consultant for the sale, said unit owners stand to get between S$774,378 and S$12,948,410 for each unit.

LHN said it may retain the existing commercial usage of the first and second levels of the building, while planning to convert the third to sixth levels of the property into serviced apartments.

Source: Business Times © SPH Media Limited. Permission required for reproduction.

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