http://www.businesstimes.com.sg/archive/wednesday/premium/companies/others/ccm-units-condo-contract-terminated-20140423
Published April 23, 2014
CCM unit's condo contract terminated
The loss-making subsidiary was constructing the Balestier project
By cai haoxiang
[email protected] @HaoxiangCaiBT
A LOSS-MAKING subsidiary of CCM Group that is being disposed of has received a notice of termination on a condominium in Balestier it was constructing.
The contract was terminated "on the grounds of alleged breaches of contract", the Catalist-listed construction firm said yesterday. It added that it was seeking legal advice and evaluating the financial impact of this development.
The contract, secured in August 2011, was worth $32.3 million. It was awarded by developer Orion-One Residential to CCM subsidiary CCM Industrial. The latter was to build a 23-storey residential flat with a five-storey car park, swimming pool, communal facilities and a sky terrace, at 6 Jalan Ampas.
The freehold project was marketed under the name The Viridian@Bales-tier. Construction was scheduled to start in October 2011 and was originally slated to be completed in October last year. According to a marketing website, the project was expected to be completed in the middle of this year, with prices from $785,000.
A source, who declined to be named, told The Business Times that the project was marketed more than a year ago and had sold quite well. "There was pretty good sales volume. At that time, market sentiment was still pretty decent and cooling measures weren't as severe as today," he said.
CCM Industrial also had its Eon Shenton project worth $94.6 million terminated on March 20. This was a contract to build a 32-storey commercial building at 70 Shenton Way. On March 27, the company revealed that it had to pay a performance bond of $4.73 million, which was provided for in its 2013 financial statements.
CCM has announced plans to get out of its unprofitable Singapore construction projects and go into property development in the US and Australia. In its 2013 financial year results, CCM reported a $22.4 million loss. It also made an $8.7 million provision for losses stemming from higher costs of completion.
The provision was due to a raw material price increase, sub-contractor fees, a delay in the completion of projects, and other overheads and bad debts. CCM also made a $3 million provision for a legal claim relating to a subcontractor dispute.
The company announced a fund-raising exercise on April 8, in part "to discharge costs of its Singapore construction projects, repay and redeem liabilities and pursue property development opportunities overseas, particularly the United States and Australia".
On April 17, CCM said that it was disposing CCM Industrial, its local construction arm, for $1. The subsidiary had been fully impaired in its 2013 financial statements, and its net tangible liability was $7.7 million.
The new construction arm of CCM, called Singapore Construction, will take over CCM Industrial's remaining projects. Management is separate from CCM Industrial, CCM had said on April 10. The topline revenue attributable to Singapore Construction for existing projects is $7 million.
When reached by phone yesterday, a lawyer representing CCM declined to comment on its lawsuits, citing client confidentiality.
CCM made a number of major announcements recently on its change of direction from construction to property development. It announced its first property development project in Texas, in the US, in February. It is also bidding for a project in Perth, Australia.
CCM shares have been on a downtrend. They fell 0.1 cent, or 12.5 per cent, to 0.7 cent yesterday.