Jul 15, 2009 - The Straits Times
FAR East's executive director (property services) G.L. Yap
explains:
The scenario
An eligible tenant signs a two-
or three-year lease for a 1,000 sq ft unit at $15,000 per month ($15
psf).The process
The tenant will be instructed to set
up a new company. Each month, he will issue company shares - named
Redeemable, Convertible, Cumulative Preference Shares (RCCPS) - in lieu of
rent. The value of each share depends on the structure of the company. Share
issues will be capped at 49 per cent of the paid-up capital, or $500,000,
whichever is lower. The tenant can opt to buy back the shares after
a set period or after the lease expires at the original selling price plus
interest of 4 per cent per annum. Alternatively, he can convert the RCCPS into
ordinary shares at the current market value of the company. He will
now start paying the rent in cash.If the business fails at any time, the
losses will be shared among shareholders - including Far East Organization - in
proportions based on the structure of the company.
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