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Thread: Mixed Development/Integrated Development Management Fee Calculation

  1. #1
    Join Date
    Nov 2015
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    Duo Residences
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    Default Mixed Development/Integrated Development Management Fee Calculation

    Mixed developments are becoming a highlight for future land use where URA blue sites can have residential component. Offices, retail and even hotel can become part of the mega development. There are a few notable ones like Duo, South Beach, Tanjong Pagar Centre being 4 in 1. There are few 3-in-1s (PLQ, Marina One) and 2-in-1s are becoming increasingly common. We will see more of them in the coming years as land use intensifies.

    There is a component that is often hidden during launch which is the management fee calculation. Having signed both Duo (2013) and PPR (yesterday), I can't help but noticed how this factor is calculated. I hope to shed some light for future investors looking at Mixed Developments even for 2-in1.

    Residents have to pay for both residential and shared spaces. Shared spaces can be pretty vast depending on the overall development size. Residents have to ask for share component of both residential (pool, carpark, security etc) and shared spaces (commercial/public accessed component) which can add up to a bigger sum. This factor eats into overall yield.

    Calculations that I personally witnessed:
    Park Place Resident Total Management fee: Unit Share/Total Residential Size + Unit Share/Total Shared Space <itemised>
    Duo Residence Total Management fee: Unit Share/ (Total Residential Size + Shared Space) <one overall figure only>

    My point is for investors who are looking at mixed developments in the future, do take note of this shared space calculation as a total. The bigger the mixed development, the larger the shared space. Agents and developers might not have fully explained this to you.

    2 Cents,
    PropVestor

  2. #2

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    Care to share what is the projected value for a 1 or 2 bedded is such development?
    To serve as a comparison point for other single use residential project. Many thanks in advance for the sharing.

  3. #3
    Join Date
    Nov 2015
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    Duo Residences
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    Based on mentions at the sales gallery (1 bedder minimal share starting amount):
    Duo Est $350
    PPR Est $400
    For both, I added about $100 more for inflation etc since its 2-4 years down the road. Since both are Green Mark Platinum certified, this should have some effect on the long term maintenance fee to some extent. Correct me if I am wrong.

    Shared space for Duo is definitely lesser than PPR's 100,000 sqft.

    PPR calculation: 33/16,000 (PPR facilities only) + 33/100,000 (shared space) for single bedder of 489 SqFt. Based on back of envelop calculation by % share and estimated per month maintenance costs, it should be about $400 to $500 for first year onwards. Again, this is strictly my own estimated calculation. Please share yours if you have any.

    2 cents,
    PropVestor

  4. #4
    Join Date
    Oct 2012
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    1,092

    Default

    And also don't forget still need sinking fund after first year besides maintenance fee.

  5. #5

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    Quote Originally Posted by PropVestor View Post
    Based on mentions at the sales gallery (1 bedder minimal share starting amount):
    Duo Est $350
    PPR Est $400
    For both, I added about $100 more for inflation etc since its 2-4 years down the road. Since both are Green Mark Platinum certified, this should have some effect on the long term maintenance fee to some extent. Correct me if I am wrong.

    Shared space for Duo is definitely lesser than PPR's 100,000 sqft.

    PPR calculation: 33/16,000 (PPR facilities only) + 33/100,000 (shared space) for single bedder of 489 SqFt. Based on back of envelop calculation by % share and estimated per month maintenance costs, it should be about $400 to $500 for first year onwards. Again, this is strictly my own estimated calculation. Please share yours if you have any.

    2 cents,
    PropVestor
    Thanks for the sharing, appreciate it. Timely as I'm looking at Artra and the same question pop up and my agent wasn't able to explain clearly though it could be they have not been briefed with the details.

  6. #6

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    Do u think a 2 bder at $1.3m 80% loan will be cash flow positive? Meaning rental to cover mortgage plus maintenance plus property tax?

  7. #7

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    I'm referring to a project like Artra. Expected rental $4K?

  8. #8

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    Quote Originally Posted by Khng8 View Post
    Do u think a 2 bder at $1.3m 80% loan will be cash flow positive? Meaning rental to cover mortgage plus maintenance plus property tax?
    Maybe can check on how the condo (Katong Regency) above nearby One KM is doing. Probably the most relevant reference as of now.

  9. #9
    Join Date
    Nov 2015
    Location
    Duo Residences
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    291

    Default

    Quote Originally Posted by Khng8 View Post
    I'm referring to a project like Artra. Expected rental $4K?
    Yet to view the unit. Let me get back to you after Friday. For a start, look at Ascentia Sky transaction, rental and lodged caveats. This will clarify some of your estimations.

    PropVestor

  10. #10

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    PropVestor,

    my understanding is ... Ascentia sky, some units are 'letting go' at a lower psf as their view will be blocked by Artra ...

    rental wise...it was pretty high before.. but going fwd...with Artra's construction ...Ascentia will suffer ...

    I am not sure a 2bedder can command $4k ...

    not forgetting ... there are :
    Metropolitan
    Alex
    Ascentia
    Echelon
    Artra..


    by which time .. i am sure Metropolitan will be the cheapest ... as would be oldest and ugliest.

    rental competition will be very tough over at Redhill side ...

  11. #11
    Join Date
    Nov 2015
    Location
    Duo Residences
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    291

    Default

    Hi Khng8 and Proud Owner,

    Just got back from viewing the unit. Got the KF division head to field us around.

    1km around Redhill
    Aside from the ARTRA, 2 more plots of land will be up for development in the near future BUT ARTRA real key advantage is really the COVERED proximity to the RedHill train station. Good that they built the resident entrance behind as the 24/7 Fairprice Finest is going to draw a crowd. The round the clock license applied is very HK style. Maximise use of every psf without wastage and keeping the development high.

    Agent confirmed the shops are strata title which means the mix can be quite varied. No known quota for F&B versus retail. This is constrained by the number of parking lots which is limited for public. I believe its quite a HK style approach. The childcare centre will contribute to the traffic (humans and cars) as parents from nearby will drop off and shop in the supermarket and shops. Human footfall is expected to be pretty high. This is a huge plus IMHO over other developments unless you want peace and quiet (Principal Garden will fit this criteria). Do not complain of the noise, MRT and human traffic as it is a given. More so if you are facing the MRT. The acoustic barrier will prevent some noise generation but high pitch/high frequency sound comes from the train braking. My friend who happens to stay at 10+ floor at Ascentia Sky already complains about this less so this development that is dead facing it. The windows if you noticed at ARTA are built to withstand this noise (<60 decibels limit legislation). AS folks will be happy that ARTRA will be blocking this noise in the future. More peace and quiet for them in AS which in forsaking the view, you get noise reduction. Its a trade off, not a trade down for AS.

    Rental will be quite fiercely contended like what proud owner mentioned. Tenants can choose what they want around the area from the 8-10 developments in the 2km radius. For rental decline rate as this LH property ages, the mixed development will allow slower decline which is a plus factor for me. More so for the stack that is not facing the train station, these units will enjoy the best of both worlds. Convenience and less rental decline.

    The lack of 1 bedder positioning also makes this development slightly more attuned for families which is why there is a childcare centre and supermarket. This is important for positioning agains the nearby competition. Comparing the layout view, ARTRA has done their homework to maximise space especially for the living area. This is one of the best layout I have seen minus the corner stack which has a slanted living room and one bedroom with west sun. Best to avoid this stack IMHO.

    Finally, the rental question. A1 and A2 indicative entry price (without ABSD) will allow you to rent out estimated between $3,700 to $4,200 (2021 pricing against current inflation, land supply and population increase, not against current sentiments) with an acceptable rental yield. However, if your tenants wanted more peace and quiet, they may choose somewhere else fairly quickly. Given this smaller development size and the lack of 1 bedders, proportionally more owners may actually choose for own stay. You really need to slam on the convenience factor. In terms of TOP timing, 2021-2022 will be at supply decline. This is an important point to keep in mind versus what is happening now.

    All the comments are my own and I wish you all the best in this investment.

    2 cents,
    PropVestor

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