Owners of Mandarin Gardens eye new collective sale at $2.88 bil

January 13, 2023

The more positive reception to a collective sale at Mandarin Gardens could be due to the fact that the condo will be 37 years old this year. Completed in 1986, it has a 99-year lease with effect from 1982. This means it has a balance of 58 years left on its lease. (Picture: Samuel Isaac Chua/The Edge Singapore).

The latest collective sale committee (CSC) members of Mandarin Gardens believe that they stand a high chance of convincing 80% of the owners in the 1,006-unit condominium, located on Siglap Road in prime District 15 in the east, to agree to a collective sale. Likewise, they are hopeful that the 1.08 million sq ft, 99-year leasehold site will draw developer interest despite its size.

The CSC is gathering responses among the unit owners to launch a collective sale. If successful in securing the 80% consensus, the development could be put up for sale at the reserve price of $2.88 billion later this year. The price excludes the land betterment charge.

This is not the first time the owners of Mandarin Gardens have attempted a collective sale. The first collective sale attempt in 2008 fell through due to the Global Financial Crisis. The second attempt took place a decade later in 2018. The initial reserve price was set at $2.478 billion and raised to $2.788 billion in November 2018, after it was found that the land was undervalued by over $300 million. In February 2019, it was raised a second time to $2.93 billion, but when the collective sale agreement expired in March 2019, only 68% of the owners had agreed to it.

After the failed attempt, the owners waited two years before retrying. This is in accordance with the amended Land Titles Strata Act of 2010. The first retry requires approval from just 50% of the combined share value or number of owners; while for the second and subsequent retries, approval of 80% is needed.

At the end of the two-year waiting period, some owners of Mandarin Gardens who had championed the last collective sale attempt were itching to make another go at it. “We have received a more positive response from the owners this time around,” says R Janardhanan, a CSC member in this latest collective sale attempt. He was involved in the previous collective sale attempt too.

Ageing condo, shortening lease

The more positive reception to a collective sale at Mandarin Gardens could be due to the fact that the condo will be 37 years old this year. Completed in 1986, it has a 99-year lease with effect from 1982. This means it has a balance of 58 years left on its lease.

While there is still a staunch group of residents with strong attachment to the condo, the CSC has seen a greater shift in favour of the collective sale. “This time around, there is a sense of urgency among some residents to capitalise on this opportunity,” says Thomas Ong, another CSC member.

A major concern among most residents is the shortening lease and its impact on future prices, he adds. “That is another factor for more people to re-evaluate their stance on a collective sale.”

Nicholas Mak, head of research and consultancy, at ERA Realty, observes: “Age-related issues plague all condos, regardless of their tenure and size.”

For now, the management corporation strata title (MCST) of Mandarin Gardens has “a handsome amount of funds” to maintain the condo for the next few years, says CSC member Ong. But the expectation is that maintenance costs will go up in the coming years. “Moving forward, if the lifts break down frequently or if there are leaks in the water pipes, it would require walls to be hacked in order to replace them,” he adds. “It would be costly and a major inconvenience for residents.”

Replacement cost

Since the expiry of the last collective sale agreement in March 2019, about 100 units at Mandarin Gardens have changed hands, based on caveats lodged to date. In 2022, about 26 units were sold at prices ranging from $903,000 ($1,089 psf) for an 829 sq ft, two-bedroom unit to $3.82 million ($1,005 psf) for a 3,800 sq ft, five-bedroom unit.

The latest transactions occurred last month when a 1,528 sq ft three-bedder was sold for $1.96 million ($1,282 psf) on Dec 15, and a 1,572 sq ft three-bedder fetched $1.96 million ($1,247 psf) on Dec 6.

Some residents of Mandarin Gardens have lived there for many years and are now in their 70s or 80s. Their concern is replacement cost, as they recognise the difficulties in finding another similar-sized unit in the District 15 neighbourhood at a comparable price, says Janardhanan. Hence, these owners are more reluctant to support the collective sale. Other residents are prepared to “right-size” to a smaller apartment or HDB flat, and are therefore happy to endorse the collective sale, he adds.

“These are common and valid concerns that are often cited by en bloc holdouts,” says ERA’s Mak. “As a general rule of thumb, support for an en bloc is usually high if owners can secure a 30–40% premium to the resale prices on the open market”. Support is further bolstered if owners feel that they are able to preserve their standard of living, vis-a-vis the size of their unit, when they purchase their replacement home, he adds.

Shaun Poh, executive director, head of capital markets, Cushman & Wakefield Singapore, agrees, adding that as property prices in Singapore have increased in recent years, some en bloc holdouts would be concerned that the premium they will gain from a collective sale deal might not cover their replacement costs.

One of the largest condos in the east, Mandarin Gardens’ facilities include barbecue areas, a gym, 10 commercial units, several children’s playgrounds, squash courts, tennis courts, swimming pools, and children’s wading pools. There are also many green spots scattered around the development.

New launches, new benchmark prices

Next to Mandarin Gardens is the 841-unit Seaside Residences by Frasers Property. The 99-year leasehold condo is fully sold and completed in 2021. The latest transaction at Seaside Residences is for a 786 sq ft, two-bedroom unit that changed hands for $1.78 million ($2,265 psf) last November.

Three large-scale projects are in the pipeline for launch this year. One of them is The Continuum, an 807-unit freehold condo, at Thiam Siew Avenue, by frequent joint-venture partners Hoi Hup Realty and Sunway Developments. Another is the 638-unit Tembusu Grand at the Jalan Tembusu Government Land Sale (GLS) site, located next to the Canadian International School (Tanjong Katong Campus), by a joint venture between City Developments and MCL Land. The biggest is SingHaiyi Group’s 1,008-unit project on a GLS site at Dunman Road, which is adjacent to a park connector and the Geylang River and within walking distance of Dakota MRT Station.

Based on selling price estimates using EdgeProp’s Landlens property tool, it is possible that The Continuum could see an initial selling price of $2,755 psf, and Tembusu could have an initial selling price of $2,470 psf. Meanwhile the Dunman Road project might see units selling from $2,544 psf.

More at: https://www.edgeprop.sg/property-new...e-sale-288-bil