If all goes according to plan, Mandarin Gardens – a 99-year condominium that sits on a one million sq ft plot off East Coast park – is set to become Singapore’s largest ever en bloc deal.
The 1,006-unit project, built in 1986, has set a jaw-dropping price tag of $2.48 billion in its fresh attempt at a collective sale.
Already, the wheels to en bloc ville have been set into motion for Mandarin Gardens. According to C&H, their appointed marketing agent, owners have already approved of the asking price as well as the method of apportionment. With that approval, the collective sales committee has begun the process of collecting signatures from owners to get the requisite 80% for a collective sale to be launched.
But will the deal follow through? In this article, we examine factors that could make or break Mandarin Garden’s en bloc aspirations.
1) Size matters
As far as Singapore land sites go, Mandarin Gardens is GARGANTUAN. At 1.07 million sq ft, it is about 1.3X larger than the largest existing en bloc deal in Singapore, held currently by the former Farrer Court. The 838,488 sq ft estate was sold to a consortium for $1.3388 billion in 2007 and has been redeveloped it into D'Leedon.
Meanwhile, the second-largest en bloc deal took place at Pacific Mansion when the 128,352 sq ft freehold site was acquired by Guocoland, along with Intrepid Investments and Hong Realty for $980 million in March 2018.
But as grand as these massive deals sound, bigger isn’t always better when you’re trying to go en bloc. In fact, size could get in the way of a successful collective sale attempt.
So while Mandarin Gardens sits on an attractive location near the East Coast Park and boasts sprawling sea views, its large quantum could be a hurdle for potential buyers. Developers who are keen to acquire the site may have to go in as a joint venture to share the risk (more on this in the next point).
Then there is the matter of getting the pre-application feasibility study (PAFS) approval from the Land Transport Authority (LTA) to ensure that their proposed increase in number of dwelling units does not exert undue pressure on existing infrastructure. This will be especially challenging for a large site like Mandarin Gardens, whose redevelopment is estimated to be able to yield over 3,000 new housing units.
Size isn’t just a problem for potential buyers. With so many owners involved, the en bloc process becomes more complicated and can potentially turn ugly. Acrimony reportedly broke out during its last en bloc attempt in 2008 when residents against the sale claimed the sales committee had gone round collecting proxy votes to control the outcome of the general meetings.
On its likelihood to be put up for collective sale, our en bloc calculator gave it an “unlikely” rating of between 20% and 39%, although Mandarin Gardens was also the most-searched property on our calculator.
A screenshot from EdgeProp’s en bloc calculator.
Other projects that received high search volumes of our en bloc calculator include Amber Park and Aspen Heights.
Top 10 most-searched projects on EdgeProp’s en bloc calculator
Source: EdgeProp en bloc calculator.
2) Project cost and risk
Potential buyer(s) of the mammoth Mandarin Gardens site could end up paying an overall price tag of over $4 billion to purchase and build the new property.
That’s not all, developers will be required to pay Additional Buyer’s Stamp Duty (ABSD) of 15% on the land cost of a project if they are unable to build and sell all units within five years of being awarded the site.
The risk to the potential buyer will be significantly higher with a site like Mandarin Gardens, which is expected to yield over 3,000 units upon redevelopment. Further, with that price tag, a developer might be able to purchase up to four different sites to diversify the risk, instead of putting all their money in the same basket.
JLL's Tan (extreme right) opines that Mandarin Gardens’ prospects of going en bloc could be “challenging” due to its size.
Tan Hong Boon, regional director at JLL opines that Mandarin Gardens’ prospects of going en bloc could be “challenging” due to its size. In addition, developers also have more choices of en bloc sites in this sizzling collective sale climate, as condo owners scramble to put their properties collectively on the market.
“The price expectation from sellers should then be reasonable, so that developers find it worthwhile to take on the large site,” says Tan.
3) Competition from nearby projects
Mandarin Gardens faces competition from nearby developments like Laguna Park and Lagoon View, which are both also gunning for an en bloc sale.
The 516-unit Laguna Park was completed in 1978, while the 480-unit Lagoon View was completed in 1977. Both projects are leasehold and are located on Marine Parade Road. In addition, both projects are situated in close proximity to the East Coast Park and are less than 400m away from the Siglap MRT station on the upcoming Thomson-East Coast MRT line.
From a developer’s standpoint, Laguna Park or Lagoon View may be more attractive than Mandarin Gardens as both sites are smaller, and offer similar amenities and facilities as Mandarin Gardens.
Nevertheless, Mandarin Gardens may have picked a better time to attempt a collective sale this time around compared to its previous attempt in 2008, which came at the tail-end of a three-year en bloc fever. The process came to a halt in 2009, when the collective sale committee only went as far as appointing a marketing agent. Its proximity to the popular new project, Seaside Residences, located just across the road could be another plus point - based on URA data, it is amongst the new projects in district 15 with the highest sales transaction volumes from January 2017 to January 2018.
Mandarin Gardens is located just across the popular new project, Seaside Residences.
For this cycle, industry experts expect the en bloc momentum to last through 2018 and 2019.
Aside from residential units, Mandarin Gardens also comprise 10 shop units, a minimart, a kindergarten and a restaurant space.
Watch this space for updates!
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