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Mandarin Gardens En Bloc Not Successful.001

The En bloc exercise of Mandarin Gardens was a popular talking point in Singapore in 2018 and 2019. If it were successful, it would set the highest en bloc record in terms of the value of $2.927 billion.

Some reasons for the for En bloc exercise are as follows:

  • More maintenance is required to up-keep older estates, such as faulty lifts, leaking cook, cracked wall slabs, corroded sewage prices and popping tiles
  • Rising and unexpected maintenance costs, repair charges and needing higher sinking funds
  • Remaining lease of Mandarin Gardens is less than 64 years as of 2019
  • Able to attract developers to pay a fair premium with opening up of Thomson East Coast Line and close proximity to Siglap MRT Station
  • Development charges have been increasing for District 15
  • High interest of En Bloc and can ride on the en bloc wave.
  • Concern that the value of the land declines as lease shortens
  • Concern that sales of the property may be taxable under capital gain in the future
Mandarin Gardens Singapore East Coast

Estimated Gross En Bloc Price

Based on the sales proceed distribution, the estimated achievements would have been as follows:

  • One bedroom units getting $1.86m to $1.96m
  • Two bedroom units catching $2.12m
  • Three bedroom units obtaining $3.02m to $3.5m
  • Four bedroom duplex units securing $4.89m
  • Penthouse units to get around $5.976m

Outcome

However, the en bloc exercise did not materialise as Mandarin Gardens could not obtain the required 80% consents from the owners. On the final date to complete the Collective Sales Agreement (CSA), 23 March 2019, only 68.34% consensus was achieved. This is in spite of an increase in the reserve price.

It should be noted that this 68.34% includes partially signed units.  Excluding the partially signed units, the final achievement is effectively 64.46%.

 

Mandarin Gardens Singapore Gallery.018

Why?

The outcome could have been caused by the following factors:

  • Some owners are hardcore lovers of Mandarin Gardens and would not want to sell
  • Some indicated that it will be challenging to find a replacement unit that is of similar size
  • The committee had to deal with over one thousand owners. Scope of the development was a significant issue, developers could possibly build 3,000 to 5,000 units, and that is a very high number of units to sell, bearing in mind that the market size is limited
  • The promise of CSA artificially pushed up the Reserve Price which was not seen to be sustainable
  • Some owners are not satisfied with the distribution of sale proceeds
  • Weak en bloc market sentiments.  Potential Developer Buyers became very cautious.
  • New Cooling Measures by the Government implement in July 2018; Additional Buyer’s Stamp Duty (ABSD) and Seller’s Stamp Duty (SSD), resulting in many owners having to pay the new ABSD rates and SSD and not motivated to sign the CSA

 

Mandarin Gardens Landscape

Timeline Milestone

25 November 2017

An invitation to all owners was extended to form a Collective Sales Committee (CSC)

21 January 2018

Extraordinary General Meeting (EGM) passed  an ordinary resolution to form a CSC and to appoint a marketing agent

25 March 2018

EGM approved Collective Sales Agreement (CSA) and collection of signatures was commerced, seeking a reserve price of $2.479 billion.

6 June 2018, 60 Day Milestone

Estimated 55% of the units have signed the CSA.

6 July 2018

Implementation of New Cooling Measures by the Government - increasing Additional Buyer Stamp Duty for Buyers and up to 30 per cent for developers.  Developers will face higher expenses to redevelop older properties.

22 August 2018

Estimated 62% of the owners of the total 1,017 units have signed the CSA.

13 November 2018

Changes were made to the Reserve Price increasing it to $2.788 billion.

21 February 2019

Announcement of an increase of Reserve Price by 5% to $2.927 billion with an adjusted of the total land cost (psf per) to $1,250 from $1,191.

23 March 2019

End of the validity of CSA, with only 64.46 per cent consensus was achieved falling short of the required 80%.

Effect and Consequences Of The Outcome

Since 80% consensus was not achieved, the whole en bloc sales process ended. A waiting period of 2 years (from the date of the first EOGM) is required before a new CSC can be formed to re-start the en bloc process. If 50% of the owners by share value signs a Land Strata Title Act, a new CSC could be developed without having to adhere to the 2 year restriction.

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