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Mandarin Gardens 'likely to draw joint ventures and foreign players'

Foreign developers with deep pockets will be more likely to stomach the risk to make a bid, say analysts

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The date for an extraordinary general meeting to approve sale conditions for Mandarin Gardens has been set for March 25.

Singapore

WITH an eye-popping reserve price of S$2.45 billion and sprawling size of over one million sq ft, Mandarin Gardens could be a tough sell.

But if what could be the nation's largest residential en bloc deal ever materialises, it will likely involve several developers joining hands - perhaps including a foreign developer.

Owners of the 1,006-unit condominium at Siglap Road could pocket between S$1.58 million and S$5.07 million, Raymond Khoo, business development director and division director for marketing agent C&H Realty, told The Business Times.

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"We are not only concentrating on local developers - they might come in on a joint venture, but we are eyeing foreign developers because they have the deep pockets and strong financial muscle," he said. "In particular, Chinese developers might want to showcase what they have done in Johor Baru and want to bring it over to Singapore."

Tay Huey Ying, head of research and consultancy at JLL Singapore, said that a joint venture would be "highly likely" for Mandarin Gardens, given the track record of past billion-dollar residential development land deals.

These include the record holder by dollar value of the Farrer Court collective sale site in 2007 for S$1.34 billion, purchased by CapitaLand, Hotel Properties Ltd and US-based Wachovia Development.

Analysts said that besides the hefty price tag and additional charges such as for the lease top-up, a key risk is that developers here are required to pay an Additional Buyers' Stamp Duty (ABSD) of 15 per cent on the land cost of a project unless they build and sell all units within five years.

Analysts told BT that Mandarin Gardens could yield between 3,000 and 4,200 units when redeveloped.

"Whether you have 400 or 4,000 units, you have the same amount of time to complete all your sales," said Desmond Sim, CBRE Research's head of Singapore and South-east Asia.

"For the same price, a developer here can buy five-and-a-half land parcels of half a billion each - and they can spread the risk over five years," said Nicholas Mak, executive director of ZACD Group.

Meanwhile, many local developers have already stocked up on their land banks in the past year's collective frenzy, said Mr Sim.

Foreign developers with deep pockets will be more likely to stomach the risk, and will be more likely attracted to bid for the land, said analysts.

"Foreign developers are used to building very big developments, and so Mandarin Gardens may not seem that big to them," said Edmund Tie & Co research head Lee Nai Jia. "Branding might be also one factor - they may want to use Singapore to showcase their product so they can enter other markets."

An industry specialist who declined to be named said that large listed developers, such as CapitaLand, may toss their hats into the ring on a consortium or joint venture basis.

Some foreign names with the capital and appetite for risk could include Qingjian Realty, the specialist said, or Hong Kong-listed Chinese developer Logan Property and Chinese conglomerate Nanshan Group. The two jointly placed a record bid of over S$1 billion for a Stirling Road residential plot in 2017.

CBRE Research's Mr Sim said that if allowed, the buyer could divide the land into several properties - similar to the way that Tripartite Developers, a three-way equal joint venture involving Hong Leong Holdings, City Developments and Trade & Industrial Development (TID), acquired three million sq ft at the Upper Changi Road North area in the 1970s to roll out several condominiums.

Still, more headwinds for Mandarin Gardens lie ahead, Mr Mak of ZACD group warned. The date for an extraordinary general meeting has been set for March 25 to approve the sale conditions. But the challenge of getting 80 per cent of the signatures required, including contacting owners who are foreign investors, could hold up the process, he said.

"Most condominiums here hover between 300 to 500 units, and this one is more than double the typical size," he pointed out.

Mr Khoo of C&H said that he was "confident of getting a lot of bidders" and that "a seasoned developer will know how to handle the five-year rule". He added that a major draw is that Mandarin Gardens boasts "one of few the last pieces of sea-facing locations" in Singapore - which Dr Lee and Mr Sim agreed would be attractive to potential buyers.

Mandarin Gardens is also located close to the upcoming Thomson-East Coast Line and established schools such as Tao Nan School and Victoria Junior College.

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