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Setting a new market quantum for Management Corporation Strata Title properties
In private residential developments, the Management Corporation Strata Title (MCST) ensures that the property and its common areas are well-maintained. Recovering management fees and sinking fund arrears from Subsidiary Proprietors is a common challenge faced.
In situations such as an owner defaulting on the payment of monthly maintenance fees and sinking fund, legal proceedings could ensue, and a strata unit may be put up for sale. That was the case for the MCST of Mactech Building. Looking to leverage auctions as a mode of sale to recover arrears of contributions and interest thereon, they appointed our Auction and Sales team to assist in the forced sale of two freehold B1 industrial units located at #01-01 and #01-13.
Key challenges
Closing such sales can be challenging due to their associated circumstances. For one, potential buyers are not able to access the property for viewing, due to the nature of a forced sale. Such properties could be sold without vacant possession, which could cause disruptions and create issues for a new buyer expecting immediate occupancy. Potential disputes between both parties could also escalate.
Following a successful forced sale, it could also be possible that the property's current occupiers may face eviction, which could create potential legal challenges, financial loss and displacement.
Outcomes and impact
Our Auction & Sales team showcased its deep industry expertise by positioning the two properties as rare assets to own, given their freehold tenure status in industrial land-scarce Singapore. On top of that, ground floor units are usually highly sought after by industrial end-users and investors.
The unit at #01-01 had a guide price/opening price tag of $2m. After 35 competitive bids by prospective owners, the unit was hammered down at a very impressive 34% above market value of $2.68m.
Similarly, the unit at #01-13, which had a guide price/opening price of $1.48M, was also hammered down at a higher price—20% above market value—of $1.78m following 16 competitive bids.
We believe the reasons behind both properties sales closing at price above market rates is due to the strong demand for freehold industrial properties under competitive bidding circumstances.
The right team for the job
For over past five years, our team has been growing its track record for success when it comes to achieving successful MCST sales transactions. Due to the circumstances of the sale, auctions are strongly recommended; as a mode of sale, it is transparent and eliminates possibility of any conflict of interest.
Knight Frank ensures that all terms and conditions of the auction are clearly communicated to prospective buyers, eliminating uncertainty and empowering prospective buyers to purchase properties under forced sale circumstances. Furthermore, auctions can create dynamic environment to drive competitive bidding, for higher bids and quicker sales.
MCST sales have been growing in popularity due to the rising living cost such as maintenance fees which strains some owner’s ability to keep up with the monthly or quarterly contributions—leading to the forced sale of their properties. As of May 2024, our team has successfully sold three strata units, all of which were divested at their first auction.
Delivering over and beyond expectations
For most auction properties, closing transactions way above their reserve price during a first auction is delivering over and beyond their expectations. We remain committed to delivering exceptional outcomes for our clients.