Once in a while we hear of killer litter offences. Yet there is another high-rise danger lurking; the killer lifts are often forgotten. (Some say killer pools.) These silent killers have a stranglehold on our finances through high maintenance and a large one-off sum for replacement at the end of their life spans.

We look at an example of an almost two decade old condo in District 21, with approximately 341 units. In the AGM previously, a list of facilities were drawn up to highlight their replacement costs due in the coming 3-5 years. They amounted to almost $11.5 million!

  • District 21 Condo: 341 units
  • Managing funds (MF) reserves: $500,000 Sinking fund reserves: $2,100,000
  • Annual MF expenses: $1,300,000 Annual SF expenses: $537,000 (2y avg)
  • Annual MF collection: +$1,258,000 Annual SF collection: +$403,000

Simply as a matter of fact, the owners either have to significantly increase their contributions to the Sinking Funds from $75 a month to $500 a month. Or gather to vote on the below two outcomes.

  1. One-off top up of {$11.5m-$2.1m)÷341} = $39,000 per unit owner
  2. Skip the big items. Axe the lifts, clubhouse, swimming pool.

Only when the tide goes out do you discover who’s been swimming naked.

Warren buffett

3 thoughts on “Case study: Killer lifts?

  1. i read your article with alot of interest.
    1) your posting of the annual cost via the sinking fund was a shocker. however, to be fair, the bigger the condo, the higher the costs. so i give the costs the benefit of the doubt. that is until i scrolled down and looked at the car park barrier cost. generally speaking there is only one entrance to the condo. that simply implies that the costs maybe vastly over exaggerated to benefit certain parties.
    2) upon further review, the CCTV cost are significantly overpriced. the present technology via POE (power over ethernet) significantly reduces costs for users. Even if i were to install new wires on 10 blocks of 8 story buildings with 160 high grade cameras, it would only cost $40,000.
    3) it surprises me that costs like above can pass the AGM. owners are generally not knowledgeable and they hire a managing agent (MA) to handle everything. that includes sourcing and knowing what to pay and what not to pay. alas, it certainly seems like the MA is NOT working for the condo that is paying for the services.
    to be honest, i wouldn’t be surprised if this is a common occurrence in singapore.

    Like

  2. High costs can be a result of legacy issues from developers, previous managing agents. “Just like how printers are sold at a low price. Once you run out of the consumable ink you need to buy more, and this tends to be relatively expensive. Again the cartridges are not interchangeable and you have no choice.” (https://www.marketingteacher.com/pricing-strategies/)

    Agree that the bigger the condo, the bigger the costs. The $11.5 million is simply a case study to draw attention to a consistent SF funding plan, instead of kicking the can down the road.

    If the lifespan of major facilities are around 20 years, the sinking fund collection should have accumulated enough to cover it (including inflation) by the 18th year.

    It is important to have a few buffer years. Along the way, some replacements have to be done earlier. Expense accordingly, and adjust the remaining cost estimates downwards. In this manner, by the 18th year we may see $10 million expected replacement costs, and around $8 million in Sinking fund reserves.

    Much healthier. And better positioned to negotiate further.

    Like

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