Far East offers $119m for Seletar site

Source : Straits Times – 18 Sep 2009

THE first land tender exercise since the Government announced measures to calm the property market closed yesterday with a bullish top bid well out of sync with the other leading offers.

Far East Organization lodged a bid of $119.08 million for the mainly residential site at the corner of Yio Chu Kang Road and Seletar Road.

This was 35 per cent higher than the second bid and nearly 2-1/2 times higher than the lowest offer of $48.8 million.

The site is on the reserve list, which means that it was put up for tender only after a developer triggered its sale by committing to a minimum acceptable bid.

There were 12 bidders in all – more than expected – including high-profile developers such as Frasers Centrepoint, Sim Lian Land and Ho Bee Investment.

The Far East bid, which works out at $376.29 per sq ft (psf) of gross floor area, was ’surprisingly bullish’ as the site is in a sleepy area that is not near an MRT station, said property consultant Nicholas Mak, a Ngee Ann Polytechnic lecturer.

The 99-year leasehold site also has a height restriction of five storeys.

About 85 per cent of the site’s maximum gross floor area of 29,400 sq m is slated for residential use. The remaining space is for shops.

Apart from the Far East’s knock-out bid, the other leading candidates – mostly developers aiming to top up land banks – tendered offers in a narrow band.

Their bids were within earlier expectations of $250 psf to $300 psf per plot ratio, which would fit a final selling price of completed flats at $700 psf to $750 psf.

‘The second to the fifth bids came in quite close and are more reflective of the market,’ said a property consultant who declined to be named.

‘These developers would have taken into account the Government’s measures as the confirmed list will add to the supply in the market.’

The Government announced on Monday that it will reinstate the confirmed list of sale sites and remove the interest absorption scheme, among other smaller measures, to ‘temper the exuberance in the market and pre-empt any speculative bubble from forming’.

Under the confirmed list, sites are put out for sale according to a pre-determined schedule, regardless of developers’ interest.

An industry source said that developers will understandably become more cautious, particularly as the Government has yet to disclose the number of sites that will be on the confirmed list.

But Mr Mak said Far East is clearly banking on a continued rise in private home prices.

He estimated that the site can yield 220 to 240 housing units. These units, experts predict, will likely have to sell for around $850 psf to $900 psf.

The nearest condominium in the area, Seletar Springs, is going for around $500 psf, said Mr Mak. Caveats lodged in July and last month ranged from $487 psf to $563 psf.