Hotel site draws just one bidder

Source : Straits Times - 10 Oct 2008

A TENDER for a hotel site on Kallang Road has attracted just one bidder, who has lodged the minimum price allowed under the process.

Tenders typically attract prices above the minimum bid but on this occasion Citywide Land’s $51 million offer was right at the limit for the plot next to Lavender MRT station.

‘It’s a reflection of the highly uncertain market environment,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. ‘And some developers may find it challenging to get funding for land purchases.’

The 99-year leasehold site is on the reserve list and was launched after an unnamed firm applied on Aug 1 for it to be put up for sale.

In the application, it had to commit to bid at a minimum price acceptable to the State, which was $51 million.

The bid from Citywide Land was right on the money at $249.6 per square foot per plot ratio for the 4,219 sq m site.

The Urban Redevelopment Authority said it will decide on the awarding of the tender after evaluating the bid.

When the application was made in August, Mr Mak had expected bids of between $400 to $450 psf, although he added that poor market sentiment or lower-than-expected visitor arrival numbers could bring bids down to $330 psf.

An unnamed consultant had reportedly expressed surprise that the site was even triggered given global economic concerns and soaring construction costs. Since then, the economic climate has worsened further.

The site has a maximum allowed gross floor area of 18,986 sq m, which could accommodate a hotel of up to 25 storeys. This means some of the rooms will have views of Kallang River, said Mr Mak. ‘This is a good hotel site. When the situation improves, the bidder will be seen as very lucky,’ he added.

Fellow consultant Ku Swee Yong, director of marketing and business development at Savills Singapore, said the low bid is not surprising as construction costs are still high.

‘To build a 3 1/2-star hotel, they have to bid low,’ he said.

Citywide Land is an unfamiliar name in the property market here.