Short Street hotel site receives $8.8m offer

Source : Business Times - 2 Apr 2009

THE Urban Redevelopment Authority says that a reserve list hotel site in Short Street has received a committed bid of $8.8 million from an unnamed developer and the site will now be put up for public tender.

The trigger price works out to about $200 per sq ft per plot ratio.

The 12,535.6 sq ft site has a maximum permissible gross floor area of 43,884.4 sq ft and can be built up to 12 storeys.

URA said that the site can accommodate between 90-100 hotel rooms.

Cushman & Wakefield managing director Donald Han said that based on market conditions, the final tender price may not be too far off from the trigger price.

‘There has been a huge drop in hotel occupancy levels,’ he said, adding that occupancy and revenue per available room are estimated to have fallen by 20 per cent in recent months.

Chee Hok Yean, executive vice-president at Jones Lang LaSalle Hotels, also reckons the trigger price is fair, given weak economic conditions, lower tourists arrivals and impending supply. ‘The site is in a revitalised precinct and will have potential for a new concept lodging facility,’ she said.

In October 2008, a hotel site at Kallang and Jellicoe roads was sold for $51 million or about $250 psf ppr. There was only one bidder in that tender.

Given that the Short Street site is well located, the trigger price does seem low.

Robert McIntosh, executive director at CBRE Hotels, said that with prices of new developments falling, it is not surprising that land prices should follow. He believes the potential developer of the Short Street site is likely to position the hotel as either a three-star or boutique establishment.

On the upside, he noted that construction costs have been falling ‘rapidly’.

URA will launch the public tender for the site in about two weeks, and the tender period will be about eight weeks.