New sites may entail hefty bids

Source : Business Times – 4 Jun 2009

THE two new sites that have been added to the Reserve List for second-half 2009 Government Land Sales (GLS) Programme are attractively located next to MRT stations. However, with estimated values of about $150 million (for the residential plot next to Bartley Station) and $300 million (for the commercial and residential plot in Bedok), bidding for the sites will involve substantial sums and this may limit the number of bids, market watchers say.

‘We’ve seen some smaller developers starting to look out for residential sites to restock their land banks but they are generally looking for smaller-scale sites, costing less than $100 million each,’ says DTZ executive director Ong Choon Fah.

Developers may still bid for bigger sites – such as the new plots announced yesterday by the Ministry of National Development (MND) – but may form joint ventures to mitigate the investment risk, she added.

The 1.98 ha plot next to the newly opened Bartley MRT Station on the Circle Line can be developed into a new condo with about 505 units. The plot has a 2.8 plot ratio (ratio of maximum potential gross floor area to site area).

It is currently occupied by a plant nursery and the Jin Long Si Temple. ‘The temple will be relocated by Sept 30, 2010 or when the site is triggered for sale, whichever is earlier,’ a URA spokeswoman said. Earlier this year, the Court of Appeal upheld a High Court judgment that the government did not discriminate against the temple when it acquired its land for the Circle Line.

As for the nursery, it is operating on a Temporary Occupational Licence that expires on July 31, 2009. ‘The tenant has been informed to move out by this date,’ URA’s spokeswoman added.

Knight Frank chairman Tan Tiong Cheng estimates the site is worth about $150 million or $250 per square foot (psf) of potential gross floor area (GFA). That’s assuming a new condo on the site can sell for about $600-$700 psf today and based on current construction costs.

CB Richard Ellis highlighted that four of the 19 residential sites on the H2 2009 Reserve List will be of special interest to developers because of their proximity to MRT stations. Besides the new Bartley plot, the other three are at Bishan St 14, Serangoon Ave 3 and Dakota Crescent.

Knight Frank’s Mr Tan reckons that the Bedok plot, designated for commercial and residential use, could be valued at about $280 million-$300 million today, based on a blended land price of about $300 to $320 psf per plot ratio. The estimated commercial GFA in the development will be about 31,460 sq m (about 338,632 sq ft).

Market watchers feel that the most logical use for the commercial component of the Bedok project would be retail and entertainment.

The plot’s developer will have to incorporate a new bus interchange. ‘Transport-oriented developments or TOD are a global trend and Singapore is no different,’ observes DTZ’s Mrs Ong.

City Developments executive chairman Kwek Leng Beng, commenting on the MND’s H2 2009 GLS Programme, which comprises entirely the Reserve List, said: ‘With limited supply coming on-stream, the office sector should start to stabilise in that the drop in rentals will be less severe.

‘With no new hotel rooms in the pipeline, hotels will face less pressure in resorting to fierce price-cutting measures which is currently being practised. The residential property market should sustain the recovery that we have been experiencing in the last few weeks. Overall, we welcome this news which will certainly help to instill confidence.’

Jones Lang LaSalle’s head of research for South-east Asia Chua Yang Liang reckons that even when the market recovers, the Reserve List may remain the mainstay of the GLS Programme. ‘The confirmed list is a policy tool for the release of sites for strategic developments,’ he said.

Dr Chua acknowledged, however, that a serious drawback of such a strategy is that the lead time for releasing a reserve site is longer than a confirmed site. ‘So relying solely on the Reserve List when the market picks up may cause a supply crunch,’ he added.