Far East tops tender with bid 35% clear of field

Source : Business Times – 18 Sep 2009

It plans Holland V-type shophouses, 150-200 apartments

The tender for a residential and commercial plot at the corner of Yio Chu Kang and Seletar roads yesterday drew 12 bids, with Far East Organization topping the list with an offer that outshone its closest competitor by a huge 35 per cent – possibly the widest margin at a state tender in recent years.

Far East’s offer of $119.08 million works out to $376 per square foot of potential gross floor area – much higher than market expectations.

The second-highest bid, by a Centurion Properties unit, was $88.19 million or $279 psf per plot ratio (psf ppr).

Sim Lian, Soilbuild Group and Frasers Centrepoint bid in the $247 to $253 psf ppr range.

Four others also bid above $200 psf ppr – Ho Bee; Roxy-Pacific unit Mequity; JBE Development, which is controlled by Hongkonger Patrick Lam who developed The Luxe in Handy Road; and Heeton. Wah Khiaw Developments bid about $200 psf ppr.

‘The strong turnout shows developers are still hungry for land,’ said a developer who took part in yesterday’s tender. ‘Second, the relatively small outlay also boosted the participation rate.’

While National Development Minister Mah Bow Tan announced this week that the government would resume land sales under the confirmed list in the first half of next year, it makes sense for developers to clinch sites now and launch ahead of the competition, according to Credo Real Estate managing director Karamjit Singh.

Mr Singh estimates that a new low-rise condo on the Seletar/Yio Chu Kang roads site could fetch an average price of $750-780 psf in today’s market.

‘There’s very little supply of new condos in the location. The area also has a wide catchment of landed property owners whose buying power would be higher than the typical HDB upgrader’s.’

The 2.1-hectare, 99- year leasehold site can be built up to five storeys.

BT understands that Far East could manage a breakeven cost for the project’s residential component of about $600 psf, despite its bullish bid.

‘It apportioned a much higher land value for the project’s commercial component – which can form up to around 15 per cent of the project’s maximum gross floor area – than its residential component,’ an analyst said.

Chng Kiong Huat, Far East Organization executive director (planning and development), said that the group’s scheme includes 150-200 apartments, comprising two and three-bedroom units.

‘The project should be launch-ready in the second half of next year,’ he said.

For the commercial component, Far East is looking at developing a modern shophouse cluster in the style of Holland Village.

‘There will be a supermarket or neighbourhood centre type of food market, as well as restaurants, pubs and wine bars,’ Mr Chng said. ‘We’ll retain the commercial component as an investment property for rental income.’

Market watchers point out that Far East is no stranger to the location, having developed more than a dozen projects in the Yio Chu Kang/Hougang vicinity over the past 20 years. These include Bullion Park, Florida Park, Banyan Villas, Regentville, Gerald Park and Central Place.

In a Sept 16 report, UBS Investment Research said that it expects the government to provide land for 3,000-3,500 private homes, including executive condos, in the first-half 2010 confirmed list – close to the level in H2 2007.

For the whole of 2010, UBS reckons that ‘it is reasonable for the government to release 4,000-5,000 units on the confirmed list’.

‘But if prices continue to rise sharply in H1 2010, more units could be included in the confirmed list for H2 2010,’ said the report, which was written by analysts Regina Lim and Michael Lim.