16/12/2024
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BT Published Tue, Sep 21, 2021 ยท 5:42 pm
MARKET watchers were mostly surprised with the outcome of Tuesday's tender closing for a white site along Marina View earmarked largely for private residences and hotel use.
The plot, which was triggered earlier from the government's reserve, list drew just one bid at tender.
And the sole bid - S$1.508 billion or S$1,379 per square foot per plot ratio - from a wholly-owned unit of IOI Properties Group - was just S$101 more than the price at which the group successfully applied for the site to be released from the reserve list of the first-half 2021 Government Land Sales Programme.
Veteran developers and property consultants generally expect the 99-year leasehold plot to be awarded.
Explaining the lower-than-expected number of bids as well as bid price, the head honcho of a listed property and hotel group said: "There is generally low-risk appetite for hotel development as the hospitality sector is still affected by Covid and more so in Singapore where demand for hotel rooms is very much dependent on international travel, which has yet to resume in a significant way."
In similar vein, JLL Asia-Pacific's head of transaction advisory services for hotels and hospitality, Calvin Li, said: "The limited number of tenderers suggests that most investors continue to be cautious around the large minimum requirement for a hotel..."
The 0.78-hectare (about 84,000 sq ft) site can generate a maximum gross floor area of 1.09 million sq ft. Of this, at least 548,959 sq ft has to be for residential use and at least 279,861 sq ft for hotel use. The project can have up to 21,528 sq ft for optional office space and up to 21,528 sq ft of space for other commercial uses (including retail and F&B).
In an earlier release, the Urban Redevelopment Authority (URA) had estimated the project's private housing units at 905 and hotel rooms at 540.
"Sentiments in the residential market are positive and prices on the uptrend," said JLL senior director Ong Teck Hui.
Nicholas Mak, head of research and consultancy at ERA Realty Network, says: "For the project as a whole including the residential component, the huge construction costs as well as major uncertainties due to supply-chain disruptions caused by the pandemic and manpower shortages would increase the risk profile of this project."
Analysts say that despite being hungry for land, most developers may have been put off by the huge total development cost which a veteran developer estimates at S$2.3 billion.
Moreover, says Mr Mak, the development period for the Marina View site is likely to be longer than usual. The URA has stipulated a seven-year project completion period - compared with the usual five years for a typical residential development site. "The longer the development period, the higher the risk. Some developers may be saving their bullets for other land tenders," said Mr Mak.
Most of the property industry folks The Business Times spoke to expect the URA to award the Marina View site to IOI Properties as the government had announced in June that the minimum price of S$1.508 billion that the successful applicant committed to bid for the reserve-list plot was acceptable to the state.
Expressing a contrarian view, Huttons Asia chief executive Mark Yip noted the bid price appears to be on the low side and "may be viewed as opportunistic by the government". "Furthermore there is no other bidder for the site and that gives another reason for the government not to award the site".
Market watchers highlight that in recent times there has been at least one occasion when the URA awarded a plot to the sole bidder. The tender for a residential with commercial at first storey site in Silat Avenue closed on April 26, 2018, with just one bid, at S$1,138 psf ppr, from a consortium comprising UOL, UIC and Kheng Leong Company.The confirmed-list plot was awarded three weeks later, on May 17; it is being developed into Avenue South Residence. In late 2008, a hotel plot in Kallang Road/Jellicoe Road triggered from the reserve list was also awarded to its sole bidder. The V Hotel Lavender stands on the site today.
Bursa Malaysia-listed IOI Properties is no stranger to the Marina View area. It is developing a predominantly office project on another white site nearby, along Central Boulevard, that it bought at a state tender in late 2016 for S$2.57 billion or S$1,689 psf ppr. In a way, having a hotel and residential project nearby could complement its Central Boulevard office exposure.
Painting a more holistic picture, Tricia Song, head of research for South-east Asia at CBRE, said: "When developed, the Marina View site's large residential and hotel components, with relatively smaller retail and office components, will accentuate the C*D's transformation into a multi-faceted 'live, work and play' district.
"City living is likely to take root in the longer run, as the city centre rejuvenates its older commercial buildings, attracting larger residential populations."
