Ong Chor Hao | The Business Times | Monday, Jun 03, 2013

A PRIME 99-year leasehold commercial site between Cecil Street and Telok Ayer Street will be put up for sale by public tender, after it was triggered for release from the government’s reserve list.

The Urban Redevelopment Authority (URA) said a developer has applied for its release after commiting to a bid of at least $623.7 million in the tender.

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

This latest land parcel was made available on the reserve list late last year, and has a site area of some 81,800 square feet, including an open space of 17,400 sq ft. It can cater for a 50-storey building, URA said.

The maximum permissible gross floor area (GFA) is about 831,000 sq ft, of which at least 664,000 sq ft, or 80 per cent, must be for office use.

The minimum bid price translates to about $751 per square foot per plot ratio (psf ppr).

Analysts expect between five and 10 bidders to contest the site, with a top bid of between $900 psf ppr and $1,000 psf ppr, given its location in the Central Business District and that it will be directly connected to Tanjong Pagar MRT station.

“Since the government has not put up any commercial site in the financial district on the Confirmed List since 2011, the tender of this site is likely to attract much attention from major developers,” said Nicholas Mak, head of research and consultancy at SLP International.

The expected price range for the highest offer compares with the $882 psf ppr Far East Organisation paid in 2011 for the plot it is now developing as SBF Center across the road at Robinson Road and Cecil Street.

Guocoland paid $1,006 psf ppr in 2010 for a site above Tanjong Pagar MRT Station, which will become Tanjong Pagar Centre.

Desmond Sim, associate director at CBRE Research, noted that rents for Grade A office space has bottomed out, and developers may be able to enjoy a “probable upswing”.

But consultants agreed that the quantum of the bids is tempered by a key restriction that strata-subdivision for sale is not allowed at the latest site.

Developers cannot sell individual office units at the latest site and will have to rent them out instead, noted SLP’s Mr Mak.

“This restriction could drive away boutique developers that would need the down payments of strata-subdivided units to fund the construction,” he said. He expects interest to be from developers with “deep pockets” who plan to eventually divest the asset to a trust.

Brigid Chan, head of commercial for HSR Property Consultants, expects the “usual major commercial developers” to be interested in this plot since it will become a predominantly office building.

Mr Sim also raised the issue of a potential glut of office space supply when the massive Marina One project completes sometime around 2017. The $7-billion mixed-use development will have about 1.9 million sq ft of net lettable area.

However, if the latest site is completed earlier, say 2015, the developer could benefit as there is technically no Grade A office space in the pipeline for that year, he noted.

“It will serve the pent-up demand from the lack of supply in 2015,” Mr Sim added.

Separately yesterday, JTC Corporation launched a 30-year leasehold site at Mandai Link for sale by public tender, under the Industrial Government Land Sales programme.

The plot’s area is about 0.7 hectares, with a maximum permissible gross plot ratio of 2.5. It is zoned for Business-2 (food only) development, catering to end-users from the food production industry.

Consultants expect between three and eight bidders for the site, with a top bid of $80 to $100 psf ppr.

“End-users in the food production industry could be fairly interested to explore setting-up their industrial operations in this locality,” said Alice Tan, head of research and consultancy at Knight Frank Singapore.

This is in view of the growing food and beverage business in Singapore and the emerging need to expand food manufacturing and preparation in centralised operations, she added.

The last industrial plot zoned food-only was a 30-year-leasehold site at Tuas Bay Walk. The 0.58-ha site was awarded to Yee Lee Development for around $9 million, or $84.57 psf ppr in April.

The tender for the Mandai Link site will close on July 12 at 11am.

 

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