The Orchard Boulevard site will be linked directly to the Orchard Boulevard MRT Station and is adjacent to Orchard Bel Air (Photo: Samuel Isaac Chua/EdgeProp Singapore)
When URA announced on Feb 8 that the Marina Gardens Crescent site would not be awarded, most were not surprised. The sole bid of $770.5 million or $984 psf per plot ratio (psf ppr) jointly submitted by GuocoLand, Hong Leong Holdings and TID was "too low", according to URA.
By comparison, the adjacent site at Marina Gardens Lane was sold to a Kingsford-led joint venture for $1.03 billion ($1,402 psf ppr) in July 2023, while the Marina View white site was awarded to IOI Properties Group for about $1.51 billion ($1,379 psf ppr) in September 2021. Hence, GuocoLand and partners’ bid of $984 psf ppr was 29.8% lower than Kingsford’s bid and 28.6% below that of IOI’s, notes Wong Siew Ying, PropNex head of research and content.
However, GuocoLand’s bid is consistent with its earlier bid for Marina Gardens Lane, which was in second place at $985 psf ppr (See Table). Far East Organization and City Developments’ joint bid of $953 psf ppr, in third position, was just 3.4% below.
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Some would argue that those two bids are more representative of the market value today, while Kingsford’s bid was an outlier. The Marina Gardens Crescent site should, therefore, have been awarded.
“The top-end of the residential market has been the most affected not just by the additional buyer’s stamp duty [ABSD] for foreigners, but sentiment due to the money laundering case - where assets seized have ballooned to over $3 billion from $2.8 billion last August,” says a property veteran who declined to be named. “Even the legitimate foreign money coming to Singapore has turned cautious. The site should have been awarded based on the current market conditions as the tender price is realistic.”
Will the highest bid received for the Orchard Boulevard site be rejected by URA as too low? At the close of the government land sale (GLS) tender on Feb 1, the highest bid received for the Orchard Boulevard site was $428.28 million ($1,617 psf ppr) by a joint venture between UOL Group and Singapore Land Group (SingLand).
The bid is 32% below the $2,377 psf ppr paid for the Cuscaden Road GLS site six years ago, notes Leonard Tay, head of research at Knight Frank Singapore.
The Cuscaden Road site received nine bids in 2018. SC Global Developments submitted the winning bid in a joint venture with New World Development and Far East Consortium. The new luxury development, the 192-unit Cuscaden Reserve, obtained its Temporary Occupation Permit last year.
"As the Cuscaden Reserve site was awarded in 2018, six years ago, the price does not reflect market conditions today," says Jeremy Lake, managing director of investment sales and capital markets at Savills Singapore.
Read also: Three-bedroom unit at Cuscaden Residences on the market for $4 mil
And unlike the Marina Gardens Crescent site, where URA could compare with the bid by the Kingsford-led consortium, Thomas Tan, CEO of SRI, notes that there is no recent comparison for the Orchard Boulevard site.
Beyond price, another deciding factor is the number of bids, notes Savills’ Lake. "Multiple bids give good visibility on the market value,” he adds. “A single bid, on the other hand, could be an outlier”.
For the Orchard Boulevard GLS site, four bids were received. The highest bid of $1,617 psf ppr by UOL and SingLand is 2.4% higher than the next highest bid of $1,578 psf ppr submitted by Allgreen Properties.
"Four bids reflect competition, and it is easier to justify that it is the maximum price that developers find is fair," says SRI’s Tan.
The Orchard Boulevard bid reflects the additional risks developers have to undertake, adds Knight Frank’s Tay, along with the increased ABSD for foreign buyers in conjunction with the increased development costs.
With no recent comparable, what is URA's reserve price for the Orchard Boulevard site? In a written answer to a parliamentary question raised on the basis for determining the reserve prices on sites under the GLS and industrial GLS programme in July 2021, K Shanmugam, Minister for Law, replied that the reserve price for sites is pegged to 85% of the estimated market value of each site, as assessed by the Chief Valuer’s Office (CVO). It considers proposed land use and site-specific conditions, relevant land sale transactions, and completed building rental and sale transactions.
Read also: Private home prices up 1.5% q-o-q in 1Q2024, transactions down 20%: URA flash
“Bids below the reserve price are not automatically ruled out; whether a site is awarded depends on the prevailing market conditions, number of independent bids received, and the specific circumstances of each site,” Shanmugam said.
Of 133 sites launched for tender between 2016 and 2021, 17 were not awarded as the highest bids were deemed “not reflective of the fair market value of the land”, Shanmugam added. “Of the sites that were awarded, the majority were within 15% of CVO’s estimated market value.”
Therefore, the property veteran notes that the Orchard Boulevard site would be awarded if the tender price is within 15% of the CVO’s valuation and is “realistic, based on the current market conditions”.
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