CDL leads pack as bullish bids continue at government land tenders

Angela Teo
/ EdgeProp
February 3, 2018 10:00 AM SGT
The past fortnight has seen a flurry of not just the close of tenders for collective sale sites but also for 99-year leasehold sites sold under the government land sales (GLS) programme.
Jan 30 marked the tender closing of three residential sites: on Handy Road across from Plaza Singapura shopping centre and the Dhoby Ghaut MRT interchange station; West Coast Vale, off West Coast Road; and Chong Kuo Road, off Sembawang Road.
While the batch tender closing of three residential sites has dispersed competition among developers — with six to 10 bids received versus an average of 13 bids for sites awarded in 2017 — “developers across the board continue to price in a continued recovery in end-residential prices, with estimated breakeven prices at or above market prices today”, notes Louis Chua, Credit Suisse analyst, in a report on Jan 31. “Rising land bids will continue to be the catalyst for higher prices from 2018.”
CDL a big winner
Following its $906.7 million en bloc purchase of Amber Park in October 2017, listed giant property group, City Developments (CDL) emerged the top bidder for two of the three GLS sites that closed on Jan 30: The Handy Road site in prime District 9, for which it submitted a bid of $212 million ($1,722 psf per plot ratio); and the West Coast Vale site, for which it bid $472.4 million ($800 psf ppr).
There were 10 bids for the Handy Road GLS site, and six for the West Coast Vale site. For the Handy Road site, CDL won by a margin of 12.3%, while the margin for the West Coast Vale site was a narrower 0.7%.
“We have been very selective and see great potential in the two sites,” Sherman Kwek, CDL group CEO said in a statement on the evening of Jan 30, upon winning the two sites. “As Singapore’s residential market begins to gradually recover, we will continue to seek suitable opportunities to increase our local landbank.”
CDL also announced its plan to build a 200-unit residential development on the Handy Road site, comprising three blocks spanning eight to 10 storeys, with basement parking. A conserved building on the site will be converted into a clubhouse. Meanwhile, the West Coast Vale site will be developed into twin 36-storey towers with about 730 apartments and basement carpark.
City Developments beat 10 bidders with its bid of $212 million ($1,722 psf ppr) for the Handy Road site (Credit: URA)
Optimism in high-end market fuels developers’ confidence
According to Credit Suisse, CDL’s top bid of $1,722 psf ppr for the Handy Road site was slightly lower than the $1,733 psf ppr paid by Frasers Centrepoint in December for the former Zouk discotheque site on Jiak Kim Street, also in District 9.
Still, CDL’s bid is “bullish”, notes Nicholas Mak, ZACD Group head of research & consultancy. Based on the land price of $1,722 psf ppr, he estimates that the breakeven price for the new project ranges from $2,340 to $2,400 psf. CDL’s bid is 49% higher than the $1,157 psf ppr paid by the consortium — comprising Hoi Hup, Sunway Development and SC Wong — for the Sophia Hills site (also a 99-year leasehold GLS site) in March 2013, adds Mak. Furthermore, there has been no GLS site made available in the vicinity since then.
The 493-unit Sophia Hills is expected to obtain Temporary Occupation Permit anytime soon. The project is more than 95% sold, with recent transactions averaging $2,000 psf. Since the site on Handy Road is closer to the Dhoby Ghaut MRT interchange station, Mak concedes that “a certain land price premium is expected”.
Optimism for the high-end market has also been fuelled by the strong take-up rate at CDL’s New Futura project, which was previewed on Jan 18. It has sold 35 of 124 units at an average price of $3,200 psf. Credit Suisse’s Chua expects residential prices to rise 5% to 10% and transaction volume to rise 36% this year.
West Coast Vale site - EDGEPROP SINGAPORE
City Developments beat five others to win the site at West Coast Vale with a bid of $472.4 million ($800 psf ppr) (Credit: URA)
West Coast Vale premium
While the winning margin for the West Coast Vale site was just 0.7%, CDL’s top bid of $800 psf ppr is 35% higher than the $592 psf ppr paid by China Construction Development Co’s CSC Land in February last year for the yet-to-be-launched 520-unit Twin Vew condo.
As at end-December, the adjacent 752-unit Parc Riviera by EL Development was 97% sold at an average price of $1,200 psf — 13 months after it was launched for sale, says Tricia Song, head of research at Colliers International Singapore. “This could have increased the confidence of developers in the location despite the abundant supply.”
Song estimates CDL’s breakeven price for the project at West Coast Vale at $1,250 psf, with an average selling price of $1,400 to $1,500 psf. CDL is no stranger to the West Coast neighbourhood, having developed Botannia, Hundred Trees and Monterey Park there over the past 12 years.
Aerial view of Chong Kuo Road site - EDGEPROP SINGAPORE
The top bid of $43.95 million ($681 psf ppr) for the Chong Kuo Road site came from a joint venture between Lian Soon Holdings and OKP Land (Credit: URA)
Competitive bids for Sembawang site
For the Chong Kuo Road site, of the eight bids received, the top three submitted were all above $43 million and within a narrow margin of 1.7%, notes Song. The top bid of $43.95 million ($681 psf ppr) came from a joint venture between Lian Soon Holdings and OKP Land. Song estimates the breakeven cost on the site at $1,100 psf and the new development to have an average selling price ranging from $1,300 to $1,350 psf. Newly launched projects nearby — the freehold The Brooks I & II — have seen units transacted at an average of $1,275 psf over the past year.
The 46,101 sq ft site on Chong Kuo Road has a maximum gross floor area of 64,551 sq ft. It can be developed into a boutique condominium with 70 to 85 units. While the site is located in an established and quiet private residential estate with a limited supply of new condos in the area, there are several other vacant land parcels in the vicinity that could be launched for sale in the future, notes Mak. This could spell new competition for the upcoming development on Chong Kuo Road, he adds.
“Bidding for all three sites was bullish, with top bids exceeding or at the top end of expectations,” says Ong Teck Hui, JLL national director of research and consultancy. “This was despite the close of the batch tender, which did not seem to temper bidding, as well as the availability of collective sale sites on the market.”
This article, written by Cecilia Chow and Angela Teo, appeared in EdgeProp Pullout, Issue 816 (Feb 5, 2018).