Wednesday, May 26, 2010

First tender in new setting draws record bid

EC plot in Sengkang fetches top bid of $320.58 psf ppr

(SINGAPORE) The first state land tender to close following the government announcement of bumper land sales for the second half has seen a record price for executive condominium land.

The plot, at Sengkang East Avenue and Buangkok Drive, however drew seven bids, down from 11 bids for an earlier plot at Compassvale Bow/Buangkok Drive at a tender in March.

Industry players also pointed out that for yesterday's tender, the top bid aside, the other bids were within expectation.

Market watchers suggest the bullish top bid of $320.58 per square foot of potential gross floor area could be due to the top bidder's ability to control costs better as it involves a joint venture involving a construction group and a steel supplier.

Maxdin Pte Ltd, a subsidiary of Greatearth Holding, which in turn is part of United Engineers, will hold a 65 per cent stake in the tie-up with Lee Carriers, which is part of Lee Metal Group, a leading fabricator and manufacturer of reinforcement steel products and a trader of steel products.

Maxdin was unsuccessful at two earlier tenders for EC sites that closed in March. It placed the third highest bid for a Yishun plot and was the fourth highest tenderer for the Compassvale Bow plot. Interestingly, Maxdin had offered a much lower price of $270.56 psf per plot ratio (psf ppr) for that site, despite the fact that it has a superior location (near Buangkok MRT Station), than its bid yesterday.

The Compassvale Bow plot drew a top bid of $315 psf ppr from a partnership between Frasers Centrepoint and Lum Chang. At yesterday's tender closing, Frasers Centrepoint, bidding solo, emerged in third position, with a $288 psf ppr bid.

'Bidders with financial muscle who have not been successful at recent tenders and who need to replenish land are hungrier than those who have already secured at least one site,' a developer suggested.

At yesterday's tender, the top bid was nearly 10 per cent higher than the second highest offer, of about $292 psf ppr, from a tie-up between Hoi Hup Realty and Sunway Developments.

Others who took part in yesterday's tender included Qingdao Construction (Singapore) at about $286 psf ppr, GuocoLand unit First Capital Holdings ($260 psf ppr) and a JV between NTUC Choice Homes and Chip Eng Seng ($240 psf ppr). Sim Lian Land placed the lowest bid, of $211 psf ppr.

Market watchers say the breakeven cost for Greatearth and Lee Metal could be around $600 psf. According to CB Richard Ellis, resale units at the neighbouring Park Green and The Rivervale ECs as well as The Florida in Hougang have been selling at $500-620 psf between January and May this year.

A spokesman for Greatearth's parent, United Engineers, said yesterday that the group's proposed scheme is for a project with about 500 units - comprising two, three and four-bedroom apartments with three-bedders making up the bulk of units. 'We're looking to launch the project in about six months. Greatearth will be project manager, and provide the design and build services, with Lee Metal being the passive investor.'

When the site was triggered for tender, analysts had estimated it would fetch $200-300 psf ppr. Before yesterday's tender close, the record price for EC land was the $315 psf ppr that Frasers Centrepoint and Lum Chang paid for the Compassvale Bow plot in March. That surpassed the previous record of $220 psf ppr for the Summerdale EC site in Boon Lay in May 1997.

'Give it time, land bids will tame. There's a lot of caution in the air,' said Knight Frank chairman Tan Tiong Cheng.

Industry players say visitorship at showflats slowed at the weekend, due to the weak stockmarket and the bumper land sales programme for H2.

Source: Business Times, 26 May 2010

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