New Reporter
09-02-24, 13:52
Rejecting the ‘too-low’ bid for the Marina Gardens Crescent site risks missing the big picture
Leslie Yee
Feb 08, 2024
THE Urban Redevelopment Authority (URA) has rejected the sole bid for the 99-year leasehold Marina Gardens Crescent site, assessing the bid price to be too low.
The site, launched for sale under the confirmed list of the Government Land Sales (GLS) Programme for the first half of 2023, will now be made available on the reserve list of the H1 2024 GLS Programme. Developers can submit applications for the sale of the site, with a minimum price that is acceptable to the government.
Located next to Marina South MRT station, the Marina Gardens Crescent plot can be used for residential and commercial development. It has a maximum gross floor area of nearly 783,000 square feet, and can generate about 775 private homes.
The sole bid – from a consortium comprising GuocoLand : F17 -0.69%, Intrepid Investments and TID Residential – for the plot was nearly S$770.5 million or S$984 per square foot per plot ratio (psf ppr).
The land rate was nearly 30 per cent lower than the S$1,402 psf ppr that Kingsford Group paid for a neighbouring plot in Marina Gardens Lane, in a state tender which closed last June.
While the call to reject the sole bid for the Marina Gardens Crescent site is not unexpected nor without precedent, it may be worth reconsidering the decision.
Transparent process
First, the site was released for tender on Jun 30, 2023. Interested developers had over six months to do their sums, come up with preliminary plans and work out whether to bid for the site and if so, at what price.
As the cost of taking part in state land tenders is not prohibitive, any interested developer could have submitted a bid at minimal cost, and with potentially good upside if the bid succeeded.
The fact that there was only one bid for the plot in a transparent and competitive Singapore property development market should be taken as an accurate reading of the market’s appetite for the site.
Second, while accepting the bid for the site may affect valuations of properties in the vicinity, including that of Kingsford’s Marina Gardens Lane site, Kingsford should be assumed to have bought the Marina Gardens Lane site with its eyes open, aware that sites nearby may fetch lower land rates.
Moreover, a property valuer has multiple data points to consider, and may conceivably attach less weight to the price of the Marina Gardens Crescent site, if this is viewed to be an anomaly.
Third, the price of the sole bid for the Marina Gardens Crescent site can hardly be seen to be absurd.
At the tender for the Marina Gardens Lane site, the second and third-highest bidders submitted bids that worked out on a psf ppr basis to S$985 and S$953, respectively. Thus, the outlier was Kingsford’s bullish top bid.
In addition, market conditions can change in the period of nearly seven months between the tender closings of the Marina Gardens Lane and Marina Gardens Crescent sites.
Financial considerations
Fourth, there are financial benefits to accepting the bid for the Marina Gardens Crescent site.
Sure, maximising proceeds from land sales matters. Revenue from state land sales accrue fully to past reserves. Spending of the returns generated by reserves is done through the Net Investment Returns Contribution, which is a major contributor to the annual budget.
By not awarding the Marina Gardens Crescent site, the government may achieve a higher land price in future. However, there is no guarantee this will happen.
Meanwhile, there is a missed opportunity to generate returns from the cash proceeds received from selling a site, and there are costs associated with holding onto a vacant land parcel.
Importantly, when a developer starts developing a vacant land plot, there will be jobs created and spin-offs generated for various parties involved in developing the project.
Housing supply
Fifth, the government should be fully committed to selling sites on the confirmed list of the GLS in a timely manner.
The government plays a critical role in supplying land for housing development. Having adequate private housing supply is vital to meet demand from a growing population, increasing household formation and rising aspirations of residents.
Homes take time to build. If insufficient homes are built in a timely manner, risks rise of private home prices overheating and rental rates escalating excessively.
Sixth, awarding the Marina Gardens Crescent site to GuocoLand and its partners from the Hong Leong Group in Singapore would have added impetus to development of the Marina South area, and would have potentially benefited Kingsford’s project at Marina Gardens Lane.
Attractively priced homes at Marina Gardens Crescent could be well received by savvy buyers. This can in turn catalyse demand for homes in the area with possible positive spillover to Kingsford’s Marina Gardens Lane project. When buyer acceptance of homes in Marina South rises, Kingsford has room to price homes at its project more aggressively.
Seventh, rejecting the sole bid for the Marina Gardens Crescent site may dent participation at future state land tenders.
With high interest rates and construction costs as well as economic uncertainties, developers are justifiably cautious when bidding for sites.
By rejecting what are deemed as low bids, the URA risks discouraging some developers from participating in upcoming land tenders. A developer who is keen on a site might not bother to bid as it fears it is wasting its time by submitting a bid that could be unacceptable.
The rejection of the sole bid for the Marina Gardens Crescent site represents a missed opportunity for GuocoLand and its partners. More importantly, it may also be a missed opportunity to speed up development in the Marina South area, as well as add to the supply of private homes.
https://www.businesstimes.com.sg/opinion-features/rejecting-too-low-bid-marina-gardens-crescent-site-risks-missing-big-picture
Leslie Yee
Feb 08, 2024
THE Urban Redevelopment Authority (URA) has rejected the sole bid for the 99-year leasehold Marina Gardens Crescent site, assessing the bid price to be too low.
The site, launched for sale under the confirmed list of the Government Land Sales (GLS) Programme for the first half of 2023, will now be made available on the reserve list of the H1 2024 GLS Programme. Developers can submit applications for the sale of the site, with a minimum price that is acceptable to the government.
Located next to Marina South MRT station, the Marina Gardens Crescent plot can be used for residential and commercial development. It has a maximum gross floor area of nearly 783,000 square feet, and can generate about 775 private homes.
The sole bid – from a consortium comprising GuocoLand : F17 -0.69%, Intrepid Investments and TID Residential – for the plot was nearly S$770.5 million or S$984 per square foot per plot ratio (psf ppr).
The land rate was nearly 30 per cent lower than the S$1,402 psf ppr that Kingsford Group paid for a neighbouring plot in Marina Gardens Lane, in a state tender which closed last June.
While the call to reject the sole bid for the Marina Gardens Crescent site is not unexpected nor without precedent, it may be worth reconsidering the decision.
Transparent process
First, the site was released for tender on Jun 30, 2023. Interested developers had over six months to do their sums, come up with preliminary plans and work out whether to bid for the site and if so, at what price.
As the cost of taking part in state land tenders is not prohibitive, any interested developer could have submitted a bid at minimal cost, and with potentially good upside if the bid succeeded.
The fact that there was only one bid for the plot in a transparent and competitive Singapore property development market should be taken as an accurate reading of the market’s appetite for the site.
Second, while accepting the bid for the site may affect valuations of properties in the vicinity, including that of Kingsford’s Marina Gardens Lane site, Kingsford should be assumed to have bought the Marina Gardens Lane site with its eyes open, aware that sites nearby may fetch lower land rates.
Moreover, a property valuer has multiple data points to consider, and may conceivably attach less weight to the price of the Marina Gardens Crescent site, if this is viewed to be an anomaly.
Third, the price of the sole bid for the Marina Gardens Crescent site can hardly be seen to be absurd.
At the tender for the Marina Gardens Lane site, the second and third-highest bidders submitted bids that worked out on a psf ppr basis to S$985 and S$953, respectively. Thus, the outlier was Kingsford’s bullish top bid.
In addition, market conditions can change in the period of nearly seven months between the tender closings of the Marina Gardens Lane and Marina Gardens Crescent sites.
Financial considerations
Fourth, there are financial benefits to accepting the bid for the Marina Gardens Crescent site.
Sure, maximising proceeds from land sales matters. Revenue from state land sales accrue fully to past reserves. Spending of the returns generated by reserves is done through the Net Investment Returns Contribution, which is a major contributor to the annual budget.
By not awarding the Marina Gardens Crescent site, the government may achieve a higher land price in future. However, there is no guarantee this will happen.
Meanwhile, there is a missed opportunity to generate returns from the cash proceeds received from selling a site, and there are costs associated with holding onto a vacant land parcel.
Importantly, when a developer starts developing a vacant land plot, there will be jobs created and spin-offs generated for various parties involved in developing the project.
Housing supply
Fifth, the government should be fully committed to selling sites on the confirmed list of the GLS in a timely manner.
The government plays a critical role in supplying land for housing development. Having adequate private housing supply is vital to meet demand from a growing population, increasing household formation and rising aspirations of residents.
Homes take time to build. If insufficient homes are built in a timely manner, risks rise of private home prices overheating and rental rates escalating excessively.
Sixth, awarding the Marina Gardens Crescent site to GuocoLand and its partners from the Hong Leong Group in Singapore would have added impetus to development of the Marina South area, and would have potentially benefited Kingsford’s project at Marina Gardens Lane.
Attractively priced homes at Marina Gardens Crescent could be well received by savvy buyers. This can in turn catalyse demand for homes in the area with possible positive spillover to Kingsford’s Marina Gardens Lane project. When buyer acceptance of homes in Marina South rises, Kingsford has room to price homes at its project more aggressively.
Seventh, rejecting the sole bid for the Marina Gardens Crescent site may dent participation at future state land tenders.
With high interest rates and construction costs as well as economic uncertainties, developers are justifiably cautious when bidding for sites.
By rejecting what are deemed as low bids, the URA risks discouraging some developers from participating in upcoming land tenders. A developer who is keen on a site might not bother to bid as it fears it is wasting its time by submitting a bid that could be unacceptable.
The rejection of the sole bid for the Marina Gardens Crescent site represents a missed opportunity for GuocoLand and its partners. More importantly, it may also be a missed opportunity to speed up development in the Marina South area, as well as add to the supply of private homes.
https://www.businesstimes.com.sg/opinion-features/rejecting-too-low-bid-marina-gardens-crescent-site-risks-missing-big-picture