Published September 21, 2012

Surge in optimism reflected in Prince Charles Crescent tender

Top bid of $960.28 psf ppr exceeds best forecast by 13%

By Mindy Tan

THE quality of the bids received at the close of the tender for a 99-year leasehold residential site at Prince Charles Crescent reflects general optimism in the market. The site received a top bid of $516.3 million, or $960.28 per square foot per plot ratio (psf ppr).

That all eight bids received for the site were above $800 psf ppr indicates a surge in market optimism, said Jones Lang LaSalle's national director for research Ong Teck Hui.

The top bid was submitted by a tie-up between Wing Tai's Wingstar Investment, Metro Australia Holdings, and UE E&C's unit Maxdin. It trumped consultants' expectations in July, when the site was triggered, that it could fetch between $760-$850 psf ppr.

This represents a 13 per cent premium over the top end of market expectations, and beat the top bid put up for the Jervois Road parcel in February ($881 psf ppr).

"Of the 17 bids (seen at the tender for the Jervois Road parcel in February), only two were above $800 psf ppr, with the other 15 ranging from $532-$763 psf ppr," said Mr Ong.

The second highest bid for the plot, which has a site area of about 2.38 hectares, came in at $946.55 psf ppr, in a joint effort by Hong Leong Group's Intrepid Investments, City Developments's unit Verwood Holdings, and Hong Realty.

The site also attracted bids from Keppel Land's Sherwood Development ($908 psf ppr), Wheelock Properties's Pinehill Investments ($890.27 psf ppr), and Bay Front Land ($871.65 psf ppr), whose shareholders comprise World Class Land and Fragrance Group.

The lowest bid was submitted by Plan Achieve, at $805.69 psf ppr.

Added Mr Ong: "The elevated bidding pattern cannot be due to site attributes alone, but reflects a fundamental shift in demand and pricing expectations by the bidders. QE3 could have raised sentiments."

The strong bids could also be attributed to uptick in interest in projects like V on Shenton and Leedon Residences, said Lee Sze Teck, senior manager, training, research and consultancy, at DWG. In addition, Ascentia Sky is almost fully sold as of August, he noted.

"The estimated breakeven cost is between $1,400-$1,450 psf, while the selling price could be in the range of $1,600-$1,650 psf, which is similar to subsale prices of Ascentia Sky," said Mr Lee.

Said Nicholas Mak, executive director, research and consultancy, at SLP International Property Consultants: "The developer is likely to build a project with high quality finishes that is targeted at the higher mid-tier market segment.

"Based on the top bid, the breakeven price for the new project on this site is estimated to be about $1,400-$1,450 psf, which is higher than the recent average transacted prices of two of the older 99-year leasehold condominium in the vicinity, namely Tanglin Regency ($1,273 psf) and Tanglin View ($1,293 psf)."

Added Joseph Tan, executive director, CBRE Residential: "The top bid for the site works out to a breakeven cost of $1,350-$1,400 psf. Between January-September this year, transactions of units in Ascentia Sky averaged $1,500 psf. Unit sizes in Ascentia Sky are fairly generous. If the typical units in the new project are ranged between 70 sq m (753.5 sq ft) and 100 sq m (1,076.4 sq ft), they can be priced 10-15 per cent higher."

The Development Control guideline on the maximum allowable number of dwelling units which was announced earlier this month is applicable to this site if the planning permission for the proposed development is received on or after Nov 4, said URA. If the application is submitted before Nov 4, URA may impose requirements where necessary.