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Thread: Developers keen on shorter lease site

  1. #1
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    Default Developers keen on shorter lease site

    http://www.straitstimes.com/archive/...-site-20121116

    Developers keen on shorter lease site

    Top bid of $73.8 million received for 60-year lease

    Published on Nov 16, 2012

    By Cheryl Lim


    A RESIDENTIAL site that comes with a shorter-than-normal lease has attracted a surprising 23 bids.

    It was the best response for a site in recent years but fell short of the 32 offers received for a Westwood Avenue residential plot in December 2009.

    The 1.02ha site in a private estate in Upper Bukit Timah's Jalan Jurong Kechil neighbourhood was offered for sale with a variable lease option of 30, 45 or 60 years.

    It can be developed into a condominium, flats or retirement housing.

    The top bid of $73.8 million for a 60-year lease came from the Aspial Corporation subsidiary World Class Developments. This translates to a price of $482 per sq ft per plot ratio (psf ppr).

    Bigger developers were noticeably absent from the tender exercise while smaller players like Chip Eng Seng and Roxy Pacific Holdings were in the fray.

    The lowest bid came from Kwan House with $23.3 million. It was also the only developer to tender for a 45-year lease. No bids were received for a 30-year lease.

    Despite the shorter-than-usual lease, analysts expect that completed units could go for a selling price of $900 to $1,100 psf.

    These prices are still lower than 99-year leasehold properties in the vicinity.

    ERA Realty key executive officer Eugene Lim noted that one-bedroom apartments at the nearby Suites at Bukit Timah are going for $1,600 psf.

    Mr Ong Teck Hui, national director for research and consultancy for Jones Lang LaSalle, said most buyers are less keen on properties with shorter leases because of concerns over long-term value depreciation.

    But many analysts agreed that the strong interest from developers indicates market confidence that homes with shorter leases will still sell.

    This site has been on the market for a couple of years. It was released in 2006 with a 30-year lease, and earmarked by the Government for retirement homes.

    But the site failed to find any takers because developers said the lease was too short for a viable project.

    The Jalan Jurong Kechil site was then made available for tender through the reserve list system earlier this year. It was put up for public tender after a developer committed to bid at least $24 million. This is the first time the Government had made land available with the development option of retirement homes.

    In the event the site is developed for retirement housing, analysts say it will be an an untested segment of the real estate market.

    DWG's senior manager of training, research and consultancy, Mr Lee Sze Teck, said a firm taking the risk on retirement homes now might reap benefits later.

    "They could have a first-mover advantage in this retirement home property segment," he said.

    Mr Nicholas Mak, SLP International's head of research, noted that the developer could face problems if buyers cannot find banks prepared to finance shorter leases of up to 60 years.

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  2. #2
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    Default Multiple-lease site attracts 23 bids

    http://www.businesstimes.com.sg/arch...-bids-20121116

    Published November 16, 2012

    Multiple-lease site attracts 23 bids

    First such residential site gets $73.8m top bid, or $482 psf ppr

    By zeinab yusuf saiwalla


    THE first-ever residential site launched with multiple lease options at Jalan Jurong Kechil in the Upper Bukit Timah area has received an overwhelming response from developers - attracting 23 bids for the 1.02-hectare land parcel.

    The highest bidder was World Class Developments (North), a subsidiary of Aspial Corporation, which bid $73.8 million or $481.51 per square feet per plot ratio (psf ppr).

    Only one bid was tendered for the shorter lease term of 45 years while there were none for the 30-year tenure, the third option offered by the Urban Redevelopment Authority (URA).

    According to International Property Advisor chief executive Ku Swee Yong, the competitive bidding could be due to the expected high demand from buyers in the retiree category.

    "This also implies that we have a shortage of such accommodation targeted at senior citizens who are healthy and middle-upper income," Mr Yong added.

    The top bid of $73.8 million is 10.3 per cent higher than the second highest bid of $66.9 million by CEL Property.

    Most bids clustered around the median bid of $246 psf ppr, ranging from $198 to $302 psf ppr.

    The lowest bid came from Kwan House, with a bid price of $23.3 million or $151.99 psf ppr for a 45-year lease. URA indicated that the 60-year leasehold equivalent of Kwan House's bid would be $25.6 million or $169.3 psf ppr.

    Property consultants BT spoke to expressed surprise at the number of bids, saying the site received the highest number of bids since the Westwood Avenue residential site, that closed in December 2009 with 32 bids.

    Said Ong Teck Hui, national director, research and consultancy, at Jones Lang LaSalle: "The tender participation involving 23 parties far exceeds expectations as demand for shorter-leasehold residential properties is untested. The experience of existing properties with substantially run-down leaseholds is that most buyers are less keen on them due to concerns about long-term value depreciation. However, the keen competition among bidders in this tender shows that they are confident of demand despite the shorter leasehold.

    "With a top bid of $482 psf ppr, selling price may be in the region of $900 psf or a 25-30 per cent discount from a 99-year leasehold equivalent."

    SLP International's head of research, Nicholas Mak, noted that the wide range between the top and bottom bids could have been due to the mispricing in a closed-envelope tender since a residential land parcel with a fresh lease that is shorter than the usual 99 years is a new product in Singapore.

    Mr Mak cautioned that the developer of this site could face some risks with financing because some banks are not prepared to finance homebuyers for residential projects with leases of 60 years or shorter.

    In a statement released by Aspial Corp yesterday evening, the management said they would explore various development options which include condominium and retirement housing.

    Savills Singapore research head Alan Cheong estimated that the top bid of $481.51 psf ppr for a 60-year site could translate to a breakeven cost of around $700 psf, assuming it is a normal residential project. The breakeven will be slightly lower if it is retirement housing.

    "Would you pay anything around $800 psf for a 60-year home - or would you head off to Iskandar (the development region coming up in Johor)? That is food for thought," said Mr Cheong.

    But ERA Realty key executive officer Eugene Lim felt the high price and competitive bidding reflected the location of the land parcel. "It is located in an established residential estate. It has a tranquil environment, is close to the nature reserve and is attractive to residents who prefer serenity," he explained.

    He expects the selling price to start from $1,100 psf owing to the average selling price of $1,600 for a one-bedroom unit at Suites at Bukit Timah, which is located down the road from the land parcel.

    Mr Lim added that the development will likely consist of small units with an affordable quantum that targets investors, and it is likely to be popular among those looking to gain a foothold in the Bukit Timah area.

  3. #3
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    Before I can do homework, they already do homework liao...

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    how about "devlopers short on landbank, hence bid on shorter tenor lease projects?"

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    Quote Originally Posted by kane
    how about "devlopers short on landbank, hence bid on shorter tenor lease projects?"
    Mitigate risk?? Lower $$ lower fundin, lower interest. HAhaha

  6. #6
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    This actually provide support to LH99 projects and the banks have to come in to change their policy against pty with shorter lease for their loans. Then this would also in line with garmen policy of less and less FH land sales...

    In future, maybe this will become the norm...

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    Quote Originally Posted by chestnut
    Mitigate risk?? Lower $$ lower fundin, lower interest. HAhaha
    maybe. quick turnaround from bid to sale is their risk mitigation. but i read a report on the developers landbank, and it look like they need a top up soon.

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    It will be interesting to see what kind of price benchmark it sets at launch and also the response gonna be like ...

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    Quote Originally Posted by bakasa2002
    It will be interesting to see what kind of price benchmark it sets at launch and also the response gonna be like ...
    yes, this will set the standard.

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    I think min around 900psf no horse run

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    then 99lh horses going for 900psf will run far far??

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    This is the same concept of packing 315ml drinks in a 330ml cans. Bottom line is selling less for more

  13. #13
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    just like my chicken rice, less chicken, less rice, same price.

  14. #14
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    Quote Originally Posted by kane
    just like my chicken rice, less chicken, less rice, same price.
    If this turn out to be success it should help boost the value of older leasehold properties.

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    OTB owners happy like F

    (On The Boat)

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    Quote Originally Posted by Ringo33
    If this turn out to be success it should help boost the value of older leasehold properties.
    So all of us should buy to give additional boost to our invested units?

    Hahaha TCSS


  17. #17
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    if i hv the means i will buy

  18. #18
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    Quote Originally Posted by chestnut
    So all of us should buy to give additional boost to our invested units?

    Hahaha TCSS

    Sounds like you're playing it like stocks. Create a higher mark to market by setting a new record price. Ha.

  19. #19
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    Jalan Jurong Kechil site awarded to World Class Developments for $73.8m

    Tendered price comes at $5,182.95 psm.

    According to a release from the Urban Redevelopment Authority, World Class Developments (North) Pte Ltd's $73.8m bid was awarded the tender for the residential site at Jalan Jurong Kechil, which has a maximum Gross Floor Area of 14,239 sqm, and a site area of 10,170.8 sqm.

    World Class Development's bid was previously reported to be the highest among 23 bids. The site was offered for sale with a lease option of 30 years, 45 years or 60 years, and World Class Developments chose 60 years.

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