FRASERS Centrepoint's top bid yesterday for a 99-year leasehold commercial site at Cecil Street/Telok Ayer Street was 18.8 per cent higher than the next highest offer, by Far East Organization.
However, Frasers Centrepoint group chief executive Lim Ee Seng said that he was comfortable with the group's bid price of $1,112.44 per square foot per plot ratio (psf ppr), which would result in a breakeven cost of about $2,000 psf for a new development.
At least 80 per cent of the 830,564 sq ft maximum gross floor area in the development must be set aside for office use.
Strata subdivision of the project is not allowed.
Residential use is also not permitted for the project, which will be directly connected to Tanjong Pagar MRT Station, based on rules for the site stipulated by the Urban Redevelopment Authority.
The tender for the site drew four bids.
"When completed in four years, (it will be) a brand new office building in the CBD with a $2,000 psf breakeven cost - I think it's a very decent price," said Mr Lim.
Agreeing, a seasoned property consultant said: "I don't think you can find a brand new office building in the CBD at $2,000 psf in today's market. It's a fair bid price."
He noted that Tuan Sing paid $2,580 psf on existing net lettable area for the freehold Robinson Point in June.
The 14th and 18th floors of Springleaf Tower in Anson Road have changed hands at $2,200 psf and $2,280 psf respectively. Springleaf Tower has a remaining leasehold tenure of about 82 years.
CBRE Research associate director Desmond Sim said: "There still remains a gap between any seller's and buyer's price expectations and hence boosting one's portfolio through development would seem a viable option. It also allows the top bidder to build the development according to market preferences as well as to the top bidder's strengths."
Ong Teck Hui, national director at Jones Lang LaSalle, said the 19 per cent gap between the top two bids yesterday "reflects a divergence in office market outlook".
The top bid of $1,112 psf ppr points to expectations of a stronger recovery in the office market, which is currently "stable with moderate demand".
"However, the rest of the bids are seen as more cautious, probably factoring in a slower recovery in the market due to uncertainty over the strength of economic growth as well as oncoming supply over the next few years," added Mr Ong.
Frasers Centrepoint said yesterday: "This is one of the last remaining commercial sites within the mature part of the CBD. We plan to build a high-rise premium Grade A office building incorporating the latest office features.
"The proposed building will enjoy an excellent frontage amidst the lush greenery of an open park within the site."
Mr Lim said Frasers Centrepoint has no specific plans for the project other than to complete it and explore the possibility of injecting it into its Frasers Commercial Trust, or holding it for the long term.
Market watchers say they would not be surprised if Frasers Centrepoint decides to move its headquarters, currently at Alexandra Point, to the proposed development in Cecil Street. Thus it could occupy part of the proposed development while leasing out the rest of the space.
Mr Lim said the group is likely to incorporate space for some food and beverage outlets as part of the maximum 20 per cent non-office component in the project.
The other two bidders at yesterday's tender were Mapletree ($901 psf ppr) and Philippine property group Megaworld Corporation's AT Capital Holdings, which offered $851 psf ppr.
Makati-headquartered Megaworld's portfolio of projects includes business parks, offices, malls and hotels.
The 81,840 sq ft site was triggered from the reserve list after an unnamed developer successfully applied for its release, with a minimum price commitment translating to $750.97 psf ppr.
At a September 2011 state tender, Far East Organization group clinched a site next to Capital Tower for $882 psf ppr, which it is now developing into SBF Centre, comprising strata offices and medical suites which it is selling.
In late 2010, GuocoLand paid $1,006 psf ppr for a "white" site above Tanjong Pagar MRT Station - with minimum office and hotel components stipulated at 60 per cent and 10 per cent respectively of the maximum GFA.
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