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Thread: Beach Road commercial site nets top bid of $1.62b

  1. #1
    Join Date
    Oct 2011

    Default Beach Road commercial site nets top bid of $1.62b

    Beach Road commercial site nets top bid of $1.62b

    Sep 29, 2017

    GuocoLand units' offer was one of five above trigger price, a sign of developers' confidence

    Annabeth Leow

    Developers were ready to pay big bucks for a prime Beach Road commercial site, with the top offer coming in at a bumper $1.622 billion, it was announced yesterday.

    All five offers were well above the initial trigger price for the 99-year leasehold site. The top $1.622 billion bid was lodged by GuocoLand units GLL Prosper and GLL Thrive, the Urban Redevelopment Authority said yesterday.

    It works out to around $1,706 per sq ft (psf) per plot ratio (ppr) for the 2ha site, which has a maximum permissible gross floor area of 950,593 sq ft, of which 70 per cent or more must go to office use.

    The plot was on the reserve list of the Government Land Sales programme but was triggered for tender on July 6 after a developer committed to bid at least $1.138 billion, or $1,197 psf ppr.

    All five bids lodged in the tender exercise came in ahead of this, with the lowest - from three units linked to developer Far East Organization - at $1.295 billion.

    ZACD Group executive director Nicholas Mak noted that four of the bids were at least 20 per cent higher than the trigger price, a sign of "revived confidence among developers and property players".

    Industry watchers also said the bullish offers were due to the site's plum location - it is on the outskirts of the Central Business District and near Bugis, City Hall and Esplanade MRT stations - as well as expectations of a rental recovery in the office market.

    The winning developer will be required to build an underground walkway between the plot and Bugis MRT station and conserve and restore the former Beach Road Police Station, which is on the site.

    Analysts said that rents at South Beach Tower, which is fully occupied, and the upcoming Duo development also auger well for the area's leasing prospects.

    Calling the site "the final piece of the jigsaw to establish Beach Road as a commercial node", Mr Desmond Sim, CBRE's head of research for Singapore and South-east Asia, said: "The bid is a clear reflection of the bidders' confidence in the office market, which is in its initial phase of recovery."

    Mr Mak added: "The developer may be of the opinion that when the new commercial building on this site is completed in about 2022, the office leasing market could be in the middle of the recovery phase."

    The bid is validated by the rents of premium offices in Beach Road, said Dr Lee Nai Jia, head of research at Edmund Tie & Company.

    "Over time, we anticipate the Central Business District will extend to the Kallang River areas and the Beach Road area will be a prime office site for information technology, business and the financial services sector," he said.

    Dr Lee added that the sale of the Beach Road site "may also encourage some of the older buildings to do addition and alteration works to retain their tenants and remain competitive".

    On a per unit basis, GuocoLand's Beach Road offer tops the $1.69 billion, or $1,069 psf ppr, paid in 2007 for the plot that became nearby South Beach Tower, as well as last year's record $2.57 billion, or $1,689 psf ppr, for a Central Boulevard site.

  2. #2
    Join Date
    Oct 2011


    Beach Road shaping up to be a Quek and Kwek playground

    Sep 29, 2017

    Kalpana Rashiwala

    A TIE-UP between GuocoLand and its Hong Kong-listed parent Guoco Group is poised to build a plush office, residential and retail project near City Developments-IOI's South Beach - putting Malaysian tycoon Quek Leng Chan's project near that of his City Developments (CDL) cousin Kwek Leng Beng's.

    The Urban Redevelopment Authority tender for the two-hectare Beach Road commercial site, which closed on Thursday, drew five bids. GuocoLand-Guoco Group's S$1.622 billion top bid works out to S$1,706.30 per square foot per plot ratio (psf ppr).

    Property consultants such as ZACD Group's executive director Nicholas Mak described the top bid as "very bullish"; it is 60 per cent higher than the S$1,069 psf ppr that a CDL-led consortium paid for the South Beach site a decade ago.

    GuocoLand-Guoco Group's top bid for the Beach Road site also surpasses the S$1,689 psf ppr that IOI Properties paid last November for the white site along Central Boulevard, a more choice location in the Marina Bay area. But Savills Singapore research head Alan Cheong offered an alternative perspective. He said that, on a base-case scenario where GuocoLand does an all-office project, the breakeven cost would be about S$3,000 psf on net lettable area for a new AAA-grade office development.

    "Once the tenancies are stabilised, the developer can get away with a monthly per-square-foot average rent in the low teens and still achieve net yield of about 4 per cent - above current market returns."

    The GuocoLand-Guoco Group's bid was 3.2 per cent higher than the second-highest bid of about S$1,654 psf ppr by Kingsford, the owner of which hails from China.

    A consortium led by the Riady family-controlled OUE submitted the third-highest bid - about S$1,526 psf ppr; Japura Development, linked to Li Ka-shing's Cheung Kong Holdings, offered S$1,477 psf ppr for the site, and Far East Organization, one of Singapore's most established property groups, placed the lowest bid, S$1,362 psf ppr.

    Said Mr Cheong of Savills: "The market is sending a very strong signal that developers want to be in the CBD when it comes to offices."

    JLL's head of research and consultancy in Singapore, Tay Huey Ying, said the tender result is a reflection of developers' bullish outlook on the Singapore office market.

    Optimism is riding high in the office investment sales market, on the back of the nascent recovery in the leasing market. "Including today's tender, JLL estimates that in the year to date, office investment sales (including land) amount to S$8.6 billion, up 50 per cent from S$5.7 billion in the year-ago period.

    "This, in turn, has been underpinned largely by the strengthening CBD Grade A office leasing market."

    Market watchers noted that GuocoLand's success at its Tanjong Pagar Centre mixed-development project would have spurred it to hand in a bold bid for the Beach Road site.

    CBRE's head of research for Singapore and South-east Asia Desmond Sim said he would not be surprised if GuocoLand includes a residential component for the Beach Road project, since the additional buyer's stamp duty is not payable for the site as it is zoned "commercial".

    A back-of-the envelope calculation by BT shows that, after factoring in the minimum office and maximum retail quantums allowed, GuocoLand could build about 270 apartments averaging 900 sq ft each.

    URA has stipulated that the plot can be developed into a maximum gross floor area (GFA) of 950,592 sq ft, of which at least 665,424 sq ft (70 per cent) must be for office use. The remaining GFA can be used for additional office, retail (subject to a maximum GFA of 32,292 sq ft), commercial school, hotel, serviced apartment or residential uses.

    Apart from any GFA for hotel, serviced apartments or residential use, the rest of the development's GFA cannot have more than three strata lots, thus prohibiting strata sub-division of the office and retail components.

    The developer is expected to restore the former Beach Road Police Station, a conserved building on the site, and to build an underground pedestrian link to the nearby Bugis MRT station.

    The Beach Road site was first made available on the reserve list of the Government Land Sales Programme in November 2014. In June this year, the URA announced that the site had been triggered for launch, with an unnamed developer that had made a successful application, undertaking to bid at least S$1.138 billion.

    CBRE's Mr Sim said: "This is the final piece of the jigsaw to establish Beach Road as a commercial node."

    The future development on the site will complement the established Bugis and Suntec enclaves, as well as newer projects such as Duo and South Beach, he added.

    Guoco Group is part of Mr Quek's Hong Leong Group Malaysia; his Singaporean cousin Mr Kwek helms the Hong Leong Group Singapore, which includes CDL.

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