Five-party consortium places 2 bids for Jurong Lake District site

It comprises CapitaLand Development, City Developments, Frasers Property, Mitsubishi Estate and Mitsui Fudosan (Asia); analysts are not surprised there is no other contender, given risks of mega project, long timeline

Mar 26, 2024

A CONSORTIUM comprising CapitaLand Development, City Developments, Frasers Property, Mitsubishi Estate and Mitsui Fudosan (Asia) has submitted two bids, with different concept proposals, for the master-developer site in Jurong Lake District (JLD).

The first three parties are taking a 25 per cent stake each in the consortium, with the two Japanese companies holding a 12.5 per cent stake each.

There was no other contender for the site at a state tender that closed on Tuesday (Mar 26).

Under the dual-envelope, concept-and-price tender, which the Urban Redevelopment Authority has adopted for the 99-year leasehold site, only the names of bidders were released on Tuesday but not their bid price.

A site to bind them all

As part of the project’s first phase, minimum office and residential components have been stipulated.

Referring to the quintet consortium, Desmond Sim, chief executive officer of Edmund Tie & Co, said: “This is a site to bind them all. The consortium brings together some of the top developers in the region. Their participation in the tender will endorse the government’s push to drive Jurong as the next major business district after the CBD.”

“The five consortium members will bring their respective best practices, especially in terms of sustainability, for this master-developer project.”

Analysts were not surprised that the JLD site tender drew just one consortium, and that it comprised five members – given the generally cautious sentiment in the Singapore property market as well as the risks of undertaking a big project with a long timeline in a still-high interest rate environment.

The master-developer site was released under the confirmed list of the first-half 2023 government land sales (GLS) programme. It comprises three plots of land between Jurong East MRT interchange station and the future Jurong Lake District MRT stationJurong Lake District MRT station.

Wong Siew Ying, PropNex’s head of research and content, estimates that the master-developer site could fetch S$900 per square foot per plot ratio (psf ppr) to S$1,000 psf ppr, translating to S$3.5 billion to S$3.9 billion for the entire site. The land cost for the first phase of the development could be around S$1.2 billion to S$1.3 billion. These figures exclude the option fee the successful developer will have to pay for the flexibility to buy the land in phases.

Tricia Song, CBRE’s head of research for Singapore and South-East Asia, said she had expected the site to draw one to two bids, with a top bid of around S$1,000 psf ppr, before taking into account the infrastructural and engineering costs to achieve the various sustainability, net-zero emission, car-lite, district cooling and integration features, which will likely be quite substantial.

URA has envisioned JLD as the “largest mixed-use business district outside the city centre, a model for urban sustainability and innovation, and a place to grow businesses, homes and communities by Jurong Lake and Jurong Lake Gardens”.

The URA has said the sale of the site will kick-start the next phase of development in JLD, and to cater to demand for offices, private homes and complementary spaces in the medium term.

The 6.5-hectare (nearly 700,000 square feet) site, zoned white, can be developed to a maximum gross floor area (GFA) of 365,000 square metres (nearly 3.93 million square feet).

Of this, at least 1.57 million sq ft has to be for office use. Up to 1.79 million sq ft GFA is to be for residential use, of which a maximum of 1.57 million sq ft – estimated to yield about 1,700 housing units – shall be for private apartments and condo units, and a maximum of 215,278 sq ft can be for serviced apartments.

There will also be about 786,000 sq ft for complementary uses such as shop, restaurant, entertainment, hotel, community, or more offices. “The proposed integrated development will be progressively completed over the next 10-15 years and provide the critical mass to propel the development of this future business district,” URA said when it launched the tender for the site in June 2023.

As part of the first phase of the development, the successful tenderer will be required to build at least 753,473 sq ft office GFA and about 549,000 sq ft residential GFA (translating to about 600 private housing units). However, the successful bidder will have flexibility to phase out the remaining supply according to market demand through an option scheme drawn up by URA.

Capitalising on residential play

Tay Huey Ying, head of research and consultancy for Singapore at JLL, said: “We expect the schemes submitted will leverage the maximum residential quantum permissible for the site, capitalising on the robust demand for private homes in this locality and benefiting from the positive impact on cash flow resulting from pre-sales activities.”

Like many other property consultants, Tay pointed to the successful launch of J’den condominium in November last year, with 88 per cent of its 368 units sold at a new benchmark launch price of S$2,451 psf on average for the locale on its launch day. “This was driven by pent-up demand in the area, optimism surrounding JLD’s growth potential as well as its high connectivity and proximity to amenities,” she added.

Huttons Asia CEO Mark Yip noted that Plot 1 of the master-developer site, next to Genting Hotel Jurong, is the nearest land parcel to the former Jurong Country Club site, which was previously designated as the Singapore terminus for the proposed Kuala Lumpur-Singapore high-speed rail (HSR) project. “If the project is restarted, there may be opportunities to build service apartments to tap on the potential transient demand at a major transit node,” he added.

JLL’s Tay sounded a note of caution on the first phase of the office component of the project on the master-developer site, which is anticipated to enter the leasing market around 2028; this will coincide with a peak in new islandwide office completion over the next five years. “Besides JLD, a further 2.35 million sq ft of new office space is set to be completed in 2028, with the majority concentrated in sought-after areas like the CBD and Orchard Road.”

“The first phase of the office component of the JLD master-developer project will have to be marketed at competitive rents, owing to the intense competition,” Tay added.

This, alongside the hefty infrastructure cost necessary to comply with the tender conditions, are among the key factors that would have kept the land bid prices for the master-developer site in check, she added.

In a concept-and-price tender, bidders are required to submit their concept proposals and tender prices in two separate envelopes.

The concept proposals will first be evaluated against a set of specified criteria, which in this case are: the quality of the master plan and design concept; quality of public realm; sustainability; and track record of the bidder and its design team.

For the master developer site in JLD, URA has stated that “only compelling proposals” will be shortlisted to proceed to the second stage of evaluation, which will be based on price.

URA conducted the sale via a dual-envelope system to evaluate the tender submissions for the site to ensure that the selected concept proposal is aligned with the vision for the JLD.

The master developer can choose the duration in which it intends to complete the purchase of the entire land parcel after award of tender, that is, the option period. The master developer only pays upfront for the land required to be developed under Phase 1 in addition to an option fee, corresponding to the option period selected, for the right to buy the rest of the land parcel.

For a five-year option period, the fee is 10 per cent of the land price of the remaining GFA (that is, GFA for the entire site less the GFA in Phase 1). For option periods of six, seven and the maximum eight years, the respective option fees are 11, 12 and 13 per cent.

To encourage the master developer to complete the development of the entire site, 5 per cent of the option fee percentage paid can be used to offset part of the land price of the last phase. This means the net effective option fee works out to 5 per cent, 6 per cent, 7 per cent and 8 per cent respectively for options periods of five, six, seven and eight years.