Bids For Beach Road Site May Have Topped $2b

Source : The Business Times July 26, 2007

The development cost for the future 99-year leasehold project could hit $3b

A state tender for the former NCO Club/Beach Road camp grounds yesterday drew seven bids with market watchers estimating bids could have topped the $2 billion mark or $1,250 psf of potential gross floor area.



Revamp: The development will entail the conservation and restoration of the former NCO Club building and three blocks of the former Beach Road camp
The all-in development cost for the 99-year leasehold project is expected to be in the $3 billion region, analysts estimate.

Urban Redevelopment Authority revealed the bidders, but not their bid prices, under yesterday's two-envelope system tender, where bidders had to submit concept proposals and tender prices separately. The tender attracted big names familiar with the local market such as CapitaLand, City Developments, Pontiac Land, Overseas Union Enterprise (OUE), Keppel Land and Cheung Kong Holdings.

And some of them have teamed up with heavyweight overseas partners like Dubai's Istithmar (part of Dubai World group) and a unit of US-based Elad Properties (these two teamed up with CityDev). Morgan Stanley is believed to have partnered Pontiac. OUE, controlled by Indonesia's Lippo Group and Malaysian tycoon Ananda Krishnan, is expected to rope in partners like Austria's Raiffeisen Zentralbank (RZB).

Billion Rise Ltd (believed to be linked to Li Ka-shing's Cheung Kong Holdings) partnered Keppel Land to put in two bids. OUE is also believed to have placed two bids, one through Beach Development and the other through Nicoll Development.

Such a strategy, of placing two bids, presumably gives the bidders an opportunity to present alternative concepts, whether at the same or different prices, and hopefully boost their chances of success.

Under the two-envelope system, the concept proposals will first be evaluated against a set of prestated criteria (including overall design concept, quality of architectural design, adaptive reuse of conservation buildings, and composition and placement of uses). Only proposals that substantially satisfy the evaluation criteria will be shortlisted.

At the second stage, the tender price envelopes of these shortlisted bidders will be opened and the site awarded to the highest of these bidders, provided this top bid meets the government's reserve price.

Market watchers reckon the majority of bids at yesterday's tender would be in the $1,000 to $1,200 psf per plot ratio range which works out to around $1.6 billion to $1.9 billion for the 99-year site which can have a maximum gross floor area of nearly 1.6 million sq ft.

Construction costs, fees and interest could amount to a further $900 million to $1 billion, bringing the likely all-in investment to about $2.5 billion to $3 billion.

The site can be developed into a project with nearly 1.6 million sq ft gross floor area, of which a minimum 40 per cent is for office use, and at least 30 per cent for hotel rooms. The rest can be for complementary retail and residential use.

The development will entail the conservation and restoration of the former NCO Club building and three blocks of the former Beach Road camp. The new towers in the building can be up to 45 storeys high.

Market watchers reckon that some of the schemes could possibly entail a high-rise tower with hotel rooms on the lower floors and apartments on the upper floors, seen in places like New York but novel in Singapore.

The release of the Beach Road site is part of the government's strategy to alleviate the shortage of office space.

JP Morgan real estate analyst Chris Gee said: 'The office rental market is the most volatile of all the investment property segments in Singapore.'

He noted that even before the close of yesterday's tender, the URA had made known its plans to offer four other sites in the CBD which can be substantially developed into offices - two at Anson Road and two near the One Shenton condo project. The tender for the first of the Anson Road plots closed on Monday and was yesterday awarded to highest bidder Mapletree Investments at $1,021 psf per plot ratio.

The tender for the second Anson Road plot closes next month. The tender for a plot directly behind One Shenton closes in September, while that for the next-door site will be launched by the end of this month.