URA Ends Suspense With Award Of Marina View Site

Source : The Business Times, December 6, 2007

MGPA's bid is about half the price it paid for plot next door

The Urban Redevelopment Authority finally awarded Marina View Land Parcel B to Macquarie Global Property Advisors (MGPA) unit MGP Kimi Pte Ltd yesterday, about three weeks after the tender for the 99-year leasehold site closed.

The longer-than-usual time to evaluate the tender, which was based solely on price, had led market watchers to speculate the state's reserve price for the confirmed list site might not have been met. The reserve price for confirmed list sites is confidential, the URA said yesterday, when asked by BT.

The tender for the plot had attracted just two bids, and the higher offer, by MGP Kimi, of $779.42 psf ppr, was less than most market watchers had expected, even after factoring in a minimum hotel component stipulated for the plot.

MGPA's bid for Land Parcel B was about half the $1,409 psf ppr it paid for the next door Land Parcel A in September. However, the earlier site does not have any requirement for hotel use. Hotel land values are significantly lower than office values and this partly accounted for the lower bid for Land Parcel B, analysts have said.

Another factor was new caution that has set in among developers following the sub-prime lending crisis in the US. Office investors are especially wary, as the sub-prime lending worries may directly clip demand by big banks for Singapore office space. An extra concern is that the government has been stating that it will boost supply of office land in the next few years to alleviate the current shortage.

Notwithstanding all these factors, some market watchers had suspected that the top bid for Land Parcel B could have been below the state's reserve price and that it may not be awarded. And the long evaluation time added fuel to the speculation.

In the past, the government has indicated that its guideline is to award sites if the top bids are at least 85 per cent of the market value assessed by the Chief Valuer (CV). However, bids below the 85 per cent guideline may be accepted if there is ample evidence from recent property transactions of a market downturn, according to past government statements.

When quizzed on the 85 per cent guideline yesterday, the URA said: 'The Chief Valuer's estimated market value serves as a guide in evaluating tenders. However, the government reserves the right to reject any tender, regardless of the bid price. Tenders are evaluated taking into consideration all relevant factors, including CV's estimated market value.'

The authority said the tender evaluation for every state site, including Marina View Land Parcel B, involves a Tender Evaluation Committee comprising officials from a few government agencies including the URA, the Singapore Land Authority, and the CV's Office, who make their recommendation, which is then reviewed by a committee made up of the Ministers for National Development, Law, Finance and Trade and Industry. 'Sometimes the evaluation is more complex and can take more time,' it said.

Some market observers are wondering if longer tender evaluation periods will be a more normal occurrence if the government pumps up its land sales under the confirmed list for the first six months of next year, assuming that developers' cautious mood lingers for a while.