Ho Bee-IOI Tie-Up Wins Sentosa's Pinnacle Site

Source : The Business Times, January 10, 2008

Bid of $1.1b seen as relatively low as US sub-prime crisis dampens market

IT was the last chance for a bite of the sweet Sentosa Cove pie, but only three developers tendered for The Pinnacle Collection site with Ho Bee Investment and Malaysia's IOI Properties partnering to put in the winning bid of $1.1 billion.

The Pinnacle Collection: Ho Bee expects the breakeven cost to be about $2,600 psf

In a joint statement released yesterday, the joint venture partners said its bid for the largest and last condominium development site works out to $1,822 per sq ft (psf) per plot ratio (ppr).

In July 2007, SC Global won the tender for The Beachfront Collection condominium site with a bid that works out to $1,800 psf ppr. Not only were five bids received, but SC Global's winning bid also set a new benchmark price for Sentosa Cove, topping the highest bid of $1,361 psf ppr for The Seaview Collection tender held in March 2007 - also won by Ho Bee/IOI - by over 30 per cent.

The Pinnacle Collection was, however, awarded based on price and design concept.

Ho Bee has a 35 per cent stake in the project and news of the win, with what appears to be a relatively low bid, was greeted by investors positively yesterday. Its share price rose 3 per cent to end the trading day four cents higher at $1.39.

Ho Bee Investment executive director Ong Chong Hua said: 'The US sub-prime crisis has in our view helped us to secure what we believe to be the best site, not only in Sentosa but also in Singapore, at a price level which would otherwise be much higher for such an iconic site under normal circumstances'.

Factoring in higher construction cost for a luxury development, Ho Bee expects the breakeven cost to be about $2,600 psf.

The 231,676 sq ft site has a 2.6 plot ratio and a total permissible gross floor area of about 602,360 sq ft. Mr Ong said it will build 280 units comprising a mix of three- and four-bedroom units as well as penthouses.

The development is targeted for launch in the first quarter of 2009.

Upbeat about the high-end market, Mr Ong said that while the sub-prime crisis has created some market uncertainty, the Singapore real estate market is fundamentally 'very healthy', backed by solid demand and robust economic growth.

'We think the sub-prime crisis provided a very healthy consolidation to the market. It is a good reality check on the 'irrational exuberance' which we had experienced especially in mid-2007,' he added.

He also believes the high-end market will consolidate in the next three to six months after which he expects a steady growth of 5-10 per cent.

This will be Ho Bee's eighth project at Sentosa Cove and IOI Properties' third foray into the Singapore property market.

On the tender price, CB Richard Ellis (Research) executive director Li Hiaw Ho noted that the winning bid was only 14 per cent above the reserve price of $1,600 psf ppr. 'When the site was opened for tender in September 2007, market sentiment was more upbeat and it was widely expected that the winning bid would be in the region of $2,000 psf ppr,' he added.

He noted that the latest launches in Sentosa Cove, the Turquoise and Marina Collections, were priced at an average of $2,600 psf and $2,700-$3,000 psf, respectively. He also expects The Pinnacle Collection to sell at around $3,000 psf.