Thursday, July 17, 2008

Hiap Hoe-SuperBowl Top Bid For Hotel Site Below Forecast

Source : The Business Times, July 17, 2008

Group is aiming to build 3-star hotel that caters to China, India markets

A JOINT venture between Hiap Hoe Ltd and its sister company SuperBowl Holdings Ltd yesterday placed a lower-than-expected top bid for a hotel site in the Balestier area opposite the Sun Yat Sen Nanyang Memorial Hall.

Park and hotel: Hiap Hoe expects to spend another $120m in construction cost, if it is awarded the site

HH Properties bid $73.3 million or about $172 per square foot of potential gross floor area for the 99-year leasehold plot. This is lower than the $350-470 psf per plot ratio (psf ppr) that analysts had indicated for the site when it was launched by the Urban Redevelopment Authority in late March.

Industry observers noted that yesterday's top bid was also significantly below the $420 to $805 psf ppr at which the government awarded 99-year hotel sites last year.

Still, they were not too disappointed with the outcome of yesterday's tender. Property investment sentiment has worsened significantly in recent months, and especially in the past week following negative newsflow from the US.

So the observers were generally relieved that yesterday's tender attracted three bids - instead of a repeat-show of an earlier state tender for a hotel site at Race Course Road that closed in May without drawing a single bid.

Some analysts also suggested that stringent requirements for the latest plot in Balestier, including having to maintain a park that occupies about a quarter of the 1.77-hectare site, may have tempered bids yesterday.

'It's heartening to see several bids submitted,' CB Richard Ellis executive director Li Hiaw Ho said.

Jones Lang LaSalle executive vice-president Chee Hok Yean said: 'I think the government should consider making an award. Even with the stringent requirements, there were three bids. Awarding the site will help contribute to the supply of budget hotels in Singapore, a segment where more supply is needed to cater to regional travellers.'

The two other bidders at yesterday's tender were Garden City Holdings (S) Pte Ltd (controlled by the Tew family), and Park Hotel Group unit Park Plaza Pte Ltd, with respective bids of $53.13 million and $35 million.

Teo Ho Beng, managing director of both Hiap Hoe and SuperBowl (the two listed companies are part of Hiap Hoe Holdings group) told BT that if the companies are awarded the Balestier site, the plan is to develop 'probably a three-star hotel catering to businessmen as well as tourists, especially from China and India'.

The hotel may have about 500 rooms, and there will also likely be some retail (probably a small shopping centre) and office space.

'We expect to spend another $120 million or so in construction and fitting-out costs, so our all-in investment would be around $200 million,' Mr Teo indicated. At least 60 per cent of the gross floor area has to be for hotel and hotel-related uses.

Hiap Hoe group is no stranger to the Balestier area. Its headquarters are located there and last year, SuperBowl sold two adjoining freehold plots at Balestier Road slated for hotel development for $39.8 million, more than double the $17.8 million it had paid for the property a year earlier.

'That was an attractive offer on the table and we'd found the sites a little too small. So we disposed of them and decided to try bidding for alternative hotel sites,' Mr Teo said yesterday.

The group last year bid unsuccessfully at state tenders for hotel plots located at Tanjong Pagar, Rangoon Road, Upper Pickering Street, and New Market Street/Merchant Road.

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