Stars Kovan Launch . Land Sale & Pricing Analysis
ASSET Legend Limited won the Urban Redevelopment Authority (URA) land sale for the Stars of Kovan site at a tender bid of S$276.8 million, or S$848.84 per square foot per plot ratio (psf ppr).
URA announced the results of the land tender on 28 November 2014.
This is a 99-year leasehold mixed-development site at the corner of Tampines and Upper Serangoon Roads, about 350m from Kovan MRT station.
The land zoned for residential on top of 1st storey commercial was launched for tender on 25 September 2014. This tender closed on 27 November 2014.
In November 2014, the BCA (Building and Construction Authority) announced that projects built on government land sale sites going forwards, would have to meet higher building design & constructability standards, as well as a specified level of prefabrication.
The Stars Kovan launch is the 1st government land sale site required to comply with these new buildability and productivity regulations. The site’s tender closing date was extended from November 13 to November 27 to give bidders more time to factor in the new requirements.
ASSET Legend is a subsidiary of Li Ka-shing’s Cheung Kong Holdings. Cheung Kong Holdings has an impressive portfolio of developments internationally, including luxury projects in Singapore such as Marina Bay Suites, Costa del Sol, and Thomson Grand.
Stars Kovan Launch . Pricing Analysis
Asset Legend’s winning price of S$848.84 psf ppr was higher than the market expectations of S$670-750 psf ppr. It is considered “aggressive” by analysts, who expected more conservative bids due to the new prefabrication requirements, as that is likely to lead to slightly higher construction costs.
The 2nd highest bid of S$240 million (S$736.06 psf ppr) was put up by Sustained Land’s SL Capital Ventures Pte Ltd.
A Joint Venture comprising City Developments unit Verwood Holdings, Hong Leong Group’s Intrepid Investments, and TID Residential put in the 3rd highest bid of S$234.6 million (S$719.50 psf ppr).
The tender drew a total of 11 bids, within market expectations. The lowest bid of S$172.7 million (S$529.66 psf ppr) was put in by Koh Brothers’ KBD Ventures.
Based on analysts’ computations, the top bid translates to a break even cost of over S$1,300 for the residential units. The site is primarily residential, with its ground floor zoned for commercial space. Conveniently located near Kovan MRT station, it is expected to yield about 340 residential apartments.
“As (the new requirements are) a new move, the economies of scale have yet to be tested and the breakeven price for this project could be higher as it is the first adopter,” said Eugene Lim, the KEO (Key Executive Officer) for ERA Realty Network.
“Asset Legend could be bullish about the site’s prospects due to its proximity to the Kovan MRT station and its main road frontage, which works well for the first-floor commercial units.”
RST’s Research director Ong Kah Seng said that optimistic bids are common with foreign developers, who might be willing to take a lower profit margin as they see the benefits of developing a plum site that could yield a product with greater investment potential.
See this link for the news report for the tender results (opens in new window).
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