Straits Times: Wed, Nov 09
THE reserve price is not the sole factor in determining whether the Government awards a site and revealing it would colour developers' assessments - and bids.
The Urban Redevelopment Authority (URA) laid out its policy for The Straits Times yesterday, noting that the reserve price serves only as a guide and is not a rigid formula in deciding a tender.
It had awarded sites in the past even when the top bid was below the reserve price, a URA spokesman said.
The URA's response comes after a joint bid by UOL Group and Singapore Land for a Paya Lebar mixed-use site was rejected for being 'too low' on Friday. The consortium issued a terse statement asking for the price to be made public for future tenders 'as much costs and efforts are put into submissions of such a scale'.
UOL and Singapore Land were the sole bidders, offering $566 per sq ft per plot ratio for the site - 35 per cent less than what a nearby plot achieved just six months ago. The latest site, however, had certain technical constraints such as a canal running through it and a hotel component that limited the number of bidders.
But the URA said yesterday that it would not be 'meaningful' to reveal the reserve price to 'influence developers' independent assessment and bid prices, which is dependent on many factors including their risk profile and their outlook of the market'.
'It would be more meaningful for the Government to make its own assessment of the developers' independent bid prices, taking into consideration the reserve price, in deciding whether to award the land parcel,' the spokesman added.
The reserve price system has worked well and has not deterred sites from being sold under the government land sales (GLS) programme, the URA said.
Associate Professor Sing Tien Foo of the National University of Singapore's department of real estate said revealing reserve prices could mean an increased likelihood of bids clustering around the number, which is not ideal for competitive bidding and correspondingly the filling of the state's coffers. It might also hinder the best use of land as developers might work around the figure in conceptualising their finished product.
But some developers said they wanted a minimum price - or at least a guide price - set for GLS sites to give them a clearer indication of how much to bid. EL Development managing director Lim Yew Soon said he 'totally agrees' with having the reserve price public.
He added that the Government can be flexible and make qualifications that the price is indicative. If the market turns abruptly within the tender period, which can take about two months, bids below can still be accepted, Mr Lim noted.
Mr Herman Chang, managing director of Macly Group, said having a guide price instead of a minimum price would mean a more efficient way of bidding, one fair to all parties. 'Presently, some developers might think that land price might be too high and decide not to bid. But with a guide price, they know whether it's within their estimates or not and this might attract more bidders instead,' he said.
Industry watchers also weighed in further on the Government's decision to reject the Paya Lebar bid. They noted that a re-tender would not necessarily mean a higher bid. It is also unclear how the Government decides whether to award a site as there have been low and single bidders awarded land in the past.
In November 2007, the higher of two bids for a land parcel at Marina View was about half the price of a site next to it sold two months earlier. The site was eventually awarded.
But URA said that it is not fair to make a direct comparison on the tender evaluation results between the two sites.
'While both tenders for the Marina View ... and (Paya Lebar) sites were evaluated based on the same principles, the prevailing market conditions and other relevant factors such as the attributes of the sites were different for both sites.'
Inconsistent land tender awards, Forum
Source: The Straits Times © Singapore Press Holdings Ltd
Martin Koh/ Sherry Tang