Friday, November 30, 2012

CapitaLand outbids UOL, SingLand for Bishan St 14 site

The $505.1m bid beat 9 other bidders.

According to Nomura, post market close on 29 Nov 2012, the land tender for a 99-yr LH site (GFA 592,189sqft, c.645 units) along Bishan St 14 closed with a total of 9 bidders, whose bids had ranged from S$368-505mn.

Here's more from Nomura:

CapitaLand’s bid of $505.1mn or S$852.9psfppr was the highest, 3.1% higher than the second highest bid of S$490.1mn submitted by a JV which had consisted of UOL, Sing Land and Orix Investment.

The above-mentioned site is adjacent to CAPL’s project Sky Habitat  (99-yr LH, 509 units, 28% sold) and of which the developer had bought earlier in 2011 for S$550.1mn / S$869.4psfppr.

When the site was first launched, consultants had predicted 10-15 bidders to participate and a top bid of S$750-850psfppr. CAPL’s bid thus appears to be towards the upper end of the range. On the whole, we consider CAPL’s bid to be fair, taking into account two existing market conditions.

Based on the land cost of S$852.9psfppr, we estimate a break-even price of S$1,234-1,299psfppr which translates into a pre-tax margin of 23-30%, assuming an average selling price (ASP) of S$1,600psf, which is in line with the ASP of Sky Habitat based on data lodged in Realis.

Protection of Sky Habitat’s selling price vs heightened inventory risk?
The site if awarded would allow CAPL to protect the selling prices of its existing project (Sky Habitat), which still has about c.72% unsold inventory as of end Oct 2012.

On the flip side, the site would also mean that the developer will have more inventories to sell within the area, which could translate into heightened inventory risks should buyer’s sentiments turn and physical demand weakens.

We expect the market’s reaction to be mixed on account of the above- mentioned factors. Investors are likely to be keeping a close watch on Sky Habitat sales in the next few months as a gauge for the success of CAPL’s upcoming project, assuming the site is awarded to the developer.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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