A HOUSING Board tender for a mixed-use commercial/residential site at Yishun Ave 4 which closed on Tuesday garnered a “muted” turnout from just five bidders.
This fell short of consultants’ earlier predicted six, to as many as 18 bidders by the most bullish of the lot.
Northern Resi and Northern Retail, both units of listed construction engineering group BBR Holdings, beat four others to offer the highest price of S$185.09 million, which translates to S$629.24 per square foot per plot ratio (psf ppr).
Again, this was below even the floor of consultants’ predictions of at least S$650 psf ppr for the highest bid.
The Yishun plot, with a gross floor area of about 27,327 square metres, is the first of two selected government land sale sites to adopt a new building method called prefabricated prefinished volumetric construction (PPVC). It has to meet a certain level of prefabrication under new government rules for the built sector.
Two Koh Brothers units, KBD Ventures and Changi Properties, put in a very close second highest bid of S$181.6 million (S$617.37 psf ppr), only 1.9 per cent less than the highest tenderer.
R’ST Research director Ong Kah Seng thus called the top bid a “chance occurrence”. When interest is high in a site, bidders would bid aggressively, resulting in a wide margin between the first and second bids, but there was notably no outlying top bid in this tender, he said.
Sim Lian (Focus) Pte Ltd put in the third highest bid of S$168 million (S$571.14 psf ppr). The fourth and fifth bidders were Wee Hur Development and KSH Land Development, respectively.
Desmond Sim, CBRE research head for South-east Asia, said it was not surprising that the tender participants were developers with a construction arm, given the site’s mandatory use of PPVC technology. “Such developers have the advantage of being able to control construction costs better, transferring potential savings into their profit margins,” he said.
But the higher construction cost using the PPVC method – which involves assembling whole rooms or apartment units complete with internal fixtures off-site, and installing them on-site Lego-style – may also have been priced into the subdued bids, SLP International executive director Nicholas Mak said.
“In a buoyant property market, the developer may be able to pass on the higher construction costs to the buyers. But this could be difficult in the current market,” he said. The alternative would thus be for the developer to lower its own land costs.
Ong Teck Hui, national research director at JLL, said the bidders also likely also took into account retail and residential competition in the vicinity.
Northpoint City, an integrated development which includes the largest mall in the north, will be completed in 2018, while Junction Nine at Yishun Ave 9 will be ready in mid-2017. There are also some 920 units for sale at Northpark Residences, and 660 units for sale at Symphony suites.
Chia Siew Chuin, director of research & advisory at Colliers, cited the requirement for the commercial component of the development to be held under a single strata lot as another reason for the low bids.
“This disallows any strata subdivision of the commercial component during the lease term, which could have prompted a more cautious bidding strategy from developers due to the more restrictive investment exit options available,” she said.
The expected breakeven price for the residential component is estimated to be S$950 to S$1,000 psf. Its selling price could range from S$1,050 to S$1,150 psf, depending on the state of the market when it launches, she said.
The retail component could also achieve monthly gross rents of S$6 to S$12 psf, she added.