CDL and Mitsui Fudosan JV submit lone bid of $1,202 psf ppr for Zion Road (Parcel A)

The GLS tender for the residential property at Zion Road, (Parcel A), closed on 4 April with a single bid of $1.107billion or $1.202psf/psf/ppr from a joint-venture between Singapore listed property group City Developments Ltd and Japanese real estate developer Mitsui Fudosan.

The Zion Road GLS site (Parcel A), is the first GLS to offer long-stay serviced apartment with a stay minimum of three months. The 164,439 square foot site, which is 99-year leasehold and has a commercial floor on the ground floor, is zoned for residential use. URA stated that the site, which has a plot-ratio of 5.6, could yield up to 1,170 residential units including long-term services apartments. Another 25,834 square feet of commercial space is available on the site.

If CDL and Mitsui (Asia), Pte. If CDL and Mitsui Fudosan (Asia) Pte. Ltd. win the site, they will develop a mixed-use development consisting of two blocks, one 69-storey, the other 64-storey, with 740 residential units available for sale. There will also be a retail podium, as well as 35-storey building offering 290 rental apartments, says Sherman Kwek. Together with our valued partners, we are looking forward to transforming River Valley Enclave into a sustainable landmark. The CDL living sector strategy is well suited to the long-stay serviced apartment concept, as it already has a portfolio in Japan, UK, and Australia. This will boost CDL’s income stream after completion.”

In December 2017, Frasers Property purchased Jiak Kim Street for $1,733 per square foot, per person. But that was before July 2018’s cooling measures, and since then several rounds of cooling have been implemented. “Developers are faced with higher borrowing and construction costs,” says he. Land prices are also affected by the harmonisation of GFA, as the area that can be sold is reduced from 5 to 6 percent.

It is possible that the lower price of land for Zion Road parcel A was due to the inclusion in the tender of serviced apartments with long-term stays. The risk is higher because this is a brand new asset class. Therefore, it has to be factored in the land price. If the serviced apartments for long-term stay are sold separately, it may be possible to attract more interest in both sites.

In the vicinity of Zion Road there are hotels and serviced studio apartments that offer daily rates above $300 (excluding tax and GST). The rates of hotel rooms in four- and five star hotels are similar or even higher.

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He adds that “These rates are 50 percent higher than the rental of a one-bedroom condominium in the area.” The developer could position the long-stay apartments in the mid-to-premium price range to target medical tourists and working professionals with short-term contracts. They are located near Singapore General Hospital and National University of Singapore.

Kwek, CDL’s Kwek, says that the listed property group is well-known in the area. It has developed luxury condominiums like New Futura and Gramercy Park as well as hospitality properties such as Grand Copthorne Waterfront and King’s Centre. CDL’s 540-unit Irwell Hill residences is its latest condominium in the area. Only two penthouses remain and the average price per square foot is $2,712

Hong Leong Holdings, the Singapore private property arm (of which CDL also is a part) of Hong Leong Group (of which CDL belongs), along with GuocoLand & Hong Realty launched the 376-unit The Avenir freehold in 2020. The entire project has been sold for an average of $3,204 per square foot.

Frasers Property has sold all 455 units of its Riviere at Jiak Kim Street by April 2023. The average price per square foot was $2,814

With a land cost of $1,202 per square foot per year, the break-even price for the Zion Road site (Parcel A), could be between $2,400 and S$2,600 depending on design, materials and technical considerations. Launch prices start at S$2,700.

The average price of the project at launch is estimated to be around $3,000 per square foot. This range of prices may be attractive to Singaporean residents and homebuyers.

It is not surprising that only one consortium, led by CDL has bid for the site. This is due to the expertise needed to operate and develop a serviced apartments as well as the large capital outlay required upfront.

Chia says that these long-stay serviced apartment can generate a new source of rental income. This can mitigate the risk of developing residential units to sell, especially during times of low demand for homebuying and slow sales in Singapore.

The site has received a muted response, as Core Central Region is still struggling with a subdued demand from foreign buyers after the additional stamp duty increase in April 2023. Developers who are interested in that site will also consider the River Valley Green parcel A, which is smaller, and located closer to Great World City.

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