BT : Chip Eng Seng makes top bid for residential site in Simei

Business Times - 12 May 2010

Chip Eng Seng makes top bid for residential site in Simei

$152.7m offer works out to $523 psf ppr; CEL plans project with about 280 units

By UMA SHANKARI

CHIP Eng Seng's property arm CEL Development trumped 17 other bidders to put in the top offer of $152.7 million for a residential site on Simei Street 3.

The offer, which works out to $523 per square foot per plot ratio (psf ppr), was much higher than analysts' estimates of $295-$410 when the site was released on March 23. The tender closed yesterday.

CEL's bid was just 3 per cent above the second-highest bid of $148 million - or $507 psf ppr - put in by Frasers Centrepoint.

The top bid was also 34 per cent higher than the lowest bid of $113.8 million ($390 psf ppr) from Allgreen Properties. Other bidders included Far East Organization, MCL Land, Keppel Land, Hong Leong Group and UOL Group. The site has a maximum gross floor area of about 292,000 sq ft.

Analysts said the tender aroused strong interest because the site is in the established Simei HDB estate and across the road from Simei MRT Station and Eastpoint shopping mall.

The new project is expected to be popular with HDB upgraders and private home owners because of its accessibility and amenities.

CBRE research director Li Hiaw Ho said the 18 bids represent a level of interest not seen in a government land tender in the past five years for a site of this size and quantum - above $100 million. 'This demonstrates the strength of a location that is close to an MRT station, as well as developers' confidence in the residential market going forward,' he said.

CEL said that if it is awarded the site, it plans to build a project with about 280 units ranging from studio apartments to four-bedroom units. The development is likely to be launched in early 2011, it said.

CBRE's Mr Li said the top bid of $523 psf ppr will translate to a breakeven cost of $860-$900 psf. The new project could sell for around $1,000 psf if it is launched in the first half of 2011, he said.

This is higher than what nearby projects are fetching. CBRE's data shows that between January and April, typical new units in nearby Double Bay Residences sold for $660-$750 psf. And in the resale market, units in Modena and Tropical Spring were sold for $615-$780 psf over the same period.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said Chip Eng Seng could have bid aggressively because it has development and construction arms, which means it can better manage construction cost.

Mr Mak pointed out that several other groups with construction and development arms also made aggressive bids for the site. 'If they buy the site, their construction division will also have another job,' he said.

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