99-year residential site at Enggor Street behind the Icon development drew just two bids

In a sign that developers are turning cautious after the withdrawal of the deferred payment scheme, a state tender for a 99-year residential site at Enggor Street behind the Icon development drew just two bids yesterday.

The higher bid by Far East Organization was 55 per cent above the only other offer by GuocoLand.

Far East offered $233.8 million or about $852 per square foot of potential gross floor area for the 32,681 sq ft plot near Tanjong Pagar MRT Station. GuocoLand’s $150.98 million bid works out to around $550 psf per plot ratio.

All eyes are now on a tender for the residential site next-door closing on November 15.

Far East’s breakeven cost for a new condo project is understood to be in the $1,340 to $1,400 psf range. That still leaves it with a profit margin based on current prices being achieved at Icon.

Caveats show that mid-level units (on the 20th to 22nd levels) of Icon have been changing hands in recent months in the $1,500 to $1,600 psf range in the subsale market, although units above the 40th storey have been sold by Far East at above $2,000 psf.

The property giant is understood to have sold a penthouse on the 46th floor recently for about $2,300 psf. It is now left with about 30 units in the 646-unit project, and its prices range from $2,000 to $2,400 psf.

For the latest site, called Land Parcel A at Enggor Street, BT understands Far East’s scheme is for a 62-storey tower with about 200 apartments - likely to be a spread of unit types like Icon - and is targeting to launch the project around end-2008 or early 2009.

Far East will develop retail space on the project’s ground level to be linked to Icon Village, the street-level retail component of its earlier project.

While property market watchers attributed the thin participation at yesterday’s tender to developers turning cautious following the withdrawal of the DPS scheme, some were puzzled by the disparity between the two bids. ‘Far East has crunched their numbers and know what they are in for, based on their experience with selling Icon units,’ a seasoned property consultant said.

However, some analysts could not help but suggest that Far East’s significantly higher offer may also have been partly motivated by a need to support property prices, including the values of sites it bid earlier. In September, the property giant clinched a prime condo plot next to Ang Mo Kio Hub for $601 psf per plot ratio - a record for suburban 99-year leasehold condo land. That tender attracted a whopping 14 bids. Another state tender for a condo site next to Kovan MRT Station that closed in early October drew six bids.

‘Developers are a bit concerned after the DPS withdrawal. It looks like they’ve chickened out of this tender,’ a seasoned property consultant said, when explaining yesterday’s thin bidding.

However, another property consultant, CB Richard Ellis executive director Li Hiaw Ho suggested that another reason for the lukewarm response yesterday could be due to the site’s location.

‘It is behind Icon and is sandwiched between a commercial site that has been awarded and another residential site (Parcel B) whose tender will close on Nov 15. Nevertheless, the site is about five minutes’ walk from Tanjong Pagar MRT Station,’ he added.

Source : Business Times - 2 Nov 2007