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

By Nicholas Lam

/ EdgeProp Singapore |

April 4, 2024 8:07 PM SGT

The government land sales (GLS) tender for the residential site at Zion Road (Parcel A) closed on April 4 with a sole bid of $1.107 billion or $1,202 psf per plot ratio (psf ppr) from a joint venture between Singapore-listed property group City Developments Ltd (CDL) and Japanese real estate developer Mitsui Fudosan.

The Zion Road (Parcel A) GLS site is the first to pilot long-stay serviced apartments with a minimum stay of three months. The 99-year leasehold, 164,439 sq ft site is zoned residential with commercial on the first floor. The site has a plot ratio of 5.6 with a maximum gross floor area (GFA) of 920,871 sq ft. URA said the site could yield 1,170 residential units, including long-term serviced apartments. The site has another 25,834 sq ft of commercial space.

"In the event that CDL and Mitsui Fudosan (Asia) Pte. Ltd. are awarded the site, the JV will explore a mixed-use project comprising two blocks – 69-storey and 64-storey – with around 740 residential units for sale, a retail podium as well as a 35-storey block offering around 290 rental apartment units," says Sherman Kwek, CDL group CEO. "Together with our valued partner, we look forward to transforming the River Valley enclave with a new sustainable landmark. The long-stay serviced apartments align well with CDL’s living sector strategy, which already boasts a portfolio of rental apartment assets in Japan, the UK and Australia. It will also boost CDL’s recurring income stream post-completion."

The last site awarded near Zion Road (Parcel A) was at Jiak Kim Street, which was sold to Frasers Property for $1,733 psf ppr in Dec 2017. However, that was before the cooling measures in July 2018, and several more rounds of cooling measures have been introduced since then, points out Mark Yip, CEO of Huttons Asia. "Developers are facing higher construction and borrowing costs," he says. "The harmonisation of GFA also impacts land price as the saleable area is reduced by 5 to 6%."

According to Yip, the lower land price is likely due to the inclusion of long-stay serviced apartments in the tender for Zion Road (Parcel A). "As this is a new asset class, the risks are higher; therefore, they have to be factored into the land price," he adds. The two sites may attract more interest if the long-stay serviced apartments are offered separately."

There are already hotels and serviced apartments in the neighbourhood of Zion Road, with daily room rates for premium serviced studio apartments above $300 (excluding taxes and GST). Hotel room rates for four- and five-star hotels have similar or higher rates, notes Huttons' Yip.

"These rates are 50% higher than the rental for a one-bedroom condo in the vicinity," he adds. The developer might position the long-stay serviced apartments at mid- to premium price range, targeting working professionals on a short-term contract and medical tourists as they are not far from Singapore General Hospital, one north, and the National University of Singapore.

Justin Quek, CEO of OrangeTee Group, says the 25,834 sq ft commercial space on the site includes a 6,458 sq ft childcare centre. The project will be integrated with the Havelock MRT station on the Thomson-East Coast Line (TEL).

CDL's Kwek says the listed property group has a strong track record in the area, having developed luxury condos such as New Futura, Gramercy Park, Cliveden at Grange and Tribeca by the Waterfront, as well as hospitality assets such as Grand Copthorne Waterfront Hotel and King’s Centre. CDL's latest condo in the area is the 540-unit, 99-year leasehold Irwell Hill Residences. Launched in 2021, only two penthouses left and an average transacted price of $2,712 psf.

Hong Leong Holdings - the private property arm of Hong Leong Group in Singapore (of which CDL is also a member), together with GuocoLand and Hong Realty, launched the freehold 376-unit The Avenir in 2020. The project is entirely sold at an average price of $3,204 psf.

Meanwhile, Frasers Property's 455-unit Riviere on Jiak Kim Street was entirely sold as of April 2023, with an average price of $2,814 psf.

At a land price of $1,202 psf ppr, the breakeven cost for the Zion Road (Parcel A) site could range between $2,400 psf and S$2,600 psf depending on technical, material and design considerations, with launch prices starting from S$2,700 psf, notes Alice Tan, Knight Frank Singapore head of consultancy.

Tan estimates the project's average launch selling price to be about $3,000 psf. "This price range might prove not only palatable but also attractive for Singaporean homebuyers and permanent residents," she adds.

According to Chia Siew Chuin, JLL head of residential research, it is no surprise that the site has attracted just one bid from a consortium led by CDL, given the niche expertise required to develop and operate a serviced apartment as well as the heavy upfront capital expenditure for such a sizeable project undertaking.

These long-stay serviced apartments can provide a new stream of recurring rental income, which can help mitigate the risks associated with developing residential units for sale, adds Chia, particularly during periods of low homebuying demand and sluggish sales in Singapore.

"Understandably, the site received muted responses as the Core Central Region continues to grapple with subdued foreign buyer demand after the additional buyer's stamp duty hike in April 2023," says Marcus Chu, CEO of ERA Singapore. "Furthermore, developers looking at that location are also likely to be considering the River Valley Green (Parcel A) site, which is smaller and closer to Great World City".

Tags: