FOR the third time this year, the government has thrown out a bid for a state land site that it assessed to be too low, and has held back from awarding the plot.
The tender for the 60-year leasehold long-stay serviced apartment site in Media Circle was not awarded because the sole bid was too low, the Urban Redevelopment Authority (URA) said on Thursday (Oct 3).
The S$120 million bid from a Frasers-led consortium, which worked out to S$460.80 per square foot per plot ratio (psf ppr), came in far below analysts’ estimates, which had ranged widely between S$650 and S$1,100 psf ppr for the parcel.
The consortium included Padawan MC and Empire One North Property. Padawan MC is linked to Boustead Projects, and Empire One North Property has ties with Sunray Group Holdings.
The 60-year lease for the site, which is near the one-north office hub, distinguishes it from other state land sites designated for housing, which typically come with 99-year leases. It is the first state land plot dedicated to long-term serviced apartments, a new rental category labelled SA2, which was introduced last year to help meet market demand.
In response to queries from The Business Times, a Frasers Property spokesperson said the group “acknowledges the recent decision regarding the bid for an SA2 site at Media Circle”.
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“Our proposal was based on our assessment of the 60-year tenure for this pure SA2 site, which is a new housing typology with a minimum stay duration of three months, compared to the current minimum of seven days for our existing serviced apartments. We remain interested in investing in this new asset class, and will continue to explore future opportunities as they arise.”
The Media Circle plot can yield 520 apartment units, with commercial use on the first storey. It sits on a 5,764.3 square metre (sq m) plot of land, with a maximum gross floor area of 24,211 sq m.
Two other sites with SA2 elements have been put up for sale so far, both combining residential housing with serviced apartments.
The first plot tendered at Zion Road was awarded to a City Developments Limited (CDL)-Mitsui Fudosan tie-up, which placed the sole bid of S$1.1 billion, or S$1,202 psf ppr, in April. The site near the prime River Valley neighbourhood can house up to 1,170 residential units, including 435 serviced apartments.
The second SA2-type site in Upper Thomson, in a residential suburb outside the city centre, had no takers when the tender closed in June.
Market watchers said the results pointed to a disconnect between developers’ views on such rental housing, and the government’s plans.
A seasoned developer who declined to be named said: “Some developers feel that the chief valuer should be more conservative about pricing (for the latest SA2 site), since it is a new product and the government wants to encourage this new form of rental housing.”
The reserve price of government land sale sites is pegged to 85 per cent of the estimated market value as assessed by the chief valuer, who takes into consideration factors such as proposed land use, site conditions and relevant sales transactions.
Edwin Loo, an associate director at real estate consultancy Cistri, said the location of the Media Circle site did not suit its purpose. “The site has relatively poor access to public transport and is not close to amenities.”
He added: “To be frank, URA ought to take a risk and push out a long-stay serviced apartment site in a genuinely desirable and prime location, as opposed to testing the concept in fringe areas. It is also possible that the government is struggling to price this use appropriately.”
Valuations are drawn from recent comparable transactions, and “comparable sales for this specific use are few and far between, which makes this task quite difficult”, he said.
The government has maintained its stance with reserve prices to ensure that long-term land valuations and prices are upheld, preventing disruptive price fluctuations, said Eugene Lim, ERA’s key executive officer. “We are at an inflection point in the market, and some developers may have attempted to score undervalued sites.”
Nicholas Mak, chief research officer at Mogul.sg, said: “The government has three choices. First, select better locations for SA2 sites. Second, it could build and operate the SA2 projects itself. Third, abandon or scale down the plan for a buffer stock of SA2 units.”
BT understands the URA is reviewing plans for the site.
Thursday’s outcome brings to three the number of sites that the government has not awarded this year. In February, the URA rejected the sole bid for Marina Gardens Crescent, which came in at nearly S$770.5 million or S$984 psf ppr.
The bid submitted by a GuocoLand-led consortium was nearly 30 per cent lower than the S$1,402 psf ppr that Kingsford Group paid for a neighbouring plot in Marina Gardens Lane in 2023.
Then in September, the URA rejected a S$640 psf ppr bid for a mega “white” site in Jurong Lake District (JLD), from a heavyweight group comprising CapitaLand Development, CDL, Frasers Property, Mitsubishi Estate and Mitsui Fudosan (Asia).
While the bid was similarly evaluated as being “too low”, market watchers said the bid value reflected the substantial risk developers would be taking on with the JLD development, an ambitious project to create Singapore’s second Central Business District in a suburban region.
