EC Site Bids

http://www.remisiers.org/cms_images/research/Research-Oct10-Oct14_2011/sgprop121011_flash_DBSV.pdf

EC site attracts 11 bids

The tender for an Executive Condominium (EC) site located at the junction of Pasir Ris Drive 3/ Pasir Ris Link attracted a high number of 11 bids. This site is adjacent to a condominium site, which attracted 13 bids recently. We  believe that the strong interest is in part due to the  change in government policy (a raise in monthly income  ceiling to purchase the ECs), as well as the decent  response for recent EC launches and nearby launches.

A tie up between Ho Lee Group and Maxdin submitted  the highest bid at S$291 psf ppr for the site. Ho Lee  Group will hold a 70% stake, while Maxdin, a subsidiary  of UE E&C Ltd (part of the United Engineers group) will  take a 30% stake. The group plans to build a 400-unit  project on the 1.8 ha site, which can house a total GFA of  419,978 sf. The project, comprising units of various sizes, is expected to be launched towards late March next year.


The bid price of S$291 psf ppr is fair and is in line with  market expectations. The tight range of the 11 bids which fell between S$214-291psf also indicated consistent expectation of the prices for end products. We expect breakeven cost to be around S$550-580 psf and the project should generate a 15-20% profit margin if sold at S$650 - 680 psf. Recent transacted prices for ECs range between S$622 - 731 psf.

The latest land transaction continues to highlight our view that developers are taking a cautious stance
towards property prices as there appears to have no element of forward pricing. At the same time, they are likely to continue to replenish their land bank selectively, supported by healthy balance sheets. Property stocks are trading at a steep 40% discount to asset backing and appear to have factored in much of the anticipated deterioration in prices. Prefer UOL with its multi-growth engines.