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

At the end of April, the Zion Road (ParcelA) residential site saw its government land sales (GLS) tender concluded with a bid from Singapore-listed City Developments Ltd (CDL) and Japanese real estate developer Mitsui Fudosan joining forces to form a joint partnership bidder.

Zion Road GLS (Parcel a) site serves as the pilot project for long-stay apartments; minimum stays of three months are necessary. This 99-year leasehold site of 164.43 square feet zoned residential with commercial space on its first level – URA has estimated that this plot to area ratio of 5.6 could produce 1,170 units of residential housing (including serviced apartments). Furthermore, this parcel also boasts 25,834 sq. ft of commercial space.

CDL and Mitsui Fudosan Asia Pte. Ltd will jointly explore a mixed-use project consisting of two blocks – 69 storeys high and 64 stories high – comprising around 740 residential units for sale as well as retail space on an elevated podium, along with 290 rental apartment units in a 35-storey block. This joint venture between CDL and Mitsui Fudosan Asia Pte will focus on logistics. Sherman Kwek noted that, should the project be granted, they will explore a mixed use project consisting of two towers (69 storeys and 64 stories respectively) offering 740 residential apartments for sale as well as retail podiums; alongside a 35 storey apartment block offering approximately 290 rental units. With our valuable partner, CDL hopes to transform River Valley enclave by building an environmentally-friendly landmark. CDL Living Sector Strategy comprises rental apartments in Japan and UK and fits perfectly into CDL’s long-stay apartment strategy; moreover, construction of this project will increase CDL’s recurring revenue stream once construction is complete.

Frasers Property sold Jiak Kim Street near Zion Road for $1733 psf/ppr in December 2017, before cooling measures were introduced in July 2018; since then several rounds of cooling measures have been put in place and developers are facing higher construction costs and borrowing fees; GFA Harmonisation has reduced land prices by five to six percent.

Zion Road (Parcel) tender has seen land prices reduced due to the inclusion of long-stay serviced apartments as part of its offering, an asset class which must take into account risk. Selling them separately may prove more profitable.

Daily rates for studio serviced apartments exceed $300 (exclusive of taxes and GST). Hotel rates at four- or five-star properties are similar to other chains’ rooms.

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He stated that rates for long-stay serviced apartments were approximately 50 percent more expensive than nearby one-bedroom condos, suggesting they target professionals on short-term contracts as well as medical tourists as they are nearby the National University of Singapore and Singapore General Hospital. The developer may price these serviced apartments in the mid to premium range to attract tenants for longer.

CDL Group Limited’s Director of Property Development Kwek believes their listed group boasts a distinguished history of creating luxury condos in the area, such as New Futura, Gramercy Park, Cliveden At Grange Tribeca By The Waterfront as well as hospitality assets such as Grand Copthorne Waterfront hotel and King’s Centre. CDL also created Irwell Hill Residencies on 99 year leasehold agreements – first launched in 2020 there are only two remaining penthouses with average transacted prices of $2712 per sq ft.

Hong Leong Holdings of Singapore (of which CDL is a member), GuocoLand, and Hong Realty jointly launched The Avenir residential project in 2020 and sold all 376 units at an average price per square foot of $3204.

Frasers Property’s Rivier building on Jiak Kim Street had sold all 455 units by April 2023 at an average selling price of $2,814 per square foot.

Zion Road parcel A’s breakeven cost, using land value of $1.202 per sqf per year as the benchmark, could range between $2,400 and S$2,600, depending on design considerations such as technical, design and material considerations; launch prices begin from as little as S$2,700.

Estimations place the average project launch price at approximately $3,000 per square foot, making this affordable to both Singapore homeowners and permanent residents.

CDL only entered one bid, as building and running serviced apartments requires special expertise and has high upfront capital costs associated with them. Given these constraints, this outcome was inevitable.

Chia adds that long-stay apartments can serve as a source of recurring income that helps to mitigate risks involved with developing residential properties for sale, particularly during times of low homebuying demand and slow sales in Singapore.

Given that Core Central Region properties have struggled to attract foreign buyers since April 2023 stamp duty increases, River Valley Green parcel A may offer developers looking for alternatives an easier path toward Great World City.

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