|
Winner
of BFC site to be offered choice promontory plot
Despite continued murmurs among landlords
on the impact that the Business and Financial Centre (BFC) will have on the
oversupplied office market, the long-awaited tender details for the site in
Singapore's New Downtown have turned out be a lot more interesting than
expected.
The successful bidder for the BFC land
will also be offered a choice promontory site next door fronting Marina Bay
that could house attractions from a Madam Tussaud's and planetarium to a
convention centre and food outlets. Who knows? There could even be a casino.
The successful bidder of the BFC site
will be offered the adjoining site - but at the same per sq metre per plot
ratio price it tenders for the BFC parcel. The two sites could cost over
$900 million, say analysts.
The terms for bidding released yesterday
by the Urban Redevelopment Authority come two years after the government
mooted the idea of selling a large site in the New Downtown to a master
developer, who would have the flexibility to build to demand, somewhat like
Canary Wharf in London.
The BFC aims to provide the
infrastructure to encourage global financial institutions to expand their
presence here. The proposed China Commercial Centre could also be located in
the BFC.
The promontory site - which juts out to
the sea - can take an eight to 10-storey building with a gross floor area (GFA)
of 40,000 sq metres. It has to be completed together with BFC's first phase
within eight years.
URA's director (land admin), Choy Chan
Pong, said the two sites enhance each other's values. Those working 24/7 in
the banks at BFC can patronise the food outlets at the promontory project,
which in turn will boost the lifestyles of those working in the BFC.
DTZ Debenham Tie Leung executive director
Ong Choon Fah said it made sense for the developer to buy the promontory
site for better control of what comes up in front of BFC.
As for the BFC, its development can
stretch up to 18 years. Under URA's flexible payment scheme, the BFC site -
which comprises a 3.55 ha parcel and an adjoining 1.8 ha underground plot -
can be paid for in phases over a maximum of 10 years, along with an upfront
option fee.
Its maximum GFA will be 438,000 sq m (4.7
million sq ft), of which at least 60 per cent has to be offices. The rest
can be for retail, hotel, residential and recreation/entertainment.
The BFC development will include a
1.37-hectare central open space or park. The area below it will be an
underground mall linked to the Raffles Place and Marina Bay MRT stations.
Some analysts estimate the BFC site could
fetch about $850 million and the promontory site, about $77 million, based
on a land price of $180 psf or $1,937 psm per plot ratio. This assumes a
breakeven cost of about $600 psf, for a net yield of 6 per cent that
institutional investors demand in the office market, assuming an average
gross rental of $4 psf a month.
While a land cost of over $900 million
seems a large sum for any investor, market watchers point to at least one
probable buyer - CapitaLand. The property giant has just divested over $1
billion of assets to an office real estate investment trust.
CapitaLand has said it may bid for BFC if
there is real demand for new large-scale office space. It said yesterday
that it is 'open to teaming up with both foreign partners and local
developers to jointly bid for the site'.
'We are studying details of the tender,'
it said.
Li Ka-shing's Cheung Kong group, too, has
made no secret of its interest in the project. Hongkong Land may also throw
its hat in.
In fact, the two are partners, along with
Keppel Land, in the One Raffles Quay office development nearby.
Others who could take a shot at the BFC
site might be Ng Teng Fong's Far East Organization and the Kwees' Pontiac
group.
Given the size of the development, market
watchers said they expect two or more parties to team up and form consortia.
Partners could include institutional investors like AIG, Ergo and
Prudential.
European pension and insurance funds have
also been following BFC's development with keen interest.
URA's Mr Choy Chan Pong said 'there have
been a number of enquiries, both local and foreign' without giving names.
Developers had mixed reactions yesterday.
On a positive note, CapitaLand
highlighted that BFC's first phase will come on stream only in 2007/2008 at
the earliest. And its minimum 60 per cent office component for the 100,000
sq m GFA for this phase is roughly the size of the group's Capital Tower, it
said.
Rival City Developments did not rule out
participating in BFC's development 'when the time is right' but its
statement reflected its continued fear that BFC will cannibalise existing
office buildings unless there is net new demand.
'We will have to carefully evaluate the
size of the project as well as the demand for office space. We hope that
other developers will do likewise as the original intention of the BFC is to
provide new space for corporations who are expanding or setting up regional
HQs in Singapore,' CityDev said.
'We hope that the government reserve
price will not be too low as this may cause deflation and dampen office
values,' it added.
The Real Estate Developers Association of
Singapore said the flexible development and payment schedules will 'help
maintain stability in the property market and avoid the hollowing-out of the
existing CBD'. - By
Kalpana Rashiwala Singapore
Business Times 28 May 2004
Master developer to have up to 10 yrs to
buy BFC site
Phased approach will give it leeway to
match demand
The successful bidder for the Business
and Financial Centre (BFC) site will be given up to 10 years to buy the
entire site in phases and up to 18 years to finish developing the whole
project, which will have 438,000 sqm (4.7 million sq ft) of gross floor area
(GFA).
The idea is to give the BFC's master
developer the flexibility to time land purchases and project development
according to market demand.
For a start, the developer must pay for
the first phase of land, enough to generate at least 100,000 sqm of GFA - or
almost a quarter of the total - soon after the tender is awarded. The
developer then has a choice of option periods of six, eight and 10 years to
buy the rest of the BFC parcel. It must state its choice of option period
within a month of tender award.
In return for the right to buy the
remaining land later at a pre-determined price - the successful bid price
during the tender - the developer will have to pay the state an option fee.
This works out to as little as 0.5 per cent annually on a net basis for the
outstanding land price for the remaining phases, in the case of a six-year
option. For the eight and 10-year options, the respective fees work out to
0.625 and 0.7 per cent a year. But there's a catch to this seemingly low
option fee. The developer must share with the state any upside in land value
- between the time the tender is awarded and the time the developer
exercises the option to buy later land phases.
Analysts say this is a real possibility
since the office market is generally considered to be bottoming out.
If land values go down, however, the
state will also split any potential drop in price with the developer. The
average commercial development charge rates in seven locations that make up
the core Central Business District - including Raffles Place, Shenton Way,
Cecil Street and Marina Centre - will be used as a proxy for land values. So
for the master developer, if the average DC rate in this area increases by,
say, 10 per cent during the period, its land price for that particular phase
will increase by 5 per cent from the original tender price.
The lower option fee for a shorter option
period reflects the higher risk to the developer.
The developer must buy land to build at
least 219,000 sqm - 50 per cent of BFC's maximum floor area - within half of
the option period. Otherwise, the master developer loses all rights to the
subsequent phases of the BFC land.
With yesterday's release of the detailed
tender conditions, the BFC site, which is on the government's reserve list,
becomes open for application by developers immediately. If at least one
developer applies to bid for it at a minimum price acceptable to the state,
the site will be released for sale through a tender in which bidding will be
open to all interested parties. The bidding period will be about four
months.
Bids will be expressed in terms of $ per
square metre of potential gross floor area. - By Kalpana Rashiwala
Singapore
Business Times 28 May 2004
|
