The only bidder for Marina South is way below expectations and raising doubts that it will be awarded
A white site in Marina South, designated for residential and business development, received only one bid at a state tender that closed on Thursday (18 Jan), and it was significantly below the market expectations.
The only bidder, a consortium consisting of GuocoLand Investments and TID Residential for the 99-year leasehold parcel in Marina Gardens Crescent, was S$770.5 Million or S$984 psf per plot ratio.
The land rate paid by Kingsford Group for an adjacent plot on Marina Gardens Lane in a tender closed in June of last year was 30 per cent less than that. Kingsford Group’s S$1.03billion plot is zoned residential with commercial space on the first floor. The plot can produce approximately 790 private homes – similar to the 775 unit offer for the last tender.
The Marina Gardens Crescent plot can be developed up to a maximum Gross Floor Area (GFA) that is approximately 783,000 square feet, which is about 6 percent more than the maximum GFA of 738,000 square feet stipulated for Kingsford’s plot.
Observers noted that the only bid received for the Marina Gardens Crescent site, located right next to Marina South station, was less than the S$1,191 psf ppr for a Media Circle site that was offered in the same tender that closed on Thursday. The Media Circle plot, which is zoned residential and has commercial space on the first floor, is located much farther away from the city. It’s also not as near an MRT station. Urban Redevelopment Authority conducted the tender.
The Business Times polled property consultants this week, and they expected that the Marina Gardens Crescent would fetch between zero to five offers. The highest offer was estimated to be between S$1,100 per square foot per year (ppr) and S$1,500.
On Thursday evening, most market watchers anonymously told BT that they did not expect the Government to award the Marina Gardens Crescent Site. The Chief Valuer is aware of a comparable transaction on the site sold by Kingsford. A property consultant, who refused to be identified, said that only one bid had been received for the most recent site.
One analyst stated that it would be interesting to know if the Government will award the Marina Gardens Crescent Site at S$984 per square foot per year and if this price meets the Reserve Price set by the Government. The reserve price for Government Land Sale sites is set at 85 percent of the estimated market values as determined by the Chief Valuator, after taking into account factors such as the proposed land use and site conditions.
Marina Gardens Crescent only had one bidder. The first is the high amount involved.
Future supply in the area
The area is also set to receive a large number of new homes, including the Marina Gardens Lane plot and the Skywaters Residences. These four developments can offer a total of 1,900 homes.
The lack of schools and higher additional buyer’s stamp duty rates for foreigners or investors from April 2023 may also impact the demand for future homes in this area.
The city is a place where developers are shying away. Developer sales of private homes in the island fell to a 15 year low of 6,452 unit in 2023.
Developers who are risk-averse will be more interested in The Media Circle plot. It can produce 355 residential units. Developers are cautious due to the property cooling measures as well as high interest rates and macroeconomic headwinds.
Costs continue to rise and profit margins shrink, which is also hurting developers.
If awarded the Marina Gardens Crescent Site, the consortium would develop a new, exciting mixed-use development that would cater to local residents as well as a variety businesses. It will also contribute to the vision of the government to make Marina South a sustainable, attractive and community-centric area.
Hong Leong Group’s Singapore-listed GuocoLand and its partners in the bid Intrepid Investments, TID Residential are both part of Singapore-listed GuocoLand.
Last year, at the tender for the Marina Gardens Lane, a joint venture between GuocoLand and Guoco Group, along with Intrepid Investments, was the second highest bidder, paying S$985 per square foot per person. This was just a little bit more than the single bid on the plot next door, which came in Thursday. GuocoLand, Hong Leong Group and Intrepid Investments are making a second attempt to establish themselves in the emerging growth area after missing out on the first opportunity.
Potential for tidy profit
Observers pointed out that the consortium would make a tidy profit should it be awarded the Marina Gardens Crescent property.
Breakeven costs range from S$2,100 to S$2,000 per square foot. The selling price will likely be influenced by the previous Marina Gardens Lane site.
In 2026, a residential development could be built on the Marina Gardens Crescent at a price of S$2,800 to S$3,200 per square foot.
Analysts said that residential developers could be pressured to reduce the value of similar sites within the city if GuocoLand was awarded the site.
The site is located next to Marina South station and consists of four separate plots. One of the plots measures 186,422 square feet, while the other plot, measuring 58.238 square feet, has been designated as an open area for a pedestrian mall. Two underground pedestrian spaces are smaller.
A “white” land parcel is one where the government allows a wide range of uses, but stipulates either a minimum or maximum of certain uses in order to achieve its planning goals.