Singapore Site Tender Triggered One Week After CDL-Mitsui Awarded Neighbouring Plot

Less than a week after a joint venture between City Developments Ltd and Mitsui Fudosan of Japan captured a residential project in Singapore’s upscale District 10 with a below-market bid, an unnamed developer has made an offer on an adjacent site, triggering a tender for the 610-home project, according to an announcement by the city-state’s Urban Renewal Authority on Monday.

The mystery builder has bid S$605 million ($444 million) for Zion Road (Parcel B), a residential site near Havelock MRT station which had been included on a reserve list of URA projects which could be made available to developers, should there be adequate interest, with the agency’s acceptance of the offer triggering a tender for the 0.9 hectare (2.22 acre) plot.

With CDL and Mitsui made the sole offer for the neighbouring plot, which combines condos with a rental residential tower and a retail podium, the partners are seen as likely suitors for this latest tender, where they are expected to face more competition for the build-for-sale project.

“We expect CDL-Mitsui JV to be interested in defending the area, and more developers to be interested in this plum site,” CBRE’s head of research for Singapore and Southeast Asia, Tricia Song said in a statement. “We expect 3 to 4 bids and (a) top bid price of S$1,300-1,380 psf ppr or about S$730-770 million.”

Top Bid Could Reach $565M

Zion Road (Parcel B) can yield up to 559,745 square feet (52,002 square metres) of housing on a gross floor area basis, with analysts Song’s prediction on the sale price representing a 15 percent premium to CDL and Mitsui’s winning bid for the adjacent Zion Road (Parcel A) awarded last week, due to both its condo-only nature and the project’s smaller scale.

“Without the SA2 (rental residential) component and at about 60 percent the GFA of Parcel A, Parcel B poses lower development risk and should warrant a higher land rate,” CBRE’s Song said.

Expected to yield 740 units and a retail podium, the URA’s terms for the tender for Zion Road (Parcel A) also included a requirement that the developers build 290 units as long-stay serviced apartments.

Zion Road (Parcel B) was included in the reserve list for Singapore’s Government Land Sale programme for the first half of this year when it was released last December. At 5,450 new private homes confirmed to be put up for sale, that first-half land sale programme was the largest in more than a decade, with the new tender expanding that pipeline to 6,060 homes.

Wong Siew Ying, head of research and content at real estate agency PropNex estimates that the newly launched site could fetch a top bid of S$633 million to S$700 million or around S$1,150 to S$1,250 per square foot of built area, while predicting two to three offers.

Together, the two Zion Road parcels could deliver 1,350 new private homes for sale in the area around 10 minutes’ walking distance from the Great World commercial complex on the site of the former Great World amusement park and about two kilometres from Orchard Road.

Defending Existing Site

Even if Parcel B is awarded at the top end of CBRE’s estimates, the price of S$1,380 per square foot of built area would still be 20 percent below what Frasers Property paid to acquire a site opposite the Zion Road plot in 2017. Frasers developed that site on Jiak Kim Street as its Riviere luxury project after having paid S$1,733 per square foot of built area for the site seven years ago.

After having risen at a record pace in 2021, annual home price growth in the Lion City slowed to 1.5 percent in the first three months of this year, compared to the 2.8 percent rise in the fourth quarter of 2023. That slowdown came as new home sales slipped 6 percent compared to the same period in 2023 to total just 1,175 units from January through March, according to the URA.

The market decline has dampened developer desire for new land, with recent land sales bringing fewer offers, including the CDL-Mitsui solo bid for Zion Road (Parcel A), with a second plot awarded that same day to a a JV between Malaysia’s GuocoLand and Hong Leong Holdings also only drawing a single proposal.

Propnex’ Wong sees the unsolicited bid for Zion Road (Parcel B) as potentially reflecting a move to snatch up more sites during a market lull.

“We did not expect the Zion Road (Parcel B) site to be triggered so soon,” Wong said. “This could reflect developers’ confidence in the home buying demand in that area, given the site’s attractive location. The developer could also be seizing the opportunity to apply for the plot at a more measured price, amidst the cautious market sentiment.”