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Thread: Prime Somerset Site Draws S$617m Bid From Dark Horse

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    Default Prime Somerset Site Draws S$617m Bid From Dark Horse

    A gaint Australian property firm trumped high-profile local developers yesterday when it tabled a record bid for a prime Orchard Road block.

    Lend Lease, Australia’s largest developer, put in a whopping $617.2 million offer for the coveted Somerset Central retail site next to Specialists’ Shopping Centre. The Aussie developer’s $1,455 psf offer beats record for government land sale in Orchard.

    The surprise bid from the Aussie dark horse - it has never shown interest in Orchard Road before - outstripped local big guns like CapitaLand and Far East Organization. ‘Lend Lease has failed to win other tenders here, and they often team up with other developers, so coming in now, solo and in such a bullish way, is unanticipated,’ said Mr Nicholas Mak, Knight Frank’s director of research.

    The Lend Lease bid beat the record for a Government land sale in the Orchard Road area - on a per-square-foot (psf) basis - by more than 30%. Its offer works out to $1,455 psf of potential gross floor area (GFA). This, along with the four other tenders, passed the record prices set for two other Orchard Road sites awarded recently.

    The Orchard Turn site near Orchard MRT station was awarded for $1,020 psf to CapitaLand last year, while Far East clinched the former Glutton’s Square site on the other side of Specialists’ Centre for $1,085 psf in January.

    Including Somerset Central, these are the first Orchard Road sites to be put up for tender in over a decade. Mr Mak said the ‘unexpectedly bullish’ bids were because Somerset Central is the last prized mall development site on Orchard Road ‘for some time to come’. It also helped that several developers had strategic interests in snapping it up, he added.

    Lend Lease’s move has thrown a spanner in the works of its bidding rivals, who own nearby sites. These include Frasers Centrepoint - whose mall is across the road from the Somerset site - and Lippo Group, which has Meritus Mandarin Hotel down the road and which joined CapitaLand to bid for the site. But the mall to be built at Somerset Central will pose direct competition to the mall coming up at adjacent Glutton’s Square. This is owned by Far East, whose bid Lend Lease pipped by just $7 million.

    Somerset Central can host a 16-storey ‘landmark development’ with at least 60% of the 424,052 sq ft building put to retail-related use. There must also be a 24-hour pedestrian mall linking Somerset MRT station with the junction of Orchard and Grange Roads.

    Lend Lease has never developed a retail project in Singapore but it does own stakes in Parkway Parade, Heartland Mall in Hougang and Paradiz Centre. It development experience here is limited to the Admiralty Industrial Park that it built in Woodlands about a decade ago but it is planning to develop more malls in Asia, its chief executive for Asia, Mr Eng Ooi, told The Straits Times yesterday.

    Mr Eng defended the group’s bullish bid, saying Somerset Central is ‘a very good site’. He said the group plans to devote the entire plot to retail use and is open to the idea of tying up with OCBC Bank, which owns Specialists’ Centre, to combine and redevelop the two sites.

    The land sales so far have resulted in a myriad of owners in the Somerset area but Colliers International’s director of research Tay Huey Ying said it could pay for them to ‘jointly develop their sites so as to create a shopping magnet in this part of Orchard Road’.

    Source: The Straits Times, 17 August 2006

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    Default Lend Lease sets record $1,455 unit land price for Somerset site

    Top Print Edition Stories
    Published August 17, 2006

    Lend Lease sets record $1,455 unit land price for Somerset site
    Aussie developer pips hot favourite Far East by 1.1%


    (SINGAPORE) Australia's Lend Lease group has offered the highest-ever unit land price for a site in Singapore, with a top bid of $617.2 million for a 99-year leasehold commercial site just above Somerset MRT Station.

    Hot site: Artist's impression of the upcoming retail centre, expected to be ready by December 2009, on the 78,702 sq ft site above Somerset MRT Station next to Specialists' Shopping Centre

    The bid works out to a unit land price of $1,455 per square foot of potential gross floor area, which is higher than expected and underscores the bullish outlook for the Singapore property sector, especially among foreign investors.

    Lend Lease, the developer of England's famous Bluewater mall in Kent, says it is confident of the fundamentals of the Singapore retail market. It plans an all-retail project - currently estimated to cost a total of about $900 million, including the land price - on the 78,702 sq ft Somerset Central site, which can be built up to 424,205 sq ft gross floor area (GFA).

    'The mall is expected to be ready by December 2009,' Lend Lease Real Estate Investments Pte Ltd CEO Ooi Eng Peng told BT. 'It will focus on the mid-market fashion and food segment to suit that stretch of Orchard Road.'

    In psf price terms, Lend Lease's bid is 34 per cent more than what Far East Organization paid for the nearby former Glutton's Square site in January. Far East had been widely tipped to be top bidder for the Somerset Central site.

    Instead, Lend Lease pipped its $610 million or $1,438 psf per plot ratio (psf ppr) offer by a narrow 1.1 per cent margin yesterday. In fact, all five bids at yesterday's tender were above $1,100 psf ppr.

    This reflects developers' confidence in Orchard Road and the retail tourism scene, according to CB Richard Ellis executive director Li Hiaw.

    Colliers International's director for research and consultancy Tay Huey Ying agreed that this is despite the large amount of retail space coming up at the Marina Bay integrated resort.

    Knight Frank executive director Danny Yeo said the strong bidding for the Somerset site also reflects its scarcity: 'This is the last goldmine on Orchard Road for mall developers.'

    He estimates that Lend Lease's breakeven cost will be close to $3,000 psf. This means it would have to charge a gross average monthly rental of at least $18 psf to achieve a 6 per cent net property yield - the current level being sought by investors here.

    Mr Yeo said that once the Somerset Central site is awarded, it will help liven up a stretch of Orchard Road which has traditionally played second fiddle to the area above Orchard MRT Station.

    Next to Somerset Central site is OCBC's ageing Specialists' Shopping Centre and beside that is the former Glutton's Square site bagged by Far East.

    OCBC and Far East already have an alliance to cooperate - involving either a massive retrofitting of Specialists' Centre or a total redevelopment of the more than 30-year-old complex along with the development of Far East's site. In fact, OCBC has taken a 10 per cent interest in Far East's Glutton's Square site. It remains to be seen if the duo will extend their cooperation to include Lend Lease, when it is awarded the Somerset Central site.

    But even if this doesn't happen, Mr Yeo says there will be connectivity between the new developments on all three sites, which together will have a 300 metre frontage on Orchard Road - compared with the 250-metre stretch at Ngee Ann City. He also envisages a 'canal boulevard' at the rear of all three properties, built by partly decking over Stamford Canal and creating an open pedestrian mall lined with shops and outdoor refreshment areas.

    'All this, plus the MRT location, means this stretch of Orchard Road is set to be a formidable alternative in terms of shopping experience to the Orchard/Paterson roads corner,' he said.

    Apart from Lend Lease and Far East, the other three bidders in yesterday's state tender were: Frasers Centrepoint, which offered $1,320 psf ppr; a joint venture between CapitaLand and Lippo ($1,304 psf ppr); and a City Developments-AIG tie-up ($1,168 psf ppr).

    In December last year, CapitaLand and Sun Hung Kai Properties clinched the Orchard Turn site above Orchard MRT Station for $1,020 psf ppr.

    Lend Lease's Mr Ooi noted the Australian group is refocusing on Asia, especially for its core retail development business, starting with Singapore. Lend Lease recently teamed up with Lehman Brothers Real Estate Partners II and Eden Property Mauritius Investments to buy Paradiz Centre in Selegie Road for $138 million. The new investors plan to reposition the building.

    Lend Lease's Asia Pacific Investment Company (II) fund bought Parkway Parade in 2000. The group is also providing retail design services for City Square mall along Kitchener Road and designed the original Jurong Point mall.

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