SPH-UE venture’s bid for Sengkang mall site is tops

Offer of $1,155.52 psf ppr is 20.5% above closest rival’s

A 70:30 Singapore Press Holdings and United Engineers tie-up has emerged as the top bidder for a shopping centre site at the corner of Sengkang West Avenue and Fernvale Road with a bid of $328 million or $1,155.52 per square foot per plot ratio (psf ppr).

The state tender for the 99-year leasehold, triangular plot next to Fernvale LRT Station was well participated, drawing 12 bids.

The top bid was about 20.5 per cent or $55.8 million more than the second highest offer of $272.2 million or $959 per square foot per plot ratio (psf ppr) by Han Chee Juan’s Alpro Management Services. Mr Han developed Iluma mall in Bugis which he later sold to CapitaMall Trust.

Alpro’s bid at yesterday’s tender for the commercial plot in Sengkang was $44.8 million or about 20 per cent above the third highest bid of $227.4 million or $801.12 psf ppr from a Mapletree unit.

A unit of Frasers Centrepoint – the group that developed Compass Point mall next to Sengkang MRT Station, about 2 km away from the latest plot – offered $770.14 psf ppr. The 94,618 sq ft plot tendered yesterday can be developed into a gross floor area of up to 283,854 sq ft.

SPH owns Paragon along Orchard Road and 60 per cent of Clementi Mall, which opened last year and is profitable. Based on the group’s top bid at yesterday’s tender in Sengkang West, market watchers’ estimates of the breakeven cost for a new mall project range from about $2,400 psf to $2,600 psf.

Knight Frank group managing director Danny Yeo, who estimates the breakeven cost at about $2,500 psf, said: ‘Assuming an investor is looking to achieve a 5 per cent net yield based on this breakeven cost, it would need a gross monthly rental of about $14 per square foot.’

‘This is a location with a lot of growth potential because this part of Sengkang has a good mix of existing public housing and landed homes (in the nearby Yio Chu Kang and Seletar areas). In addition, there’s potential for more middle-class public housing to be built in the area. And then there’s the Seletar Aerospace Park. All these will provide a good catchment of shoppers for the proposed mall development on this site.’

Credo Real Estate executive director Ong Teck Hui too said: ‘It is timely for a new retail mall to cater to the residents in the locality, which is a growth area…According to HDB’s annual report, there are some 46,000 flats in Sengkang, while the projected ultimate is 90,000 units.’

Mr Ong attributes the strong response to yesterday’s tender to ‘optimism that suburban retail business will continue to do well in spite of slower economic conditions’.

‘A retail centre with a trade mix that caters more to the needs of heartlanders is likely to be well patronised by shoppers, thus ensuring its viability. Furthermore, many retailers are keen to establish footholds in new retail centres in order to grow their business,’ he added.

Other bidders at yesterday’s tender included Hong Leong Holdings unit Noscom Investments, Sim Lian and Mercatus Retail Holdings (said to be linked to NTUC Income and NTUC FairPrice). Guthrie teamed up with Sun Venture to bid $629.90 psf ppr.

Other bidders included Mezzo Development, and Singapore Land unit SL Development. The lowest bid by Unique Capital was at $452 psf ppr.

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