SPH – DBSV

Commercial land at Sengkang West/Fernvale Rd receives good response

A commercial site put up for tender by HDB at Sengkang West Avenue/Fernvale Rd met with good response, attracting 12 bidders. The top price of 328m or $1,155psf ppr was submitted by a consortium made up of SPH and UE. It beat the second bidder Alpro management (JHan Chee Juan, developer of Iluma) with a $959psf ppr price tag. The 94,619sf site can house 283,856sf of GFA. Located at the Fernvale LRT station, the site is seamlessly linked to the Sengkang MRT/LRT station and Sengkang bus interchange and will cater to the lifestyle needs of the growing Sengkang residents as well as those in the north eastern regions of Hougang, Punggol and Serangoon Central.

Based on our estimates, we reckon breakeven cost of the development is $2,300-2,350psf. Based on stabilized monthly rental estimates of $12-14psf, the development can yield 4.3-5.1% return when completed and fully tenanted.

The response continues to support our view of the more resilient nature of suburban retail malls as they cater to more non-discretionary spending patterns. We reiterate our positive stance and maintain Buy call on landlord CMT.

SPH/UED’s top bid for Sengkang retail site – a long term perspective in retail malls

Additional comments on SPH’s bid for retail site at Sengkang West/ Fernvale

• SPH’s continued move in retail mall investment not surprising

• Bid seems optimistic, but likely to adopt a long term perspective given area’s potential

• Do not expect any impact on its DPS (24 Scts)

• Maintain Hold recommendation & TP

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