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Published September 20, 2007

MGPA puts in record $2.02b bid for office site

All eyes are now on the plot next door, say consultants

By KALPANA RASHIWALA

(SINGAPORE) Macquarie Global Property Advisors (MGPA) is enlarging its footprint in the Singapore office market, putting in a record bid yesterday of $2.02 billion, or $1,409 psf of potential gross floor area, for a site slated for mostly office use.

Market watchers reckon MGPA's all-in investment including land, construction costs and fees could be around $3 billion. The project could be completed around 2010.

The one-hectare plot, which is behind the One Shenton development and dubbed Marina View Parcel A, attracted just three bids in all. The 99-year leasehold plot can be developed into a maximum gross floor area (GFA) of 1.43 million sq ft, at least 70 per cent of which has to be set aside for offices.

Sources suggest Macquarie could be looking at an all-office scheme. Based on this, the sources estimate that Macquarie's breakeven cost could be around $2,500 psf of net lettable area, and that it could be looking at exiting the investment at about $3,500 to $4,000 psf.

Said MGPA managing director Simon Treacy in a release yesterday evening: 'The site presents a rare opportunity to develop a Grade A+ office building in the prime business district of Singapore where strong demand coupled with limited supply makes now an ideal time for high quality office development.'

Office industry watchers reckon that on a project-average basis, the development could fetch a monthly gross rent of around $12 per square foot and based on that, the net yield works out to 4.7 per cent on breakeven cost.

An all-office project could yield about 1.2 million sq ft net lettable area of offices. 'An all-office configuration would provide opportunities to maximise the floor plate,' said CB Richard Ellis executive director Li Hiaw Ho.

Macquarie's bid was nearly 10 per cent higher than the second highest offer, believed to be from a joint venture between Mapletree Investments and CapitaLand ($1.8 billion, or $1,281 psf per plot ratio). The only other bid came from Malaysia's IOI Group, at $1.6 billion or $1,128 psf ppr. Property consultants say that all eyes are now on the next-door, Marina View Land Parcel B, which is being offered for sale at an Urban Redevelopment Authority tender that will close on Nov 13. The 0.9-hectare plot can be developed into a maximum GFA of 1.22 million sq ft, of which at least 60 per cent has to be set aside for offices, and 25 per cent for hotel use.

MGPA's bid yesterday of $2.02 billion is the highest ever for a state land sale in Singapore, pipping the total of $1.91 billion paid for the Marina Bay Financial Centre site in two phases, excluding the option fee.

The unit land price of $1,409 psf ppr is also said to be the highest for a primarily office site, surpassing the $1,104 psf ppr set in 1995 when Straits Steamship Land (now Keppel Land) bid for a site in the China Square area, which it later developed into what is today Prudential Tower.

It remains to be seen if MGPA will decide to team up with any partners for Marina View Land Parcel A. Assuming an all-in investment of $3 billion in developing this project, MGPA's all-in investment in Singapore over the past year would cross $4 billion.

In March this year, an MGPA fund bought Temasek Tower for $1.04 billion or $1,550 psf of net lettable area. Late last year, MGPA made its maiden foray into Singapore's real estate by buying 12 floors at Springleaf Tower on Anson Road for about $134 million, or $1,240 psf.