The ‘too low’ bid for Marina Gardens Crescent could lead to a missed opportunity.
The Urban Redevelopment Authority has rejected the only bidder for the 99 year leasehold Marina Gardens Crescent, as the price was deemed too low.
The site that was launched for sale in the GLS Programme’s confirmed list for the first half 2023 will now be available on the Reserve List of the GLS Programme H1 2024. Developers may submit an application for the sale of a site with a price minimum that is acceptable to government.
The Marina Gardens Crescent plot, located next to the Marina South MRT Station, can be developed for both residential and commercial purposes. The plot has a maximum floor area of 783,000 square foot and can produce approximately 775 private houses.
The only bidder for the plot, a consortium consisting of GuocoLand: F17-0.69% Intrepid Investments, and TID Residential was a consortium that offered S$770.5M or S$984 psf per plot ratio.
The land rate paid by Kingsford Group for an adjacent plot on Marina Gardens Lane in a closed state tender in June last year was almost 30 percent lower.
It may be worthwhile to reconsider the decision. While it is not surprising or without precedent that the Marina Gardens Crescent site was rejected, the rejection of the only bidder for the site has never been done before.
Fifth, the GLS should sell all sites that are confirmed on the list in a timely fashion.
Land for housing is a crucial part of the government’s role. It is important to have an adequate supply of private housing in order to meet the demand for a growing population and increasing household formation.
Building a home takes time. Insufficient housing is built too quickly, which can lead to a rise in private home prices and rental rates.
Sixth, the awarding of the Marina Gardens Crescent to GuocoLand, its Singaporean partners, the Hong Leong Group, would have given a boost to the development of Marina South and could have benefited Kingsford’s project on Marina Gardens Lane.
Smart buyers may be attracted to the attractively priced homes in Marina Gardens Crescent. This could in turn stimulate demand for homes within the area, with positive spillovers to Kingsford’s Marina Gardens Lane development. As the demand for homes in Marina South increases, Kingsford can price its homes more aggressively.
Seventh, if the only bidder for the Marina Gardens Crescent is rejected, it may prevent future participation in state land tenders.
Developers are cautious because of the high cost of construction and interest rates, as well as the economic uncertainty.
The URA may discourage some developers from taking part in future land tenders by rejecting bids that are considered low. Developers who are interested in a particular site may not bid because they fear wasting their time with a bid which could be rejected.
GuocoLand, along with its partners, have missed an opportunity by rejecting the only bid for the Marina Gardens Crescent. It may be more important to note that it is a missed chance to accelerate development in the Marina South region and to add private homes.
The site was first released for bidding on June 30, 2023. Developers had more than six months to calculate, create preliminary plans, and decide whether or not to bid on the site.
The cost to participate in the state land tenders was not prohibitive. Any interested developer could submit a bid with minimal costs, and potentially good upsides if their bid won.
It is important to note that the fact that only one bid was made for the plot on a competitive and transparent property market in Singapore should be interpreted as a true reflection of the market’s interest.
While accepting the bid may have affected the valuation of nearby properties, including Kingsford’s Marina Gardens Lane, it should be assumed that Kingsford bought the Marina Gardens Lane with an open mind, knowing that sites near the site could fetch lower land prices.
A property valuer may also consider other factors and give less weight to Marina Gardens Crescent if it is perceived as an anomaly.
Third, it is hard to see that the price of the only bid for the Marina Gardens Crescent Site is absurd.
The second and third highest bidders at the Marina Gardens Lane tender submitted bids which worked out to S$985 psf and S$953 psf, respectively. The outlier, then, was Kingsford’s top bid.
The market can also change during the nearly seven-month period between the closing of the Marina Gardens Lane site and Marina Gardens Crescent.
Accepting the Marina Gardens Crescent bid has financial benefits.
Maximising the proceeds of land sales is important. The revenue from land sales by the state is credited to past reserves. The Net Investment Returns contribution is the main contributor to the budget. It is used to spend the returns from reserves.
The government could achieve a future higher land price by not awarding Marina Gardens Crescent. There is no guarantee that this will occur.
The opportunity to earn a return on the sale proceeds of a property is lost, and holding a parcel of land vacant comes with costs.
When a developer begins to develop a vacant plot of land, jobs will be created, and there will also be spin-offs for the various parties involved.