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Singapore Property News

Need for tie-ups to sew up Holland Rd tender

A KEY talking point about the recent dual-envelope tender for the commercial and residential site near Holland Village MRT Station was the alliances that surfaced. All 15 entries came from 10 consortiums, with some placing multiple bids.

Posted on 27-Mar-2018

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Need for tie-ups to sew up Holland Rd tender

A KEY talking point about the recent dual-envelope tender for the commercial and residential site near Holland Village MRT Station was the alliances that surfaced. All 15 entries came from 10 consortiums, with some placing multiple bids.

One alliance was between City Developments (CDL) and RB Capital, the first tie-up between the two (more on this later).

Another point of interest was the recently separated partners in the Capitol project - Perennial Real Estate Holdings and (an affiliate of) Pontiac Land - each embracing other parties for the tender. Pontiac teamed up for the first time with Australia's Lendlease, while Perennial partnered Qingjian Realty.

And an old partnership will be rekindled if the consortium of CapitaLand and Hotel Properties (HPL) wins; the duo had joined forces about a decade ago to develop the d'Leedon and The Interlace condos.

The tender also saw alliances between companies within the same stable of family-controlled groups.

Four companies controlled by the Quek/Kwek family also came together in a consortium: GuocoLand, Hong Leong Holdings, TID and Hong Realty.

Why so many consortiums?

For one, forging partnerships helps mitigate risks for a big project, especially one with a long holding period for part of the development.

The all-in development cost of the project should be well over S$1 billion.

The 2.3-hectare site comprises two zones: Zone 1 is for residential use (so presales of strata titled apartments can help partly fund the project).

But for Zone 2, the mixed-use component, no strata subdivision is allowed. So if the developer builds multiple components here - say serviced apartments, retail and office - it cannot get a separate strata title for each component, meaning it would be more difficult to divest to, say, Reits, which tend to specialise in a certain property sector. A retail Reit for instance may not want to acquire a property that also includes serviced apartments and/or office space.

In any case, the developer is not allowed to sell off Zone 2 in the first five years after the entire project has received its Temporary Occupation Permit.

The dual-envelope concept and price tender mode that the Urban Redevelopment Authority adopted for the site's sale may be another reason.

When the state adopts such a mode of selling land, its paramount objective would not be revenue maximisation (as with the more usual price-only tender mode). Instead, there is a more important outcome, for instance a certain design concept, urban planning or other strategic goals.

Bidders have to submit their concept proposals and tender prices in two separate envelopes. The state will first evaluate the concept proposalsfor a shortlist.

At the second stage, the price envelopes of the shortlisted tenderers will be opened and the site awarded to the applicant with the highest bid.

Given the importance accorded to design and ideas, bidders stand to boost their chances if they rope in the right partner with complementary strengths. Selecting a partner one is comfortable working with is key.

The right architect to translate the vision of the consortium partners into a design that works for the site and the surrounding neighbourhood will also be imporant.

Hence the tie-up of CDL, a seasoned residential developer and leader in green developments, with RB Capital, known for its strong curation expertise in lifestyle commercial real estate.

RB Capital, set up in 2006, created a splash along a stretch of the Singapore River with its successful repositioning of F&B outlets at The Quayside and the opening of InterContinental Singapore Robertson Quay next door last year. This may just be the spark needed for the Holland Road project.

That, and the two relatively young chief executives of CDL and RB Capital - Sherman Kwek, 42, and Kishin RK, 34 - are understood to get along well.

Similarly CapitaLand may count on HPL boss Ong Beng Seng, known for his lifestyle, clubs and retail savvy to create some excitement in their proposed scheme.

The tie-ups above - of a "traditional developer" with a niche lifestyle property player - could well be the winning formula. The two consortiums placed one bid each.

Other consortiums are counting on boosting their chances by placing multiple bids.

Far East Organization joined an affiliate company and Sekisui House of Japan for three bids.

Three consortiums placed two bids each: the GuocoLand-Hong Leong Holdings partnership; the Lendlease and Pontiac tie-up; and the Perennial-Qingjian team.

By submitting multiple bids and offering a spread of design concepts, the probability of being shortlisted for the next round increases, goes the logic.

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