A HOTEL site on Havelock Road has been triggered from the Government Land Sales' Reserve List, after the Urban Redevelopment Authority (URA) received a commitment from a developer to bid at least $18.0 million for the plot.
The 60-year leasehold plot, which measures about 16,535.5 sq ft, has maximum permissible gross floor area of about 23,088.6 sq ft.
Based on the trigger price of $18.0 million, this translates to about $780 per square foot per plot ratio (psf ppr).
"After a series of record prices set for hotels, the latest being the $1.09 million (per room) achieved by Hotel 1929, small to mid-size developers or hoteliers may perceive that taking on development risk is better than buying completed projects that are more than fully valued," noted Alan Cheong, head of research at Savills Singapore.
In a similar vein, the 49-room Berjaya Hotel on Duxton Road exchanged hands for $50 million, or about $1.02 million per room, in May.
Bidding for such a site could thus potentially cost significantly less than the market price of a similar completed development.
"For boutique hotels and conservation shophouses that command a total completed value of about $50 to $100 million today, there is an active market from liquid investors in Asia," added Mr Cheong.
Consultants concur that the site should receive healthy interest, with the development likely to be a boutique hotel with waterfront views.
"Given the small size of this site, smaller boutique developers may be attracted to bid for this site. However, as the land parcel consists of three conserved warehouses, the developer who secures the site will have to follow URA's conservation guidelines and more planning work could be required," said Lee Lay Keng, head of Singapore research at DTZ.
According to URA, the three conserved warehouse buildings can be restored for hotel use.
Indeed, the developer who secures the site will likely leverage this unique aspect of the property, said Ong Kah Seng, director at R'ST Research.
"(That it) will be a conservation property ... is of paramount significance for boutique hotels," said Mr Ong. "They compete (with other boutique hotels mainly) through unique characteristics. (Siting their hotel on a) conservation property will give them a headstart. The developer which triggered it and those that will be participating are most likely motivated by this."
Mr Ong added that he expects the top bid to come in at about $850 to $980 psf ppr. He expects the winning bid to exceed $920 psf ppr.
In addition to the existing warehouses, the site has certain size limitations given that part of the land area is for open space or car park, noted Nicholas Mak, executive director, research and consultancy, at SLP International.
As such, the hotel owner will be unable to provide many recreational facilities in the hotel, he said, adding that the new hotel will likely house about 30 to 40 rooms. Due to its proximity to the financial district, which is about a five-minute drive away, it could also cater to business travellers, he added.
Mr Mak said the tender could attract about six to 11 bidders, with the top bids ranging from $866 psf ppr to $953 psf ppr.
URA will launch the public tender for the site in about two weeks and the tender period for the land parcel will be about eight weeks; the launch date will be announced later.