BPM303 TMA01 (Tutor-Marked Assignment One) SUSS : July 2024 – Project Development and Finance, Singapore

Sole consortium of giant developers bid for Jurong Lake District master developer site

Nicholas LamTue, Mar 26, 2024

The EDGE

The tender for the master developer site at Jurong Lake District (JLD) drew two bids when it closed at noon on March 26. Both bids were made by a partnership of five of the biggest developers in Asia.

The URA tender is based on a two-stage evaluation based on concept and price.

The site at JLD is 6.5 ha across three land parcels and will have a projected maximum gross floor area (GFA) of 3.93 million sq ft. URA estimates that the combined sites can yield at least 1.57 million sq ft of office space, 1,700 residential units and an additional 785,765 sq ft of GFA that can be allocated for retail, hospitality, and communal spaces.

Given the scale of the development, it can be developed in phases. URA requires the first phase to have a minimum of 753,474 sq ft of office space and 600 residential units. According to URA, the winning consortium will have the flexibility to phase out the remaining supply according to market demand.

Question 1

In the initial stage, you are tasked to carry out a feasibility study to support the Jurong Lake District Development.

Your report must include the following analyses and research findings:

(a) Site analysis

(b) Office and Residential Property markets

(c) Economics

(d) Discuss the recommendations of this development and evaluate the challenges associated with the development of the Jurong Lake District

Question 2

URA adopts a two-stage evaluation process for the master developer site at Jurong Lake District (JLD). Discuss the rationale behind URA’s choice of this approach for development, contrasting it with traditional land sales conducted by URA.

Question 3

In Jurong Lake District development, Plot A is designated for office use, occupying a land area of 35,000 square meters. According to regulations, the plot has a plot ratio of 4.2. The developer aims to achieve 90% efficiency of Gross Floor Area (GFA) for leasable spaces.

Based on estimates from a property consultant, the net rent after a 36-month holding period is projected to be S$100 per square meter per month for comparable office buildings in the vicinity. Additionally, the capitalization rate for office buildings is determined to be 4.5%.

The project team has provided an estimation of construction costs at S$3,500 per square meter of GFA. The development schedule entails a design and construction stage spanning 6 months and 36 months, respectively.

Furthermore, the developer has secured negotiations with a local bank for a short-term financing scheme, offering an interest rate of 7% per annum.”

(a) Conduct an analysis and apply Profit Evaluation Analysis (risk/return) to determine the project’s profit margin given that the developer tenders land at $ 40,000 per square meter of land area

(b) Demonstrate your understanding of the potential concerns regarding the accuracy of profit when using this method to calculate the project’s return.