SINGAPORE - A record price has been set for hotel land in Singapore - $1,167.35 per square foot per plot ratio (psf ppr).
This is for the first hotel development site in Jurong at Jurong Town Hall Road.
A state tender drew 11 bids from major players in the industry including Ascott Holdings, City Developments and United Engineers Developments but Tamerton Pte Ltd, a wholly owned subsidiary of Resorts World Singapore (RWS) topped them all with its $238.2 million bid.
Far East Organisation unit Boo Han Holdings in partnership with the group's listed vehicle, Far East Orchard, submitted a bid of $204.8 million or $1,003.56 psf ppr, placing it in second position.
This was 16.3 per cent lower than the top bid by RWS, which is also a wholly owned subsidiary of Genting Singapore.
HSR Property Group special adviser Donald Han said RWS's foray into Jurong is a strategic move aimed at capturing the Malaysian visitors market.
"If they do not cater to some of their clients from Malaysia, who patronise their casinos but who do not have the budget for the $300-$400 rooms in Sentosa, they would lose out significantly on a potential income base," Mr Han explained.
He added that the hotel development would most likely be a three-star property.
Other bidders for the site were United Engineers Development ($984.50 psf ppr), Legend Land which is linked to Hotel 81 ($950.74 psf ppr), and City Development's Redvale Investments and Redvale Developments ($784.12 psf ppr).
Though the record bid by Genting Singapore surprised most analysts BT spoke to, they are confident about demand for the upcoming hotel.
"The estimated breakeven of between $550,000 to $580,000 per room may appear to be slightly on the high side for an untested area like Jurong East, but it could still be acceptable for Genting which, because of synergies arising from its RWS operations, has a captive market to itself. Filling up the bulk of the rooms should therefore be more confidently executed for them than by others," explained Savills Singapore research head Alan Cheong.
Other than providing accommodation for visitors to RWS, the hotel will also be well placed to cater to the growing business community in Jurong East, explained Mr Han.
"The timing is right and the fact that the hotel will be ready in the next three years or so, it will be right where the action is when the surrounding developments in Jurong Gateway are completed," Mr Han said.
Said Jones Lang LaSalle national director Ong Teck Hui: "The long-term plans for Jurong Gateway do look very promising with a strong mix of office, retail, residential, hotel, entertainment and food & beverage uses. The site's close proximity to Jurong East MRT station, upcoming developments like Jem, Westgate and others make it particularly attractive."
RWS currently owns six hotels with 1,500 rooms. This development is the group's first hotel away from Sentosa.