City Dev

City Dev: A JV between City Dev and Hong Leong submitted the top bid of $105m ($350psf GFA) for the landed housing parcel at Serangoon Garden Way, 10% above the next highest bidder. Interest in the site was strong with 16 total bidders participating.

However, the top bid came in at the low end of market expectations of $320-500psf. The last landed housing site to be put on sale was in Sep ‘10 at Sembawang Greenvale which transacted at $546psf of land area. The muted bidding is not surprising given the rising supply backdrop and represents an extension of a theme where developers are increasingly selective, but reluctant to bid as aggressively as before.

Nevertheless, City Dev has taken a reserved approach to adding to its land bank, and this win represents its only second since Dec ‘10. Recall, mgt reiterated at its last results briefing that it would adopt a prudent and selective approach to future land tenders.

The parcel is located attractively between the Ang Mo Kio, Bishan and Lorong Chuan MRT sites. Furthermore, the site is also located near major transportation arteries and schools such as the Australian International School, and Zhonghua Primary and Secondary Schools. The site could yield 80 landed 2 storey homes.

Deutsche estimates breakeven costs of around $2.6m /unit ($710psf GFA) implying ~11% margins assuming an ASP of $3.0m (on par with recently transacted landed properties in the area). Assuming a 50/50 structure, the house estimates that the project will be mildly accretive at $0.01/sh. Maintains Hold with TP $11.86.