Roxy: Recently announced that it will acquire a freehold residential site at 26 Sea Avenue for $21.5m. The site has a total land area of 19.4k sq ft (plot ratio of 1.4) and is within walking distance to Katong 112 and a short drive to the ECP expressway.
OCBC notes that the company knows this vicinity well, given that it has long held investment assets here (Grand Mercure Roxy Hotel and 47 units in Roxy Square) and has previously developed several projects close by as well.
The land purchase price works out to be $789 psf per plot ratio and the house estimates a breakeven price between $1.2k – $1.4k psf. Despite residential prices being mired in a downtrend, these breakeven levels are well below average transaction prices at comparable residential projects, such as Marine Blue, Coralis and Parc Seabreeze, which are trading at between $1.5k and $1.8k psf.
This development, if brought to launch expediently, would likely be profitable and OCBC likes the risk-reward here. In addition, the size of this project is relatively small for Roxy (adjusted NAV of $916.7m as at end Jun 15), which points to a sensible level of incremental risk exposure.
OCBC maintains Hold and TP of $0.52.
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