s
Introduction
The proposed development on Central Boulevard will comprise of a 4-storey podium and a
50-storey tower consisting of 66% office, 18% residential as well as 16% hotel. Based on this
proposed typology, the report will provide a comprehensive review of the client’s corporate
objectives, proposed joint venture partners as well as an in-depth analysis of the current and
prospective profitability of the project.
Overview
The required rate of return on shareholders’ equity for mixed-use developments in Marina
Bay is determined in the capital markets. The required rate of return from the capital market
is used to determine the discount rate for the development of the Central Boulevard site. This
ensures that the discount rate commensurates with the level of risk involved in the project.
The financial feasibility of this development project is carried out using a Discounted Cash
Flow (DCF) model and the Monte Carlo Simulation. These models assist in computing the Risk-
to-Reward ratio (COV), Net Present Value (NPV) and Internal Rate of Return (IRR) at various
levels of Loan to Value (LTV) scenarios. Inputs in the Monte Carlo Simulation are based on the
market analysis and historical data extracted from Real Estate Information System (REALIS).
The above investment metrics can be found in the Appendix attached.
Summary of Results
This report will establish the rationale behind developing in Central Boulevard and will
demonstrate the strategic alignment of this project with Keppel Land’s corporate objectives.
Firstly, the development of Central Boulevard is in line with Keppel Land’s corporate objective
of focusing on core markets. Marina Bay, Singapore is Keppel Land’s key market and the
development of this site will allow Keppel Land to have greater dominance and influence over
dictating office rentals and leasing agreements. Secondly, acquiring this land site will allow
Keppel Land to execute the acquisition phase of its capital recycling strategy. Keppel Land has
made several divestments in 2014 and is still looking for strategic opportunities such as this
site to reinvest its capital. Thirdly, undertaking this project will allow Keppel Land to grow its
fund management business. In the proposed exit strategy, Keppel Land can divest the office
and hotel components to Keppel REIT and Alpha Investment Partners respectively. This allows
both fund managements vehicles to grow in assets under management. Fourthly, developing
this site will provide Keppel Land with the opportunity to invest in new partners and new
platforms. The proposed development of this site will require Keppel Land to forge a new
business relationship with the Mandarin Oriental Hotel Group and officially venture into the
Singapore hospitality market. Therefore, it is in the utmost interest of Keppel Land to bid high
to maximise the probability of securing this site.
Based on the results from the Monte Carlo Simulation, we recommend Keppel Land to take
an 80% LTV ratio for this project and submit a tender bid of $1,990,000,000. This translates
to an initial equity outlay of $457,700,000 based on a total expected development cost of
$2,886,361,238. The expected NPV is $5,460,000 while the expected IRR is 16.02%.
Executive Summary

s
Joint Venture
We recommend Keppel Land to form a joint venture consortium with Hongkong Land and
Cheung Kong Property Holdings, with each partner holding a 33.3% equity stake. This will
curtail the initial equity outlay and total development cost to approximately $152,567,000
and $962,120,000 respectively.
Limitations
Developing in Marina Bay requires a substantial amount of capital and Keppel Land will be
exposed to several unique risks that are associated to this project. These risks include office
and residential dependent returns, the presence of negative cashflows as well as the threat
of surrounding white site developments. These risks can be mitigated by drawing upon a more
competitive loan with a longer fully-amortized term, stronger marketing efforts of office
space and residential units as well as asset enhancements initiatives.
Executive Summary

CHAPTER 1: SITE & LOCATIONAL ANALYSIS 01
1.1 Site Description 01
1.2 Development Constraints 02
1.2.1 Greenery Replacement 02
1.2.2 Building Edge 02
1.2.3 Pedestrian Network 02
1.2.4 Activity-Generating Uses (AGU) 02
1.2.5 Pocket Park 02
1.2.6 Vehicular Access 02
1.3 Locational Analysis 03
1.4 SWOT Analysis 04
CHAPTER 2: SELECTION OF DEVELOPER 05
2.1 Decision 05
2.2 Keppel Land Structure 06
2.3 Keppel Land Business Model 06
2.3.1 Property Trading 06
2.3.2 Property Investment 07
2.3.3 Keppel REIT and Alpha Investment Partners 07
2.3.4 Keppel Land Hospitality Management 08
2.4 Keppel Land Financials 08
2.4.1 Revenue 08
2.4.2 Net Profit 09
CHAPTER 3: RATIONALE FOR TENDER 10
3.1 Corporate Objectives 10
3.1.1 Focus on Core Markets 10
3.1.2 Capital Recycling Strategy 10
3.1.3 Grow Fund Management 10
3.1.4 Strategic Investment in New Platforms 10
3.2 Strategic Location 10
3.3 Profitability 11
CHAPTER 4: ECONOMIC OVERVIEW 12
4.1 Singapore’s Economic Growth 12
4.2 Singapore’s Interest Rates and US Federal Interest Rate 12
CHAPTER 5: OFFICE MARKET ANALYSIS 13
5.1 Supply 13
5.2 Demand 14
5.3 Vacancy & Rental Rate 15
5.4 Capital Value 15
TABLE OF CONTENT

5.5 Competitive Analysis 16
5.5.1 Keppel Land’s Existing Developments 16
5.5.2 Other Competitors’ Developments 17
CHAPTER 6: HOTEL MARKET ANALYSIS 18
6.1 Supply 18
6.1.1 Government Policy 18
6.1.2 Supply Pipeline of Luxury Hotel Rooms 18
6.2 Demand 18
6.2.1 BTMICE 18
6.2.2 Annual Visitor Arrival 19
6.3 Occupancy Rate, ADR RevPAR 19
6.4 Capital Value 20
CHAPTER 7: RETAIL MARKET ANALYSIS 22
7.1 Supply 22
7.1.1 Supply Pipeline of Retail 23
7.2 Demand 24
7.2.1 Visitor Arrival 24
7.2.2 Leasing Market 24
7.2.2.1 Retail Sales Performance 24
7.3 Vacancy 25
7.4 Conclusion 25
CHAPTER 8: PRIVATE RESIDENTIAL MARKET ANALYSIS 26
8.1 Launch and Primary Sales Volume 26
8.2 Upcoming Supply and Unsold Stock 26
8.3 Prices 27
8.3.1 High-End Market 28
8.4 Market Outlook 29
CHAPTER 9: DEVELOPMENT PROPOSAL 33
9.1 Proposed Development 33
9.1.1 Design Philosophy 33
9.1.2 Design and Architect Management 33
9.1.3 Landscape Architect 33
9.2 Site Plan 34
9.2.1 Open Green Space 34
9.2.2 Vehicular & Pedestrian Access 34
9.3 Product Development 35
9.3.1 Office 35

9.3.2 Hotel 36
9.3.3 Residential 37
CHAPTER 10: FINANCIAL ANALYSIS 39
10.1 Investment Timeline 39
10.2 Debt Structure & Interest Rate 39
10.3 DCF Model & Monte Carlo Simulation 40
10.3.1 Open Market Valuation (OMV) 40
10.3.2 Funding Structure & Land Bid 40
10.3.2.1 Scenario 1 41
10.3.2.2 Scenario 2 42
10.3.2.3 Scenario 3 43
10.4 Conclusion 44
CHAPTER 11: JOINT VENTURE 45
11.1 Rationale for Joint Venture 45
11.1.1 Healthy Financial Position 45
11.1.2 Bankruptcy Risk 45
11.1.3 Joint Expertise 45
11.1.4 Proficient Management Subsidiary 46
11.1.5 Joint Venture Flaws 46
11.2 Proposed Joint Venture Structure 46
11.2.1 Development Cost after Joint Venture 47
11.3 Exit Strategy 47
CHAPTER 12: UNIQUE RISKS ANALYSIS
12.1 Office and Residential Dependent Return 48
12.2 Potential Presence of Negative Cashflows 49
12.3 White-Site Concentrated Area 49
APPENDIX I: DISCOUNTED CASHFLOW (DCF) ASSUMPTIONS
APPENDIX II: UNLEVERED DCF 0% LTV
APPENDIX III: LEVERED DCF 60% LTV
APPENDIX IV: LEVERED DCF 70% LTV
APPENDIX V: LEVERED DCF 80% LTV
APPENDIX VI: MONTE CARLO ASSUMPTIONS
APPENDIX VII: RESULTS FROM MONTE CARLO 0% LTV
APPENDIX VIII: RESULTS FROM MONTE CARLO 60% LTV
APPENDIX IX: RESULTS FROM MONTE CARLO 70% LTV
APPENDIX X: RESULTS FROM MONTE CARLO 80% LTV
REFERENCES

SITE & LOCATION
Summary
This section aims to present the
characteristics of the subject site
and provide a geographical analysis
of its location. A SWOT analysis will
be conducted to understand the
feasibility of the site.

1.1 Site Description
Figure 1: Picture of Central Boulevard
The site is situated along Central Boulevard in Marina Bay. The site details are shown below.
Site Description: Central Boulevard
Site Area 11,200 m2
Plot Ratio 13.0
Gross Floor Area (GFA) 145,600 m2
Zone* White
Lease Period 99 Years
Shape Fairly Regular
Topography Slightly Unlevelled
Figure 2: Central Boulevard's Site Description
*(Minimum 60% of GFA allocated to Commercial Use)
1. Site & Locational Analysis
01

1.2 Development Constraints
The tender for site should obliged to the following requirements stipulated on Urban Design
Plans and Guidelines for Downtown Core Planning Area.
1.2.1 Greenery Replacement
Greenery replacement commensurating the site area in the form of roof gardens, sky
terraces, planter boxes and any landscape area is required within the new development
project.
1.2.2 Building Edge
Based on the Building Edge Plan, the development must include a podium with minimum
height of 19 metres or approximately 4-storeys.
1.2.3 Pedestrian Network
1. Underground Pedestrian Network (UPN) that offers direct access to Mass Rapid
Transit (MRT) Stations is to be incorporated.
2. Promenade through block link on ground floor facing the Central Boulevard and
Raffles Quay should be provided.
3. Elevated Pedestrian Network (EPN) in the form of a 2nd-storey pedestrian link must be
integrated to the development on the land parcel for connectivity between
developments in the area.
4. Covered walkway on ground floor along the site boundary is required to serve as a
public amenity.
5. 2 points of vertical pedestrian circulation connecting the UPN as well as the 2nd-Storey
pedestrian link to the covered walkway on ground floor need to be included. Vertical
pedestrian circulation comprises of two-way escalators and a passenger elevator.
1.2.4 Activity-Generating Uses (AGU)
AGU includes retail, eating establishments, entertainment, sports and other similar uses. With
reference to the AGU Plan, the development on the site should dedicate spaces on the 1st-
storey fronting Central Boulevard for any of the AGU uses mentioned above. In addition, AGU
should also be allocated alongside the UPN on basement Level and the 2nd-storey pedestrian
link.
1.2.5 Pocket Park
According to the Parks and Waterbodies Plan, a portion of the site area is to be reserved for
open space. However, the exact proportion will only be known after the tender document is
released on December 2015.
1.2.6 Vehicular Access
Currently, there has not been any affirmed constraint regarding the vehicular access on the
site due to the absence of tender document. However, there is a high possibility that any
drop-off point and carpark entrance on the proposed development would not be feasible
along Central Boulevard. This is evident in the case of Marina Bay Suites and One Raffles Quay.
02

1.3 Locational Analysis
The subject site faces Central Boulevard on the north side. From this viewpoint, The Sail @
Marina Bay, Hong Leong Building as well as One Raffles Quay can be observed. Towards the
south, the site faces Commerce Street with sights of Asia Square and One Shenton. At the
north-eastern end, the site fronts Marina View and enjoys a panoramic view of the sea.
Marina Bay Financial Centre can be observed from the eastern point of the site.
The old Central Business District (CBD) has been in operation for many decades. Some existing
infrastructure has either been non-relevant or unable to cater to the changing needs of
businesses. As Singapore continues to be a regional hub for international businesses, the
government has placed much focus into Marina Bay as the new CBD. This is to ensure that
Singapore continues to stay relevant, being able to attract large multi-national corporations.
In the Urban Redevelopment Authority (URA) Master Plan 2014, the Marina Bay area is
manifested with white sites intended for commercial, hotel, residential, sports, recreational
and other such uses.
Being located just a stone’s throw away from the Downtown MRT station, the site is highly
accessible. In addition, the subject site is served with a comprehensive transport network
system such as Ayer Rajah Expressway (AYE), Marina Coastal Expressway (MCE), East Coast
Parkway (ECP), Central Expressway (CTE) and North South Expressway (NSE)
The Sail @ Marina Bay Hong Leong BuildingOne Raffles Quay
Marina Bay
Financial Centre
One ShentonAsia Square
03

Future plans of the
Thomson-East Coast Line
(TEL) announced by Land
Transport Authority (LTA)
will further augment the
site’s accessibility. The
43km TEL will grant dwellers
from the north, north-east
and eastern region of
Singapore improved access
to Marina Bay. Commuters
can start enjoying the
service of this MRT by 2019.
1.4 SWOT Analysis
A SWOT analysis is conducted to understand the feasibility of the site.
Strength
Comprehensive Transportation Network
Seamless underground network connectivity
Uninterrupted Sea View
Regional Financial Hub
Weakness
High development and land cost
Surrounding iconic developments
Development Constraints
Opportunity
Large MNC corporations may relocate to
Singapore for stability
Planned to be a vibrant and dynamic district
TEL completed by 2019
Threats
Unreleased land parcels in the Marina Bay
area
Interest rates for borrowing are expected to
rise
Companies decentralising away from the
CBD
Figure 3: 43km Thomson-East Coast Line
04

DEVELOPER
Summary
Keppel Land is chosen as our client
due to its strong financial health and
strategic positioning in the New
Downtown, making it the ideal
candidate to tendering for this site.

2.1 Decision
Given the prime location of the site, it is unsurprising that the site will receive the limelight
among developers compared to other released land parcels in the reserved list as well as a
high tender bid. With the expectedly extravagant development cost, well-established
developers with healthy financial standings and financial means are at the top list of the
considerations. The following chart summarises the financial health of distinguished
Singapore-based developers as of Q2 2015.
As shown in the figure above, Wing Tai Holdings has the leading financial health in terms of
net debt to equity ratio. Wing Tai Holdings had previously unveiled an interest to create a
presence in the Downtown Core area. Wing Tai Holdings and its joint venture partners used
to bid for the land parcel of Marina Bay Financial Centre but failed to secure the land. Thus, it
is reasonable to favour Wing Tai Holdings as our developer client due to their expected
immense interest for this site.
Nevertheless, Keppel Land is selected as our client developer for this project instead. Keppel
Land has a net debt to equity ratio of 0.25 as of Q2 2015, ranked after Wing Tai Holdings.
Although Keppel Land’s financial health does not commensurate to those of Wing Tai
Holdings, it is superior against the other developers listed in the chart. It is also important to
expand the criteria for selecting a client developer beyond merely financial health and
contemplate on other relevant elements. Keppel Land is chosen after reviewing its renowned
establishment in the Marina Bay area. It has various supplementary developments within
close proximity to the tendered land parcel. This includes One Raffles Quay, Marina Bay
Financial Centre and Ocean Financial Centre. In regards of this, Keppel Land will have the
ability to dominate this area. Therefore, it is presumed that it will be in Keppel Land’s interest
to secure the tendered land parcel.
2. Selection of Developer
1.40
0.58
0.51
0.41
0.35
0.27 0.25
0.11
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
NetDebttoEquity
Figure 4: Net Debt to Equity, Q2 2015
05

2.2 Keppel Land Structure
Keppel Land is the property arm of Keppel Corporation, one of Singapore's largest
multinational groups with key businesses in offshore and marine, property as well as
infrastructure. One of Asia's premier property businesses, Keppel Land is acclaimed for its
exceptional portfolio of residential developments and investment-grade commercial
properties as well as undeniable standards of corporate governance and transparency. Keppel
Land was privatised and removed from the Singapore Stock Exchange with effect from 16 July
2015. This is following Keppel Corporation's voluntary unconditional cash offer for the
remaining shares in Keppel Land which it did not possess. Keppel Corporation ended up
owning 99.27% of Keppel Corporation after this exercise.
Figure 5: Keppel Land's Business Structure
2.3 Keppel Land Business Model
Figure 6: Keppel Land's Business Model
2.3.1 Property Trading
Keppel Land has developed many residential properties in Singapore, China, Indonesia as well
as Vietnam. In 2014, it has started venturing into new markets such as the United States.
Keppel Land’s approach to real estate development has always been about Thinking
UnboxedTM. It strives to create residential developments that are luxurious, innovative and
timeless. This development ethos has resulted in Keppel Land being recognized as one of
Asia’s premier real estate developers. Some of Keppel Land’s award-winning residential
developments include Reflections at Keppel Bay and Corals at Keppel Bay. Both of these
developments are designed by Pritzker Prize laureate, Daniel Libeskind.
Keppel
Corporation
Keppel Offshore
& Marine
Keppel
Infrastructure
Keppel Land
Keppel Land
Property Trading
Property
Investment
Fund
Management
Keppel REIT
Alpha
Investment
Partners
Hotels and
Resorts
Keppel Land
Hospitality
Management
06

2.3.2 Property Investment
Keppel Land’s portfolio of property investments consists of prime Grade A office buildings in
Singapore, Indonesia, Vietnam and The Philippines. In 2014, Keppel Land has begun to
aggressively scale up its commercial portfolio in existing overseas markets through
redevelopment and acquisitions. Some of Keppel Land’s commercial properties include
HarbourFront Towers and Keppel Towers. Even though many of Keppel Land’s Singapore
commercial property investments have been divested to Keppel REIT, Keppel Land is still able
to maintain exposure through its equity stake of 45.21% in Keppel REIT.
2.3.3 Keppel REIT and Alpha Investment Partners
Keppel Land has two established fund management vehicles - Keppel REIT and Alpha
Investment Partners. Keppel REIT is a commercial real estate investment trust that has a
Singapore and Australia centric portfolio. Some of Keppel REIT’s prime investment-grade
properties include Marina Bay Financial Centre and One Raffles Quay that are designed by
Kohn Pederson Fox Associates as well as Ocean Financial Centre that is designed by Pelli
Clarke Pelli Architects. Alpha Investment Partners is an Asian focused real estate private
equity fund that has commercial, residential as well as hospitality assets in Singapore, China,
Hong Kong, Japan and South Korea. The combined assets under management of both fund
management vehicles have reached $18.7 billion as of 2014.
Keppel Towers HarbourFront Towers
Corals @ Keppel Bay Reflection @ Keppel Bays
07

2.3.4 Keppel Land Hospitality Management
Keppel Land Hospitality Management is the hospitality arm of Keppel Land which manages
hotels, serviced apartments, golf resorts as well as marinas in various geographical locations
such as Singapore, China, Indonesia, Vietnam and Myanmar. Keppel Land Hospitality
Management has over 20 years of experience operating in the hospitality sector. It manages
its hotels and serviced apartments under the award winning 5-star hotel brand, Sedona.
2.4 Keppel Land Financials
2.4.1 Revenue
Keppel Land’s revenue grew by 2.48% in the financial year 2014. Revenue increased from
$1.46 billion to $1.49 billion, driven mainly by the property trading segment. Divestment of
Al Mada Towers in Jeddah as well as new revenue streams from the completion of Shanghai
and Chengdu condominiums had helped offset the slightly weaker residential sales
recognition in Singapore.
Figure 7: Keppel Land's Revenue Performance
685.4
949 938.9
1461 1497.2
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
200
400
600
800
1000
1200
1400
1600
2010 2011 2012 2013 2014
$million
Total Revenue Percentage Change
Ocean Financial Centre One Raffles Quay Marina Bay Financial Centre
08

2.4.2 Net Profit
Keppel Land’s net profit decreased by 15.06%, mainly due to the lower fair value gains on
their portfolio of investment properties. Excluding the fair value gains, Keppel Land would
have registered higher net profits due to the one-off gains from various divestments done
throughout the year which includes the sale of Equity Plaza, Marina Bay Financial Centre
Tower 3 and Prudential Tower.
Figure 8: Keppel Land's Net Profit Performance
1068.2
1374.7
838.4 885.9
752.5
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
0
200
400
600
800
1000
1200
1400
1600
2010 2011 2012 2013 2014
$million
Net Profit Percentage Change
09

RATIONALE FOR TENDER
Summary
Keppel Land should participate in
this tender as the acquisition of this
site is strategically aligned with its
corporate objectives.

3.1 Corporate Objectives
3.1.1 Focus on Core Markets
Singapore is one of Keppel Land’s core markets and the company has interests in an array of
investment-grade developments situated in the Marina Bay area. By tendering for this land
parcel, Keppel Land is able to deepen its presence and potentially exert dominance in the
Marina Bay area. This dominance will allow Keppel Land to have greater influence over
dictating office rental and leasing agreements, leading to high rental and occupancy rates in
their commercial developments. On the other hand, Keppel Land may have more aggressive
competition for its existing development if it fails to secure the land.
3.1.2 Capital Recycling Strategy
As part of Keppel Land’s capital recycling strategy, it has successfully divested and received
net proceeds of $1 billion in the year 2014. Keppel Land has subsequently committed $1.1
billion in new and existing investments. However with $2.6 billion in cash and cash
equivalents, Keppel Land is still looking for strategic investments. This is evident from its
recent bid for Asia Square Tower 1 and $1.5 billion tender bid for a mixed-use site in Paya
Lebar. Unfortunately, Keppel Land did not manage to secure both sites. Therefore, this tender
site presents Keppel Land with an investment opportunity to allocate its capital and generate
returns.
3.1.3 Grow Fund Management
As Keppel Land seeks to grow the assets under management (AUM) in its fund management
vehicles, a pipeline of acquisition properties provided by the sponsor is crucial. However, the
acquisition pipeline for Keppel REIT is currently empty after the recent acquisition of Marina
Bay Financial Centre Tower 3. This tender site allows Keppel Land to develop an office
component which can be potentially divested to Keppel REIT, growing the REIT’s AUM.
3.1.4 Strategic Investment in New Platforms
A key Keppel Land strategy in driving growth involves investing with new partners and in new
platforms. This tender site provides the opportunity for Keppel Land to execute this strategy
as it is a large white site that can be subjected to different land uses. One of the proposed
components in this development which will be discussed later is a hotel component. The
development of a hotel component will signify Keppel Land Hospitality Management’s official
entrance into the Singapore hospitality market. Furthermore, Keppel Land is also in a position
to forge new business relationships as we are recommending signing a management
agreement with a reputable international hospitality chain.
3.2 Strategic Location
The seamless connectivity of Central Boulevard coupled with the agglomeration of financial
institutions in the New Downtown financial district ensures that there is sustainable demand
for office spaces in this area. Given Singapore’s stable political background as well as her
reputable status as a regional hub, there will always be multinational corporations that would
consider establishing their corporate offices in the prestigious New Downtown. In addition,
URA has given developers more flexibility through white site zoning. This allows them to exert
3. Rationale for Tender3. Rationale for Tender
10
?

creative land use typologies when developing projects, resulting in greater vibrancy of the
area. As a result, it can be expected that Central Boulevard will flourish with many exciting
and attractive supporting amenities that would augment its value as the area develops. A
project in this location would be in for the long-term prospects. Keppel Land can expect to
benefit from long-term capital appreciation and valuation gains.
3.3 Profitability
Following our recommendation, the return on investment for the new land is expected to
reach 14% to 16% along with positive expected Net Present Value (NPV). These results can be
found in the Financial Analysis section of the report later.
These results are based independent of other projects developed by Keppel Land. If Keppel
Land integrates this potential development with its current real estate portfolio, it will be able
to unlock synergies and create new realms of possibility in improving investment return.
11
3. Rationale for Tender?

ECONOMIC OVERVIEW
Summary
Singapore has experienced the
slowest GDP growth since Q3 2012.
Interest rates are expected to rise
by the end of December 2015 unless
significant adverse development
arise in US economic data by then.

4.1 Singapore’s Economic Growth
The latest GDP annual growth rate shows that Singapore’s economy grew slightly by 1.8% in
Q2 2015, a decline from the 2.8% observed in the previous quarter. It is the lowest GDP annual
growth rate since Q3 2012. Based on Trading Economics (2015), the slower growth is primarily
due to the shrinking of manufacturing sector accompanied by the significant contraction of
trade-oriented services sector.
The overall GDP growth for Singapore in
2015 is expected to be within the range
of 2% and 2.5%. This is a revised
forecast from 2% to 4% by the Ministry
of Trade and Industry (MTI) after the
release of lower GDP annual growth
rate in Q2 2015. The economy has
performed poorer than anticipated in
H1 2015 globally. According to Oxford
Economics (2015), the overall GDP
growth rate in 2015 is predicted to be
2.4%, softening from the GDP growth
rate of 2.9% in 2014. The GDP growth
rate will only be expected to pick up in
2016 to 3.5%, stabilising at 3.3% to 3.7%
until 2019. This is illustrated in Figure 1.
4.2 Singapore’s Interest Rates and US Federal Interest Rates
Singapore’s prime lending rate as of August 2015 has remained low at 5.35% since January
2014. However, this rate may be expected to rise if US Federal Reserve proceed with their
growth in interest rates. Earlier in January 2015, Monetary Authority of Singapore (MAS) has
announced that interest rates in Singapore will rise in tandem with those in US. A hike in The
Fed’s interest rate will also trigger heightened mortgage rate in Singapore.
Recently, there has been numerous speculations on US Federal Reserve’s plans to increase
interest rates. The Fed’s interest rate has remained static at the range of 0% to 0.25% since
December 2008. The latest Federal Open Market Committee (FOMC) meeting in 16th and 17th
September resulted on the Fed’s decision to postpone the rise in interest rates. The restraint
is prompted by fragile economic recovery and the recent turmoil in the global economy. This
includes China’s economic slowdown, global stock market volatility and deteriorating
commodity prices. Nevertheless, the possibility of a hike in interest rates at the FOMC
Meeting in December still remains strong. 13 out of 17 FOMC gathered to determine interest
rates mentioned their intention to still raise it before January 2016 (The Telegraph, 2015).
According to Wharton Finance Professor Krista Schwarz (2015), The Fed have also virtually
promised to increase the rates in December unless significant adverse development arise in
US economic data by then.
4. Economic Overview
2.9%
2.4%
3.5% 3.7% 3.4% 3.3%
0.0%
1.0%
2.0%
3.0%
4.0%
2014 2015
(F)
2016
(F)
2017
(F)
2018
(F)
2019
(F)
GDPGrowthRate
Year
Actual and Forecast GDP Growth
Rate
Figure 9: GDP Forecast by Oxford Economics
12

MARKET ANALYSIS
Summary
Market sentiments for Office, Hotel,
Retail and Residential remain weak
in 2015.

5.1 Supply
The overall shadow space available in Singapore doubles from 2014 to 2015. This resulted
mainly from mergers and acquisitions undertaken by financial institutions as well as their
scaling down on risky business propositions since the implementation of Basel III regulatory
framework.
Figure 10: Island Wide Shadow Space
Approximately 3.8 million sq ft of
office spaces in the CBD is expected to
come on stream by 2016. The 1.1
million sq ft of excess shadow space
and thinning number of leasing
prospects available may suggest an
oversupply in the office sector over
the next 2 years (Savills, 2015). The
bulk of this supply stems from Marina
One which will provide 1.8 million sq
ft of office space when it is completed
in 2016. On the bright side, there is
currently no supply pipeline of office
spaces in the Marina Bay area beyond
2016.
500,000
1,200,000
700,000
400,000
358,000
842,000
550,000
1,100,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2008 2009 2010 2011 2012 2013 2014 YTD 2015
FloorArea(Sqft)
Office/BP Space (LHS)
5. Office Market Analysis
Figure 11: Office Space Pipeline
13

5.2 Demand
Figure 12: Summary of Recent Leasing Transactions
Financial institutions such as banks are the key driver in the take-up for office spaces.
However, the banking sector has yet to make a complete recovery from the global financial
crisis. This has resulted in the absence of fresh demand from banks for CBD office spaces. In
addition, some financial institutions are observed to have curtailed on their office space
usage. Notably, Standard Chartered Bank is planning to return 70,000 sq ft of its office spaces
in Marina Bay Financial Centre Tower 1. This is equivalent to 3-storeys of office spaces. In
contrast, smaller-space occupiers are observed to be offsetting tenant’s muted demand for
large spaces in the New Downtown area. 21,000 sq ft of space in Asia Square 2 was recently
taken up by a shipping company. In addition, Rakuten, Marubeni Singapore, Nordea Bank,
South 32 (BHP) and Clarksons have leased a grand total of 104,000 sq ft. Smaller-space
occupiers continue to provide some vitality for the leasing demand of office spaces in New
Downtown.
However, non-office developments such as business parks and high-tech industrial spaces
have posed a threat towards offices located in the CBD. These non-office developments have
enticed tenants with their attractive rents. This can be demonstrated by Google’s relocation
from Asia Square in New Downtown to Maple Business City II starting next year. This will
release 100,000 sq ft worth of office spaces in Asia Square Tower 1 (Colliers, 2015).
Furthermore, cost-conscious firms have increasingly used decentralisation strategy to
alleviate their operating expenses in a period of uncertain economic conditions. A recent
example would be Diamler Group and Beca, an automobile firm and a mechanical engineering
service firm, decentralising from Downtown area to Westgate Tower in the suburban micro-
market.
14

5.3 Vacancy & Rental Rate
Figure 13: Net Demand, Net Supply and Vacancy rate of CBD Grade A offices, 2006-1H/2015
Although the vacancy rate in the CBD area remains low at 4.3% in 1H 2015, the massive supply
pipeline of office spaces accompanied by falling demand will lead to an upward spiral of
vacancy rate in the next few quarters.
Micro-Market
Average Monthly Gross
Rents ($ per sq ft/ Month)
Quarter-on-Quarter
Change (%)
2Q 2015 1Q 2015 2Q 2015 1Q 2015
Premium
Raffles Place/New Downtown 11.93 11.93 0 0
Grade A
Raffles Place/New Downtown 10.43 10.41 0.2 1.6
Shenton Way/Tanjong Pagar 9.00 9.00 0 0
Marina/City Hall 10.04 9.97 0.7 2.2
Figure 14: Office Rents
As of Q2 2015, the average monthly gross rent of Premium Grade office spaces in the Raffles
Place/ New Downtown micro-market has remained consistent for three consecutive quarters
(Colliers, 2015). Rent for office spaces in the CBD is expected to be strained by issues such as
poor economic performance, a cautious hiring market and changing preference of office
spaces. It is estimated to contract by 5% to 10% in 2H 2015 and decrease by 4% to 6% year-
on-year from Q4 2014 to Q4 2015 (Knightfrank, 2015).
5.4 Capital Value
Investors are becoming more vigilant in Q2 2015 with slowing rental growth, bullish prices,
rising interest rate and increasing competition for strata-titled office spaces (Colliers, 2015).
The implementation of Total Debt Servicing Ratio (TDSR) in June 2013 has also chipped away
investors’ appetite as property loans become more difficult to obtain. Nevertheless,
institutional players, optimistic private-equity investors, high net-worth individuals and family
offices have continued to provide support for prices of office spaces as investment properties.
In Q2 2015, a pick up on transactional activities is detected. This is most probably a result of
4. Office Market Analysis5. Office Market Analysis
15

supply-led demand from new strata-titled units launches such as GSH Plaza in the Raffles
Place/New Downtown micro-market. 30 out of the 52 caveats lodged during the first two
months of Q2 2015 are new units. There is an increase of 2 caveats lodged for new strata-
titled office space in Q2 2015 as compared to those in Q1 2015. The table below summarises
the list of transactions that have been carried out recently.
Property Price PSF NLA
One Raffles Place $1,290,000,000 $2,382
PWC building $201,900,000 $1,892
158 Cecil Street $240,000,000 $2,100
GSH Plaza $31,600,000 $3,055
Prudential Tower $14,100,000 $2,802
Figure 15: Sale of Office Space, Q2/2015
A notable example was seen in June 2015 when OUE Commercial REIT entered into a
conditional sales and purchase agreement with OUE Limited. OUE Commercial REIT has
attained an effective interest of over 60% in One Raffles Place through the acquisition of
majority stakes in OUB Centre Limited,
which holds the legal title of the property.
These recent investment sales have caused
the average capital value of Premium
Grade and Grade A office space in the
Raffles Place/New Downtown micro-
market to stay flat at $2,821 psf and $2,532
psf respectively as of June 2015. There was
a rise in average capital value of about 1.3%
in 1H 2015. The outlook for office sales
after that period is expected to remain
tepid in the short to medium-term due to
poor market sentiments. One can expect
that there will be moderate price
correction in the near future.
5.5 Competitive Analysis
A competitive analysis for top prime office developments within the vicinity of Central
Boulevard is conducted.
5.5.1 Keppel Land’s Existing Developments
Keppel Land possesses ownership interests of 3 prime office spaces in close proximity to
Central Boulevard. These include Marina Bay Financial Centre (MBFC), One Raffles Quay
(ORQ) and Ocean Financial Centre. They have a total net lettable area of 2,920,000 sq ft,
1,300,000 sq ft and 885,500 sq ft respectively. Further details of these developments are
shown below.
Figure 16: Capital Value of Office Space
16

Project MBFC ORQ Ocean Financial Centre
Ownership Interest RQAM RQAM Keppel Land
Floor Plate 20,000 - 45,000 sf 18,000 - 30,000 sf 20,000 - 25,000 sf
Committed Occupancy 98.7% 100.0% 100.0%
Effective Rent $12.50+ psf $12.00+ psf $10.50 - $13.00+ psf
Figure 17: Keppel Land's Project Analysis
As shown in the table above, Keppel Land has successfully maintained healthy occupancy
rates for all of its developments in the area. The effective rents it fetched are well above
$11.93 - the average of Premium Grade A office rental in New Downtown area.
5.5.2 Other Competitors’ Developments
There are 3 other prime office developments within the vicinity of Central Boulevard. These
include CapitaGreen, Asia Square Tower 1 and Asia Square Tower 2. They have a total net
lettable area of 702,900 sq ft, 1,200,000 sq ft and 780,000 sq ft respectively. The table
below shows further information on these developments.
Project CapitaGreen Asia Square Tower 1 Asia Square Tower 2
Ownership Interest CapitaLand BlackRock Property BlackRock Property
Floor Plate 22,000 sf 35,000 sf 31,000 sf
Committed Occupancy 83.0% 96.3% 95.6%
Effective Rent $13.00+ psf $11.00 - 12.00+ psf $11.00 - $12.00+ psf
Figure 18: Competitive Analysis
CapitaGreen is seen to have a relatively lower occupancy rate than Asia Square Tower 1 and
2. This is most probably due to it being recently launched on December 2014. CapitaGreen is
expected to reach 100% occupancy rate by end of 2015 (Singapore Business Review, 2015).
Furthermore, Asia Square Tower 1 has recently been listed for sale by BlackRock Property.
The asset manager is expecting for a price of at least $3 billion ($3,200 psf, well above the
average capital value for premium grade office of $2,821 psf (Colliers International Singapore
Research, 2015). This offer has so far aroused the interests of many bidders including Keppel
Land, CapitaLand and Norway’s Sovereign Wealth Fund.
CapitaGreen Asia Square
17

6.1 Supply
6.1.1 Government Policy
The Urban Redevelopment Authority (URA) had introduced a new policy in July 2014 that
tightens the approval of new development applications for hotel, boarding house and
backpackers’ hostel uses. It will only be subsequently reviewed in 2016. This policy indicates
that all proposals for new hotels, boarding houses and backpackers’ hostels, including any
change to such uses of sites that are not zoned or permitted for hotel use will generally not
be allowed in areas such as Outram, Rochor, Downtown Core, Singapore River and areas
outside the Central Area. As such, the supply of potential hotel space will be significantly
limited in Singapore.
6.1.2 Supply Pipeline of Luxury Hotel Rooms
CBRE Hotels estimated that there are approximately 45,850 hotel rooms in Singapore as of
2013. An estimated number of 13,670 new hotel rooms will be completed from 2013 to 2017.
This translates to a growth rate of 29.8% over this four-year period. On the other hand, luxury
hotel rooms are expected to grow at 19.3% over the same period. With a lower expected
growth rate in the luxury hotel market, there may be an inadequate supply of luxury hotel
rooms coming onto the market to meet the growing demand.
Figure 19: Luxury/ Upscale Hotels in Central Area
6.2 Demand
6.2.1 BTMICE
Singapore has seen steady growth in the Business Travel and Meetings, Incentive Travel,
Conventions and Exhibitions (BTMICE) industry as the number of business visitors increased
by 3% to reach 3.5 million in 2013. These visitors spent an estimated S$5.5 billion during their
134
157
502
314
654
350
204
220
225
0
200
400
600
800
1000
1200
2014 2015 2016
Sofitel So Singapore The Patina, Capitol Singapore
Hotel Jen Orchardgateway Oasia Downtown
The South Beach Andaz Singapore DUO
Clermont Singapore Somerset Grand Cairnhill Redevelopment
InterContinental Singapore Robertson Quay
6. Hotel Market Analysis6. Hotel Market Analysis
18

visit. According to the International Congress and Convention Association (ICCA), Singapore
ranked 6th among the top convention cities in the world in 2013, hosting a record number of
175 ICCA events. As Singapore continues to push for more first-in-Asia and first-in-Singapore
events, the demand for BTMICE space and corporate accommodations are expected to
increase steadily. Hence, providing BTMICE space such as meeting rooms and ballrooms in
the proposed hotel component will be crucial to meet this growing demand.
6.2.2 Annual Visitor Arrival
As of June 2015, Singapore has welcomed
approximately 7.26 million international
visitors. Although visitors from the ASEAN
region have decreased in 1H 2015, a growth
was registered in June 2015 due to the
support from other Asian markets.
Consequently, year-end visitor arrival is
expected to reach 15.3 million, representing
an estimated year on year growth of 1.36%.
The annual visitor arrival is projected to
increase over the next few years (CBRE, 2015).
Thus, a steady demand for hotel rooms can be
expected for hoteliers. Previously, a decrease
of visitor arrival was observed in 2014. This is
probably due to the recent aviation accidents
which impacted short-term visitor arrivals.
However, visitor arrivals are expected to
recover and growth can be expected in the
long term.
6.3 Occupancy Rate, ADR and RevPAR
The occupancy rates for luxury hotels in
Singapore during the year 2014 was 87.5%,
while the Average Daily Rate (ADR) for
luxury hotels increased by 5.9% to reach
S$461.80. This translates to a Revenue per
Available Room (RevPAR) of S$404.30,
which is a 5.3% increased from 2013.
However in 1H 2015, occupancy rates for
luxury hotels hovered around 84.3% while
ADR decreased by 3% to reach S$444.30.
The declines in both occupancy rates and
ADR have led to the subsequent decline of
7.2% in RevPAR, reaching S$374.60.
Figure 20: International Visitor Arrivals
74.00%
76.00%
78.00%
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
$500.00
Occupancy
ADR/RevPAR
ADR RevPAR Occupancy Rate
Figure 21: Luxury Hotel Performance
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
0
5000
10000
15000
20000
NumberofArrivals('000)
Visitor Arrivals Percentage Change
19
6. Hotel Market Analysis

6.4 Capital Value
There was only one major hotel sale in 1H 2015 so far. This is unlike the high number of
transactions seen over the past few years. The decrease in volume is due to the lack of an
investible market in CBD and Orchard road coupled with high asking prices (CBRE, 2015).
Figure 22: Hotel Investment Sales
Project Marina Bay Sands Westin
Ownership Interest Las Vegas Sands Daisho Group
Rooms 2561 305
Committed Occupancy 99.0% Undisclosed
The Marina Bay locale currently has 2 existing hotels. These include the 2,561-room Marina
Bay Sands Singapore and the 305-rooms The Westin Singapore. According to the 2014 Las
Vegas Sands annual report, Marina Bay Sands had been operating at 99% occupancy rate and
-100.00%
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
0
500
1,000
1,500
2,000
2,500
2011 2012 2013 2014 2015 1H
%ChangeinSales
Transactions
Sales Volume Percentage Change
Marina Bay Sands Westin
20

commanded an ADR of US$431 (S$538). This shows the huge demand for luxury hotel rooms
in the Marina Bay district.
On the other end, The Westin Singapore currently commands an approximate ADR of $390
while occupancy rate remains undisclosed. The Westin Singapore reflected positive signs in
the hotel investment market when Daisho Group acquired the hotel in December 2013 at a
price of $468 million. This translated to $1.5 million per room, one of the highest hotel
transaction prices.
With Marina Bay Sands requesting the government to release an adjacent land site for their
hotel expansion plans and Daisho Group’s positive outlook for the hotel market through their
high acquisition of the Westin, it can be seen that the long-term prospects of hotels in Marina
Bay is expected to exceed the current short-term declines in the hotel sector.
21

7.1 Supply
The supply of Singapore retail space has steadily increased over the years. Island-wide private
retail stock has grown by 4.9% year-on-year to 47.2 million sq ft from 2014 (Mapletree
Commercial Trust, 2015). As seen in the pie chart below, the Downtown Core area accounts
for 14% of these spaces, relatively less than the other areas.
The table above reveals the retail developments that were recently completed.
The retail space launched in the Core Central Region (CCR) from 2014 to 1H 2015 amounted
to a total of 939,200 sq ft. In addition, a total of 310,000 sq ft and 628,400 sq ft are launched
in the Rest of Central Region (RCR) and Outside Central Region (OCR) respectively.
There is also an increasing trend of existing shopping malls undergoing asset enhancement
initiatives (AEI) to stay relevant and competitive. Suntec City and Tampines Mall have recently
completed their AEI works, providing competitive supply in the retail market. Moreover, it
has been announced that CapitaLand Mall Trust will be performing interior upgrading works
City Fringe,
26.70%
Outside Central
Region, 23.40%Rest of Central
Region, 19.50%
Orchard Area,
16.30%
Downtown Core
area, 14.00%
Project Sub Market Sq Ft (Gross)
2014 Orchard Gateway CCR 166,400
Kallang Wave CCR 441,500
One KM RCR 215,000
Paya Lebar Square RCR 95,000
Seletar Mall OCR 188,000
Big Box OCR 329,000
2015 Capitol Piazza CCR 156,100
Claymore Connect CCR 50,200
Suntec City AEI CCR 125,000
Tampines Mall AEI OCR 30,000
321 Clementi OCR 81,400
Figure 24: Retail space launched in various sectors
7. Retail Market Analysis
22

for Plaza Singapura in Q3 2015. This enhancement works are expected to be completed in Q4
2016.
7.1.1 Supply Pipeline of Retail Spaces
Figure 25: Pipeline of Retail Space 2015 - 2019
The aggregate supply pipeline of retail space available island-wide from 2015 to 2018 is
around 4.2 million sq ft. Approximately 22.3% of these supply pipeline will be situated in the
Downtown Core area. The table below lists developments comprising of retail space to be
launched within the next 4 years.
Expected Launch Date Project
2015 South Beach Avenue
National Art Gallery
Marina Square
Extension
Eon Shenton
2016 Tanjong Pagar Centre
Marina One
Duo Galleria
2017 Nil
2018 City Gate
Figure 26: Expected Date of Launch for Retail Projects
23

7.2 Demand
7.2.1 Visitor Arrival
Tenants’ demand for retail space in the Downtown area is highly dependent on tourist traffic.
Singapore’s visitor arrivals for the first 4 months of 2015 fell by 5.4%, recording approximately
4.9 million visitors. A fall in shopper traffic and pedestrian footfall for Central Region malls is
observed in Q2 2015 (Savills, 2015).
7.2.2 Leasing Market
Figure 27: Notable New Store Openings in Q2 2015
Several new-to-market F&Bs are discovered to be making their debut in the Central Region
retail market. Capitol Piazza has attracted 2 new-to-market tenants, Four Seasons and
Angelina. Four Seasons which specialises in London roast duck has opened up a 150-seat
restaurant. Similarly, Angelina has set up a 60-seat Parisian tearoom. In the Orchard area,
Scotts Square has also incorporated a new F&B concept involving the 45-seat Hong Kong-style
London Fat Duck. Marina Bay Sands recently let out its retail space to a new-to-market Bread
Street Kitchen totalling 149 seats.
7.2.2.1 Retail Sales Performance
There is a decline of 2.7% year-on-year for
retail sales in Central area as consumer
spending stayed in tentative territory
(Colliers, 2015). Discretionary consumer
categories such as goods and books,
furniture and household equipment as
well as recreational goods reported a drop
of 2.7%, 5.0% and 5.7% respectively in the
same period.
Retailers Location Category Nature of Brand
Angelina Capitol Piazza Food & Beverage New-to-Market
Four Seasons Capitol Piazza Food & Beverage New-to-Market
London Fat Duck Scotts Square Food & Beverage New-to-Market
Bread Street Kitchen Marina Bay Sands Food & Beverage New-to-Market
24
Figure 28: Retail Sales Index

7.3 Vacancy
Overall vacancy levels for retail space have been spiraling upwards due to immense pressure
from falling tourist arrivals and upcoming competitive retail supply. As shown from the above
figure, the vacancy rate in the Downtown Core region is the highest compared to Orchard and
Outside Central Region. The Downtown Core vacancy rate rose by around 6% in just half a
year. It is expected to reach a range of 16% to 19% by the end of 2015. (Knightfrank, 2015).
7.4 Conclusion
The proposed mixed-use development will not incorporate any retail space. This is due to the
poor market sentiments for retail space in the central area. In addition, there is poor
pedestrian flow and traffic footfalls during after-work hours and weekends.
The main contributors for demand for retail space in the Downtown Core comes mainly from
food and beverage, which Keppel Land have adequately provided in Marina Bay Link Mall.
Furthermore, an expected 140,000 sq ft of retail space is expected to come on stream, upon
the completion of The Heart at Marina One. Based on the Huff retail gravity model, a
substantial amount of retail space must be allocated in order to compete against a shopping
mall of such size. Therefore, we recommend to not develop any retail space. Instead, it is
advisable to channel the gross floor area into more profitable land uses for this development.
Figure 29: Retail Vacancy Rate, 2011 - Q2/2015
25

8.1 Launch and Primary Sales Volume
Figure 30: Primary Residential Property Launch and Sales Volume
Developers launched 2,099 new private residential units in Q2 2015, a surge of 76.5% from
the 1,189 units launched in the previous quarter. The aggregate of 3,288 units launched in 1H
2015 shows an expansion of 13.9% from 2H 2014.
The total sales volume for private residential properties in the primary market as of Q2 2015
has climbed 61.4% quarterly from 1,311 to 2,116 units. This new sales comprise of 1,999
uncompleted units as well as 117 completed units. The sales volume in 1H 2015 amounted to
an increase of 17.9% from 2H 2014. The soar in transaction volumes is mainly propelled by
the launches of new projects in Outside Central Region (OCR), such as North Park Residences
and Botanique at Bartley. These developments had high take-up rates despite weak property
market condition. North Park Residences successfully transacted 561 of its 600 units
launched. Similarly, Botanique at Bartley sold 403 of its 500 units launched.
Furthermore, new sales of completed units in the Core Central Region (CCR) have also
received greater interests among buyers. A total of 67 completed units were sold in Q2 2015,
the highest level seen since Q1 2012.
8.2 Upcoming Supply and Unsold Stock
As of Q2 2015, the total supply in the pipeline available for private residential units is 61,237
units, a 10.2% shrink from the previous quarter.
Property Type As at Q1 2015 As at Q2 2015 Absolute Change % Change
Private Residential Units 68,201 61,237 -6,964 -10.20%
Figure 31: Supply in the Pipeline
8. Private Residential Market Analysis
26

URA revealed that 11,618 and
21,043 private residential units will
be completed by 2H 2015 and 2016
respectively. The supply for private
residential units will also continue
to diminish after 2016.
The Government resumes to reduce the supply of residential sites via the Government Land
Sales (GLS) Programme due to the concern going over unsold stock. There are only 4
Confirmed List and 11 Reserved List sites with a residential use component released for sale
in 2H 2015. In comparison, 6 Confirmed List and 11 Reserved List sites with a residential use
component were released in 1H 2015. All the private residential sites released on 2015
Confirmed List are situated in OCR and RCR. This signifies the scarcity of supply for residential
sites in CCR.
The pipeline of unsold stock available island-wide in Q2 2015 is 26,905 units, a decline of 5.4%
from Q2 2014 and 20.7% from Q2 2013. The CCR market has shown a more significant drop
of 15.1% from Q2 2014 and 24.3% from Q2 2013. The unsold stock in CCR stands at 8,211
units for Q2 2015. It can be expected to shrink further as the market resume to absorb the
remaining stock, complimented by the tapering of residential sites for tender.
8.3 Prices
The graph below revealed that the property index for non-landed private properties in
Singapore has dipped by 0.9% from 145.5 to 144.2 in the latest quarter. The price index has
encountered its seventh consecutive quarterly drop, resulting in a plunge of 6.7% from 154.6
to 144.2 since Q3 2013.
Figure 33: Singapore Non-Landed Residential Property Price Index
147.2 147.9 148.8
151.5 152.4
154.0 154.6
153.2
151.3
149.7
148.6
147.0
145.5
144.2
138.0
140.0
142.0
144.0
146.0
148.0
150.0
152.0
154.0
156.0
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
PriceIndex
Quarter
9. Private Residential Market Analysis8. Private Residential Market Analysis
11,618
21,043
14,168
9,371
4,117
920
0
5,000
10,000
15,000
20,000
25,000
2H2015 2016 2017 2018 2019 >2019
No.ofUnits
Expected Year of Completion
Figure 32: Pipeline Supply of Private Residential Units
27

Price declines were observed across all segments of the private residential property market
- CCR, RCR and OCR. In the CCR, prices of non-landed properties in Q2 2015 fell further by
0.6% from the 0.4% drop in Q1 2015. Prices in the RCR also dip by 0.6% although less
notable than the 1.7% drop in the previous quarter. Likewise, the prices in OCR took a
plunge of 1.1% this quarter, a constant rate as the previous quarter. URA statistics showed
that the prices in CCR are the least volatile among other markets in general. Consequently,
potential investors for the CCR residential market may gain a higher market confidence as
they are conventionally more risk-averse (Savills, 2015).
Figure 34: Non-Landed Residential Property Price Index
8.3.1 High-End Market
The prices of high-end properties have continued to fall by 5.4% to an average of $2,024 per
sq ft from Q2 2014 to Q2 2015 (Knight Frank Residential Sales Research, 2015). In comparison
to the plunge of 9.6% from Q1 2014 to Q1 2015, the rate of decline has improved significantly.
This generates a better prospect for developers considering high-end residential
development.
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
PercentageChangeinPriceIndex(Q-o-Q)
PriceIndex
Quarter
CCR RCR OCR
Percentage Change (CCR) Percentage Change (RCR) Percentage Change (OCR)
28

8.4 Market Outlook
The private residential market as of Q2 2015 were being surrounded by a few major events.
The market sentiments are currently affected by the first probable increase in interest rate
decision by US Federal Reserve since June 2006. The fluctuations in the stock market and
Asian currencies have resulted in uncertainties on Asia’s economic prospects, including
Singapore. In addition, the cooling measures implemented by the government also continue
to hamper the private residential property market. Short-term and mid-term foreign investors
remain modest on private residential property investments due to their low confidence that
property price growth will exceed the taxation costs involved. The TDSR framework has also
restricted the flow of liquidity into private residential market among Singaporeans.
Consequently, the launching of new projects may stay suppressed as developers remain
prudent on the outlook of the private residential market for 2H 2015. However, this may also
create a golden opportunity for developers. Developers can enter the market and utilise the
relatively lower competition during this period of time while yielding sufficient profit
depending on buyers’ affordability.
The launches of private residential properties with attractive attributes and pricing strategies
have been well received by the market. Strategically located and integrated projects were still
realising healthy absorption rate despite the weak market condition. According to Mr Ong
Teck Hui as the National Director of Research & Consultancy at JLL, Northpark Residences was
definitely a market mover that attracted much interest being a unique development
integrating retail, residential and transport connectivity. Amidst the challenging market,
developers offering a unique product will have the competitive advantage in capturing
buyers.
Nonetheless, normality has not been observed in the private residential market. Although
sales volume has been increasing this quarter, the private residential property price still
encountered a negative growth. Buyer’s affordability seem to have played a critical role in the
transaction volumes of projects. Projects with larger units are faced with a lower take-up rate
due to their higher price quantum, especially those in the CCR. These large units will
eventually add to the unsold stock. This is evident in the case of Marina Bay Suites which
focused on developing large residential units consisting of 3 bedrooms, 4 bedrooms and
penthouses only. Based on the current data gathered from Realis, 21 units remained unsold
6 years after it was first launched in 2009. Among these unsold units, 66.7% are 4 bedroom
units. In addition, only 1 out of 3 penthouses were transacted. Aside from the losses of not
being able to clear off their inventories, the consortium developers for Marina Bay Suites
should also bear with hefty Qualifying Certificate (QC) Charges over their unsold units. Taking
into consideration the prevalent weak property market condition, smaller residential units
will most likely be in favour to the market as compared to larger residential units.
9. Private Residential Market Analysis9. Private Residential Market Analysis8. Residential Market Analysis
29

Figure 35: Residential Property Cycle
Despite the poor market sentiments in the property market, the high-end property segment
may have a positive outlook in the near future. The luxury residential market is expected to
find a bottom soon as it has been affected sufficiently by cooling measures imposed (DBS,
2015). The investments made by The Blackstone Group, a highly-established real estate
private equity fund manager, signals the potential recovery of prices in the luxury market. The
Blackstone Group carried out a bulk purchase of 34 units at 21 Anderson Royal Oak Residence
as well as 18 units at Paterson Suites in the end of 2014. According to OCBC Singapore Mid-
Year 2015 Credit Outlook, this optimistic market sentiments will not run through the mass
market segment.
Ms Alice Tan, the head of research for Knight Frank has mentioned that the price difference
between high-tier and mid-tier residential properties have begin to narrow. This results in
increasing pressure imposed by Real Estate Developers’ Association of Singapore (REDAS) on
the government to review the implementation of cooling measures in luxury residential
market. According to Ms Alice Tan, high-end residential prices will increase within the range
of 5% to 8% over the next 3 years.
8. Residential Market Analysis
30

A competitive analysis for residential developments within the boundary of Singapore’s Postal
District 1 in Marina Bay is conducted. Currently, there are 2 developments with unlaunched
residential units in the area, Marina One Residences and V on Shenton.
Project Marina One Residences V on Shenton
Ownership Interest M+S Pte Ltd UIC
Number of Units 1042 510
Absorption Rate 88.3% 94.8%
Marina One Residences is developed by M+S Pte Ltd, a joint venture by Khazanah Nasional
Berhad and Temasek Holdings. The mixed-use development incorporates 2 residential towers
amounting to 1042 units. It offers 1 to 4 bedroom units as well as penthouses. 401 units at its
first residential block were launched in Q4 2014. The absorption rate for the released units
has reached 88.3%, leaving only 47 unsold units currently. Marina One Residences has a
stockpile of 641 units waiting to be launched. According to Mr Tan Sri Azman Yahya as
Chairman of M+S Pte Ltd, they will restrain the release of 521 units at the second residential
block until 2017 when the project has attained its Temporary Occupation Permit (TOP). M+S
Pte Ltd receives an exemption on Qualifying Certificate (QC) rule. Consequently, it is not
obligated to clear all their units within 2 years of completion. According to Ms Kemmy Tan as
Chief Operating Officer of M+S Pte Ltd, the release will also be accompanied by an upward
revision on the prices of new units against those launched earlier. The average unit prices sold
at the first residential block since the initial launching is approximately $2,250 psf. M+S Pte
Ltd is optimistic towards being able to discharge all of their units at the first residential block
by 2017. In Q2 2015, the transacted price of Marina One Residences units span from $2,200
to $2,800 psf with an approximate average of $2,420 psf.
Marina One V on Shenton
31

V on Shenton is developed by United
Industrial Corporation Ltd (UIC). The
integrated development includes a
residential tower with a total of 510 units.
It supplies 1 to 3 bedroom units and
penthouses. It started launching 329 units
in Q3 2012. Subsequent discharge of units
are then carried out in Q4 2012, Q1 2013
and Q2 2015. The aggregate of units
launched as of Q2 2015 tantamounts to 400
units. The developer has attained an
absorption rate of 94.8% with 21 launched
but unsold units. V on Shenton still has a
remaining of 110 unlaunched units which can be released in the near future following the
previous launches. In Q2 2015, the transacted price of V on Shenton units concentrated at a
range of $1,900 to $2,600 psf with an average approaching $2,240 psf.
Figure 37: Location of Competitors
32

s
Picturesque
Bay Views
Tranquil Garden
Sanctuary
Exquisitely
landscaped Sky
Terrace
Azure Infinity
Pool

DEVELOPMENT PROPOSAL
Summary
The proposed development will
comprise of a 4-storey podium and
a 50-storey tower, consisting of 66%
office, 18% residential and 16%
hotel.

9.1 Proposed Developmentsss=s
9.1.1 Design Philosophy
The design philosophy is principally founded on four core lines that are drawn vertically
against the skyline of Marina Bay. These four lines are then diagonally truncated to
create a dramatic building crown that will be landscaped into a luscious rooftop sky
garden. The glass curtain façade will also be articulated with sky terraces to help break
down the massing and scale of the building.
9.1.2 Design and Architect Management
We would like to recommend commissioning Aedas to create the development design
after careful consideration and research. Aedas is an international architecture practice
that specialises in high rise, high density and mixed-used developments in developed as
well as emerging cities. Aedas’ design philosophy revolves around designing with a deep
sense of understanding to the social and cultural context of the city, resulting in a
brilliance of contemporary and vernacular architecture. Consequently, we feel that
Aedas’ strengths and capabilities are essential to the materialisation of our proposed
development.
We would also like to suggest appointing Andrew Bromberg from Aedas to be the lead
design architect of this development. Andrew has significant experience in designing
mixed-use developments comprising of office, hotel and residential components. He has
overseen the completion of such developments in China and has won numerous design
competitions for such briefs in the United Arab Emirates. Some of his masterpieces
include The Star Vista and The Sandcrawler.
9.1.3 Landscape Architect
We suggest engaging Helen Smith-Yeo from Sitectonix to provide landscaping expertise for the urban pocket park, sky terraces as well as the
rooftop sky garden. Helen is one of the principal architects in the firm and holds a Masters in Landscape Architecture from Harvard University.
Furthermore, Helen and her practice has won numerous awards such as the Singapore Landscape Architecture Awards. She has collaborated
with many reputable developers such as CapitaLand, Keppel Land and City Developments Limited. Some of her significant projects include One
George Street, Vivocity and Kent Vale.
9. Development Proposal
Figure 38: Proposed Development
33

9.2 Site Plan
The proposed development will comprise of a 4-storey podium and a 50-storey tower, consisting of office, residential and hotel components.
The development will be constructed on the lower half of the land parcel as the upper half has been designated as an open green space. The
tower will have a South-East orientation. This is to capture unblocked views of the Marina Reservoir and panoramic ocean views while mitigating
as much afternoon sun as possible.
9.2.1 Open Green Space
This open green space will be landscaped into
an urban pocket park that provides attractive
spaces for pedestrians and building users to
rest and interact.
9.2.2 Vehicular & Pedestrian Access
In terms of pedestrian and vehicular accessibility, the development will have an elegant drop-off
lobby as well as an underground car park that is accessible via Commerce Street. There will be a
sheltered pedestrian path that stretches along Central Boulevard and runs parallel to Raffles
Quay. A 2nd-storey pedestrian link bridge will also be created to provide connections with One
Raffles Quay and Asia Square Tower 1. The development will also have a direct underground link
to the Downtown Line MRT station.
34
Figure 39: Development Site Plan

9.3 Product Development
We have decided on the displayed
level of space allocation after
undertaking a meticulous real
estate market analysis. The
proposed mix of Office, Residential
and Hotel space is intended to
provide diversified revenue
streams and a reduction of
unsystematic risk. Due to the poor
market sentiments in all real estate
sectors, a split between various
land use typologies will help the
development to attain a healthier
absorption and growth rate.
Figure 40: Typology of Proposed Development
9.3.1 Office
As Marina Bay is poised to become a leading global financial hub, the proposed office
component is developed to provide modern and efficient office space mainly for tenants from
the financial and legal industry. In addition, the office space will also be designed to appeal to
e-commerce and pharmaceutical industries which are growing in size and influence. Targeting
tenants from a diversified range of industries will assist in improving the absorption rate of
office space.
The development will feature a premium grade A office space that is both large and column
free. This makes spatial planning of offices more convenient for tenants. The development
will have an average floor plate size of 35,000 sq ft in the tower block dedicated for office
space. This is in addition to the approximately 60,000 sq ft of office space per level allocated
on the 3rd and 4th-storey of the podium block. The proposed office will also offer 150mm of
raised flooring and a raised floor-to-ceiling height of 3m, catering to specialised operations
that may require such specifications.
Column Free Space 150mm Raised Flooring
Office,
66%
Residential,
18%
Hotel,
16%
35

In addition, there will be a sky terrace garden and mist pool that is landscaped with lush
vegetation on the 5th floor yielding approximately 30,000 sq ft of green space. These
amenities provided for the tenants will serve as a differentiating factor from the other office
developments such as Asia Square and One Raffles Quay.
9.3.2 Hotel
The proposed hotel component is
envisioned to be positioned as a 5-star
contemporary luxury hotel since this is
reflective of the genius loci of Marina Bay, a
modern and affluent district for the upper
echelon of society. As branding is pivotal in
the positioning of hotels, we have selected
the Mandarin Oriental Hotel Group to
manage the proposed hotel component
under the Mandarin Oriental brand. A key
reason involves Mandarin Oriental Hotel
Group being a member of the Jardine
Matheson Group in which Hongkong Land
(our joint venture partner, described later in the report) is a fellow member as well. As a
result, Keppel Land is able to negotiate for more favourable terms in the management
contract and unlock new levels of synergies among its joint venture partner.
Mandarin Oriental is a 5-star luxury international hotel group that operates 46 Mandarin
Oriental hotels with 11,000 rooms in 25 countries. Mandarin Oriental has more than 50 years
of experience in the hospitality industry and is widely regarded as one of the world’s best
luxury hotels chains famed for their legendary Asian hospitality and service.
The Mandarin Oriental Hotel will feature 250 contemporary guestrooms, 20 well-appointed
junior suites, 30 luxurious executive suites and 2 opulent presidential suites. Each room will
have floor-to-ceiling windows that provide scenic views of Marina Bay or stunning views of
the Singapore city skyline. The interior design of the rooms will feature Mandarin Oriental’s
signature gold, cream and grey tones as well as elegant furnishings to further accentuate the
lavishness of the property.
Sky Garden Mist Pool
36

There will be a lobby bar and lounge as well as 2 specialty restaurants on the 1st-storey podium
along Central Boulevard to provide guests with a delicate selection of dining options. These
food and beverage spaces also help to fulfil the activity generating uses requirement on the
ground floor. The 2nd-storey hotel podium will comprise of a grand ballroom, 8 meeting rooms
as well as an all-day dining restaurant that offers a smorgasbord of cuisines for guests and
patrons. The remaining amenities such as The Mandarin Oriental club lounge, spa, fitness
centre and infinity pool will be located on the sky terrace level to provide users with a unique
relaxation experience.
9.3.3 Residential
The proposed residential development distinguishes itself from the other Marina Bay
condominiums by fusing the ideals of luxury and exclusivity together. The residences will be
positioned as a boutique development that offers limited number of units to attract affluent
consumers who value exclusivity and privacy.
A detailed research on the residential market has shown that the sales of larger units tend to
move slower. As such, the project will only be offering relatively smaller units with an option
of one bedroom, one bedroom with loft, two bedrooms or two bedrooms with loft units, at
an average size of 725 sq ft. Lofts are incorporated in several units to resolve the issue of
reduced floor area. High ceiling in the lofts provide a spacious and luxurious ambience, which
may be preferred by many foreigners used to living in larger spaces.
The development will have a total of 360 residential units spread over 15 storeys, 24 units on
each level. Despite the multitude of residential units per floor, the residences will retain their
exclusivity through the use of private lift lobbies integrated into each unit. These private lifts
provide a safe and secure environment for the residents to transit, circumventing any
concerns of high human traffic flow. Private lift lobbies have always been a highly desired
unique feature in luxury homes. They are able to bestow exclusivity and privacy upon
residents with only 2 sqm of additional space.
Opulent Presidential Suites Grand Ballroom Meeting Rooms
37
Private Lift Infinity Pool Sky Garden

Similar to other high-end residential developments, the proposed development offers
comprehensive recreational activities catering to residents of different age groups. The
proposed residence will incorporate a wide array of facilities such as an infinity pool and a
gym at the rooftop sky garden. Residents will get to enjoy the extensive skyrise greenery as
well as a spectacular view from the top floor of the building while using the facilities.
In addition, the residents will bear the exclusive brand of The Residences at Mandarin Oriental
to tap on the legendary service of the renowned hotel operator. This aims to create an
exceptional lifestyle. Residents will get to enjoy the best of both worlds - the tranquility of a
private home accompanied by the exquisite amenities and service of Mandarin Oriental Hotel.
For instance, services offered only to hotel guests such as concierge, valet, housekeeping and
maintenance are now awaiting the residents. This unique feature serves as an additional
selling point.
38

FINANCIAL ANALYSIS
Summary
LTV: 80%
Land Bidding: $1,990,000,000
NPV: $5,460,000
IRR: 16.02%

10.1 Investment Timeline
Figure 41: Investment Timeline
The awarding of the tender is expected to be done by the end of March 2016. Assuming
Keppel Land is successful in securing the site, it would have to pay an upfront lump sum tender
price during this period. As shown in the above timeline, the construction of the project will
begin several months after the land is acquired in March 2016. As a typical mixed-use
development project will take around 48 months to complete, the office and hotel operations
is expected to commence only by March 2020. The office and hotel developments will then
receive 6 years of net operating income, before being divested away in March 2026. This is
based on a 10-year exit strategy (discussed further in the Joint Venture section of the report)
for the proposed office and hotel spaces so that Keppel Land can realise the capital gains from
the expected appreciation of the development. The sale of residential units will be divided
into 2 launch phases to ensure that there is no sudden injection of supply, hence increasing
its absorption rate. The residential property is expected to receive its Certificate of Statutory
Completion (CSC) by March 2021.
10.2 Debt Structure & Interest Rate
It is expected that Keppel Land will raise 35%
of the total debt through the issuance of short-
term unsecured notes at a fixed rate of 3.09%
under the Keppel Land Multicurrency Medium
Term Note Program. This is based on the
historical interest rates of 2.67% to 3.51% that
Keppel Land had successfully managed to
secure during previous issuances. The
remaining 65% debt will be raised through
unsecured bank loan borrowings
denominated in Singapore dollars at an
interest rate of 1.81%. The weighted average
cost of borrowing from these debt
instruments will be 2.2367%. This weighted
average cost of borrowing is subsequently
10. Financial Analysis
Bank
Loans,
65%
Medium
Term
Notes,
35%
Figure 42: Debt Structure
39

used as a benchmark to determine the assumptions for land loan and construction loan
interest rates. Estimated interest rates of 2.10% and 2.60% are used for land loan and
construction loan respectively. The interest rate for land loan is expected to be lower
compared to construction loan considering that land can be used as a collateral.
10.3 DCF Model & Monte Carlo Simulation
In order to determine the bid price and financial feasibility of the project, an investment
analysis of the site using a discounted cash flow (DCF) model was conducted. The DCF analysis
for this project is illustrated in Appendix II, III, IV and V. To create a more rigorous analysis, a
Monte Carlo Simulation was run on the standard DCF model to establish the worst and best
scenarios. This ensures that the whole spectrum of possible outcomes have been duly
considered. This process helps developers validate or correct any preconceived notion that
they may have previously hypothesised with regards to how each critical input variable may
impact the analysis. The assumptions for the DCF model and Monte Carlo Simulation annexed
in Appendix I and VI are determined by the market analysis and historical data extracted from
REALIS for each real estate sector.
The correlations between the variables required for the Monte Carlo Simulation are shown in
the figure below. These correlations are based on observed historical values that have been
adjusted according to their estimated behavior and interaction in the future.
Office Rent Office Vacancy Hotel ADR Hotel Vacancy
Office Rent 1 -0.60 0 0
Office Vacancy -0.60 1 0 0
Hotel ADR 0 0 1 -0.23
Hotel Vacancy 0 0 -0.23 1
Figure 43: Correlations between Chosen Variables
10.3.1 Open Market Valuation (OMV)
The DCF model is run 100,000 times using
the Monte Carlo Simulation, generating a
statistical outcome as seen in the figure
(left). The open market valuation, which
is represented by the expected mean, for
this site is $1,825,512,000.
10.3.2 Funding Structure & Land Bid
Developers might be interested to use debt financing in exchange for being able to raise the
tender price without undermining profit margins when undertaking a real estate
development project. The following scenarios provide an analysis on the level of debt a
developer should use to finance the site development. Similarly, 100,000 simulations of the
DCF model was performed for the following scenarios through Monte Carlo Simulation. A list
of probable outcomes (certainty) for return (IRR) and net present value (NPV) is generated
under each scenarios.
Statistic Forecast values
Trials 100,000
Expected OMV 1,825,512,482
Standard Deviation (St. Dev) 157,586,155
Coeff. of Variation (COV) 0.0863
Minimum 1,242,844,390
Maximum 2,584,958,587
11. Financial Analysis11. Financial Analysis10. Financial Analysis
40

10.3.2.1 Scenario 1
Statistic Forecast values (IRR)
Trials 100,000
Expected Returns 14.07%
Standard Deviation 1.35%
COV 0.096
Minimum 7.49%
Maximum 19.37%
Statistic Forecast values (NPV)
Trials 100,000
Expected NPV 12,254,996
St. Dev 120,982,812
Minimum -495,567,881
Maximum 598,313,493
For the first scenario, the
developer would have to make
an initial equity contribution of
$821,300,000 in the event of a
successful bid. Under this
scenario assumptions, the risk-
to-reward ratio (COV) amounts
to 0.096, with an expected
NPV and IRR of $12,255,000
and 14.07% respectively.
There is a 90% probability that
this investment will yield a
return exceeding 12.34%. The
total expected development
cost will be approximately
$2,748,556,000.
Land Bid: $1,910,000,000
Certainty
10%
Returns
7.49% - 12.34%
NPV
(-$495,568,000)-
(-$140,800,000)
Certainty
40%
Returns
12.34% - 14.12%
NPV
(-$140,800,000)-
$9,719,000
Certainty
40%
Returns
14.12% - 15.81%
NPV
$9,719,000 -
$169,100,000
Certainty
10%
Returns
15.81% - 19.37%
NPV
$169,100,000 -
$598,313,000
Development Cost
Initial Land Cost $764,000,000
Stamp Duty $57,300,000
Initial Equity Outlay $821,300,000
Construction Cost $206,911,511
GST on Construction $13,536,267
Professional Fees $17,403,772
Marketing Cost $43,278,361
Financing Cost $1,646,126,123
Total $2,748,556,035
Debt
60%
Equity
40%
Loan to Value: 60%
41

10.3.2.2 Scenario 2
Trials 100,000
St. Dev 111,867,000
Minimum -455,819,158
Maximum 526,201,881
For the second scenario, the
to 0.099, with an expected
NPV and IRR of $5,292,000 and
15.01% respectively. There is a
90% probability that this
investment will yield a return
exceeding 13.10%. The total
expected development cost
will be approximately
$2,805,849,000.
Land Bid: $1,940,000,000
Certainty
10%
Returns
7.78% - 13.10%
NPV
(-$455,819,000)-
(-$136,227,000)
Certainty
40%
Returns
13.10% - 15.04%
NPV
(-$136,227,000)-
$3,182,000
Certainty
40%
Returns
15.04% - 16.89%
NPV
$3,182,000 -
$150,374,000
Certainty
10%
Returns
16.89% - 20.47%
NPV
$150,374,000 -
$526,202,000
Trials 100,000
St. Dev 1.48%
COV 0.099
Minimum 7.78%
Maximum 20.47%
Development Cost
Financing Cost $1,943,981,535
Total $2,805,848,559
Debt,
70%
Equity,
30%
Loan to Value: 70%
42

10.3.2.3 Scenario 3
Trials 100,000
St. Dev 1.64%
COV 0.102
Minimum 8.15%
Maximum 22.40%
Trials 100,000
St. Dev 103,411,303
Minimum -424,312,105
Maximum 451,434,196
For the third scenario, the
to 0.102, with an expected NPV
and IRR of $5,460,000 and
16.02% respectively. There is a
90% probability that this
investment will yield a return
exceeding 13.91%. The total
expected development cost
will be approximately
$2,886,361,000.
Land Bid: $1,990,000,000
Certainty
10%
Returns
8.15% - 13.91%
NPV
(-$424,312,000)-
(-$125,949,000)
Certainty
40%
Returns
13.91% - 16.06%
NPV
(-$125,949,000)-
$3,096,000
Certainty
40%
Returns
16.06% - 18.10%
NPV
$3,096,000 -
$139,461,000
Certainty
10%
Returns
18.10% - 22.40%
NPV
$139,461,000 -
$451,434,000
Development Cost
Financing Cost 2,266,457,101
Total $2,886,361,238
Debt
80%
Equity
20%
Loan to Value: 80%
43

10.4 Conclusion
Taking into account the financial analysis conducted, we recommend Keppel Land to select
Scenario 3 (80% LTV ratio) and submit a tender bid of $1,990,000,000. This would translate to
an initial equity outlay of $457,700,000, an expected NPV of $5,460,000 and an expected
return of 16.02%. By utilising higher loan-to-value ratio, the taxable income will be reduced
due to higher debt service. Even though scenario 3 generates a relatively lower NPV compared
to scenario 1 (60% LTV ratio), it allows Keppel Land to submit a higher tender bid price while
maintaining a corresponding rate of return. This will therefore increase the probability of
Keppel Land being able to secure the site.
44

JOINT VENTURE
Summary
A joint venture between
Cheung Kong as well as
Hongkong Land should be
considered to mitigate risk and
to leverage on business
partners’ expertise

11.1 Rationale for Joint Venture
This tender provides a strategic opportunity for Keppel Land to collaborate with its past
business partners. It was announced that Hongkong Land has expressed interest in Central
Boulevard. Chueng Kong Property Holdings has worked with Keppel Land on past projects and
it would be strategic to rope them in on this project as this would improve business relations.
11.1.1 Healthy Financial Position
Cheung Kong Property Holdings and Hongkong Land are selected as Keppel Land’s joint
venture partners due to their strong financial positions. According to the companies’ 2015
interim reports, Cheung Kong Property Holdings and Hong Kong Land have a debt-to-equity
ratio of 11.0% and 9.3% respectively. This low debt-to-equity ratio signifies that both joint
venture partners have sufficient financial strength to fund the investment. It is important to
ensure that the joint venture partners are capable of adequately funding the project in order
to ensure that the development will be completed on time.
11.1.2 Bankruptcy Risk
Forming a joint venture consortium with Cheung Kong Property Holdings and Hongkong Land
allows Keppel Land to reduce the risk of bankruptcy from undertaking project with a high total
development cost. This risk is highest when the project’s total development cost is greater
than the market capitalisation or shareholder’s equity of the company. A joint venture
consortium reduces this risk as the total equity contributed towards the project will be
reduced. A joint venture in this project on an unlevered basis, reduces the total development
cost from $2,886,361,238 to $962,120,413. This significantly diminishes the repercussions on
Keppel Land in the event this project fails.
11.1.3 Joint Expertise
Forming a joint venture consortium allows Keppel Land to leverage on the various expertise
of its joint venture partners. Both partners have undertaken an extensive number of office
and residential development projects with Cheung Kong Property Holdings having additional
experience in hospitality developments. A highly experienced joint venture consortium will
also contribute to better decision-making and project execution. Furthermore, Keppel Land
will be able to leverage on the strong corporate brand, credible reputation and connections
of its partners to market the development more efficiently.
11. Joint Venture
45

11.1.4 Proficient Management Subsidiary
The proposed joint venture consortium will be able to reap operational efficiencies by
capitalising on their previously incorporated management subsidiary, Raffles Quay Asset
Management Pte Ltd (RQAM). RQAM is an established asset management company with a
mandate to market and manage One Raffles Quay as well as Marina Bay Financial Centre.
With a self-sufficient management subsidiary in place, the developers do not need to set up
individual localised marketing and property management teams. This helps in saving time,
effort and cost.
11.1.5 Joint Venture Flaws
Undertaking a joint venture may sometimes result in negative consequences such as
increased bureaucracy due to the different backgrounds and standard operating procedures
of each joint venture partner. As a result, disagreements and delays in project execution may
plague the project. In this case however, such bureaucracy is minimised as this consortium
had previously collaborated together on projects such as One Raffles Quay and Marina Bay
Financial Centre. This trio of joint venture partners would most likely have already established
efficient operating procedures that can be used for subsequent joint venture projects such as
this one.
11.2 Proposed Joint Venture Structure
An equal distribution of shares
between the 3 developers is
proposed. This is based on the
previous model agreed upon
when the consortium developed
One Raffles Quay and Marina
Bay Financial Centre. In
addition, equal stakes between
the developers will ensure that
no developer can outrule the
other.
Keppel
Land,
33.33%
Hongkong
Land,
33.33%
Cheung
Kong ,
33.33%
Figure 44: Proposed Joint Venture Structure
11. Joint Venture
46
Figure 45: Proposed Joint Venture Structure

11.2.1 Development Cost after Joint Venture
The table below summarises the initial equity contribution and total development cost for
each scenarios provided in the financial analysis. The following outcomes are relevant only in
the circumstance that Keppel Land approves of the proposed joint venture structure.
Scenario 1 Scenario 2 Scenario 3
Initial Equity Outlay $273,767,000 $213,400,000 $152,567,000
Total Development Cost $916,185,000 $935,283,000 $962,120,000
Figure 46: Initial Equity Outlay and Total Development Cost
11.3 Exit Strategy
We have devised a comprehensive exit strategy based on Keppel Land’s investment profile
and objectives. We recommend divesting the 33.3% equity stake in the office component to
Keppel REIT, which Keppel Land has a 45.21% stake in. This allows Keppel Land to effectively
retain an indirect stake of circa 15.05% which maintains its exposure to the Marina Bay office
market while realising the capital gains from the valuation surpluses.
The exit strategy for the hotel component of the development will involve the other fund
management platform of Keppel Land, Alpha Investment Partners. Alpha Investment Partners
has various funds that are well-diversified among the different real estate assets such as
hospitality, commercial, logistics and residential properties. As such, we are recommending
the divestment of the 33.3% hotel stake to an Alpha Investment Partners Core Plus Fund, as
a seed asset or an acquisition property should the opportunity arise.
This exit strategy is aligned with two of Keppel Land’s corporate objectives - recycling capital
to maximise returns and generate sustained growth as well as growing their fund
management business.
11. Joint Venture
47

UNIQUE RISKS ANALYSIS
Summary
Risks pertinent to this project
include sensitive returns, the
potential presence of negative
cashflows as well as competitive
future developments.

12.1 Office and Residential Dependent Return
A sensitivity analysis was conducted to have a better understanding on the critical variables
that significantly impact the feasibility of this project. The analysis aims to quantify the
correlations of individual variables with the levered NPV.
Figure 47: Sensitivity Analysis for Critical Factors
According to the sensitivity analysis conducted above, the investment is found to be
particularly susceptible to changes in the rental rates of the office spaces. The office rental
has a positive correlation of 36.5% to the NPV. This makes the rental rates of office spaces a
critical input in ensuring success of the whole investment. In view of this, the consortium
should emphasise further on the marketability of office spaces. Office spaces that can cater
to the needs of target tenants will be able to increase the bargaining power of the consortium
during leasing negotiations. With market risk as a limiting factor in determining rental rates,
a comprehensive marketing plan fused with strategic timing for tenant sourcing are also
required.
Aside from office rental rates, changes in the selling price of residential units is also observed
to be highly correlated to the NPV. The residential sale price has a positive correlation of
17.8% to the NPV. The high sensitivity is most probably due to the residential component
generating a relatively earlier income cashflow for the investment. Residential units with
small floor area are recommended for increased marketability and higher price per unit area.
In addition to what was mentioned beforehand, our residential sector will shoulder the
exclusive brand of The Residences at Mandarin Oriental. This unique selling point will offer
potential residents an exceptional lifestyle. Residents can enjoy the best of both worlds – the
tranquility of a private home accompanied by the exquisite amenities and legendary service
of the Mandarin Oriental Hotel.
In order to maintain a positive NPV for the project, the consortium has to achieve an effective
rent of $13.59 with 6% annual growth rate for their office spaces at the 4th year (completion).
-1.20%
-1.50%
-2.03%
2.60%
-3.10%
-6.41%
17.80%
36.50%
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
Construction Cost
Hotel Vacancy
Interest Rate
Hotel ADR
Discount Rate
Office Vacancy
Residential Sale Price
Office Rental
Correlation to Levered NPV
Variables
Sensitivity Chart
12. Unique Risks Analysis!
48

In addition, residential units have to be sold at a minimum sale price of $2,538 psf in the 2nd
year and $2,703 psf in the 3rd year.
12.2 Potential Presence of Negative Cashflows
The Keppel Land, Hongkong Land and Cheung Kong Property Holdings consortium is expected
to face negative net cash outflows in most stages of the development. Negative cashflows are
anticipated for Year 0 to Year 3 and Year 5 to Year 9. This is due to the high debt service
incurred from the land acquisition loan. On the other hand, the bulk of the investment income
is expected to only materialise at the end of the holding period when the office and hotel
components are divested. In light of this, the consortium should be able to withstand any
financial pressure generated by the previous negative cashflows in order to realise the full
return on investment. Although it is highly unlikely for the consortium to default due to their
large amount of available funds and low debt-to-equity ratio, it is still rational to embark on
some precautionary measures. As shown in the DCF model annexed in Appendix V, the sales
proceeds from the sale of residential units can be used as a source of funding to ease tight
cashflows during the construction phase. Moreover, negative cashflows in the development
process can also be ameliorated by obtaining a longer loan term for the land acquisition. In
our DCF model, we assume the land loan to be fully-amortised within 10 years of the
investment horizon. If the consortium is able to acquire a more competitive loan with longer
fully-amortised term, its annual debt service will be curtailed. The remaining loan balance will
then be repaid only at the end of the holding period as a lump sum.
12.3 White-Site Concentrated Area
White-site zoning of unreleased land parcels in the surrounding Marina Bay area may give
flexibility for future developers to follow in the consortium’s footsteps of adopting a
residential, office and hotel mixed-use concept. This may increase competition and reduce
the consortium’s market share as future developments with similar concepts progressively
develop in Marina Bay. The consortium’s strategy of holding the development for only 6 years
after its completion does not extinguish the risk of this contingency. The exit strategy of
divesting the development via Keppel REIT will signify the existence of indirect equity stakes
held by Keppel Land. As new competition emerges amidst the more established Marina Bay
area, the consortium might have to consider conducting asset enhancement initiatives. This
allows it to remain competitive against newer developments with similar concepts and
mitigate any threat of being rendered obsolete.
Year Cashflows Year Cashflows
0 -$457,267,266 6 -$132,631,040
1 -$190,322,355 7 -$130,731,383
2 -$116,012,192 8 -$124,523,551
3 -$5,914,847 9 -$109,413,928
4 $62,361,209 10 $3,805,520,280
5 -$38,434,993
Figure 48: Cashflows for 80% LTV
12. Unique Risks Analysis
49
!
!

APPENDIX I: DISCOUNTED CASHFLOW (DCF) ASSUMPTIONS
Property Summary Year Equity Disbursement
Site Area 120,556 sq ft 2017 10%
Plot Ratio 13 2018 30%
GFA 1,567,224 sq ft 2019 30%
Bonus GFA 2% 2020 30%
Total GFA 1,598,568 sq ft
Typology
Office 66%
Hotel 16%
Residences 18%
Total GFA* 122,967 sq ft
Office 1,047,666 sq ft
Hotel 263,160 sq ft
Residences 287,742 sq ft
Space Efficiency
Office 68%
Hotel 80%
Residences 90%
NLA
Office 712,413 sq ft
Hotel 210,528 sq ft
Residences 258,968 sq ft
* The New Downtown, its compulsory to reach BCA Greenmark Platinum, and 2% GFA will be awarded
Professional Fees (% of Construction) Land Cost Fees (% of Land)
Architect 4% Stamp Fees 3%
Structural Engineer 1.15%
M&E Engineer 1.15%
Quantity Surveyor 1.15%
Landscape
Consultant 0.55%
Project Manager 1%
Government
Service Charge 7%
Letting (Office)
Property Tax (% of Gross Rent) 10%
Lease Admin/Repairs/ Maintenance (% of Gross
Rent) 5%
Marketing Expense 1 Month Rental X 1.125
Lease Term 3 Years
Letting (Hotel) % of Gross Revenue
Rooms 65%

Food & Beverage 25%
Other Income 10%
Gross Revenue 100%
Department Expenses 33%
Undistributed Operating Expense 22%
Management Fee 2%
Fixed Expenses 9.8%
Letting (Carpark)
Property Tax (% of Gross Rent) 10%
Operating Expenses 40%
Selling (Office, Hotel, Commercial & Carpark)
Marketing Expense 1%
Type Ratio Number of Carparks
374 Residential Units 1 Unit: 1 Carpark 374
1,027,100 sq ft Office Space 350 sq ft: 1 Carpark 272
24,000 sq ft Hotel Space 200 sq ft: 1 Carpark 120
Total 766*
*392 Carpark was use in the DCF Model since Residential’s carpark does not generate income

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