RE4701
NATIONAL UNIVERSITY OF SINGAPORE
RE4701 - REAL ESTATE DEVELOPMENT
(Semester I: 2022-23)
Time Allowed: 2 Hours
INSTRUCTIONS TO CANDIDATES:
1. Please write only your Student Number. Do not write your name.
2. This assessment paper contains Four questions and comprises 10 printed pages.
3. Students are required to answer ALL questions.
4. Students should write the answers of each question on a new page.
5. The marks for each question are shown in brackets and add up to 100%.
6. This is an OPEN BOOK examination.
RE4701 Real Estate Development
Page 2 of 13
______________________________________________________________________________________
Answer ALL questions.
“Golden Mile Complex is an architectural icon and many people think that it is important to the
public memory of Singapore. It can be sensitively integrated into the new development and be
adapted to new uses that meets the needs of today. Many successful developments that integrate
older buildings not only manage to optimise the land use efficiency, but also leverage on the
history of the site to bring value to the sense of place and identity of the development. We can
create win‐win situations with sensitive adaptive reuse.” – Chan Hui Min, Director, DP Architects1
Through the passage of time, buildings age and become physically, functionally and economically
obsolete. Old buildings would inadvertently lag behind newer buildings in terms of their ability to
attract and retain good tenants, causing an erosion of their competitiveness edge. While asset
enhancement initiatives (AEIs) could extend the economic life of a property, most buildings are
eventually torn down and redeveloped into modern and taller structures.
March 27, 2019: The media reported that the Golden Mile Complex (GMC) has been put up for
collective sale by public tender for a second time. The reserve price for the property is S$800
million, which is unchanged from the previous tender that closed in January 30, 2019 without any
buyers.2 Interested parties are invited to submit their bids by 25 April 2019, 3 pm. One wonder
who would be the potential bidders and how much would they pay for the site?
Completed in 1973, the mixed‐use development located between Nicoll Highway and Beach Road
has a total of 718 units of shops, offices and apartments. It was designed by Gan Eng Oon, William
Lim and Tay Kheng Soon of Design Partnership or DP Architects. GMC, together with People’s Park
Complex and Golden Mile Tower, are recognised by experts as architecturally and historically
significant. Representing a chapter in the island’s post‐independence history, the three buildings
were completed as part of the Government’s first Land Sales Programme in 1967.
Figure 1: GMC’s Unique Stepped Terrace Design
The trio were inspired by the
Brutalist‐architectural movement,
which usually features monumental
structures made of off‐form
concrete without being plastered
over, for an appearance of “strength
and solidity”.
The architectural and heritage
community
lobbied
for
the
authorities
to
work
with
stakeholders to conserve the
complex instead of demolishing it.
1
GMC’s Information Memorandum prepared by the marketing agent for sale of the development by tender.
2
Golden Mile Complex up for second en bloc bid at S$800 million, Channel NewsAsia (27 March 2019).
Source: The Business Times
RE4701 Real Estate Development
Page 3 of 13
______________________________________________________________________________________
They suggested rehabilitation and adaption for re‐use. Heritage conservation expert Ho Weng Hin
said, “it will be a tragedy and a great loss to Singapore if the en‐bloc sale results in the demolition
and redevelopment of such an important landmark with such architectural and social significance.”3
1.0 The Property
GMC was put up for sale by public tender by Edmund Tie & Company, the sole marketing agent for
the collective sale, in March 2019. Offering breath taking panoramic views of the sea and city
skyline, the site provides a rare opportunity for a large integrated development.
Location
GMC is located on the Beach Road/Ophir‐Rochor corridor and is envisaged to be a vibrant 24/7
mixed use district. Through the years, Beach Road has witnessed an exciting rejuvenation and
transformation with the completion of a number of large scale modern mixed‐use developments
including South Beach, DUO as well as the upcoming City Gate and GuocoLand’s Beach Road
project. Today, Beach Road is home to high‐rise residential towers, modern Grade A offices, luxury
hotels, a private hospital as well as renowned restaurants and bars, breathing life to the area both
in the day and at night.
Figure 2: Location Map of the Building
Source: Edmund & Tie
The location is strategically positioned at the gateway to the city centre just outside the Electronic
Road Pricing (ERP) zone and a mere 500 meters from Nicoll Highway MRT station, which is 3 MRT
stops to Marina Bay Financial Centre. It is also just around the corner from Nicoll Highway, which
provides a seamless link to other major expressways including Central Expressway (CTE), Pan Island
Expressways (PIE) and Kallang Paya Lebar Expressway (KPE).
3
Golden Mile Complex gets more than 80 per cent votes from owners to launch en bloc sale, The Straits Times (11 August 2018).
RE4701 Real Estate Development
Page 4 of 13
______________________________________________________________________________________
Site Details
The salient details of the site are as follows:
 Address
: 5001 Beach Road, Singapore
 Legal Description
: Lot 359T Town Subdivision 15
 Tenure
: Leasehold 99 years from 4 August 1969
 Site Area
: 13,462.3 sq m (approx. 144,907 sq ft).
 Master Plan 2014
: Commercial
Figure 3 URA Master Plan 2014
While the 99‐year leasehold building is currently zoned for commercial use by URA, the marketing
agent advised that at least 51% of the GFA can be used for commercial and the remaining 49% for
non‐commercial uses such as residential, serviced apartments, and hotels. Many exciting
development concepts may therefore be considered for this property, subject to authorities’
approval.
Baseline GFA of Existing Development4
GMC signature step‐terrace building design stands at 16 storeys with a mix retail, office and
residential uses. For the purpose of computing development charge (DC), the existing Gross Floor
Area (GFA) for the different uses, as verified by URA, are summarized in Table 1.
Permitted purposes under Use Group A include shop, office, association office, cinema, place of
entertainment, clinic, medical suite, restaurant, petrol station, auto‐service centre, commercial
garage, market, sports and recreation building. Use Group B2 refers to non‐landed residential
building. URA clarified that the development charge (DC) baseline does not indicate the site’s
4
GMC’s Information Memorandum prepared by the marketing agent for sale of the development by tender.
RE4701 Real Estate Development
Page 5 of 13
______________________________________________________________________________________
allowable development potential, which is guided by the prevailing Master Plan. Any proposal
exceeding baseline GFA would be liable for DC.
Table 1 Gross Floor Area of Existing Development
Use
Retail
Storey
B1 to L3
Gross Floor Area
22,200.99 sq m
[Commercial use, Use Group A]
Office
L4 to L9
21,850.59 sq m
[Commercial use, Use Group A]
Residential
L10 to L16
12,599.91 sq m
[Residential use, Use Group B2]
Total
56,651.49 sq m (approx. 609,791 sq ft)
reflecting an equivalent 4.208 PR
At the request of the owners, the Inland Revenue Authority of Singapore (IRAS) clarified that
Additional Buyer Stamp Duty (ABSD) is applicable to all residential property or land and the
applicable rate depends on the profile of the purchaser on the date of purchase. In the case of
GMC, if the buyer is purchasing the entire development with land where the land is zoned “part
commercial/part road” under the Master Plan, ABSD is not applicable as the zoning is non‐
residential. 5 The Buyer Stamp Duty rates for non‐residential properties will be applicable.
Since the site’s zoning does not fall within the definition of “residential property” under Section 2
of the Residential Property Act, SLA confirmed that a housing developer is not required to obtain
a Qualifying Certificate (QC) under Section 31(2) of the Residential Property Act (RPA) to purchase
GMC.6
Development Potential
The existing 718‐unit mixed‐use building sits on a 13,462.3 sq m site, which may be developed as
an integrated development with retail, office, residential, serviced apartments and hotels. In the
sale memorandum, Edmund Tie & Company states that Outline Application has been submitted
for two proposals.
5
ABSD is a tax levied on top of Buyer’s Stamp Duty on the acquisition of residential properties in Singapore. For residential sites
purchased on/after 6 July 2018 by housing developers with intention to develop the site for housing, the applicable ABSD rate is 30%.
The developer may apply for 25% ABSD remission if it undertakes to complete and sell 100% of the units within 5 years. Refer to IRAS
ABSD Fact Sheet .
6
Under the RPA, which aims to safeguard residential land for Singaporeans and prevent foreign housing developers from hoarding and
speculating in such land, any housing developer not considered a Singapore company has to apply for a QC when it acquires residential
land for development, other than from the Government. The QC regime requires a housing development to be completed within 5
years, and all units to be sold within 2 years of completion. Failure to meet the above conditions will incur an extension charge that is
pro‐rated based on the number of unsold units as follows: 8%, 16% and 24% of land purchase price for 1st year, 2nd year and 3rd year
extensions, respectively. A “Singapore company” is defined as one that is incorporated in Singapore, and all its directors and
shareholders are Singaporeans or Singapore companies. From February 2020, SGX‐listed housing developers can apply for exemption
from the QC regime if they have “substantial connection to Singapore”. New rules on qualifying cert offer reprieve to Singapore
developers, The Business Times (7 Feb 2020).
RE4701 Real Estate Development
Page 6 of 13
______________________________________________________________________________________

Proposal A:
Redevelopment at Plot Ratio 5.07

Proposal B:
Redevelopment with conservation of existing 16‐storey block
for an integrated development comprising retail, office, hotel,
residences and serviced apartments at a Plot Ratio of 6.38.
URA confirmed that it has no objection to strata subdivision of the site, subject to its prevailing
guidelines. The Land Transport Authority (LTA) required the successful buyer/developer to carry
out a Transport Impact Assessment (TIA) to assess the necessary transport improvements as part
of its future redevelopment.8
2.0 Redevelopment Option
2.1 Plot Ratio
Proposal A in the tender package involves demolishing the existing structure and erecting a new
development. The marketing brochure states that an Outline Application has been submitted for
redevelopment at plot ratio 5.0, which is 18.8% higher than the existing building’s plot ratio of
4.208.
Edmund Tie’s senior director of investment advisory Swee Shou Fern explained, “there is no plot
ratio in the master plan for Golden Mile Complex. As such we filed an outline application to test
planning parameters such as plot ratio and building height.” It is critical to confirm the site’s plot
ratio because it determines the GFA of the proposed development, which in turns dictates how
much space the developer can sell or rent. The potential rental income and sale revenue are
fundamental to determining the value of the proposed development and thereby, the market value
of the development site. Alan Cheong, Savills Singapore research head, added that URA’s advice
on planning parameters would help to “improve the saleability of the site because developers now
know what they are getting into, or how much they can build.” 9
However, the sale brochure did not confirm that the 5.0 plot ratio will be approved by the
authority. Our base scenario for the redevelopment option therefore adopts a conservative plot
ratio of 4.208. This means that the maximum GFA for the new development would be similar to
the GFA of the current building at 56,676.3 sq m (approximately 610,063 sq ft).10
7
URA advised that GMC is currently under conservation study and total redevelopment for the development will not be considered till
1 October 2019 (Edmund Tie & Company).
8
TIA is meant to identify the necessary transport improvements and internal traffic layout to support the redevelopment proposal and
is typically carried out by a developer during the detailed planning/development control stage. LTA has clarified that TIA is not a Pre‐
Application Feasibility Study (PABS).
9
Developers get more clarity on Golden Mile en bloc site, The Straits Times (9 January 2019).
10
Due to rounding errors, there is a marginal difference between GFA of existing building (56,651.49 sq m) and GFA used in the base
computation (56,676.3 sq m). The difference is not material.
RE4701 Real Estate Development
Page 7 of 13
______________________________________________________________________________________
2.2 GFA Allocation
When bidding for a site, developers would typically conduct a preliminary assessment to determine
the highest and best use for the site, taking into consideration the physical attributes and planning
and legal constraints on the site as well as current and future market conditions (including
analysing potential competitors).
For the purpose of carrying out a preliminary financial analysis, the following algorithm is used to
allocate the permissible GFA of the subject site:
 Allocate 49% GFA for residences11
 Cap commercial GFA for retail at 25,000 sq m (approx. 269,000 sq ft)12
 Allocate the balance commercial GFA to offices.
The GMC site is located within Geographical Sector 51 of the DC Table. The DC rates (March 2019)
for different uses in the sector are as follows:
Table 2: Development Charge Rates for Geographical Sector 51 – March 2019
Use Group
A
B1
B2
C
D
E
F
G
H
Purposes for which development is permitted or to be authorised
Shop, office, association office, cinema, place of entertainment, clinic, medical
suite, restaurant, petrol station, auto‐service centre, commercial garage,
market, sports and recreation building
Residential (landed dwelling‐house)
Residential (non‐landed residential building)
Hospital, hotel room and hotel‐related uses
Industrial, warehousing, science park, business park, transport depot, airport,
dock, port uses, utility installation, telecommunication infrastructure, Mass
Rapid Transit Station, Light Rail Transit Station
Place of worship, community building, community sports & fitness building,
educational & institutional uses, government building
Open space, nature reserve
Agriculture
Drain, road, railway, cemetery, Mass Rapid Transit Route, Light Rail Transit Route
$/sq m
$9,800
$3,710
$9,100
$11,550
$1,435
$910
$10
‐
$1
Source: URA Development Charge Rates Per Square Metre – Mar 2019
2.2 Revenue & Cost Assumptions for Base Scenario
Development Revenue
The residential units are estimated to be sold at an average price of $2,600 psf. The assumptions
used to value the commercial component are as follows:
11
Under the existing Commercial zone, at least 51% of the total GFA shall be for commercial use. The remaining 49% of the total GFA
may be used for non‐commercial uses such as residential, serviced apartments, and hotels, subject to LTA’s clearance on the specific
use mix. (Info memo).
12
The size of retail malls outside the core central region usually range from 20,000 sq m to 25,000 sq m.
RE4701 Real Estate Development
Page 8 of 13
______________________________________________________________________________________
Retail
Offices
Rental rate
$12 psf pm
$ 8 psf pm
Occupancy rate
95%
95%
Operating expenses 20% of gross revenue 20% of gross revenue
Cap rate
4.5%
3.0%
The following efficiency ratios were adopted to derive the rentable (commercial) and saleable
(residential) space: 70% for retail, 85% for office, and 90% for residential. In addition, another 7%
non‐GFA saleable area can be created to increase the total saleable area for the residential
component.13
Assuming the approved plot ratio is 4.208 and based on the above revenue assumptions, the Gross
Development Value (GDV) of the proposed development is $1,245.2 million. The breakdown for
the residential, retail and office components is $748.1 million, $397.8 million and $75.2 million,
respectively. In addition, $24.1 million is attributed to carpark for the commercial space.14
An overall budget of 2% of GDV is provided for marketing expenses, covering sale and leasing
commissions, advertising, and marking collaterals.
Development Costs
As part of the development appraisal, an estimate of the development costs will need to be made.
The following cost assumptions15 are used for our financial computation.
The primary cost will be the construction of the new building. For greater accuracy, the
construction cost calculation is split into four components: $3,200 psm for residential and retail,
$2,800 psm for office and $1,400 psm for car park. 16 Including demolition cost of the existing
building ($300 psm on existing GFA), construction of the new development is estimated to cost a
total of $ 204.9 million.
A contingency sum of $10.2 million (5% of the total construction costs) is provided to cover for
unknowns. Another 5% is estimated for professional fees. GST for construction costs associated
with the residential component17 is provided at the current rate of 7%18.
13
These assumptions are adopted following our consultation with several industry practitioners, ranging from architects, developers,
quantity surveyor and property consultants.
14
This is based on the assumptions that 133 carpark lots and 18 motorbike lots will be provided for commercial uses and the yearly
revenue collection adding up to about $1.46 million (based on average rate of $2.50 and $0.65 per hour for carpark and motorbike lots
respectively, operating hours from 8 am to 12 am and an occupancy rate of 75%. An operator’s fee of 20% on yearly collection and a
cap rate of 5% are assumed to compute capital value of the carpark and motorbike lots.
15
The cost assumptions are derived in consultation with developers, architects, property consultants and quantity surveyor.
16
According to Code of Practice for vehicle parking provision in Development handbook 2019 edition, 1 carpark lot will be allocated to
every 1.25 dwelling units and 1 motorcycle lot will be allocated to every 45 units. To estimate the number of lots required for residential,
an average apartment size of 100 sqm is assumed. As such, if there were 250 dwelling units, 200 carpark lots will be required for the
residential component. Size of one carpark lot is 11.52 sqm and motorcycle lot is 18 sqm. Circulation area required is 1.5x of sum of
commercial and residential lot area.
17
Iras e‐Tax Guide for developers (Fourth Edition): https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e‐
Tax_Guides/GST%20Guide%20for%20Property%20Developer%20(4th%20Edition).pdf .
18
However, GST may be increased to 9% in two to five years’ time: https://www.straitstimes.com/politics/parliament‐govt‐yet‐to‐
decide‐on‐exact‐timing‐of‐gst‐increase‐to‐9‐per‐cent‐says‐heng‐swee.
RE4701 Real Estate Development
Page 9 of 13
______________________________________________________________________________________
All capital employed in the development will have an opportunity cost. For simplicity, most
development appraisal assume 100% debt funding (Harvard, 2014).19 The effect of borrowing is
accounted for by calculating the interest (1.8% pa) which will accrue on half the construction costs
for the entire construction period.20 Given the size and complexity of the integrated development,
it is estimated that physical construction of the development will take 4 years to complete.21
Developer’s Profit
A rough comparison of value and cost of the new development using the “back‐of‐the‐envelope”
pro forma is used to determine the development’s profit.
Gross Development Value
Less: Marketing Fee (2%)
Net Development Value
$ 1,245.2 m
$
24.9 m
Construction costs
Contingency (5%)
Professional fees (5%)
GST (7% for residential)
Financing costs (1.8%)
Total Development Costs
$ 204.9 m
$ 10.2 m
$ 10.2 m
$
6.2 m
$
8.3 m
$ 1,220.3 m
Surplus (exclude land & related costs)
$ 239.8 m
$ 980.5 m
The difference between the net development value and the total development costs is $980.5
million. Land acquisition costs and holding costs are to be deducted from this surplus amount to
derive the development’s expected profit.
Land acquisition costs include land purchase price and related fees, namely stamp duty and legal
fees (5% of land price) and differential premium. The amount of differential premium payable will
depend on the developer’s proposed land use mix. For the base scenario, no differential premium
for intensification of land use is payable since there is no change in the plot ratio of the
development.22 Nevertheless, the developer will still need to pay a land premium for upgrading of
lease tenure (approx. 22.81% of land price) to top up the lease back to 99‐year.23
19
Tim Harvard (2014) Financial Feasibility Studies for Property Development (Routledge), p. 66.
20
The half balance is used to account for progressive drawdown on the construction loan as the project progresses.
21
In theory, factors such as location, working restrictions and ease of access to a brownfield development site will also influence the
construction duration. For example, Havard (2014, p. 46) suggests that a small, simple project will take longer to complete where the
site is located in a busy urban area than on a greenfield site.
22
Differential payment is also payable for change of use to higher value use as prescribed in the DC Table. DC rates for use group A
(Commercial) and B2 (Residential) in sector 51 are $9,800 and $9,100 respectively. Given that DC rate for use group B2 is lower than A,
increasing allocation to residential would not attract differential premium.
23
The current unexpired lease term is 49 years, which is equivalent to 74.1% of freehold value according to the SLA’s Leasehold Table
(or Bala’s Table) for land valuation. In contrast, the value of a 99‐year leasehold is equivalent to 96.0% of freehold value. Accordingly,
the adjustment factor to top up a 49‐year leasehold site to 99 years is 22.81% (i.e. 1 ‐ 0.96/0.741).
RE4701 Real Estate Development
Page 10 of 13
______________________________________________________________________________________
In addition, the developer will need to set aside holding costs (amounting to 9.2% of land price) to
cover property taxes and interest charges on the land cost which are payable during the design (1
year) and construction (3 years) stages of the project.24
3. Conserving and adaptive reuse of existing building
In reply to the Outline Application for redevelopment at Plot Ratio 5.0 (Proposal A), URA advised
that GMC was currently under conservation study and total redevelopment for the development
would not be considered till 1 October 2019.
Proposal B in the Information Memorandum therefore involves redevelopment with conservation
of the existing 16‐storey block for an integrated development comprising retail, office, hotel,
residences and serviced apartments. The Outline Application for this option proposed adding
29,326.0 sq m GFA to the existing 56,651.49 sq m. The total proposed GFA of 85,977.5 sq m works
out to a plot ratio of 6.38.
Based on the site layout plan below, a small multi‐storey car park beside main building (see Figure
below) can be torn down and redeveloped into a narrow tower block to accommodate the
additional 29,326.0 sqm GFA. See Figure 4.
Figure 4 Demarcation of the Conserved Site
Source: Google Map
24
Interest payable on land is equivalent to 7.2% of land costs (i.e. 1.8% pa x 4 years), while property taxes on land is equivalent to 2.0% (10.0%
pa x 4 years x 5.0 % of land value).
RE4701 Real Estate Development
Page 11 of 13
______________________________________________________________________________________
3.1 Design & space allocation of existing building
Proposal B necessitates the developer working within the constraints of the existing structure that
will be conserved as well as meeting strict conservation guidelines and building codes. GMC
signature step‐terrace building design stands at 16 storeys with a mix retail, office and residential
uses. There is a public terrace space with sea view on top of the third storey of retail podium and
a “playdeck” for the residents on the ninth floor. The offices were designed not as traditional office
spaces, but as live‐work units that we now associate with “SOHO” developments. See Figure 5.
Figure 5 GMC Stacking Plan
Source: DP Architects
Figure 6 GMC Key Features
Source: Edmund & Tie
RE4701 Real Estate Development
Page 12 of 13
______________________________________________________________________________________
The existing GFA, breakdown by floor level, for GMC have been verified by URA are as follows:
Storey
Existing GFA (sq m)
based on 1993 Guidelines
Basement
820.21
Breakdown of GFA by use (sq m)
Commercial
Residential
820.21
Ground Floor
7,575.43
7,575.43
1st Floor
6,857.78
6,857.78
2nd Floor
6,947.57
6,947.57
3rd Floor
6,564.37
6,408.12
4th Floor
1,714.17
1,714.17
5th Floor
3,530.38
3,530.38
6th Floor
3,407.61
3,407.61
7th Floor
3,546.62
3,546.62
3,243.69
156.25
8th Floor
3,243.69
9th Floor
1,608.69
1,608.69
10th Floor
1,734.89
1,734.89
11th Floor
1,608.69
1,608.69
12th Floor
1,608.69
1,608.69
13th Floor
1,682.01
1,682.01
14th Floor
1,591.17
1,591.17
15th Floor
1,558.50
1,558.50
16th Floor
1,051.02
1,051.02
Total
56,651.49
44,051.58
12,599.91
RE4701 Real Estate Development
Page 13 of 13
______________________________________________________________________________________
Question 1 (100 marks)
(a) The base scenario for the redevelopment option adopts a conservative plot ratio of 4.208. This
means that the maximum GFA for the new development would be similar to the GFA of the
current building. Under this scenario, why would a developer/owner demolish an existing
building and replace it with a new building without any increase in the GFA?
(30 marks)
(b) Assume a potential developer requires a profit margin of 10% (of GDV) to undertake the
redevelopment project with a plot ratio of 4.2. What would be the maximum amount the
developer is willing to pay for the site?
(20 marks)
(c) Assuming the plot ratio of the site remains at 4.2 and the developer is willing to meet the site’s
reserve price of $ 800 m, what is the developer’s profit margin (% of GDV) to undertake the
redevelopment project?
(20 marks)
(d) At the time of this case, URA advised that GMC was currently under conservation study. List
and discuss the various challenges and considerations to conserve and rehabilitate a large
mixed‐use building, such as GMC, successfully.
(30 marks)
END OF PAPER