Hi potatolover,

If I am not wrong, you have misunderstood my writing on the Sengkang (Fernvale) sites.

I had written:“Net Saleable Area (NSA) of 536,171 + 562,327 = 1,098,498 sq ft (equal to the GFA as 10% free balcony space is allowed, hence allowing me to assume 100% efficiency. Note that 9 Residences’ NSA is 102% of allowed GFA), construction and other costs of $380 psf, and average selling price (ASP) of $935 psf. The $935 psf selling price is about 10% discount from nearby projects.”

The $935psf selling price refers to my projection of the selling prices at the Sengkang (Fernvale) sites, not that for 9 Residences.

I noted that 9 Residences’ NSA is 102% of allowed GFA, which indicates that there is no need to provide for 80% efficiency (like you did in your table), because of the 10% free balcony space allowed for most condo projects. Once you have the 10% free balcony space, the NSA can rise to as much as the GFA, if not more.

In the case of 9 Residences, my estimated ASP is $1,050 psf, which is close to the $1,063 psf figure you suggested.

Meanwhile, you may want to know that CES has already apportioned the land cost for the Yishun site as $66m for the condo and $146m the retail space. Since the NSA of the condo is 161,500 sq ft (higher than the allowed GFA of 158,480 sq ft), I then divide $66m by 161,500, giving me a land cost of $408 psf of NSA. Next, I estimate that construction and other costs add up to $380 psf of NSA for the condo, and arrive at a total cost of $788 psf. With an estimated ASP of $1,050 psf, I then have a gross margin of $262 psf, giving the condo space a gross profit of $42.3m.

Similarly, the retail portion’s land cost of $146m when divided by the actual NSA of 78,985 sq ft (much lower efficiency for retail) implies an average cost of $1,848 psf. I then estimated construction and other costs here as $69m, or $873 psf, giving me a total land + other costs of $2,721 psf. Against an ASP of $3,500 psf, I then derive a gross profit margin of $779 psf or $61.5m in total.

Total gross profit from 9 Residences and Junction 9 is then $103.8m, against your more aggressive estimate of $148m. DMG’s report recently estimated this development to yield $86m, which I think is net of tax. Working backwards, this implies a pre-tax profit of $105m, which is very close to my figure of $103.8m.

I reckon you did not apportion the land cost as per CES’ guide, leading to the “loss” in 9 Residences. However, this is just a cost-matching situation and does not affect the total project’s figure. Nevertheless, the $40m+ gap between your total profit projection and mine is due to cost assumptions.

Based on BT’s report on Friday on the Fernvale tender, analysts said the breakeven would be $850-890 psf, which would imply an even higher construction/other costs of above $400psf for condo units. I am comfortable with using $380psf at the moment, but am likely to raise it to $400psf in future in view of rising costs. You may want to note that psf construction/other costs for commercial space are usually much higher due to low efficiency and higher "other" costs.