In a media and analysts’ briefing held on Sept 4, CapitaLand Ltd (CapLand) unveiled its design for a new 99-year residential development located on the former Gillman Heights Condominium site. This site is the last Housing and Urban Development Company (HUDC) site not within a Housing and Development Board (HDB) estate. HUDC essentially means privatised HDB flats.

To recap, CapLand had in May 2009 completed the purchase of Gillman Heights after more than a year of legal proceedings against a group of minority owners appealing against the en-bloc sale. En-bloc purchase was done through Ankerite Pte Ltd, a consortium comprising CapLand, HPL Orchard Place Pte Ltd and two private funds. CapLand has since increased its stake in the consortium from 50% to 60% - taking over 10% stakes owned by a private fund.

The new condominuim project is called The Interlace. It sits on a eight-hectare site, located at the junction of Alexandra Road and Depot Road, next to Ayer Rajah Expressway and also in close proximity to West Coast Highway. There will be a total of 1,040 units. Sizes range from 807 sq ft to 6,308 sq ft in the form of two-, three-, four-bedroom apartments, penthouses and duplex garden units. CapLand intends to launch The Interlace next month.

Renowned architect firm Office for Metropolitan Architecture (OMA) designed The Interlace. Thirtyone apartment blocks, each six stories tall, are stacked in a hexagonal arrangement to form eight large-scale open and permeable courtyards. The interlocking volumes form the topography of a “vertical village” with cascading sky gardens and private and public roof terraces vertically extending the landscape of the courtyards. Project is expected to be completed in 2014F.

CapLand has also secured S$660mil project financing for The Interlace with seven participating banks. The loan syndication was particularly well-received, attracting over S$1bil in funds. CapLand’s management has conveyed that an all-in interest margin of 3.48% would be payable, or 2.8% margin above the three-month Singapore Interbank Offer Rate.

CapLand’s management has also guided for land cost of S$363 psf per plot ratio (ppr) and construction cost in the region of S$250 - S$270 psf. Indicative construction cost is above our initial estimates of S$160 psf, probably due to the complex “‘stacked lego blocks” design. As such we have revised breakeven cost upwards to S$754 psf. Wo Hup Holdings Pte Ltd, one of the project consultants, is believed to be the contractor for the job.

Pricing will be “affordable” according to CapLand’s management. However, we do not think “affordable will equate “cheap”. Considering the design efforts and construction overlay, the project is likely to command an average selling price (ASP) of S$1,200 psf, in our opinion. We think the project will be well-received with no nearby comparable projects.

Using latest resale prices at One-North Residences and The Rochester (both apartment blocks but One-North has a “loft” living concept) as a guide, their ASP of S$1,074 psf and S$900 psf respectively are around 11% - 25% below our expected ASP for The Interlace. n We have an RNAV estimate of S$4.72/share. Adopting a 20% discount to our RNAV estimate, our fair value stands at S$3.78/share and we maintain our HOLD rating.