An Investment Report on a Land Lease Property Near Orchard and Cuscaden Roads in Singapore

As a Property Portfolio Manager, you are approached by your client, a property developer, to advise on the price to bid for a government residential land parcel at Cuscaden Road in the upmarket Tanglin, Orchard Road are of Singapore. You are to submit an Investment Report that comprises all the sections detailed in this brief in your recommendation to be the client. Introduction : The first aim is to provide an overview of the purpose of the Investment Report. The purpose of this Investment Report is to make a recommendation to the client on the possible price to bid for the Land Parcel on Tender. Secondary aim of the introduction is to explain the economic outlook. demographics and the state of the residential market. *note that population / marriage figures and relevant prevailing government policies are well related to the state of the residential market.* Site Analysis : Contains subject property's development details and planning parameters. SWOT of the subject property and i

Running Head: INVESTMENT REPORT 1
Investment Report
Student’s Name
Course Name and Number
Tutor
University’s Name
Date Submitted

INVESTMENT REPORT 2
Investment Report
Introduction
This investment report presents the findings of an evaluation of a parcel of land that has
been put up for lease in the neighborhood of Orchard and Cuscaden Roads in Singapore. The
primary objective of this report is to recommend a suitable price to bid for the piece of land. The
recommended price should be as optimal as possible. It should neither be too low for the bidder
to win the bid nor so high that the bidder spends significantly more than the market price to
acquire the parcel of land if they win the bid. The process of establishing an estimate value of
land in order to place a bid is a fairly complex one. It involves an analysis of the site, market
research and finally an estimation of the gross development value of the land. This report details
how these procedures were employed to determine the value of the land under consideration.
The second objective of this report is to explain the economic outlook of the area in
relation to the residential market. The current stage of the national economy with regard to
economic cycles, government policies and demographics are relevant in detailing the general
economic outlook and determining the prices of residential properties (Dietrich, Harris, &
Muller, 2011).
Site Analysis
The subject property is located in the Cuscaden Road in the upmarket Tanglin, Orchard
Road area of Singapore. One of the most noteworthy facts about Singapore is that it is a city state
with a land area of less than 500 square kilometers. Singapore is one of the countries with the
smallest land area; only about fifteen other countries have a land area smaller than the size of
Singapore’s. With a population of about 5 million, land is a very scarce resource in Singapore

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and hence the reason why Singapore has turned to land reclamation as a solution to the problem
of scarcity of land.
Most of the land in Singapore has been used for urban development. Most neighborhoods are
therefore served by a good transport and other urban infrastructure. Tanglin, where the subject
property is located, is an up-market neighborhood that hosts a number of embassies such as the
Embassy of Japan, Embassy of Myanmar, Embassy of the People’s Republic of China, Embassy
of the Philippines, Embassy of Indonesia and the Indian High Commission. Tanglin also hosts
the British High Commission in Singapore. There are numerous social amenities in the Tanglin
neighborhood. These include malls, hospitals, restaurants, schools, botanic gardens and sports
clubs.
Investment SWOT analysis
Strengths
 One of the key strengths of the property is that it is located
in an up-market area of the city. As such, it attracts high net
worth individuals and institutions that have the ability to
pay high rents. This contention is supported by the number
of embassies and foreign missions located in the Tanglin
area. One of the implications of the property’s location is
that it is bound to deliver high returns when it is put to
economic use.
 A further strength of the property is that it is well served by
transport and other urban infrastructure. There are many
amenities that will be available to residents of the property.
The Singapore Botanical Gardens which are a short
distance from the site for instance will provide residents
Weaknesses
 The primary weakness of the subject property as a potential
investment is that it is bound to be very expensive. The cost
of property in the Tangling area and in Singapore in general
is hiked by the limited and scarce supply of land coupled
with high demand. As a result the property indices for
Singapore are significantly higher than other cities around
the world. Singapore’ residential property is generally more
expensive than Paris, Los Angeles, Beijing, Berlin and
Madrid among a host of other cities.

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with an opportunity to be in touch with nature. This is a
rare opportunity in the state as most of the country’s forests
and natural spaces have been cleared over time to provide
room for urban expansion.
 A further strength of the subject property is that it is large
enough to deliver some economies of scale. The subject
property is large enough to house approximately 170
residential units. In a country where land is very scarce,
having access to a piece as sizeable as the subject property
is a rare occurrence. This is supported by the fact that most
of the properties for sale in the area are significantly
smaller.
Opportunities
 According to the Ministry of Trade and industry, the
economy of Singapore is expected to grow at a moderate
rate (Ministry of Trade and Tourism Singapore, 2019).
Economic growth is a key factor influencing aggregate
consumption within the economy. Demand for housing is
particularly directly related to economic growth. There are
therefore likely to an increased demand for residential
housing as economic growth means households are getting
more disposable income.
 A further opportunity that investment in the subject
property presents is the prospect of hosting staff working in
the embassies situated in the Tanglin area. As highlighted,
there are numerous embassies in the Tanglin area. The
subject property could host staff working in these
embassies or guests of the embassies.
Threats
 The ongoing reclamation of land from the sea poses a
significant threat to the subject property. Singapore expects
to add about 200 square kilometers to its total land area by
reclaiming land from the sea. This will add significantly
add to the supply of land in the city and as a result ease
some demand pressure. The prices of land are likely to fall
as a result of the creation of a significant amount of land
area. This could result in a decline in the value of the
subject property.
 There is a significant number of residential projects that are
ongoing or are set to be launched in the Tanglin
neighborhood and in the city in general. Demand for the
residential units that will be constructed in the subject
property may be adversely affected by the increase in
supply of residential units.

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Market Research
There are numerous factors that influence the price of real estate property: supply,
demand, availability of finance and interest rates among other factors (Des Rosiers, Theriault and
Villeneuve, 2010). Supply is one of the most significant of these factors. Demand for housing
and property tends to change gradually over time. In contrast, changes in supply of housing can
be rapid. These changes can be attributed to government policy to either directly increase supply
by for instance constructing mass housing units or indirectly by creating an environment that
encourages inflow of finance and other resources needed to construct new residential units
(Wyatt, 2015).
There are more than fifty residential projects that have been launched or are expected to
be launched in Singapore in 2019. Roxy Pacific Holdings, Sustained Land and other consortia
have already began work on mega housing projects. SingHaiyi is set to launch a big project
dubbed the Gazania and another called the Lilium. Two of the biggest projects launched in 2019
(Normanton Park and Treasure at Tampines) comprise more than 3500 units. It is also
noteworthy that majority of the new projects launched in 2019 are in the upmarket areas in
Districts 9, 10 and 11. A significant number of projects are located near the Orchard Road
shopping zone. The building craze that has gripped the Orchard Road zone and generally the
Tanglin neighborhood will significantly increase the supply of housing in the area and to some
extent mute demand for and increase in prices of residential property.
Mortgages play a significant role in influencing the prices of real estate property in an
economy. Mortgage listings in Singapore increased in 2018 and are expected to increase
throughout 2019. The availability of mortgage finance and willingness of consumers to take up

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mortgages to finance investments in real estate directly affects demand. One of the preconditions
for the uptake of mortgages is a stable economy. As highlighted, the national economy has been
growing steadily in the recent past hence providing investor confidence.
Estimation on Gross Development Valuation
This section provides details of the procedures used in establishing a valuation for the
subject property. The objective of this valuation is to provide an analysis of the subject property
on the basis of economic characteristics and value. There are three approaches that are typically
used by appraisers to determine the value of a specific piece of property (Tse, 2006). The three
approaches are income, sales comparison and cost. These three approaches are interrelated and
can be used together to provide a rigorous valuation (McCluskey and Borst, 2016). There are
instances when all the three approaches cannot practically be used and only one or two of the
approaches can be used.
The cost approach cannot be used to determine the value of the subject property as cost
information is not available. The income approach may also not provide an accurate valuation as
the property market in Singapore and in the Tanglin neighborhood is fluid at the moment and
consequently it would be difficult to predict with a fair amount of precision the expected income
that the property will generate (Trippi and Turban, 2013). As mentioned, there are mega housing
projects that have been launched in 2019. This increase in supply could significantly affect the
rent rates. The land reclamation efforts could also affect the supply of residential property and
consequently the rental income that can be realized. The sales comparison approach is therefore
the most suitable approach to determine the value of the subject property.

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Using the sales comparison approach, the value of the subject property is compared with
similar properties in the area that have similar characteristics and have been put to similar use
(Gold, 2015). The subject property has been put up for sale without any developments on site.
Comparisons have to be made with properties that d not have any developments or adjustments
made to eliminate the effect of the developments on the cost of the property.
Data relating to land that has in the recent past been put up for sale in the Tangling
neighborhood was gathered. The data was gathered from a variety of sources including property
listing websites, real estate brokers, developers and other appraisers (Linneman, 2011). The
Tanglin neighborhood is not vast and hence any property put up for sale is likely to be picked up
by one of the sources we relied upon if not all of the sources.
The table below presents a list of the properties that were up for sale in the neighborhood.
Area Size Developments Price Price per
square meter
Tanglin Road 1393 square
meters
none S$ 31,800,000 22,828
Leedon Park 1458 square
meters
None S$ 24,800,000 17,009
Dalkeith Road 1046 square
meters
None S$20,000,000 19,120

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Adjustments
Adjustments would be needed to match the characteristics of the properties that have
been put up for sale with the characteristics of the subject property (Dubin, 2012). The three
properties selected closely match the characteristics of the subject property. They are
undeveloped and are in the same zone/district. Consequently, the only adjustment that needs to
be done is the size adjustment.
An arithmetic average of the prices of the three properties provides a realistic estimation
of the value of the land in the area (Granger and Newbold, 2014). The fact that the variance in
these prices is not large suggests that the quoted prices are reliable (Gallimore, Fletcher, and
Carter, 2016). The average price per square meter for the three properties is S$19,652 per square
meter. Based on this valuation, the value of the subject property is approximately S$
112,450,651
Assumptions and Limitations
1. This report is partly based on information gathered from a wide variety of source and
consequently the reliability of the incorporated data cannot be entirely guaranteed
(Nelssen & Zuelch, 2011).
2. The report does not express an opinion relating to matters that are outside the realm of
work done by real estate appraisers (Gallimore & Wolverton, 2010). In particular, this
report does not express opinions on matters that require legal expertise or any other
specialized inquiry by professionals of specialized fields.

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3. This report makes the assumption that the current owner of the land holds genuine title
over the land. Further, it is assumed that the title attached to the parcel of land does not
have any encumbrances or liens attached.
4. It is assumed that the current owners of the parcel of land have complied with all
applicable zoning regulations and that there will be no restrictions to the intended use for
which the land is to be put.
5. The value of the land stated in this report is valid for a limited period of time prior to and
after the date of the report. Changes in economic conditions may lead to significant
change in the value of the land and as such no responsibility will be borne if the client or
any third party relies on this report when prevailing economic and other conditions have
materially changed (Quan & Quigley, 2009).
6. The appraiser reserves the right to make any adjustments to the analyses and conclusion
of this report if additional data that I more reliable becomes available (Laakso, 2016).
7. This report is based on the assumption that the boundaries of the property are correct and
that the size of the land provided by the client is accurate. No survey on the property has
been conducted to get an independent opinion on the size of the land. It is further
assumed that the land has not been encroached into.
8. No consideration has been given to the value of any developments on the land nor has
consideration been given to the value of removing such developments. The value of the
land stated in this report relates only to the land under consideration.

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9. The appraisers of the land are only liable to the client. The appraiser will not accept any
liability to third parties or any other party that may rely on this report apart from the
client.
Final Recommendation
The preliminary value of the subject property based on the sales comparison approach is
S$ 112,450,651. The Orchard Road zone is arguably a key attraction for new developments and
hence the reason why a significant portion of new residential projects are in that neighborhood.
The final value is adjusted based on the subject property’s proximity to the Orchard Road
shopping district. Adjusting for this proximity, the ideal value for the subject property would be
S$20,000 per square foot and the value for the entire property would be $114,440,000.
Conclusion
This report set out to derive and recommend a suitable price to bid for a 99 year lease of a piece
of land neighborhood of Orchard and Cuscaden Roads in Singapore. An analysis of the site
where the parcel of land is located was conducted to get an understanding of the parcel’s
surrounding. The nature of environment that surrounds a specific property significantly
influences the attractiveness of the property to investors and eventual tenants and thus influences
the price. A key highlight of the site analysis is that the neighborhood in which the subject
property is located is well endowed with infrastructure that includes a good transportation
network, shopping malls, schools, hospitals and botanical gardens for recreation. A SWOT
analysis of the site reveals that the site’s strengths and opportunities outweigh its weaknesses and
threats. The threat posed by increased supply of residential units in the subject property’s
neighborhood is significant. With time however, this threat can be turned into an opportunity by

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seeking to fill gaps left by residential developments that have gone before. The next procedure
involved deriving the sales value for the subject property. The sales comparison approach was
used to derive a value to bid for the property. This approach relies on the sales value of similar
properties that have been sold in the recent past to determine an ideal value for the property
under consideration. The average value per square meter of the three comparable properties
selected was adjusted to arrive at the ideal price per square meter to bid for the subject property.
The adjusted price per square meter is S$ 20,000 which yields a total value of S$114,440,000 for
the whole property.

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References
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value estimates. Journal of Accounting and Economics, Vol. 30, No. 2, pp. 125–158.
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neighbourhood factors in hedonic price modeling. Journal of Property Investment &
Finance, Vol. 18 No. 3, pp. 291-315.
Dubin, R.A. (2012). Spatial autocorrelation and neighbourhood quality. Regional Science and
Urban Economics, Vol. 22, pp. 433-52.
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