Residual Approach

Gross Development Realization

In order to obtain the unit price baseline for each type of unit; 2, 3, 4 bedroom, a
transaction prices of comparable units such as THE SANTORINI, Q BAY
RESIDENCES and WATERVIEW are taken into account as reference. By taking only
units on the 8th floor as our comparable units, the variation in price due to height
premium has been taken into account as 8th level is the mid-level of our proposed
plan of 15 levels. Table shows the sequential steps in arriving at Average Unit Price.

Derivation of Average Unit Price

2 Bedroom Unit No Area (sf) Transacted Unit Price Contrac Unit Price Average
Price ($) ($ psf) t Date ($ psf) Unit Price
After
Time
Adjustmen
t
2014 Q4 =
Base PPI

THE #08-38 753.473 $811,000.00 $1,076.00 12-Nov- $ $

SANTORINI 7 14 1,076.00 1,085.64

Q BAY #08-40 882.640 $997,110.00 $1,130.00 3-May- $

RESIDENCES 7 13 1,098.91

WATERVIEW #08-01 785.765 $850,000.00 $1,082.00 9-Dec- $

5 14 1,082.00

3 Bedroom Unit No Area (sf) Transacted Unit Price Contrac Average

Price ($) ($ psf) t Date Unit Price

THE #08-41 1044.09 $1,170,000.0 $1,121.00 9-Apr-14 $ $

SANTORINI 9 0 1,106.77 1,058.55

Q BAY #08-35 1162.502 $1,243,350.0 $1,070.00 9-Jul-13 $

RESIDENCES 0 1,030.25

WATERVIEW #08-17 1140.975 $1,200,000.0 $1,052.00 30-Jun- $

0 14 1,038.64

4 Bedroom Unit No Area (sf) Transacted Unit Price Contrac Average

Price ($) ($ psf) t Date Unit Price

THE #14-26 1367.01 $1,570,000.0 $1,148.00 14-May- $ $

SANTORINI 7 0 14 1,133.42 1,018.26

Q BAY #08-39 1377.78 $1,336,720.0 $970.00 6-Feb-13 $

RESIDENCES 1 0 956.71

WATERVIEW #08-18 1323.96 $1,215,000.0 $918.00 10-Dec- $

 1 0 10 964.64

Note: Due to unavailability of transacted 4 Bedroom unit on the 8 th floor, we have replaced it with a
transacted unit located on the 14th floor.

In order to reflect the value of the units as if it is transacted recently, transaction

prices are adjusted to the current PPI as of 2014 quarter 4 (2014Q4). The condo PPI
values and formula used for time adjustment are as follows:

Time Adjustment

URA PPI (Condo @ East PPI for

Formula
Region) Condo

2010 Q4 185.0
2013 Q1 197.1
2013 Q2 199.9 PPI 2014 Q 4
2013 Q3 201.9 Price psf 2014 Q 4 = UnitPrice
PPI then
2013 Q4 201.0
2014 Q1 197.7
2014 Q2 196.9
2014 Q3 196.5
2014 Q4 194.4

An example of the time adjustment is shown in Table below.

Development The Qbay Residences

Unit #08-38
Unit Price (psf) $1,130.00
Contract date 03-May-13
PPI of contract date 199.9
Current PPI 194.4
PPI difference 5.5
Unit Price after time adjustment $1,098.91
Table : Example of Time Adjustment Calculation

Hence the expected GDV for Tampines Parcel D site is the total of:

Propose Average(a Total

Floor Area No. of Total NFA
d Unit djusted) NFA GDV
(sqm) Units (sqft)
Type Unit Price (sqm)
($ psf)
2 75-82 17937.50 193079.25 $209,613,878.28
205
Bedrooms $1,085.64 (87.5)
 3 90-111 21105.00 227174.22 $240,476,213.58
210
Bedrooms $1,058.55 (100.5)
4 120-128
18 2232.00 24025.25 $24,463,954.84
Bedrooms (124)
$1,018.26

Total 433 41274.50 444278.72 $474,554,046.71

Estimation of costs

Construction Costs

Construction costs are the cost of construction of a development and are mainly
affected by currency fluctuations and prices of essential construction materials.

Based on Singapore Report December 2014 Rider Levett Bucknall, the construction
cost for a medium quality development, is approximately between $2,700 and $3,400
per GFA shown in Table,

Development Type Cost per GFA ($/m2)

Medium Quality Condominium 2,700 3,400
Good Quality Condominium 3,400 4,400
Luxury Quality Condominium 4,400 6,000
Table: Rider Levett Bucknall Construction Cost1

Additionally, we have chosen the lower bound of the cost/GFA of $2,700 to reflect
market conditions in line with current competitive tendering by main and sub
constructors. However, there may be deviations due to the volatile price changes in
the essential construction materials such as cement.

Construction Period
The construction period of the proposed development is approximated to be 3.5
years. This estimated duration is derived from past completed developments of
similar size and complexity.

1 CONSTRUCTION MARKET QUARTERLY UPDATE. (2014, December 1). Rider Levett Bucknall, 9-9.
Professional fees
Professional fees are the fees to be paid to professionals hired to be engaged in the
construction process (e.g. Architects, project managers). Upon market practices of
history, we observe that architect commands 5-7% of the total construction cost and
a project manager commands 1-2% of the total construction cost. As such, the
estimated professional fee for our development is estimated to be 8%.

Financing Cost

Month/Year Prime lending rate

Jan 2015 5.35%
Feb 2015 5.35%
Mar 2015 5.35%

Table: MAS Prime lending rate2

Based on available data obtained from Monetary Authority of Singapore (MAS), the
prime-lending rate for Jan 2015 to Mar 2015 is 5.35%. Prime lending rate is the
average rate of interest charged on loans by Singapores leading banks to their
borrowers. YSM Development Pte Ltd, is a reputable and experienced development
company. Hence we expect the financing cost for construction to be 1.65% in
addition to the prime-lending rate, factoring in a 1.65% risk margin which totaled up
to 7.00%.

On the other hand, we factor a lower risk margin of 1.15% for the financing cost for
purchase of land as the transacted land has been pledged as collateral. Thus the
financing cost for purchase of land amounts to 6.5%.

Marketing and Legal fees

The marketing fee for the proposed development is deemed to be 3%, in line with
market data, where typical marketing fees for residential projects are between 2.5%-
3.5%. Additionally, legal fees are typically charged at a rate of 1-2%. Hence legal
fees are estimated to be 1.5% taking into consideration the need for a buffer to meet
unforeseen circumstances. Hence marketing and legal fees are estimated to be
4.5% of the GDV.

2
https://secure.mas.gov.sg/msb/InterestRatesOfBanksAndFinanceCompanies.aspx
Profit Margin
According to a study by Knight Frank3, profit margins of new leasehold condominium
launched in 2014 has dropped more than 50% from 2013 and 2012 of around 20%.
Hence we arrive the estimated developers profit margin at 10%.

The calculations for the residual value are as follows:

Residual Method Tabulation

Land Area 15660.40

PR 2.8

GFA 43,850

Efficiency Factor 0.8

NFA 35080
Construction cost / GFA $2,700
Construction Period 3.5
Financing cost for construction (per annum) 7.00%
Financing cost for land (per annum) 6.00%
Marketing & Legal fees 4.50%
Professional Fees 8%
Developer's Profit 10%
Table : Factors for Residual Adjustment

GDV: $474,554,046.71
Less
Construction cost: $2700 psm x GFA (43,850sqm) $118,395,000.00
Professional fees: 8% $9,471,600.00
Financing cost for construction $17,082,615.42
Marketing and legal: 4.5%of GDV $21,354,932.10
Developers profit: 10% of GDV $47,455,404.67
Residual Sum: $260,794,494.51
Table: Adjustment Table for Residual Method

Let x be Site Value

Financing cost 6.5%

3 http://www.propertyguru.com.sg/property-management-
news/2014/9/62293/developer-profit-margins-fall-significantly-study-
Legal fees @ 1.5% 0.015x
Stamp duty @ 3.0% 0.03x

Land cost + transaction cost + Financing cost

x + [(1.065)3.5 -1]x + 0.045x = $260,794,494.51
1.2915x = $$260,794,494.51
x = $201,917,405.04
Estimated Land Value $201,900,000.00