The Singapore Land Authority has put up the former Alkaff Mansion for tender.
The site near Mount Faber can be used as a restaurant, art gallery, spa or museum.
The successful tenderer can lease the site for an initial three years, with an option to extend for another two terms of three years.
But analysts said that developing the site into a success will be challenging.
The former Alkaff Mansion appears in a state of disrepair now, after several of years of disuse.
In its heydays, it was a fine-dining restaurant and choice location for weddings.
Now, authorities are looking to spruce up the conservation site at Telok Blangah Green.
The tender seeks to get developers to transform the site into a restaurant, or set up an art gallery, spa or museum.
Nicholas Mak, real estate lecturer, Ngee Ann Polytechnic, said: “In terms of location, it has both advantages and disadvantages. It is located on a hill, offers a great view of the surrounding, but at the same time, because of the location, it is also a bit secluded, and a bit far from the main road, which makes it less noticeable to the shoppers or the diners around there.
“This means that the business which is operating there will need a lot of time and effort and resources to market the business.”
Market watchers believe it will cost at least half a million dollars to make the site suitable for a business. And that hefty price tag might well dampen potential interest.
The government is guiding for rentals of around S$28,000 a month for the 97,000-square-foot site, with a gross floor area of some 13,000 square feet.
Market watchers expect the bids to be close to the guidance, but said that more innovative rental models could boost interest in the site.
Mr Mak said: “Typically, (in a) land tender process, they look at the price alone, but because of the uniqueness of this site, the authorities will have to look at the concept or the ideas or the product that the operator would bring to this site. And not just look at the rent itself.
“The government should perhaps also take a stake in the development of this place, because it is going to take a substantial amount of investment to repair it. Perhaps the authorities could share the risk with the operator by offering a lower rent in the first few years of the operation until the business has established itself and has gathered a loyal group of customers. And then the authorities can share the rewards after that by perhaps pegging the rents as a percentage of the operating income.”
Chua Yang Liang, head of research, Southeast Asia, Jones Lang LaSalle, said: “The retail market has over the last few years gone into a two-tier pricing mechanism, where you have a base rent plus gross turnover; that is to assist the tenant so to speak, for the landlord to be engaged in the business model, while I understand that for most of the state properties, such a model is not quite common yet, this is one possible option to look into.”
The former Alkaff Mansion is the first conservation site to be released this year.
Analysts expect about five more in coming months.
Mr Mak said: “Presently, it is a very suitable time for the government to release more sites, but at a gradual pace to capitalise on the expected increase in tourist arrivals.”
Mr Chua said: “It won’t surprise me that there will be more of such sites available, especially with economic conditions improving, and the regional economy picking up, where tourism is expected to improve.”
Source : Channel NewsAsia – 16 Mar 2010