FEASIBILITY STUDY OF A PROPOSED CONDOMIUNIUM DEVELOPMENT IN TANJONG RHU

Abstract

In December 1988, Straits Properties paid a sum of about $ 47,000,000 for a site at Tanjong Rhu. The site is about 35,000 square metres and has an office block, a warehouse and a vacant shipyard standing on it. As an astute developer, Straits Properties Private Limited had identified the development potential of the site for condominium use. Straits Properties Private Limited also felt that the recent government policies for the lands in Tanjong Rhu will ultimately promote Tanjong Rhu into high priced residential land and by identifying the opportunity earlier, the possibilities of earning a supernormal profit will increase. However, in real estate development, high opportunity cost of holding lands may be involved. Thus decision has to be made on whether it is worth to hold the lands until such time that the lands are ripe for redevelopment. This decision making process is by no means simple because of the uncertainties present in the projection of future market conditions. Hence, certain aids to decision-making must be utilised to attempt to make the decision-making process a rational one. Analyses by the discounted cash flow model, simulation model, sensitivity analysis have thus become more commonly employed and accepted by real estates professionals.