The Interlace is scheduled to be launched in October, and the management has stressed repeatedly that pricing would be affordable. Its construction costs are expected to be between $250-270 psf, lower than the $320 psf we had assumed earlier. We correspondingly lower our estimated breakeven price to $703 psf, while keeping our ASP unchanged at $900 psf.
For The Interlace, a $660m 5-year project financing loan has been secured from seven banks (DBS, UOB, StanChart, OCBC, Bank of Tokyo Mitsubishi UFJ, Maybank and HSBC). We estimate the all-in borrowing cost to be about 4.2%.
Besides The Interlace, CapitaLand is also preparing to launch the 165-unit Urban Suites, on the site of the former Char Yong Gardens. We reckon that its launch is closer to the year’s end. Lowering our cost of construction assumption by 10% to $360 psf, the estimated post-provisioning breakeven cost for the project is $1,925 psf. We maintain our ASP assumption at $2,300 psf.
We have lowered our construction costs assumptions for the other projects in CapitaLand’s landbank, and pegged the associated companies to market value. Pegged at a 15%-premium to our FY10 RNAV of $3.98, we have raised our target price to $4.57. The stock has been a relative laggard compared to its peers. Upgrading to BUY.
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