Published July 13, 2009

Motorsports hub proposal hits bumps

Terms of tender, poor economic climate, site conditions raise risks, costs for potential bidders

By NISHA RAMCHANDANI

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(SINGAPORE) The race to build the Changi Motorsports Hub (CMH) is turning into a bumpy ride.

One challenge facing potential bidders appears to be landing the funding to pull off the project, especially given that banks are treading cautiously in the current economic climate.

Since the Request For Proposal (RFP) for the project was released on March 30, seven parties - both local and international consortia - have obtained the tender documents, said the Singapore Sports Council (SSC).

But potential bidders are finding the terms in the RFP too onerous, said an industry source. And with the economy still barely on the mend, the risks involved in going into such a mega project are heightened, added the source.

In essence, the proposed CMH will feature a permanent circuit on a 41-hectare site, as well as an entertainment complex, food and beverage facilities, retail outlets and convention halls. The track will be at least 3.5km long and will be Grade 2 certified by the Federation Internationale de l'Automobile and Grade 1 certified by the Federation Internationale de Motocyclisme.

One challenge facing potential bidders appears to be landing the funding to pull off the project, especially given that banks are treading cautiously in the current economic climate. Without financial support from the banks, embarking on the project would require deep cash reserves.

In addition, the site - which sits on reclaimed land - appears to present technical difficulties. Soil conditions are not ideal and soil settlement could affect the facilities built on the site. Sewer lines also need to be run, all of which translates to high costs.

With a total price tag in the region of several hundred million dollars, potential bidders are finding this a tough decision to make.

'We are currently studying the commercial viability of the project,' said a spokesman for Haw Par Corp, one of the parties looking to bid for the tender.

'The government has got to work together with the winning bidders to keep the costs low. If they can help relieve some of these costs, it is workable,' said Knight Frank managing director Danny Yeo, adding that the CMH will benefit Singapore as well. The firm is part of a consortium that is keen to bid for the project.

Difficulties aside, Mr Yeo is convinced of the potential that the CMH offers. 'We are excited. There's a lot of potential,' he said, pointing to the various uses of the track, coupled with the integrated commercial activities, as well as its close location to the city. Other parties reportedly in the running to bid for the project include the SUTL Group, Singapore Agro Agricultural and Peter Kwee's group, Exklusiv.

In response to queries from The Business Times, SSC said: 'In the current economic climate, it is expected that the consortia are facing the same challenges as other businesses when it comes to securing finances. We can therefore expect to see a mixture of debt financing and equity financing from the market.'

At this point, there is no indication that any of them are pulling out of the bidding, it added.

'We understand that some of them are approaching one another to explore consolidation of resources to put forth bigger and better proposals. We will continue to engage them in regular dialogue sessions leading up to the closing date of bid submissions,' SSC said.

The closing date is August 27.

The successful bidder - expected to build and operate the track for 30 years - will be selected by early next year. Project completion is scheduled for the fourth quarter of 2011, with the track opening by the first quarter of 2012.