Parkway Hospital is setting itself as a premium world first class hospital with its soon completed Parkway Novena Hospital. In the recent soft launch, all 100 suites released ranged between 452 square feet and 1,431 sq ft and were priced between $3.588 psf and $3,828 psf, excluding GST, were sold out.

This may sound a good price that Parkway has managed to launch at: just imagine selling a medical suite with a price tag from $1.63 mil to $5.1 mil, not forget to mention it is sitting on a 99 years lease. However the deal may not seem as sweet if we revisit Parkway’s aggressive bidding price back in the year 2008.

In year 2008, Parkway’s top bid came out to be 1.25 billion, which worked out to be about $1,600 per square foot per plot ratio (psf ppr) is a record price for land, and tops the previous record set by Australia’s Lend Lease, which paid $1,455 psf ppr for a commercial site above Somerset MRT station in August 2006. Compared to bids for land sites in the Novena area, (Parkway’s) bid is more than three times that of Far East Organization’s bid of $501.2 psf ppr for a hotel site at Sinaran Drive in January 2007 and Frasers Centrepoint’s bid of $506.9 psf ppr for a residential site at Sinaran Drive in July 2006. The aggressive price was almost five times higher than Raffles Medical’s bid, and double the offer made by Napier Medical, run by Tony Tan, whose family was once a major shareholder of Parkway.

Has Parkway overpaid the site? That is the concern of many Parkway shareholders. The total Parkway Novena Hospital development cost could easily amount to $2 billion. In May last year, Parkway raised $755.6 million in a rights issue, mainly to fund the land cost and development of Novena Hospital at Irrawaddy Road, which will cost about $2 billion, says Credit Suisse. About $78 million of the proceeds went towards refinancing short-term bank loans used for funding the equity investment in a joint venture to develop a hospital in Mumbai and the acquisition of additional equity interests in the World Link group of companies. It also used $242 million to discharge its short-term bank loans, according to the company’s annual report.

Therefore the strategy of Parkway is to provide the best hospital rooms money could buy in the region: A top-of-the-line A-class room in a public hospital is close to what will be a basic room in the hospital Parkway is building on the 1.7 ha site at Irrawaddy Road. The group plans to spend between $300 and $500 million on the new 324-room hospital, which will be completed by July 2011.

The 17-storey hospital will have 350 beds. Aside from 90 beds for patients in intensive care and high dependency rooms, the rest will be split among single, deluxe and VIP rooms, which come with adjoining rooms for guests and personal butlers. Parkway Health is mainly looking overseas to fill the beds. Foreigners from countries like Indonesia, Vietnam, Cambodia and even Russia, make up 65 per cent of patients at its three existing hospitals – East Shore, Gleneagles and Mount Elizabeth.

It seems that Parkway is able to work out its deal from the aggressive bid in the recent successful launch. The capacity constraints at Mount Elizabeth Hospital and Gleneagles Hospitals have somehow boosted Parkway faith in convincing its doctors and practitioners in buying the new medical suites, together with the improving economic fundamentals to the overall property market.

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