A GROUP of companies controlled by seasoned property investor Stanley Quek is selling seven shophouses for S$81.4 million to boutique real estate investment company 8M Real Estate.
Five of the shophouses are adjoining properties at Nos 15, 17, 19, 21 and 23 Tanjong Pagar Road; they are changing hands for S$57.4 million. This works out to S$2,166 per square foot on the estimated gross floor area of 26,500 sq ft spanning four floors and a mezzanine level.
The five shophouses are on 8,902 sq ft of land with about 77.5 years' balance lease. The internal space in the five adjacent properties is contiguous.
8M Real Estate managing director Ashish Manchharam said the space on the ground floor has been vacated by the previous tenant and will be leased to several restaurants. On Level 2 are Yoga Movement and landscape architects Grant Associates. Online content discovery platform Outbrain occupies most of the third floor while Adelphi Digital takes up the fourth and mezzanine levels.
The other two shophouses that 8M Real Estate is buying from Dr Quek-controlled entities are 18 Gemmill Lane and 71 Neil Road.
The Neil Road property, on a site with a balance lease term of 72 years, is being transacted for S$13 million or S$1,912 psf based on the GFA of 6,800 sq ft. All three levels and the attic are leased to PMG Group, which is in the integrated marketing communications business.
The Gemmill Lane property is being sold for S$11 million or S$2,511 psf on GFA of 4,380 sq ft spread over three levels and an attic. The street level space is leased to restaurant Bar A Thym. Level 2 is vacant while Level 3 and the attic are occupied by media group Unruly.
The companies controlled by Dr Quek are expected to make nice gains from divesting the seven shophouses after a holding period of four to five years. Based on caveats data, the five Tanjong Pagar shophouses were previously transacted at S$32.83 million in 2011; 18 Gemmill Lane changed hands at S$5.8 million and 71 Neil Road at S$8.2 million, both in 2012. The vendors are estimated to have spent about S$1 million refurbishing the seven properties, translating to a total investment of about S$48 million.
When contacted, Dr Quek said: "We believe this is an appropriate point to realise gains, having acquired the properties in 2011/2012 - and to reposition our portfolio of conservation CBD shophouses. We've made some gains here and move on to new asset classes or other areas of shophouses. I remain very keen on conservation shophouses because they are limited edition properties."
8M Real Estate, on the other hand, still sees opportunity for repositioning and further growth for the shophouses it is buying from the Dr Quek-controlled companies.
"We shall seek to immediately refurbish and lease out the ground floor of the Tanjong Pagar shophouses with several exciting new F&B concepts and fill up the vacant second-floor space at 18 Gemmill Lane," said Mr Manchharam.
The acquisition price of the seven shophouses equates to a gross yield of 4.0 per cent on the assumption the portfolio is fully leased, he added.
The latest acquisition will serve to boost the group's CBD conservation shophouse portfolio. Set up in 2014, 8M Real Estate is owned by Mr Manchharam along with some institutional investors.
Inclusive of its purchase of 37 Craig Road for S$6.5 million last month, 31 Hongkong Street for S$14.45 million last year as well as its 2014 acquisitions of five shophouses along 112-116 Amoy Street (for S$50 million), and 22 Gemmill Lane (S$14.25 million), the total value of the group's 15 shophouses today is about S$200 million, said Mr Manchharam. Having spent about S$3-4 million sprucing up the Amoy Street shophouses, 8M Real Estate has lined up hip eateries for the ground level. So far, Burger Joint has opened, while New York cocktail bar Employees Only and restaurants Ding Dong and boCHINche are slated to open next month.
"At the end of the day, we view shophouses as retail-anchored real estate and our focus is on the CBD because of the growing population that provides patronage, particularly for the ground-floor F&B outlets," said Mr Manchharam.
Offices located on the upper levels within these shophouses also draw niche tenants, for instance, online media/tech companies.
Krystal Khor of Mondania Pte Ltd brokered the sale of the seven shophouses.
Source: Business Times, 10 May 2016