Strata Sale

Three adjoining office units at Peninsula Plaza up for sale with S$9.29m guide price

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THREE adjoining office units at Peninsula Plaza will be put up for sale in an expression of interest exercise on Thursday at a guide price of S$9.29 million, exclusive marketing agent CBRE said.

The exercise closes at 3pm on May 29.

Located on the 12th storey, the area of each unit ranges from 1,001 square feet to 1,776 sq ft. The units with a 999-year tenure have a combined area of 4,262 sq ft.

The indicative price of S$9.29 million works out to S$2,180 per sq ft based on the strata area.

Yap Hui Yee, associate director of capital markets at CBRE, noted that this is "attractive" compared to the office units at the nearby High Street Plaza and The Adelphi, which are transacting at S$2,400-S$2,600 per square foot.

She added that there will be no additional buyers' stamp duty or sellers' stamp duty imposed on the units, and that the prospective buyer, be it a local or a foreigner, has the option to purchase the units either individually, or all three collectively.

Peninsula Plaza is a mixed-use development comprising a six-storey retail podium and a 24-storey office block. It is a short walk from City Hall MRT interchange station, which serves the East-West and North-South lines. Prominent landmarks include the National Gallery, St Andrew’s Cathedral and the Supreme Court.

"The successful buyer will continue to benefit from the ongoing rejuvenation within the City Hall vicinity, which has seen much transformation, with new or refurbished developments," said Ms Yap.

She added: "We are optimistic that the property’s rare 999-year tenure, centralised location, and excellent connectivity are strong attributes that will appeal to both end-users and investors. The location is ideal for trades and businesses, including law or accountancy firms, allied health professional enterprises, and commercial schools."

Source: Business Times, 8 May 2019

Commercial real estate deals roaring back to life

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A series of commercial real estate deals amounting to $1.06 billion was inked in the past week, surpassing the total investment volume for the commercial sector in the first quarter of this year.

Evia Real Estate and Metro Holdings bought 7 and 9 Tampines Grande, a pair of premium Grade A office blocks from City Developments Limited (CDL) and Alpha Investment Partners for $395 million.

Mitsubishi Estate and CLSA entered into a share purchase agreement with a Perennial-led consortium to buy Chinatown Point mall for $520 million, while Realty Centre, an office building in Tanjong Pagar, has sold for $148 million in the year's first commercial collective sale deal.

The investment sales market took a breather in the first three months of this year, with total sales staying muted at $4.6 billion, a 21 per cent decline quarter on quarter, and only about 13 per cent of the total annual investment volume last year.

The residential sector chalked up sales of $1.2 billion, with the commercial and hospitality sectors next at $900 million apiece, followed by the industrial sector at $600 million. Mixed-use and others posted $1 billion of sales.

The office sector was quiet in the first quarter, with only a few strata deals. Alpha Investment Partners acquired five floors in Suntec Tower 1 and one floor in Suntec Tower 2 for $160 million.

The retail sector saw several shopping mall transactions. In the largest private transaction of the quarter, CapitaLand and CDL acquired Liang Court mall for $400 million, and SC Capital Partners bought Rivervale Mall for $230 million.

There were a few significant transactions in the industrial and hospitality sector. SGRE Banyan entered into a $227.5 million sale-and-leaseback deal for Vibrant Group's 121 Banyan Drive warehouse. Cheong Sim Lam acquired Ascott Raffles Place Singapore for $353.3 million.

The office sector is the hottest one here after Grade A Central Business District rents extended their gains by 12.7 per cent last year and potentially another 9 per cent this year. Limited supply completions and decade-low vacancy rates have raised investor interest in the sector.

Activity in the office sector is expected to pick up further in the coming quarters, with Chevron House, Anson House and 139 Cecil Street going on the market. In addition, Frasers Property is in talks with interested parties for a potential sale of Frasers Tower.

DUO Tower and its retail component are also on the market with potential suitors such as CapitaLand Commercial Trust, Singapore's biggest office landlord, according to Bloomberg.

There could also be some deals inked in the hospitality sector. RB Capital is said to be in exclusive due diligence on Andaz hotel at DUO. Oxley has put its Mercure and Novotel hotels back onto the market, while Global Premium Hotels has placed its portfolio of 23 hotels for sale at $1.4 billion.

The writer is the head of research for Singapore and South-east Asia at global property consultancy Cushman & Wakefield.

Source: Straits Times, 28 Apr 2019

Spanish tycoon paying huge premium for Stanley St shophouse

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The nearly S$22.1m Ricardo Portabella Peralta is paying is about 36% or S$6m more than what the seller paid less than a year ago

SPANISH tycoon Ricardo Portabella Peralta continues to expand his portfolio of conservation shophouses in Singapore, paying nearly S$22.1 million for a three-storey conservation shophouse at 29 Stanley Street in the Central Business District (CBD).

This reflects a whopping premium of about 36 per cent to the previous transacted price for the property less than a year ago.

The seller, a seasoned property investor with interests in the fresh produce trade and food & beverage business, paid nearly S$16.2 million for the property in the second half of last year, The Business Times understands.

Located near the Telok Ayer MRT Station, the shophouse is on a site with 99-year leasehold tenure starting from Dec 17, 1990, leaving nearly 71 years' balance lease.

The price being paid by an entity linked to Mr Peralta works out to S$3,400 per square foot (psf) based on the the property's gross floor area (GFA) of about 6,500 sq ft. Some market watchers consider this to be on the high side.

The price the seller had paid for the property last year worked out to around S$2,490 psf on GFA.

BT reported last month that tycoon SP Tao's vehicle Shing Kwan is selling 87 and 88 Amoy Street, also on a site with nearly 71 years' balance land lease, for about S$39 million; this translates to around S$2,664 psf on the total GFA of 14,641 sq ft.

That said, Duck & Hippo group founder James Heng last year paid S$4,259 psf on estimated built-up area for 21 Boon Tat Street, though that property is on a site with 999-year leasehold tenure.

All three properties - on Boon Tat, Amoy and Stanley streets - are within the Telok Ayer Conservation Area, a buzzing F&B and lifestyle hub in Singapore's CBD.

At 29 Stanley Street, the ground floor is leased to modern sushi and cocktail bar Chi Kinjo. The upper levels are approved for office use.

The shophouse is Mr Peralta's latest acquisition on Stanley Street, where he owns, among other properties, the next-door unit at No 30, which he bought in 2016.

Other locations where entities linked to him are understood to own shophouses include Telok Ayer Street, Amoy Street, Boon Tat Street, Pagoda Street, Ann Siang Road and Craig Road.

Industry observers say things are looking up for the shophouse market. Last July's cooling measures targeting the residential property sector have helped to divert investment interest, including from foreigners, to the commercial property segment. Conservation shophouses, especially in the CBD and Chinatown (Districts 1 and 2), stand out for their scarcity value.

Moreover, they offer relatively higher yields and are easier to get financing for, compared with residential properties.

And whereas there are restrictions on the purchase of landed residential properties by foreigners, they may freely buy shophouses on sites that are fully zoned commercial.

This gives them ownership of the land title, and therein lies the attraction of such shophouses to foreigners.

Source: Business Times, 11 Mar 2019

Indonesian group buys 2 floors at Singapore's Octagon for S$30.3 million

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[SINGAPORE] AMID green shoots of recovery in the strata office market, a few whole-floor deals have surfaced recently in the Central Business District.

At The Octagon in Cecil Street, the family behind Indonesian conglomerate Central Cipta Murdaya (CCM) is shelling out nearly S$30.33 million or S$2,450 per square foot for levels nine and 10.

BT understands that a Singapore-incorporated company owned by members of the Murdaya family is acquiring the two floors from a fully-owned subsidiary of The Singapore-Johore Express, controlled by the Lee family which is also behind listed Hotel Royal.

The Murdayas already own the top two floors of the 25-storey freehold building.

They use Level 25 as their office.

Levels 9 and 10, which they are buying, are each 6,189 sq ft and add up to a total strata area of 12,378 sq ft. The space is mostly vacant and the Murdayas are expected to lease it out.

The S$2,450 psf the family is paying for levels 9 and 10 is higher than the S$2,294 psf that it paid for Level 24 in late-2016. It picked up Level 25 for S$1,278 psf in 2009.

Cushman & Wakefield brokered the sale of levels 9 and 10.

Meanwhile, at Springleaf Tower in Anson Road, the 20th floor has changed hands for S$25 million or S$2,419 psf. The 37-storey building is on a site with about 77 years' balance lease.

The seller is Hequ Trading, controlled by an Asif family, and is engaged mainly in trading bulk products such as palm oil, rice, margarine, shortening and soaps, according to information on its website. Hequ is a related company of The Royal Group Indonesia, which produces and distributes palm oil products.

The buyer is understood to be a unit of a Hong Kong-headquartered company that supplies steel mill rolls.

CBRE is understood to have brokered the deal.

Last month, BT reported that the 20th floor of Samsung Hub, a 999-year leasehold building in Church Street in the Raffles Place financial district, was sold for S$46.62 million or S$3,550 psf - busting the previous high of S$3,500 psf in the building,

Knight Frank Singapore head of research and consultancy Alice Tan said: "There seems to be a gradual recovery in strata office transaction volumes in the first five months of this year, in the light of rising office rents especially in the CBD.

"We are seeing more enquiries for strata offices since late last year - mostly from foreign investors; no additional buyer's stamp duty is payable for commercial property unlike for residential property."

Sammi Lim, director of capital markets at CBRE, who brokered the deal at Samsung Hub, says the majority of those evaluating purchase of strata offices in the CBD are looking to occupy the space themselves. "This is especially against the backdrop of rising office rents, with the trend projected to continue in view of tighter office supply in the next couple of years."

"For similar reasons, investors are also returning to the market with prospects of capital appreciation," she added.

Ms Tan of Knight Frank said that foreigners keen to buy strata offices to set up their businesses here are from South-east Asia, Hong Kong and China. "Some are in trading; we have also seen those in financial-related services. They could be start-ups, while others are establishing a regional office here.

"Of course another motivation for buying their office premises instead of leasing space is the potential of capital appreciation in the future. Prices of strata offices seem to have bottomed with 999-year/freehold properties in choice locations in the CBD leading the price recovery."

Source: Business Times, 31 May 2018

The 3 Liang Seah units are held under a single land title and sit on a 2,694 sq ft site

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The 3 Liang Seah units are held under a single land title and sit on a 2,694 sq ft site

THREE adjoining shophouses at 33 Liang Seah Street have been launched for sale via private treaty at S$30 million, while six conservation shophouses at Desker Road are up for auction.

In a press statement on Thursday, marketer for the Liang Seah shophouses, Colliers International, said the three units, which are held under a single land title, sit on a 2,694 square foot (sq ft) site within the Beach Road Conservation Area.

The estimated total gross floor area (GFA) stands at 11,500 sq ft, and the site is zoned "Commercial and Residential", with a gross plot ratio of 4.2 under the Master Plan 2014. The land also has a 999-year lease tenure beginning from 1827.

According to Colliers International, the buildings underwent extensive redevelopment works in 1997 when the shophouses were rebuilt, and the external facade was reinstated to its original specification. Located opposite Bugis Junction mall, the property is within walking distance from Bugis MRT station.

Said director of capital markets & investment services at Colliers International, Steven Tan: "Shophouses have always been a sought-after class of real estate among investors owing to their prime locations, heritage charm and scarcity. We expect to see keen investment interest for 33 Liang Seah Street amid the rising optimism in the property market in Singapore."

"The rare 999-year tenure of these shophouses and their prime location in the city centre will boost its potential for asset value retention and future capital appreciation," added Mr Tan.

Said Colliers International: "The property is currently multi-let with potential upward reversionary rents through repositioning."

Separately, PropNex on Thursday also announced the auction of a batch of six freehold conservation shophouses in Little India. The corner unit and five adjoining units at Desker Road were bought by their current owner in 2010 for S$10 million.

Farrer Park and Jalan Besar MRT stations are a short walk away, while shopping malls like City Square Mall and Mustafa Centre are within the vicinity.

Marrison@Desker - a 25-room hotel - operates on the second floor of the shophouses. There are also F&B (food and beverage) and retail units on the first level.

Taken together, the six shophouses occupy a total land area of 619.1 square metres (sq m), and a total build area of about 1,140 sq m. Their auction will be held on May 31.

Source: Business Times, 25 May 2018

Prime heritage play

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Shophouse prices have appreciated significantly in the past year or so. What's fuelling interest in these prime conservation properties?

A NICHE market often bypassed by real estate investors due to its specific guidelines on use, the prime conservation shophouse market in Singapore's city core has been buzzing with activity of late. Shophouses in the CBD and Chinatown (the old postal districts 1 and 2) have seen increased transaction activity, along with price appreciation since the second half of last year. These properties, costing anywhere from S$7 million to S$25 million each and housing tenants ranging from hipster bars to au courant restaurants to boutique offices, are sometimes compared to Good Class Bungalows (GCBs) for their scarcity value.

But there is a key difference between the two property segments which also explains their appeal: whereas foreigners are not allowed to buy landed homes in GCB Areas, they may acquire shophouses on sites that are fully zoned commercial. This gives them ownership of the land title, and therein lies the attraction of such shophouses to foreigners.

One investor also tells BT he prefers to park his money in commercial shophouses instead of residential properties, as "yields are higher; moreover there is no additional buyer's stamp duty, it is easier to get financing and no stamp duty payable on exiting the investment".

The heightened activity this year is partly led by supply.

A substantial portfolio of shophouses in the Boat Quay/Circular Road and New Bridge Road areas was put on the market by the family of the late Teochew businessman and philanthropist Lee Wee Nam.

The nine shophouses and one commercial building were snapped up in March for S$82.5 million by homegrown property investment group 8M Real Estate.

Positive sentiment from the overall improvement in the property market and more sanguine economic outlook has also spilled over to the shophouse segment; investors are being drawn by prospects of further price appreciation.

"Five years ago, freehold/999-year leasehold shophouses in Districts 1 & 2 (D1 and D2) were typically trading between S$2,000 per square foot (psf) and S$2,500 psf on built-up area. This has since increased to about S$2,750-S$3,250 psf in late 2017 till now," says Clemence Lee, associate director of capital markets at JLL.

D1 includes areas such as Boat Quay, Club Street, Amoy Street, Telok Ayer Street, Temple Street and Pagoda Street. D2 includes Bukit Pasoh Road, Jiak Chuan Road, New Bridge Road, Keong Saik Road and Teck Lim Road.

Along Tanjong Pagar Road, in District 2, the steady price rise in the past couple of years is apparent in three transactions along the same stretch: from S$2,166 psf for Nos 15-23 in 2016, to S$2,400 psf for Nos 29 and 31 in 2017, to S$2,466 psf for Nos 25 and 27 earlier this year. This translates to a total price gain of nearly 14 per cent over two years. All the shophouses in these three deals are on land with the same tenure: 99 years starting December 1994.

The big owners of conservation shophouses in Districts 1 and 2 include homegrown outfits 8M and Clifton Partners, SilkRoad Property Partners, Hongkonger Tony Chen of Arcc Holdings, Spanish tycoon Ricardo Peralta and Stanley Quek of Region Development.

8M, whose shareholders comprise Ashish Manchharam and institutional investors, owns more than 40 shophouses in Districts 1 and 2 worth about S$500 million - bolstered by its recent S$82.5 million acquisition. Set up in 2014, 8M has so far not sold any of its properties.

Mr Chen, who owns 60 conservation shophouses in Chinatown, Kampong Glam and Little India, is a long-term investor. "We are passionate about heritage shophouses. Owning a conservation shophouse is like owning a piece of unique artwork sitting on land. It has to be preserved," says the Singapore PR who has been living here for 30 years.

Clifton Partners and its affiliates currently own 14 shophouses in D1 and D2 - with a combined value of about S$250 million.

"We look for conservation units with potential for value adding and restoring to their original condition, boosting rentability in the process," says Zain Fancy, who owns Clifton. He was formerly Morgan Stanley's Asia real estate investment head.

In the past five years, the group and its affiliates have sold 15 conservation shophouses for close to S$160 million.

"We more than doubled our investment. The lowest pretax internal rate of return for a monetised shophouse was in the low-double digits per annum," says Mr Fancy.

Sammi Lim, director, capital markets, CBRE, says: "The investment outlook for conservation shophouses remains healthy. URA's conservation framework and guidelines will ensure that the capital values of these assets hold steady.

"Their scarcity and sound real estate fundamentals have bolstered investors' confidence that these heritage assets are prized and worthy of long-term investment."

Yet, agents say yields for commercial shophouses in the CBD have fallen over the past year as rental increases have not kept pace with price gains. For freehold/999-year leasehold shophouses, gross yields have eased from 3 per cent a year ago to 2.5-2.7 per cent. For 99-year leasehold shophouses, yields have slipped from 3.5 per cent to 3 per cent, said Mr Lee of JLL.

Rents for food and beverage (F&B) outlets on the ground floor of shophouses in D1 and D2 have remained flat in the past year, while rents for office space (typically on the upper levels of shophouses) have inched up a few per cent.

Prime street frontage

Perhaps for this very reason, shophouses continue to attract tenants.

According to JLL's data, it costs about 20-30 per cent less to rent ground-floor F&B space in shophouses in D1 and D2 compared with leasing the same amount of space in a nearby mall or mixed-development. "This is partly because there is no gross turnover (GTO) rent component in shophouse leases; tenants pay only a fixed rental," says the property consulting group's national director of retail Gary Nonis.

An F&B tenant can expect to pay S$10,000 to S$48,000 in monthly rental for ground-floor shophouse space of 800 to 4,000 sq ft (or about S$12 psf on average) in D1 and D2 - against S$14,000 to S$65,000 (including the GTO rent component) in a mixed development in the financial district.

The prime street frontage and flexibility of operating hours also draw tenants, says Knight Frank executive director Mary Sai. "There is also more flexibility on the way you do your layout and how you dress up the shop - unlike in a shopping mall. For a shophouse, although you have to follow URA guidelines, your facade can be quite different; you don't need to be consistent with your neighbour."

Mr Nonis points to other reasons why it makes good sense for restaurants to be in shophouses: "While F&B operators in a mixed development often rely on a captive crowd (office workers in the building) and patrons from nearby properties, the downside of operating within a mixed development, specifically within the CBD, is that it is usually a weekday trade.

"On the other hand, shophouse clusters attract not only those who work in nearby developments but also tourists."

Mr Lee says that malls draw the usual F&B tenants and tend to be more homogenised; conservation shophouses make for more experiential, destination lifestyle offerings in a heritage setting. "The younger generation likes the idea of finding a hidden restaurant or bar."

Tenants looking for non-conventional office space - at rentals much lower than prime office buildings - have also flocked to shophouses. Office tenants leasing space on the upper floors of shophouses in the financial district can expect to pay about S$5-8 psf a month for say 1,000 to 5,000 sq ft, depending on the quality of the shophouse and its location - lower than the S$10-12 psf for similar-sized space in prime Grade A office buildings, says JLL's regional director of markets Tahlil Khan.

"Shophouses tend to draw occupiers that do not require the conventional corporate image of being in an office tower - including media and PR/advertising firms, smaller law firms, tech companies and business incubators," he added.

Co-working space operator The Working Capitol is one that has taken to shophouses in a big way. It signed master leases of longer than the standard three years at 1 and 3 Keong Saik Road and for the second-level space at the neighbouring 120 and 122 Neil Road, giving it a total gross floor (GFA) area of 40,000 sq ft - enough to pack in 400 seats (from hotdesking to dedicated offices) catering to solo-preneurs to MNCs, an events venue that can seat 200 people, a cafe and four restaurants.

"Over here, our operation is so synonymous with the neighbourhood; the shophouse architecture and street landscape are such an integral part of our identity. It evokes a more emotional response compared with a glass office tower in the CBD," says The Working Capitol chief executive and co-founder, Benjamin Gattie.

The group has also leased all of 89 Neil Road which will give it an additional 25,000 sq ft GFA (for a further 300 seats) plus a 7,000 sq ft roof terrace; and has begun to operate in this space in phases since last month.

Apart from interesting restaurants and trendy offices, a row of adjoining shophouses also makes for a unique boutique hotel experience. Garcha Hotels acquired 28 conservation shophouses in three locations in 2012-2013 for a total S$148 million and spent a significant sum restoring them into three luxury hotels. Two are already operating: The Vagabond Club - a Tribute Portfolio Hotel in Syed Alwi Road and Six Senses Duxton. The third, Six Senses Maxwell, is slated to open later this year.

"For all three properties, on average, it has taken us about a year longer than we originally anticipated to restore the properties; they were full-gut renovations," says Satinder Garcha, chairman and CEO of the group.

"The biggest challenge is working within the conservation guidelines. The costs are generally higher; it is a lot more expensive to restore per square foot within a shophouse than to just build a new building - because there is a lot more complexity, and other than that, in the case of two of our three properties, putting it to a use that it was not originally built for. It is like working with a jigsaw puzzle. But then it is very rewarding to see it turn out actually." Mr Garcha notes that conservation shophouse prices in Singapore have gone up significantly in the past five to seven years because of the scarcity value. "And because of the heritage value, the appeal of these properties continually grows upon people. And I don't see that changing. I still see conservation shophouses as good investments for the long term."

There are about 6,760 shophouses in Singapore gazetted for conservation. They make up the bulk of the nearly 7,200 buildings gazetted for conservation.

"This is no mean feat for a small island and land-scarce city-state with competing land use needs. It is a testament to the importance we place on our built heritage and a holistic urban planning approach," says Teh Lai Yip, senior director, conservation, at the Urban Redevelopment Authority (URA). She was part of the team led by by Koh-Lim Wen Gin in the 1980s that championed the conservation cause. Mrs Koh-Lim retired as chief planner and deputy chief executive of URA in December 2008.

"Many other cities envy us," says Mrs Koh-Lim. "We are so small, with limited land and yet we can do conservation in a comprehensive way and there's enough critical mass and presence."

Nearly half or 3,320 of the 6,760 conservation shophouses are in the Historic Districts of Boat Quay, Chinatown, Kampong Glam and Little India. "Together as a district or as a street, I think these shophouses enhance the physical environment, the streetscape. Their presence enhances the built environment." For instance, the low-rise shophouses along Boat Quay provide 'urban windows' for the high-rise office buildings behind.

"So for the city as a whole, there is all this porosity, so the built environment as a whole is enhanced. Imagine if all the areas where you see conservation shophouses today were high-rise; there would be no breathing space," says Mrs Koh-Lim.

Architectural historian and anthropologist Julian Davison says: "The shophouse is very much a cultural signifier for Singapore. "A large part of Singapore's identity is wrapped up in its history as a port city in the late 19th and early 20th centuries and the ubiquitous shophouse defined the urban fabric of the city in that period and continued to do so until the early days of independence."

Post-independence, despite the pressures for redeveloping the city, the authorities managed to safeguard some precincts of shophouses in the Historic Districts.

Says Knight Frank's Ms Sai: "Shophouses remind us of our historic background, the immigrants who came here and wanted to have their accommodation and business in the same premises." Ms Sai herself grew up in a shophouse.

Her family used to run a coffeeshop downstairs and lived upstairs. That property was part of a row of shophouses right at the end of Tanjong Pagar and Anson Road - which was later torn down to make way for the container port.

"It was fun growing up in a shophouse. Amenities were just a few doors away. You had a barber shop, a prawn noodle shop, provision shop; there was even a wet market selling pork and vegetables within a shophouse. If you lived next to a pet shop selling birds, you would hear parrots repeating orders being shouted at the nearby coffeeshop in Hainanese."

Simon Monteiro, associate director of heritage buildings at Savills Singapore, who has been selling shophouses for nearly 25 years, says: "A conserved shophouse is like a time capsule. Each shophouse that has been gazetted for conservation brings you back to that era, what the architecture was at that time, the story of how our forefathers lived..."

Some feel however, that certain areas have lost some of that hallowed charm.

Mr Monteiro suggests it would be timely for the authorities to take a closer look at the tenant mix in certain conservation areas. "Today, there are too many Korean restaurants in Tanjong Pagar; it's like Little Korea."

"Perhaps, URA should adopt some sort of quotas on tenant mix in the Historic Districts to ensure they reflect the heritage of the place. I don't think we want tourists to label our heritage area as Korean Town.

"URA should research to create a balanced tenant mix, and educate owners that the objective of conservation is to show to the world our roots through these shophouses."

In a similar vein, Mrs Koh-Lim says: "For each of these Historic Districts, URA needs to play a more pro-active role in the place management; it needs to review the land-use control instead of just stating a broad category like 'commercial'.

"Perhaps it is timely to review and ask ourselves whether we should narrow down the kinds of trades to allow in these premises. After so many decades now, we should review and retake a new position, if you ask me. If you have the will, this can be done.

"You can have a five-year plan; it may not be feasible to implement things immediately, but gradually, you could encourage the owners and guide them back to retain some of the charm and character of the place.

"But it cannot be back to the 'good old days' for sure because some trades have vanished. Only the viable traditional trades that are still in demand - like medical halls, shops selling herbs, dried goods, traditional confectionery shops, etc - can afford the rentals."

Source: Business Times, 20 Jul 2018

 

Samsung Hub level 20 sold for S$3,550 psf

AN office floor at Samsung Hub along Church Street has been sold for S$46.62 million or S$3,550 per square foot based on its strata area of 13,132 sq ft.

On psf basis, this is the highest in the 999-year leasehold building, which is in the Raffles Place financial district.

A company whose shareholders include an Indonesian was granted an option recently to buy the entire 20th floor of the 30-storey building.

The floor is being sold by Lei Shing Hong Properties (Singapore), part of the Hong Kong-based Lei Shing Hong (LSH) group, which is involved in businesses ranging from retailing premium cars to property development and investment.

The LSH unit had paid S$43.07 million or S$3,280 psf for the floor in February last year.

BT understands that the group had planned to occupy the space and even did some renovations, but later changed its mind. The floor is currently vacant.

The S$3,550 psf for the 20th floor busts the previous high of S$3,500 psf in the building, set on two occasions. The first was back in 2013 during the heyday of the strata commercial property market before the introduction of the Total Debt Servicing Ratio framework; in that deal, a small unit of 883 sq ft on the 17th floor was transacted for S$3.09 million.

That same unit was resold at the identical price last December, along with an adjoining, larger unit of 2,562 sq ft that went for S$3,300 psf or S$8.45 million. The larger unit was previously transacted in 2013 for S$3,200 psf or nearly S$8.2 million.

In the December deals, both units are understood to have been bought by an insurance agency which plans to occupy the space.

The two units were sold by a couple of local companies that used to occupy the units but which handed over the units on vacant possession to the buyer recently.

CBRE director of capital markets Sammi Lim brokered the sales of both units.

She is also handling the ongoing sale of the 20th floor but declined to comment as it is still at an early stage.

BT understands the party that was recently granted an option for the floor's purchase is a Singapore-incorporated company the ultimate shareholders of which are Ryan Kristoffer Silfanus, an Indonesian citizen, and Singaporeans Tan Lu Dong and Ng Soo Tiong

Samsung Hub, which received Temporary Occupation Permit in November 2005, is one of the very few 999-year leasehold/freehold buildings in Singapore's Central Business District offering strata office play to investors.

Source: Business Times, 26 Apr 2018

Singapore's strata office market gains momentum

Source: CBRE

Source: CBRE

The market has room for growth in terms of sales volume and prices.

THE strata office market seems to be rousing in the last half a year. While the sales volume and pricing are still lower than the pre-TDSR period of 2013, activity seems to have steadily returned since 2015. At the peak of its cycle in 2012, property sales of strata-titled offices were at an all-time high with a record S$2.29 billion worth of new and resale strata offices traded - almost three times more than the sale transactions of S$760 million in 2017.

The market then was dominated by a 70-30 ratio of investors to end-users at that point in the cycle. Ready credit enticed many investors to purchase a slice of the office strata investment market. Developers, egged on by the frenzy, used the opportunity to convert whole commercial floors into strata units, parcelled out for sale to investors.

Post-TDSR, coupled with the surmounting pressure on rents and supply looming, investors began to shy away from the office strata market. With credit conditions tightened, the ratio of investors to end-users shifted to the converse, with end-users now making up 70 per cent of the buyers and investors the remaining 30 per cent.

End-users see many benefits to buying a strata office unit. Family offices, and small and medium businesses prefer office strata units to hedge against volatility in the office rental cycles. Singapore's office rents are increasing and will continue to do so for the next few years as the injection of supply slows. Buying an office strata unit locks in long-term operational costs. Renting an office unit subjects them to the risk of a rise in rents during the lease-renewal period.

The office strata market has always been on the radar of both local and foreign investors, namely those from Hong Kong, Malaysia, Indonesia and China in recent years. These investors, mostly family offices, are savvy and are looking to invest in an asset that allows them to preserve their wealth.

Other investors in the office strata market are typically major corporates from a diverse range of industries that span construction, financial and commodities sectors. These firms have established a footprint in Singapore over the years and find it attractive to purchase strata units to complement their regional headquarters nearby.

We expect rents and prices of strata office units to appreciate in the next 12 to 24 months, against a limited supply, which accounts for about 14 per cent of the total commercial office stock in Singapore. Compared to other investor markets like Hong Kong, Singapore's office strata market has room for growth in terms of sales volume and prices. Singapore's market is relatively open, and demand and supply dynamics are balanced. Savvy overseas investors with a strong inclination to purchase real estate will continue to see value in the the strata office market.

Source: Business Times, 10 Mar 2018

Demand for shophouse units to remain strong in 2018: CBRE

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SHOPHOUSES are a unique and interesting asset class in Singapore. This asset class, comprising narrow small terraced houses with a sheltered 'five-foot' pathway in front, is an icon of Singapore's architectural history.

Many of these shophouse units were built prior to World World 2 and located in the old city centres.

Their rich historical heritage has resulted in many of them being gazetted for conservation, carefully restored and conserved according to regulatory guidelines.

Due to the rarity and cultural value of shophouses, interest in this asset class has been very consistent. Property companies and private equity funds have shown heightened interest in this niche market in the past year, and we expect interest levels to remain similar in 2018.

Ultra-high net worth individuals who take long-term views on preserving their capital in particular, are attracted to shophouses as they hold strong value. Investors can also use them for personal purposes.

Many of them see the intrinsic value in buying into a piece of heritage, and this asset is highly prized in land-scarce Singapore.

Freehold shophouses currently generate net rental yields in the range of 2 per cent to 3 per cent, while those for leasehold ones start from about 3 per cent onwards, depending on the property, tenure, and so on.

In terms of transaction prices, compared to 2016, the total transacted volume in terms of value and the number of transactions have increased in 2017, although this is still below the numbers locked in during 2013, which was considered one of the most active years historically for this asset class.

When available in the market, adjoining units of shophouses are increasingly popular as they are rarer to come by and the buyers can explore various usages for the premises by tapping the larger space configurations and economies of scale.

We have observed in the market that there are more estate sales among families who have owned the asset for generations and are looking to divest the shophouses and redistribute the funds. These families are focused on their non-property core business and are looking to make better use of their funds by cashing out.

Shophouse sellers also include funds who want to enjoy the capital upside from a purchase made five to 10 years ago.

The data on price movements only track general price movements, but in general, prices have remained stable, with a few stand-out assets traded at higher price points. Price points vary depending on the highest value and the best use in a specific location.

Shophouses which command a premium have a winning combination of a good location, solid frontage, a strong tenant profile, and the best use, be it for food and beverage, hospitality or retail use. Shophouses which have been upgraded through extensive asset enhancements, or have potential for further enhancement works to be carried out, also stand out.

Overall, investing in shophouses in Singapore is lucrative and future-proof due to the scarcity of this asset class that is able to hold its value even during economic downturns.

Source: Business Times, 3 Feb 2018

Smaller supply of quality units slows shophouse market in H2

THE shophouse market is poised for a slower second half after having hit high notes in the preceding two half-year periods.

The drop in transaction values comes not from sagging demand, but rather a lack of quality supply being offered for sale, said Clemence Lee, associate director of capital markets at JLL.

"Most of the demand for conservation shophouses would be in Districts 1 and 2, where a lot of the quality stock that had been put on the market was sold in the first two quarters of this year.

"Since then, not many new owners have made their properties available for sale."

District 1 includes places in the Central Business District (CBD) such as Amoy Street and Boat Quay; District 2 includes Chinatown, Tanjong Pagar Road and Duxton.

Industry players reckon many owners prefer to hold on to their properties for now, as they are eyeing capital appreciation.

Giving an investor's perspective, however, 8M Real Estate founder Ashish Manchharam said: "Shophouse prices have run up in the past 12 months, but rents have not caught up, leading to yield compression.

"Owners continue to expect higher prices, which has caused a price gap between buyers and sellers - resulting in limited transactions."

Property market observers suggest that some investors may be looking to switch to the residential sector, which seems to offer better value right now.

CBRE's analysis of URA Realis caveats data as of Tuesday found that the value of island-wide shophouse deals eased from S$344.9 million in the second quarter to S$207.6 million in the third.

Caveats lodged so far this quarter (the latest was on Nov 1) amount to S$88.2 million. More deals are in the works, but most market watchers do not expect the second-half tally to surpass the S$520 million achieved in the first half, which in turn exceeded the S$453 million in H2 2016.

That said, the full-year 2017 figure is set to be the highest in four years. Already, the year-to-date figure of S$815.7 million is ahead of the S$707.1 million for the whole of last year. The last peak was in 2013, when S$1.27 billion worth of shophouses changed hands.

These figures exclude deals for which buyers have not lodged caveats; this could be the case for transactions involving share sales in companies that hold shophouses. JLL highlighted three major non-caveated deals this year: These are the S$76 million sale of the Naumi Liora hotel comprising 10 adjoining shophouses in Keong Saik Road, the S$33 million sale of 70, 71 and 72 Boat Quay, and the nearly S$60 million sale of three shophouses in Amoy Street.

Simon Monteiro, associate director of heritage buildings at Savills Singapore, said investors are steering away from 99-year leasehold shophouses and waiting for 999-year and freehold ones to be put on the market. Investors typically find it harder to get a bigger loan quantum for shophouses with fewer than 70 years left on their leases.

Mr Monteiro also said that demand is stronger for conservation shophouses that are permanently approved for food & beverage use - compared to those granted temporary permission (TP) for such use. The Urban Redevelopment Authority usually grants only TP, ranging from one to three years, for F&B use for shophouses in places with traffic and car-parking issues.

F&B tenants pay the highest ground-floor rents in conservation shophouses, but these rents have generally been flat or even dipped over the past year, given the mushrooming of F&B outlets in recent years, as well as the generally soft economic conditions, said industry players.

Krystal Khor, director of Mondania, a property agency specialising in sales and leasing of shophouses, said: "Landlords are either signing lower rents or providing basic F&B provisions such as grease traps and electricity upgrades, the cost of which used to be borne by the incoming tenants in the past.

"However, premium locations with high foot traffic still command stable rents."

She added that landlords also invest significant sums to re-do the facade to draw F&B tenants.

Shophouse prices, on the other hand, have risen.

For example, said JLL's Mr Lee, prices of 999-year leasehold shophouses in Amoy Street were transacting at between S$2,300 and S$2,500 per square foot of built-up area last year and earlier this year. In the last six months, two transactions were made at higher prices - S$2,900 psf for 89 Amoy Street and nearly S$4,000 psf for 52 Amoy Street. Analysts pointed out that the high psf price for No. 52 was partly due to its smallish size and lower absolute price quantum.

That said, with the general price appreciation and softening rents, gross yields on conservation shophouses in Districts 1 and 2 have eased by 0.5 percentage point in the past year. Among freehold/999-year properties, the softening has brought yields down to between 2 and 2.5 per cent, and among shophouses with 70-odd years left on the lease, to 3-3.5 per cent.

CBRE director of capital markets Sammi Lim said buyers continue to be a mix of family offices (both local and overseas), ultra high net worth individuals (HNWIs) and property funds, although established property groups are also getting interested.

"Despite shrinking yields, Singapore's conservation shophouses continue to appeal to buyers who value the intrinsic attributes of these heritage properties. They get to buy into a piece of Singapore history, with prospects for long-term capital appreciation, given the limited stock of this property asset class."

Foreigners are allowed to buy entire shophouses, thus gaining ownership of land title - but only for shophouses that are on sites fully-zoned commercial and approved for commercial use.

The additional attraction of investing in commercial shophouses is that they are not liable for additional buyer's stamp duty and seller's stamp duty - unlike residential property.

Mr Lee of JLL expects prices to continue appreciating on the back of sustained demand and limited supply, though price hikes will be constrained by yield compression.

With limited stock of shophouses in the prime conservation shophouse districts 1 and 2, some parties are starting to look outside the CBD and in fringe areas such as Beach Road, Serangoon Road, Joo Chiat and the East Coast. "Fringe properties tend to have smaller quantums of less than S$5 million and slightly higher yields - which make them more attractive to HNWIs and family offices."

Sources: Business Times, 18 Nov 2017