Shophouse deals affected by buyer-seller price gap

A FEW shophouse transactions have taken place recently.

These include one at Hongkong Street that changed hands at S$14.45 million. The price works out to about S$1,780 per square foot on gross floor area (GFA) of some 8,100 sq ft. Located at 31 Hongkong Street, the shophouse is on a 1,747 sq ft site with a 99-year lease topped up in December 2007.

The price is lower than the S$1,899 psf on GFA fetched for another shophouse on the same street, at No 39, in March.

This can be partly attributed to the land area for No 31 being 20 per cent smaller than No 39. Moreover, the balance lease term of 91 years for No 31 is shorter compared with the remaining land tenure of 97 years for No 39.

For both properties, their respective maximum GFAs allowed based on the 4.2 plot ratio designated for the area have been achieved; that means there is no untapped GFA. The area is zoned for commercial use under the Urban Redevelopment Authority’s Master Plan 2014.

Hongkong Street is part of the Upper Circular conservation area, a secondary settlement – which means the front of the building has to be conserved but the rear can go up to six storeys.

The seller of No 31 is understood to be a shipping company that will take a short-term lease from the buyer, 8M Real Estate. Thereafter, 8M Real Estate plans to spruce up the asset and bring in a food and beverage tenant on the ground floor and office tenants on the upper levels, said 8M Real Estate director Ashish Manchharam, who set up the boutique property investment outfit late last year. He was formerly from JLL’s investments team.

What drew me to Hongkong Street, he said, is how the location is being revitalised with the entry of new F&B operators. Office tenants also like the area as it is near the CBD and close to Clarke Quay MRT Station, he added.

The ground floor of No 39, which changed hands earlier this year, will soon be home to the award-winning restaurant Bacchanalia, which closed earlier this month at its old premises at the Masonic Hall in Coleman Street.

Other trendy eateries and watering holes along Hongkong Street include bars Vasco and 28 Hongkong Street, and Spanish restaurant FOC. The F&B business in the location will be supported by the opening of a couple of new boutique hotels along Hongkong Street, said Mr Manchharam. Existing hotels on the street include Fragrance Hotel and Hotel Clover.

8M Real Estate also owns five shophouses at 112 -116 Amoy Street, as well as 22 Gemmill Lane behind. Luke’s Oyster Bar & Chop House will occupy the ground floor of 22 Gemmill Lane later this year.

8M Real Estate is looking for restaurant operators for its 10,000 sq ft ground floor space at its Amoy Street asset to replace Beng Hiang Restaurant, which has moved out. Office tenants on the upper levels include Telstra units Ooyala and muru-D.

Other recent shophouse deals include OCBC’s sale of two adjoining shophouses at 743 and 745 Havelock Road for S$12.11 million. The sale was done through a tender handled by Knight Frank.

The bank has also sold 382 Geylang Road for S$5.1 million.

At a Colliers International auction last week, a two-storey freehold corner shophouse at 362 Tanjong Katong Road was sold for S$6.35 million. At the same auction, two strata commercial units at 1 and 1B Figaro Street were sold together for S$6.45 million. The units are on the ground floor in a row of two-storey shophouses, which have a 9,999-year leasehold tenure. These three properties were sold by Bamboo Group and marketed jointly by Historical Land and Colliers.

Knight Frank executive director Mary Sai noted that shophouse transactions have been affected by the buyer-seller price gap.

Most sellers are sticking to their asking prices, believing in the rarity value of shophouses; moreover these properties would already be generating rental income. However, TDSR (total debt servicing ratio)-hit buyers have to come up with more cash. With owners’ asking prices translating to 2.5 to 3 per cent gross yields – barely covering borrowing cost – it may not be a very compelling proposition for the buyers, said Ms Sai.

 

 

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