Category Archives: Orchard/River Valley/Holland

Districts 9 & 10

Glitzy Orchard losing some retail shine

The shine has come off the glitzy Orchard Road retail strip as shopowners report weaker results, owing to ever-popular heartland shopping centres, higher rents and pricey manpower.

Metro Holdings, which opened a new department store in The Centrepoint in the final quarter of last year, said a “disappointing level of sales resulted in losses being incurred by the new store”.

Department store operator Isetan (Singapore) had earlier reported a net loss of $3.1 million for the year ended Dec 31 on the back of higher rents and slower sales. Other than Isetan’s new store at Jurong East, other outlets registered lower sales for last year compared with 2013, “due to the challenging and competitive environment”.

Despite the gloom, there are still retailers that have something to cheer about. Robinsons The Heeren, which opened in November 2013, reported a 32.7 per cent growth in sales in January compared with a year earlier, while last month’s turnover expanded 33 per cent.Isetan’s Jurong East store helped lift group sales for the year to $340.3 million, an increase of 2.18 per cent compared with a year earlier. Courts Singapore has only one store in Orchard Road and so is less affected by higher rents, but its chief executive, Mr Terry O’Connor, said it is still a prevailing issue that could be addressed through more real estate zoning and proactive government action.

Retail experts call for retailers to find ways to use new technology to improve business and stay creative. Dr Wee said: “They should embrace technology in retail, adopt a blended approach and engage the right talent. They need to rethink the competencies needed in offline to online retailing. Consumer insights is key.

Luxury Mall Scotts Square looks to be too high-end for many tenants

Empty shopfronts dot the gleaming levels of Scotts Square. Despite its prime location in the Orchard Road retail belt and a line-up of high-end brands, the luxury boutique mall has seen an exodus of retailers as crowds stay away.

At least six stores have left the Wheelock Properties-owned mall since October, after completing their leases.

There were 10 empty shopfronts when The Straits Times visited yesterday. According to the mall’s online directory, 28 shops remain open.

Luxury watch retailer Sincere Fine Watches vacated its street-front space on the first and second floor last week, after three years at the mall.

Other recent departures include restaurants Ginza Sushi Ichi and Arossa Wine & Grill, which shut their doors on Jan 31. Urban apparel retailer Bread & Butter left last November, and Malaysian cafe Delicious the month before.

And this month, at least three more shops – fashion brands Anne Fontaine, Kiton and Marina Rinaldi – will exit the mall.

Sandwiched between Grand Hyatt Hotel and Tangs department store, Scotts Square on Scotts Road reopened in 2012 following the demolition and rebuilding of the old Scotts Shopping Centre.The three-storey mall, which has a basement with a FairPrice Finest supermarket, has 75,000 sq ft of space that can be rented, and is topped by a 43-storey six-star residence.

Some say the mall is feeling the pinch because it has gone too upmarket in an area where neighbours such as Ion pull in crowds through a blend of high-end and mid-range offerings.

Some of Scotts’ stalwarts, such as fashion brand Michael Kors, restaurant Wild Honey and shoe retailer On Pedder, continue to thrive, drawing on regulars and the strength of their brand.Unconventional newcomers such as pop-up concept space K+ and art gallery Red Square are also garnering attention.

16 units at Emerald Hill sold for S$75M

The remaining 16 unsold units in 111 Emerald Hill, a 40-unit completed condo project, are understood to have changed hands. The transaction was effected through a sale of shares in the company that developed the 12-storey freehold project.

The deal is understood to value the 16 units at a total of S$75 million to S$76 million, which translates to the low S$1,700 psf range based on the strata of around 44,000 sq ft. The units sold comprise three and four-bedroom apartments.

Under the deal inked last month, the shares in Emerald Land Pte Ltd were sold by a fund managed by LaSalle Investment Management to entities fully owned by Singapore citizens. The project received Temporary Occupation Permit in 2011.

The 24 units in the project that had been sold were transacted between November 2010 and January 2014 at prices ranging from S$2,214 psf (for a fourth floor unit in January 2014) to S$3,030 psf (for an 11th floor unit in January 2013).

Industry watchers note that the S$1,700-range psf pricing for the recent sale reflects the decline in luxury condos price as well as a discount for the bulk transaction.

Moreover, the 16 units that changed hands include the project’s four penthouses, which have roof terrace areas, and this would also have diluted the psf price.As Emerald Land is now fully owned by Singapore citizens and assuming it has been granted a clearance certificate from the Land Dealings (Approval) Unit as well as cancellation of its Qualifying Certificate (QC), it would not be under any restrictions on its options for the 16 units.

It would be free, for instance, to lease them out or hold them for as long as it wants.

Under the Residential Property Act, a foreign company, defined as one that has even a single non-Singaporean shareholder and/or director, has to get a QC from the LDAU before it may buy a private residential site.

The sale of the 16 units at 111 Emerald Hill is said to have been brokered by Savills, which last year also arranged the sale of 17 units at Paterson Suites for S$2,100 psf or close to S$80 million by a fund in the Real Estate Capital Asia Partners (Recap) series managed by SC Capital Partners.

The buyer was Blackstone, which in late-2014 also did an en bloc purchase of 21 Anderson Royal Oak Residence, a 10-storey property with 34 units.

The price was S$164 million, or S$1,917 psf. JLL brokered that deal. Both projects are completed freehold developments.

All eyes now are on 23 units at the Draycott Eight condo owned by a German core fund managed by Morgan Stanley.

CBRE and Savills have been appointed to find a buyer for the 22 four-bedders and a penthouse with a total strata area of 68,419 sq ft. Draycott Eight is on a site with a balance lease term of about 82 years. Based on market talk, the asking price is S$2,300 psf, which would amount to S$157.4 million.

Cushman & Wakefield executive director (capital markets) Shaun Poh said that going ahead, “I do not think we’ll see many more such bulk purchase deals of high-end condo units because of a lack of opportunities with a structure where the incoming buyer can take over shares in an existing company owning the units.

This potentially allows the buyer to take over the company’s loan.

“On the other hand, if a corporate buyer were to acquire the residential units on the asset level, it would be subject to the 20 per cent LTV (loan-to-value) limit.”

Another point, said Mr Poh, is that the sellers in all the recent bulk deals are funds, “which are more motivated sellers because of the fund life”.

“In contrast, local developers stuck with unsold units are mostly not prepared to give deep discounts even for bulk purchases because they can afford to wait.

An incoming investor may also not be willing to mop up the balance units in a newly completed residential project by taking over the development company, as that would mean assuming the liabilities of the developer.

This includes the defects liability period accorded to the earlier buyers of units in the project,” said Mr Poh.

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Far East Orchard unit disposes of Bassein Road properties stake for S$38.1m

FAR East Orchard’s wholly owned subsidiary, OPH Marymount (OPHM), on Thursday entered into a sale and purchase agreement with Transurban Properties (TPPL) to dispose of its interest in two properties on Bassein Road for a consideration of S$38.1 million, at its net book value sum.

This constitutes an interested person transaction. The properties are “Lot 621K of Town Subdivision 29” and “Lot 45L of Town Subdivision 29”.

On Sept 8, 2010, both OPHM and TPPL were jointly awarded the tender for both properties, which were zoned for residential purposes. They entered into a joint venture to acquire and develop the land parcel. OPHM acquired 30 per cent of the land parcel while TPPL acquired the remainder.

But OPHM had to obtain a qualifying certificate from the Singapore Land Authority for the acquisition. The qualifying certificate required OPHM to complete the construction of the residential development at the land parcels and obtain temporary occupation permit by March 24, 2016.

In April 2011, OPHM and TPPL completed the purchase of the land parcels, but a slew of property cooling measures introduced by the government since December 2011 resulted in changes in market circumstances, which included a significant and progressive slowdown in the residential property market.

Due to such changes, it was decided that OPHM should not proceed to partake in the proposed residential development on the land parcels, and the disposal will free up resources for the group to focus on other aspects of their business.



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Sales of strata-titled retail units plunged last year as tough lending curbs took effect

Sales of strata-titled retail units plunged last year as tough lending curbs took effect, a new report showed yesterday.

Only 453 sales caveats were lodged in 2014 – 61 per cent down from the 1,163 registered in 2013.

Investor demand for such strata-titled outlets is likely to stay weak this year, added the report, due to the continued impact of the total debt servicing ratio and the spectre of higher interest rates.

Ms Chia Siew Chuin, director of research and advisory at Colliers International, which compiled the report, expects the average capital values of prime strata-titled space in Orchard Road and regional centres to remain flat for most of this year.

“Unit owners are expected to hold onto their price expectations, as such units remain rentable,” she said.

The report found that prices have held steady, despite fewer transactions. Prime Orchard Road strata-titled retail space averaged $6,942 per sq ft (psf) as at Dec 31, unchanged over the year.

Prime retail space in decentralised locations also remained stable at $4,491 psf.

Average monthly gross rents for prime retail space in Orchard Road slipped by 0.8 per cent year-on-year while they edged up 1.1 per cent in regional centres.

Ms Chia expects prime rents to flatline this year. Rent movement for prime ground-floor retail space around Orchard Road is tipped to range between minus 1 per cent and 1 per cent, while regional centres could see rate growth plateau at 0 per cent to 2 per cent.

“The positive interest from retailers to set up shop or expand will still be matched by retailers’ resistance to any increases in their operation cost in a challenging operating environment,” she added.

“With approximately 1.2 million sq ft of retail space expected to be completed in 2015, the overall islandwide demand for retail space will continue to be supply-led.”

Mr Calvin Yeo, deputy managing director at Colliers International, also noted that retail activities have “gained greater prominence in residential town centres islandwide and are no longer as heavily concentrated in central Orchard Road locations”.

The report found that the rental premium that prime retail space in Orchard Road commands over similar space in the regional centres shrank to 6.9 per cent at the end of last year, from 9 per cent at the end of 2013.

He added that the retail real-estate landscape is slowly diversifying, with shops and eateries sprouting in niche locations such as shophouse enclaves or within Housing Board estates.

“Additionally, the occupation costs are typically lower when compared to malls,” noted Mr Yeo. “Going forward, we expect that such alternatives will feature more in Singapore’s retail landscape, alongside the ubiquitous shopping malls.”

Selegie malls up for Collective Centre again

Peace Centre and Peace Mansion on the fringe of the Orchard Road precinct are up for collective sale for the fourth time, after three failed attempts.

This time, the owners have set a guide price of $680 million, which works out to $1,125 per sq ft per plot ratio.

This is a slight increase from the $675 million guide price in 2011. In 2007, when the owners had first tried to make a sale, the indicative price was $470 million.

The strata-titled mixed development sits on a 76,617 sq ft site at the junction of Selegie Road and Sophia Road. It has about 55 years of lease remaining on a 99-year leasehold tenure.

Peace Centre is an office and retail space comprising two blocks that are seven storeys and 10 storeys high. Peace Mansion is a 22- storey residential tower with 86 units, including two penthouses.

The developer which purchases the plot can build a new project with a gross floor area of some 604,578 sq ft, or an approved gross plot ratio of 7.89.

Based on the current approved ratio of 60 per cent commercial use and 40 per cent residential use, there is no development charge payable.

Peace Centre could be refurbished into a modern shopping mall, and Peace Mansion converted to accommodate serviced apartments, subject to regulatory approval, said Ms Stella Hoh, executive director of investment services at Colliers International, which is handling the sale.

“The vicinity… is set to be transformed into a vibrant area with new developments and rejuvenation plans,” added Ms Hoh, noting the planned development of the Ophir-Rochor Corridor.

The District 9 property also sits near malls such as PoMo, Parklane Shopping Centre and Wilkie Edge, and enjoys a large catchment student population.

Colliers is marketing the property to local and international funds and developers.

The tender will close on Feb 11 next year.

Some luxury homes changing hands for tidy profits

RESALE activity might be slowing for luxury homes, but some owners have managed to make a tidy pile from their Orchard Road homes this quarter.

Two units at the coveted Ardmore Park project by Wheelock Properties each changed hands for over $2 million in profit last month, despite the shrinking pool of foreign buyers who have supported demand in this segment.

One unit bought in October 1999 for $1,543 per sq ft (psf) or $4.45 million was sold on Nov 18 for $2,524 psf – a profit of $2.83 million. A second unit that was bought was bought in August 2006 for $2,115 psf or $6.1 million went for $2,843 psf or $8.2 million – a gain of $2.1 million.

All 330 units at the project measure 2,885 sq ft.

R’ST Research director Ong Kah Seng, director noted that profits in the high-end residential segment tend to be “specific to the development” in today’s sluggish market. “What Ardmore Park has over other properties is that the sizes of the units are the same, and it suggests that the owners are typically wealthier, if they can afford the large units,” said Mr Ong. “It’s a true-blue, high-end development, because luxury properties developed in the past five years might be in exciting locations, but they tend to have a mixture of unit sizes and a different profile of owners.”

A 1,335 sq ft apartment at the 274-unit Tanglin Park in upscale Ridley Park went for $1,924 psf or $2.57 million on Nov 7 after selling in March 2009 for $1.5 million – a profit of $1.07 million.

However, a handful of homes in the coveted residential district have not been spared the waning market sentiment and have been hit by hefty losses. A 2,852 sq ft flat at the 164-unit Grange Residences sold for $2,612 psf or $7.45 million on Nov 12 after being bought for $8.1 million in May 2010 – a loss of $650,000.

And a 3,175 sq ft apartment at Nassim Park Residences in the prestigious Nassim Road residential enclave was bought at $3,464 psf or $11 million in April 2010 and sold for $10.7 million on Oct 9 – a loss of $300,000.

Orchard Building up for collective sale for $400M up

A Freehold commercial and residential building in the Orchard Road area is up for collective sale with offers expected to reach $420 million.

The 26-storey Thong Sia Building, which is on Bideford Road and opposite Paragon mall, has a land area of more than 21,000 sq ft. There are seven levels of commercial space and a 19-level residential tower of 37 apartments.

The building used to be occupied by watchmaker Seiko but most of the retailers have left.

The expected price of between $400 million and $420 million translates to about $2,559 to $2,687 per sq ft (psf) over the gross floor area of about 156,300 sq ft.

Sole marketing agent Jones Lang LaSalle Property Consultants (JLL) noted yesterday that if the Government allows the sale of an adjoining road that serves only Thong Sia Building, the price could go down to $2,414 to $2,532 psf.

Mr Karamjit Singh, international director at JLL, said owning a property in the Orchard Road district, “especially freehold, is a matter of great prestige, privilege and value”.

He cited a JLL study showing there are only 50 non-residential buildings directly on or off Orchard Road; 31 are freehold or 999-year leasehold while the rest have 99-year leases or less.

He added that effectively, there are “only nine or so potentially tradable freehold assets in and around Orchard Road”.

“From this perspective, it is clear that an opportunity to own the freehold Thong Sia Building is truly valuable,” said Mr Singh.

The tender closes at 2.30pm on Jan 28.

7th most expensive retail rents in Asia Pac: Orchard Road

Singapore remains an attractive destination for international brands and new labels to set up shop, despite steep rents and tough operating conditions, property consultancy Colliers International said on Tuesday.

Still, brick-and-mortar retailers are feeling the heat from the competition posed by e-commerce firms, rising costs, a tighter labour supply and shrinking profits, it added in a report on a study that had looked at 125 retail real estate markets in 50 countries.

Retail rents in Singapore were one of the 10 most expensive in Asia Pacific, coming in seventh place at US$348 per sq ft (psf) a year, the study found.

This was down a spot from its sixth place last year, when retail rents were steeper at US$355 psf a year.

Rents for retail space in Hong Kong’s Queen’s Road Central were the costliest in Asia Pacific and second most expensive in the world at US$2,073 psf.

Monthly gross rents in the prime shopping belt of Orchard Road were mostly unchanged in the past year at $36.25 psf, just slightly down from $36.38 a year ago.

“Despite the demand for space by new stores and food and beverage outlets, the retail environment is challenging due to rising costs, shrinking profits and a tight labour market,” said Ms Chia Siew Chuin, director of research and advisory at Colliers.

But more chains have made their way into Orchard Road the past year, opening shops such as Adolfo Dominguez, Etam, Cath Kidston and Cos.

Mr Simon Lo, executive director of resaerch and advisory, Asia, at Colliers, said that Asian retailers have been competing with the increasing popularity of online firms. But top-tier brands will remain in core city areas, where the supply of new retail space is limited in cities like Seoul and Singapore. This will result in the mid-range labels moving out to decentralised areas, he said.

In Singapore, more suburban malls are expected to open their doors to shoppers over the next year. This includes Waterway Point in Punggol, which has an estimated net lettable area (NLA) of 344,370 sq ft, and Big Box in Jurong East, with an NLA of 260,000 sq ft.

Monthly gross rents for prime retail space on the ground floor in city-fringe malls were $24.35 psf as at Sept 30, up from $23.39 psf a year ago. In the suburban regional centres, monthly rents were $33.72 psf, up a touch from $33.46 a year ago.

“Malls in Orchard Road are facing increased competition from malls in other districts including those in the suburban and regional areas, which enjoy a captive and ready shopper catchment,” said Ms Chia. “These malls have proven to be resilient in performance, largely due to this advantage and their close proximity to MRT stations.

Worldwide, New York’s Fifth Avenue has the most expensive rents at US$3,550 psf each year. Hong Kong’s Canton Road was in third place at US$2,011 psf per year.

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