Shophouses in the vogue again among investors

Investment in Singapore shophouses has stabilised and shows signs of picking up after taking a hit following the introduction of a loan curb in 2013. Total transaction value has been rising in the past two years even though the number of caveats lodged remained fairly steady at just over 100 a year.

Transaction value rose by about 7.6 per cent to $707.07 million last year, from $657.3 million in 2015. Demand for shophouses fell off a cliff in 2014, after the imposition of the total debt servicing ratio (TDSR) framework at the end of June 2013.

Three adjoining 999-year tenure shophouses in Amoy Street in Tanjong Pagar were recently acquired by an institutional fund for $59.6 million, or about $2,500 per sq ft, based on the floor area. In another deal, a family office bought a shophouse at 54 Boat Quay for $12.9 million or about $2,985 psf on the floor area.

Office properties, seen as a proxy for shophouses, have faced challenging leasing environment as a deluge of new office buildings weighed on rents in recent years. The average rental yield for shophouses ranges from 2.5 to 3.5 per cent, depending on the tenure of the asset.

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Stanley Quek buys shophouses in Duxton Hill for S$19.6M

A CONSORTIUM led by property investor Stanley Quek has picked up a couple of adjacent shophouses in Duxton Hill for S$19.6 million. The properties, which have three storeys and an attic, are on two separate land lots; however the units are linked, forming a distinctive corner shophouse lot. Tenants on the street level include Italian restaurant Latteria, which has also leased the open space next door from the state on a temporary occupation licence to operate an alfresco dining area.

The upper levels are leased to office tenants, the biggest of which is Duxton Asset Management, a leading international and boutique asset manager that focuses on agriculture and Asian emerging markets. The group’s two founders, Ed Peter and Desmond Sheehy, through their own private company, are the sellers of the pair of Duxton Hill shophouses.

The two properties are said to be the last shophouses owned by Mr Peter along Duxton Hill; at one time, he was one of the biggest owners along the street.

When contacted, Dr Quek told The Business Times the price he paid translates to about S$2,200 per square feet on a floor area of slightly below 9,000 sq ft. “It’s a fair value to pay for a corner property in a prime conservation area…”

Zoned for commercial use, the shophouses have a total land area of 2,540 sq ft and a balance tenure of 72 years.

Leases for the main tenants still have some time to run. “We’ll be getting 4 per cent gross yield based on the purchase price,” said Dr Quek.

The doctor turned developer and property investor stitched together a small consortium of close friends for the acquisition.

Another recent transaction, this time in the private residential market, is the S$21.07 million sale of a townhouse at the freehold Bishopsgate Residences by its developer, Kajima Overseas Asia. The buyer is a foreign-incorporated company. The price works out to S$3,465 psf based on the strata area of 6,081 sq ft. The townhouse has direct access to a basement carpark. On the ground level of the unit are a bedroom and a family area. The master bedroom and two other bedrooms along with the kitchen, dining and living areas are on the second level. The unit comes with a private rooftop pool. The townhouse comes fully furnished; the interior design was done by Hirsch Bedner Associates.

Bishopsgate Residences, which received Temporary Occupation Permit in late 2012, has four townhouses and 27 apartments.

http://www.businesstimes.com.sg/real-estate/stanley-quek-buys-shophouses-in-duxton-hill-for-s196m

Residential listings on a map

Here are some of the properties for sale/rent.

Call 94772121 for more details

Social crowd still drawn to Ann Siang Hill

They were once home to Chinese clan associations and private social clubs, and for decades, the rows of shophouses lining the streets of Ann Siang Hill would bustle with activity every night.

Between the 1950s and 1970s, scores of Chinese immigrants residing in nearby Chinatown would stroll up the hill to these associations to socialise over mahjong and opera performances.

These nights, a different sort of crowd winds up the sloping road. And the clack of mahjong tiles and the high-pitched nasal tones of opera singers have progressively given way to the clink of glasses and the babble of chatter of office workers from the nearby Central Business District.

Over the last two decades, many of the 20 or so Chinese clan associations along Ann Siang Road have sold their properties to eateries and watering holes.

Only a handful of associations, such as Fa Yun Wui Kwun and Ching Yoon Wooi Kwoon, are left. But with dwindling membership numbers and rising costs, they are barely holding on.

Change is inevitable, admits Mr James Lee, chairman of the Kwong Wai Siew Li Si She Shut clan association at 25 Ann Siang Road. The Cantonese clan has slightly more than a hundred members, down from about 600 about 50 years ago.

“We can’t remain like it was 50 years ago,” says the 61-year-old retiree, adding that some of the existing associations have chosen to rent out the ground floor to restaurants and bars, and moved to the upper floors. “We need the funds to keep our operations going.”

Next year, the 140-year-old association, which has been in Ann Siang Road since 1954, will lease out its second floor to an IT services company. Since last year, the space had been taken up by an abstract artist.

“We have no intention of selling this place. We have many good memories here,” says Mr Lee, adding that he has been approached by three

businesses wanting to buy over the building.

Named after Malacca-born Hokkien merchant Chia Ann Siang, who used to own the land, Ann Siang Hill was formerly a nutmeg and clove estate, but saw the introduction of clan associations in the late 19th century as the Chinese population in the area rose.

Today, the hill, and the streets leading up to it, including Ann Siang Road, Erskine Road and Club Street, are taking in a new breed of businesses – mostly eateries and bars – such as gentleman speakeasy Manor Bar, and Oxwell and Co, a rustic multi-concept restaurant and bar.

They join long-time Ann Siang stalwarts like luxury boutique hotel The Scarlet Hotel, and The Screening Room, a food and beverage venue cum film theatre.

As an indication of the area’s popularity with drinkers and revellers, on Friday and Saturday evenings, Ann Siang Road and the adjacent Club Street are closed from 7pm to 2am. Dining tables are brought out and revellers pour out onto the two-way streets.

“The road closures create a really cool street party vibe that is hard to come by in a lot of other areas,” says British chef and restaurateur Ryan Clift, who heads restaurant and bar Ding Dong.

Quaint shophouses, first restored in 1993, now boast colourful shopfronts and painted-over timber window shutters. Most of them, constructed between 1903 and 1941, have retained pre-war features such as mosaic-tiled floors, double-leafed doors, and five-foot walkways.

However, many businesses have had to undergo extensive and often expensive restoration works to rewire cables, fix up roofs and reconfigure water pipes.

“Due to age, rainwater can sometimes seep through,” says Mr Zedy Ng, marketing manager of boutique hostel 5footway.inn in South Bridge Road.

“We have to identify these problems and patch them up to minimise inconvenience.”

But for shops in the former hipster enclave, a hit with the indie crowd in the late 2000s, a leaky roof is the least of their problems. Their very popularity was their own undoing.

With rising rental costs, some of the smaller stores and boutiques selling a variety of products, such as patisserie cake shop Kki and design- inspired shop The Little Drom Store, have been priced out and had to relocate out of Ann Siang.

In fact, most of the quirky little shops and boutiques have disappeared, leaving just a bunch of bars and restaurants, says Ms Samia Ahad, founder of The Screening Room.

In the last 10 years, rent has increased by 30 per cent to 50 per cent.

Mr Marc Nicholson, chief executive officer of the local franchise of old-style barbershop Truefitt and Hill, said: “Many of the buildings nearby have been bought over recently. The higher value is going to put even more pressure on rents.”

For some, the area has lost its magic.

“It is not as quirky and charming as it used to be. It is just rowdy with drinking crowds,” says Kki co-owner Delphine Liau. The cake shop operated out of its 990 sq ft unit for four years till it moved to its current space at the School of the Arts last year.

“It is getting more tourists for sure, but for locals, it is losing its charm as the quaint Ann Siang Hill we used to know.”

– See more at: http://news.asiaone.com/news/singapore/social-crowd-still-drawn-ann-siang-hill#sthash.RUviTIVr.dpuf

Shophouse deals remain resilient despite volume drop

THE number and value of shophouse transactions so far this year is roughly half that of last year, as demand has been hit by tightened availability of loans, a compression of shophouse yields and investor interest being diverted to overseas properties.

Prices in choice locations in the Central Business District, however, are still holding given the limited supply and the profile of owners, mostly deep-pocketed investors that are happy to continue renting out their premises if they cannot reap significant capital appreciation.

CBRE’s analysis of URA Realis data shows that 101 caveats have been lodged for shophouse transactions so far this year totalling S$548 million, down from 206 caveats adding up to S$1.27 billion in 2013.

In the first half of last year, S$922 million worth of shophouses changed hands; however the onset of the total debt servicing ratio (TDSR) framework in late-June 2013 has caused some buyers to hold back their purchase plans.

Shophouse sales slipped to S$347 milion in the second half of 2013 before easing further to S$277 million in H1 this year and S$271 million so far this half. However, these figures do not include deals involving sales of shares in special purpose vehicle companies that own shophouse assets, since caveats are typically not lodged for such deals. An example would be a S$50 million sale of a row of five shophouses in the CBD this year.

A shophouse in Boat Quay is understood to have been sold recently for S$9.5 million – which has not been caveated.

Owners who want to sell shophouses may have had to clip their pricing expectations, say property agents, but actual transacted prices have been resilient in districts 1 and 2, where the choicest conservation shophouse stock is located, such as Telok Ayer Street, Club Street, Amoy Street, Chinatown, Duxton Hill and Tanjong Pagar.

Sammi Lim, CBRE associate director, investment properties, said: “Despite the decrease in the number of transactions compared with pre-TDSR, shophouse prices have remained resilient and in fact we are still observing an overall increase in capital values in choice locations. Current transacted prices in districts 1 and 2 in the CBD are in the range of S$2,200 psf to S$2,500 psf of gross floor area (GFA) on average – depending on land tenure – compared with S$1,800-2,200 psf around May or June last year before TDSR.”

Knight Frank executive director, investment, Mary Sai also said that transacted prices in Telok Ayer and Chinatown locations are around S$2,500 psf of GFA – surpassing the S$2,000-2,100 psf in Q1 last year. “Prices of conservation shophouses in the Central Area and Little India have held firm – defying our expectations of a price softening in the aftermath of TDSR and the Little India riot last December.

“However, shophouse prices outside the Central Area in places such as Geylang, East Coast and Upper Serangoon have softened about 5-10 per cent (post-TDSR).”

Simon Monteiro, director at Historical Land, a boutique property agency specialising in shophouses, observed that “those who are selling shophouses currently are the ones looking to divest a few small shophouses in various locations and replacing them with a bigger investment, for example, a row of shophouses; or some investors who just want to cash out now for retirement reasons”.

Even after the TDSR rollout, a few investors have managed to realise attractive gains from shophouses. For example, a property in Peck Seah Street was acquired in March last year for S$12.2 million and resold four months later (before the completion of the sale) for S$16.8 million before being flipped again in October the same year for S$20.5 million.

Such cases are rare though. Most of those making sizeable gains have longer holding periods. For instance, a property on Tras Street that was sold two months ago for S$11.15 million had previously changed hands for S$7.1 million in May 2012 and prior to that for S$5 million in July 2010, according to caveats data.

Mr Monteiro notes that most shophouses are held by ultra high net worth (UHNW) owners with very good holding power. “For them to sell, the values must double or more.”

Agreeing, Knight Frank executive director (investment) Mary Sai, said: “There are owners telling us: ‘If I don’t get my price, I’ll just rent it out.”

Yields on shophouses have declined as rental increases have not kept pace with the jumps in capital values.

“Net yields today are around 2-2.5 per cent on average on commercial shophouses in Districts 1 and 2,” said Ms Sai. “In Q1 2013, they used to be 3-3.5 per cent.”

Mr Monteiro said that current sub-3 per cent yields are “rather unattractive to investors”. “If you are a serious seller, you may have to lower your price expectations to allow the yield to the buyer to be 3-3.5 per cent. Only then will you see interest.”

Industry players note that buyers are also factoring in expected increases in borrowing costs.

Ms Sai said that a common strategy by landlords is to lease out the ground floor to a food and beverage (F&B) outlet or as a showroom, and find office tenants for the uppper floors.

The increase in Grade A office rents has helped to prop up office rents in shophouses.

“Landlords try to maximise their rental returns by having one tenant per floor to avoid having to give a bulk discount to a single tenant occupying the whole building,” Ms Sai added.

Investors that acquired shophouses more than five years ago would be able to comfortably service their mortgage from rental collection as their purchase price would be much lower than current values, she said. “But those who bought 1-2 years ago, I think, to their horror, some of them find they cannot push up the rental much if the rent at the point when they bought their property was already quite peakish. If they trigger any further increases, their tenants may not find it sustainable to continue business at the location.”

On the other hand, Zain Fancy, founder and director of Clifton Real Estate, which owns more than a dozen shophouses in Singapore, pointed out that it is still possible to spot good investment opportunities. “A lot of shophouses are under-rented; their owners have not spruced up the properties in years. So there is a value proposition here.

“By renovating properties, rents go up and hence prices increase. From the tenants’ perspective, renting space in a shophouse can be attractive. For instance, we’re leasing ground floor retail space at Pagoda Street, a location with very high foot traffic, at S$17-18 psf a month – a discount to the S$35-40 psf for ground floor space in an Orchard Road mall.

“We have leased an upper-level office floor (of about 1,200 sq ft) in one of our CBD shophouses at S$8 psf, so that’s about S$10,000 monthly rent – and they get their own toilet and pantry. The occupier is new to Singapore and was previously operating out of a serviced office, paying about S$5,000 a month for a space of about 100 sq ft.”

Ms Sai too noted that the average shophouse office rent in the CBD of about S$6-6.50 psf a month is lower than the double-digit rents in Grade A office buildings.

Street-level F&B space has been the key driver for growth of shophouse rents, noted Mr Monteiro. “There has been an influx of cafes and restaurants in conservation shophouses in the CBD for example in the Duxton, Keong Saik and Gemmill Lane locales, for instance, in the past four or five years.”

Currently, approval from the Urban Redevelopment Authority (URA) for “eating houses”, the planning term for F&B use, is granted on Temporary Permission of one to three years.

However, Mr Monteiro cautions that “that there may come a time when, to maintain a mix of trades in the conservation districts, URA may limit approvals for F&B use in shophouses even in the CBD”. This could potentially cause a reversal of interest in commmercial shophouses, he added.

Another reason for thinning of shophouse transactions is that some property investors have been moving away from the Singapore scene in search of higher yields, say agents.

Still, Singapore shophouses have their attractions. “Funds and UHNW investors, mainly foreigners, are among the buyers,” said Mr Monteiro. Investors switching from the residential segment, which has been hit by cooling measures, also find commercial shophouses an attractive alternative. There are no restrictions on foreign ownership of shophouses on sites fully zoned commercial.

Ms Sai points out that despite the already sharp price appreciation, a shophouse investor paying, say, S$2,500 to S$2,800 psf on GFA in the CBD will feel comforted knowing that it is still cheaper than the S$3,000-4,000 psf on average for new strata retail units in city-fringe locations and at least S$3,000 psf for new strata offices in the financial district.

Agents say that prices of shophouses in districts 1 and 2 will continue to be supported by the fact that they are mostly well located – in the business district and near an MRT station.

There is also an increase in demand from end-users looking to buy and occupy a shophouse for their own business instead of leasing it out, said CBRE’s Ms Lim. “These properties are a limited-edition asset class as they are designed with a distinctive facade, possess a unique charm and are steeped in history. Shophouses will continue to be highly sought after. Transaction values and volumes are projected to increase about 10 per cent in 2015.”

Ms Sai too expects the pricing outlook for districts 1 and 2 shophouses to remain resilient next year. “But other areas including Little India (District 8) and non-central locations may succumb to the impact of TDSR and the economic situation.”

http://www.businesstimes.com.sg/real-estate/shophouse-deals-down-but-prices-stay-resilient

Shophouses to be auctioned in estate sale

Two freehold properties will be up for auction as a result of an estate sale, said property firm and consultancy Colliers International yesterday.

The properties up for sale, resulting from the owner’s death, are a two-storey conservation shophouse in Beach Road and a terraced house in Devonshire Road.

This comes amid a rebound in the number of mortgagees who have put properties up for auction, as more borrowers default on loans. The home owners find it harder to sell their properties on their own.

But, as a whole, the auction market has not fared as well, thanks to government measures such as the additional buyer’s stamp duty.

So far, $57.6 million worth of properties has gone under the hammer in the first three quarters, well down from the $87.7 million that changed hands over the same period last year, according to earlier reports.

The shophouse, which has tenants, has an indicative price of $5.1 million and a land area of 1,381 sq ft.

Values of shophouses in the area have registered healthy growth, according to data from the Urban Redevelopment Authority. The average transacted price of shophouses in the Kampong Glam district was $4,700 per sq ft (psf) this year, up 20 per cent from a year ago.

The two-storey terraced house to be auctioned also has tenants, and has an indicative price of $4.4 million.

The property’s land area is 1,405 sq ft, with a plot ratio of 2.8, said Colliers.

“The property has a unique facade, which will appeal to a niche group of buyers who appreciate properties that are architecturally distinct,” said Ms Grace Ng, deputy managing director of Colliers.

Both properties will be auctioned on Oct 29, at Amara Hotel.

– See more at: http://business.asiaone.com/news/shophouse-terraced-house-be-auctioned-estate-sale#sthash.k6n5to4Q.dpuf

Restoring Singapore Shophouses: A glimpse

An interesting video of URA’s efforts to conserve two historic sites in Singapore” Kampong Glam and Little India

 

Conservation properties for sale in D7 and D8

in today’s local media news, it was reported that a hotel, comprising three shophouses along Jalan Klapa, off Victoria Street in the Kampong Glam Conservation Area has been put up for sale with an indicative pricing of $17-18 million. Located at 9, 11 and 15 Jalan Klapa, the shophouses are on total land area of 4,275 sq ft; the site has a balance lease term of about 92 years. The gross floor area is estimated at 7,911 sq ft. The site is zoned for commercial use but is permanently approved for hotel use. The shophouses have 15 themed rooms (with an average size of around 215 sq ft), spanning across two storeys and a mezzanine level, a cafe lounge and a small pool. The indicative pricing translates to a net yield of around 2-3 per cent, based on the current income stream from rooms as well as food and beverage operations.