Tourists are returning to Singapore’s Chinatown where people are milling through the shops on Trengganu Street, Temple Street, Pagoda Street, Smith Street and Sago Street. All of the streets are linked through Trengganu Street, which, along with Pagoda Street, was converted into an open-air mall for pedestrians by URA in 1997.
There was a time when the hawkers of Trengganu Street were known for their the brewed tonic soups, which were an amalgamation of tortoise snake, turtle, or fruit bats, according to Singapore Infopedia.
Today the most exotic beverage is coffee in new cafes which have recently opened including Plus Coffee Joint on Temple Street, Afterwords Cafe on Pagoda Street, and Rough Guys Coffee and a Korean-style cafe September Coffee on South Bridge Road.
The majority of street vendors in Chinatown these days are selling souvenir trinkets, clothes as well as antiquities and art. There are many other items for sale, however.
In April seven conservation shophouses located situated at 20 Trengganu Street were placed on the market for sale through an expression of interest (EOI). The three-storey shophouses are Gross Floor Area (GFA) 31364 square feet, and the plot is 10,444 square feet. The estimated price was $110 million according to the marketing agency CBRE one year ago. It was $3,507 psf on the basis of GFA. However the property was removed at the end to the EOI.
The seven shophouses located at the intersection of Trengganu Street and Temple Street are for sale once more and this time through a private agreement. Savills Singapore is the sole agency for marketing. Savills Singapore, has stated the price “in the region of $85 million” or $2,710 per square foot Based on GFA that’s 22.7% lower than the estimate of the price last year.
Fully let with 3-% gross yields
The shophouses on 20 Trengganu Street are fully leased as per Yap Hui Yee the executive director of capital markets and investment sales for Savills Singapore, who is managing the sale.
The first level is home to seven shop units. The the tenants currently in place comprise an antique store, a supermarket and takeaway food counters as well as a clothing store and fruit stand. The second level is filled with Yum Cha, a Chinese dim sum eatery Yum Cha, which has been a tenant since the year 2000.
The third floor houses the 40-room 3-star Hotel 1888 Collection, which has been in operation since January of 2019. Room rates start at $185 per night for a standard room. The boutique hotel has the rent per month of $50,000, according to Yap.
The rental rate for the whole property which includes restaurants on the 2nd level as well as the units for retail on the upper floor, is $215,000. Based on the estimated cost of $85 million this amounts to a gross return of around 3%.
In accordance with the Inlis property record search according to an Inlis property title search, 20 Trengganu Street is owned by Royal & Sons Organisation, an organization belonging to the Royal Group of Companies controlled by billionaire Asok Kumar Hiranandani as well as the son of Asok, Bobby. In accordance with a caveat filed by URA Realis, the Hiranandanis of the Royal Group purchased the property in 2007 for $18 million.
The shophouses in the block is scheduled to be sold under an 198-year lease beginning in 1872. This means that the lease has a balance that is 47 years. The shophouses are slated for commercial use in the Chinatown (Kreta Ayer) Historic Conservation Area in the URA 2019 Master Plan.
“The property at 20 Trengganu Street boasts a prominent 100m frontage that runs along Trengganu, Smith and Temple Streets,” says Yap. It is situated 150m away from Chinatown MRT Station, an interchange between both the Northeast as well as Downtown Lines. In just five minutes, walk to Maxwell MRT Station on the Thomson-East Coast Line. A five-to-10-minute walk will lead you to two additional MRT stations. Tanjong Pagar on the East-West Line and Telok Ayer on the Downtown Line.
Savills’ Yap believes the future capital value of the asset is in its value-add capabilities by way of asset enhancement programs. The currently approved uses include shops on the top level as well as a restaurant on second and a hotel at the bottom. The buyer of the property could transform the second floor of 10,382 sq feet to 40 rooms for hotel use. Together with 40 rooms on the third floor the hotel operator will have an additional 80 rooms -more than the current inventory. Yap states that the top level can be transformed into restaurants or entertainment venues, “subject to approval from the authorities”.
The owner only has to request a change in use, which is priced at $535. And the new owner will need to seek a brand new license to operate a hotel in accordance with Yap.
“We are considering investors who would like to run hotels or take advantage of the trend of co-living that has seen a huge increase in interest,” the woman says. “A large portion of the wealthy private individuals — the ultra-high-net worth family offices and individualsare considering buying commercial shops with the potential transformation to accommodate.”
Shophouses in conservation are beautiful because of their rarity with only 7,000 of them in gazetted conservation zones in Singapore. The price at $85 million to build a 80-room hotel in a shophouse much lower than a typical hotel on similar size that Yap estimates will cost between $200 million to $300 million. “But there’s no such cost range, as there’s an extremely limited number of hospitality assets available on the market,” she adds.
The quantum cost will be $31.33 million on the initial floor, assuming a price of $3,000 per square foot across the floor space of 10,444 square feet. Subtracting $31.33 millions from the $185 million tag, the upper floors are responsible for the remainder of $53.67 million. If the two floors are repurposed into a hotel with 80 rooms it will cost $670,000 for each key, Yap estimates.
The hospitality sector is riding the rebound
The cost per key for the hotel located at Trengganu Street is competitive. In Mosque Street, RB Capital’s family office bought Porcelain Hotel for 90 million dollars in October 2021. With 138 rooms at the hotel, it equates to approximately $652,174 per key.
In March in Hong Kong, the rental housing company Weave Living and Singapore-listed property developer SLB Development acquired the 88-room Clover Hotel on North Bridge Road in an 80:20 joint partnership. The $74.8 million amount paid is equivalent to $850,000 for each key.
On Teck Lim Road just near Keong Saik Road, Hilltop Capital — which is linked to Kimen Group — sold the 45-room Hotel Soloha for $53.38 million in May 2022. It’s about $1.19 millions per key.
July 2022 witnessed Silkroad Property Partners acquire a row of 11 shophouses along Mosque Street as part of its portfolio of 14 properties, including a pair located on Pagoda Street and another situated in Tanjong Pagar, for $110 million. The upper levels that comprise these Mosque Street shophouses have been converted into apartments and services.
“We know that a lot homes are rented by expats on a twoor three-year lease, as they are awed by the Chinatown area as well as the close accessibility of the CBD,” says Yap.
After the removal of travel restrictions across the world and Singapore’s tourism industry is set to see a significant recovery from 2023, according to Yap.
Singapore Tourism Board (STB) expects the number of international visitors arriving in Singapore in the coming year will be between 12 between 12 million and 14 million. The full recovery is anticipated in 2024. The STB’s forecast came rise of higher than expected visitor figures that reached 6.3 million by 2022. This is significantly higher than the 4-6 million that it originally forecast. The tourism industry earned 14 billion dollars last year.
According to STB the Revenue per room available (RevPAR) as of May 2023 stood at $211 which is 10% over The RevPAR was $192 that was recorded in the year prior to the Covid time. Thus, Yap reckons “it’s a perfect time for investors who want to take advantage of the revival and growth of the hotel sector”.
The volume of sales is expected to decrease by 2023.
The the demand for shops is strong because of solid fundamentals and the lack of these properties, Yap expects transaction volume in 2Q2023 as well as the remainder of 2019 to drop in comparison to 2022. “But it shouldn’t be a major drop,” she notes.
The sales of commercial shophouses was already slowed in the first quarter of 2023 in the face of a cautious mood due to the high interest rates and the soaring cost of mortgages, according to PropNex Research. Based on caveats filed by the government, 28 shops were sold between January and March, a decrease from the 35 deals reported in the 4Q2022 quarter and down 46% year-on-year compared to 52 deals reported in 1Q2022.
The value of shophouse transactions in the 1Q2023 quarter was $278 million, which is down to 11.7% compared to the previous quarter and in 40.6% y-o-y.
“There is a growing bid-ask gap and the majority of owners are motivated to sell their home at the right price” Yap observes. “The buyer’s profile will stay the same — families with high net worth as well as those from overseas which includes those who are from China, India, Indonesia and Taiwan. Shophouses are considered assets for wealth preservation as well as the long term capital appreciation. Therefore, they are attracted to them.”
Despite the cautiouser sentiment there were a few notable deals that caught the eye in Chinatown. The first was in January when a freehold storehouse located at the number 233 South Bridge Road was sold at $15.2 million. The property is situated on an size of 1,486 square feet which has a GFA of 3,013 square feet. Therefore, the price is $5,045 psf.
Nearby, two shophouses located on Pagoda Street that have a total site size of 2,500 square feet were sold for $5,200 per square foot Based on GFA on July 20, 2022. The caveat is yet to be filed, however the deal was reported to be mediated by Savills.
Yap did not discuss the deal due to a non-disclosure contract. It is however an all-time record price for Chinatown she claims.
The future owner of the 20 Trengganu Street, the property is still on the lease remaining, which is different from some shophouses along Hongkong Street, Carpenter Street and Smith Street, where some leases have lapsed under 30 years and have to be renewed as per Yap.
For experienced property investors such as Royal Group, which has been holding for 16 years the property located at the 20th floor of Trengganu Street for the past 16 years, now is the perfect moment to sell and invest the proceeds. The owners believe that this is the ideal moment to sell their property after receiving numerous offers that were not solicited Yap says. Yap.
Royal Group has also been moving its portfolio to more expensive properties. In December, the group acquired the freehold commercial building Ming Arcade in an en group deal for $172 million. The building is situated on 21, Cuscaden Road, just off Singapore’s top shopping street, Orchard Road, which is undergoing a revamp.
Ming Arcade was a popular site for sale. Ming Arcade site was launched to be sold by tender and concluded with over five offers. “The site was hotly contested,” says Jeremy Lake who is the managing director of capital markets and investment sales in Savills Singapore, who handled the sale.
Based on its current GFA of 55,046 square feet the sale price of Ming Arcade came to $3,125 psf for each plot ratio (ppr) which was higher than that previous mark of $2,910 the ppr set by Hongkong-listed Shun Tak Holdings for the group purchase of the Park House (the former Park House (the Park Nova) Park Nova) on June of 2018. Savills handled the en bloc purchase too.
Royal Group is expected to revamp Ming Arcade into an 18-storey hotel with 170-rooms. The group already has several high-end hotels, such as the Sofitel Singapore Sentosa Resort & Spa and the soon-to-open 2nd Raffles Hotel, an all-villa hotel located in Sentosa set to open in early next year.
Within the close vicinity to Ming Arcade are a number of newly constructed hotels and residences like The 142-room Artyzen Hotel created by Shun Tak, and the hotel with a 204-room Singapore Edition by Ian Schrager and Marriott International, which is part of a mixed-use community which includes a the luxurious residence Boulevard with 88 that was created in partnership in collaboration with Hong Leong Holdings and City Developments.
However, Chinatown has its appeal as noted by Savills”Yap. “It’s an ode to Singapore’s diverse and rich cultural heritage. The region has changed into a plethora of commercial and leisure activities, including new developments in the commercial sector and trendy F&B places, along with temples and other treasures of culture,” she adds.
Yap says that Chinatown is a popular destination for international travelers who want to get lost in the historical enclave. “Given the fact that hotels in boutiques with the potential to be a lucrative investment are typically tightly held,” she adds, “20 Trengganu Street is an chance for investors to purchase the corner shophouses in a thriving district.”