DUCK & Hippo group founder James Heng continues to pile up on conservation shophouses.
He is paying S$14 million for 31 Keong Saik Road. This works out to about S$4,300 per square feet based on estimated built-up area for the three-storey freehold property - surpassing the S$4,259 psf he paid for 21 Boon Tat Street in September this year. That price was already a new high for conservation shophouses in Districts 1 and 2, said property agents.
Market watchers noted that whereas both levels of the Boon Tat Street property are approved for food and beverage use, only the ground level of the three-storey 31 Keong Saik Road is approved for F&B use. Moreover as a street address, Boon Tat Street is considered more prime than Keong Saik Road.
(District 1 includes places in the Central Business District such as Club Street, Boon Tat Street, Amoy Street, Telok Ayer Street and Boat Quay while District 2 includes the Tanjong Pagar, Tras Street, Duxton and Kreta Ayer areas as well as a chunk of Chinatown).
Including the latest acquisition, Mr Heng is understood to have picked up at least six conservation shophouses in 2017 and 2018. Besides Boon Tat Street and Keong Saik Road, he has bought properties along Amoy Street, Teck Lim Road, Ann Siang Road and Liang Seah Street.
Industry players note that high networth individuals (HNWIs) are drawn to park their money in Singapore's commercial shophouse market given the limited supply in this real estate asset class.
A seasoned agent told Weekend BT: "The policy on ABSD (additional buyer's stamp duty) for the residential property market has helped to divert more high net worth capital into the commercial shophouse space."
"We have received a lot of fresh enquiries from foreign and local HNWIs keen on commercial shophouses since the latest residential property cooling measures were announced in July this year."
The ABSD on foreigners buying residential properties in Singapore has been raised to 20 per cent from 15 per cent previously. Companies making residential property acquisitions pay 25 per cent ABSD, up from 15 per cent. Besides ABSD, all buyers pay the 4 per cent buyer's stamp duty (BSD).
In contrast, there is no ABSD for shophouses that are on sites fully zoned commercial; only a 3 per cent BSD is payable - for all buyers.
Duck & Hippo Group was acquired this year by London-headquartered Big Bus Tours, the world's largest operator of open-top sightseeing tours. The acquisition price was not disclosed, but market watchers expect Mr Heng to have landed with a nice pile of cash, part of which he has chosen to invest in the Singapore conservation shophouse market.
The ground floor of 31 Keong Saik Road is leased to restaurant Butcher Boy, while offices occupy the upper levels.
Based on JLL's analysis of caveats data on URA Realis, the transaction value of shophouses has already reached S$1.399 billion in the first 11 months of this year - surpassing not only the S$1.033 billion for the whole of last year but also the high of S$1.385 billion in 2012, prior to the introduction of the total debt servicing ratio (TDSR) framework in late-June of 2013, which dampened shophouse deals from the second half of 2013.
Savills Singapore associate director of heritage buildings, Simon Monteiro, noted that the rise in District 1 and 2 shophouse prices this year has further compressed yields - amid sluggish rentals for ground-floor retail and F&B space, although office rents have been firming.
That said, market watchers expect interest for conservation shophouses to continue remaining strong next year.
JLL's senior director, capital markets, Singapore, Clemence Lee, said: "Demand from HNWIs, family offices, foreign investors, boutique real estate funds, end users and corporates remains strong as conservation shophouses are viewed as a good long-term investment due to their limited supply, good location and strong heritage value. There tends to be more buyers in the market as compared to sellers."
He expects prices of conservation shophouses in Districts 1 and 2 to continue appreciating gradually next year. "However, any price increase would be constrained by the yield and income which these properties are able to generate. Threats of rising interest rates will keep any price increase moderate," Mr Lee added.
Savills Singapore is marketing the 999-year 136 Telok Ayer Street for S$15.5 million, or about S$4,500 psf on built up area. The property has three storeys and an attic. Only the ground-floor is approved for F&B use.
Adapted from The Business Times, 19 Dec 2018.