mr funny
09-07-11, 04:02
http://www.straitstimes.com/PrimeNews/Story/STIStory_686218.html
Jul 2, 2011
Six coffee shops sold for nearly $60m
Hefty price tag may be due to stable return on investment: Analysts
By Huang Lijie & Danson Cheong
SIX coffee shops have sold for an eye-popping price tag of nearly $60 million - showing how popular this form of dining has become for Singaporeans.
Analysts told The Straits Times it is a pricey deal as coffee shops usually command about $4 million to $5 million.
They said the $57.3 million tag may be due to the stable return on investments this type of venue can offer because of its long-term popularity with diners.
However, diners should not be affected - at least for now - as the stallholders are still paying the same rent and most of their rental agreements are not due to expire soon. But they may need to pay more when the agreements are up for renewal.
All six coffee shops were put up for sale at the same time by property investor Peter Koh to three buyers who are said to be newcomers to the business.
The most expensive, a 13-stall outlet in Bukit Batok Street 11, sold for $14.5 million while two others in Tampines and Yishun fetched more than $10 million each.
A fourth coffee shop in Ang Mo Kio Avenue 6 sold for less than $10 million, while the two cheapest were in Bedok North Street 3 and Ang Mo Kio Avenue 4, each fetching almost $5 million.
The three most expensive ones were bought by trading company Lubritrade. It is not known who bought the others. Lubritrade said it picked them because of their high customer traffic and it was a strategic investment.
Its spokesman said: 'We were purely looking at the yield for the company and you can't find a stable investment with a 5 per cent return elsewhere.'
But Mr Dennis Wee of realty firm Dennis Wee Group said: '$60 million for six coffee shops is a lot of money."
Mr Pang Lim, managing director of Koufu, which runs more than 50 food courts, coffee shops and cafes, said a price tag of $14.5 million for a coffee shop is 'quite high', given that returns from this business have slipped in recent years.
'Previously, the returns from a coffee shop were about 6 to 7 per cent, but in the last two years, because of difficulty hiring coffee shop workers, the returns have slipped to about 3 to 4 per cent.'
However, Mr Charles Chua, head of PropNex Realty's investment sales, said: 'As an absolute figure, $14.5 million is on the high side but not if the coffee shop has a large crowd to support business.'
When The Straits Times visited the six coffee shops, the ones in Bukit Batok, Tampines Street 81, Yishun Street 81 and Ang Mo Kio Avenue 4 looked to enjoy brisk business.
The Lubritrade spokesman said the current tenants are signed on for at least another three years, which assures a stable revenue stream for the period.
Dr Chua Yang Liang, head of research at Jones Lang LaSalle, said coffee shops are seen as offering a good return on investments now because of low interest rates and the lack of financial instruments that give similar safe returns.
He said returns of about 5 per cent from coffee shops are also comparable to that enjoyed by retail mall landlords.
Dr Chua added: 'Risk in the residential market due to policy issues may also have driven investor interest into the retail and industrial property sector, such as coffee shops.'
Mr Chua of PropNex added that coffee shops are also an astute business investment because coffee shops have become a part of the dining habit of Singaporeans and thus offer investors stable cash revenue.
The high selling price, however, will not immediately affect, if at all, the rent that the coffee shop operators and stallholders pay because the contracts they signed under the previous owner have yet to expire.
Still, there is no stopping coffee shop operators, who run the space and are the middleman between the coffee shop owners and stallholders, from raising rents when their contracts with the hawkers expire.
Mr Umar Ruddin, 42, manager of Noorul Indian Cuisine at the coffee shop in Bukit Batok, said the price of its prata went up by 10 cents to hit 80 cents for a plain prata about four months ago because he was anticipating an increase in rent following talks of a buyover of the coffee shop at a high price. Rent for the stall rose by $700 to hit $6,000 last month.
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[email protected]
Jul 2, 2011
Six coffee shops sold for nearly $60m
Hefty price tag may be due to stable return on investment: Analysts
By Huang Lijie & Danson Cheong
SIX coffee shops have sold for an eye-popping price tag of nearly $60 million - showing how popular this form of dining has become for Singaporeans.
Analysts told The Straits Times it is a pricey deal as coffee shops usually command about $4 million to $5 million.
They said the $57.3 million tag may be due to the stable return on investments this type of venue can offer because of its long-term popularity with diners.
However, diners should not be affected - at least for now - as the stallholders are still paying the same rent and most of their rental agreements are not due to expire soon. But they may need to pay more when the agreements are up for renewal.
All six coffee shops were put up for sale at the same time by property investor Peter Koh to three buyers who are said to be newcomers to the business.
The most expensive, a 13-stall outlet in Bukit Batok Street 11, sold for $14.5 million while two others in Tampines and Yishun fetched more than $10 million each.
A fourth coffee shop in Ang Mo Kio Avenue 6 sold for less than $10 million, while the two cheapest were in Bedok North Street 3 and Ang Mo Kio Avenue 4, each fetching almost $5 million.
The three most expensive ones were bought by trading company Lubritrade. It is not known who bought the others. Lubritrade said it picked them because of their high customer traffic and it was a strategic investment.
Its spokesman said: 'We were purely looking at the yield for the company and you can't find a stable investment with a 5 per cent return elsewhere.'
But Mr Dennis Wee of realty firm Dennis Wee Group said: '$60 million for six coffee shops is a lot of money."
Mr Pang Lim, managing director of Koufu, which runs more than 50 food courts, coffee shops and cafes, said a price tag of $14.5 million for a coffee shop is 'quite high', given that returns from this business have slipped in recent years.
'Previously, the returns from a coffee shop were about 6 to 7 per cent, but in the last two years, because of difficulty hiring coffee shop workers, the returns have slipped to about 3 to 4 per cent.'
However, Mr Charles Chua, head of PropNex Realty's investment sales, said: 'As an absolute figure, $14.5 million is on the high side but not if the coffee shop has a large crowd to support business.'
When The Straits Times visited the six coffee shops, the ones in Bukit Batok, Tampines Street 81, Yishun Street 81 and Ang Mo Kio Avenue 4 looked to enjoy brisk business.
The Lubritrade spokesman said the current tenants are signed on for at least another three years, which assures a stable revenue stream for the period.
Dr Chua Yang Liang, head of research at Jones Lang LaSalle, said coffee shops are seen as offering a good return on investments now because of low interest rates and the lack of financial instruments that give similar safe returns.
He said returns of about 5 per cent from coffee shops are also comparable to that enjoyed by retail mall landlords.
Dr Chua added: 'Risk in the residential market due to policy issues may also have driven investor interest into the retail and industrial property sector, such as coffee shops.'
Mr Chua of PropNex added that coffee shops are also an astute business investment because coffee shops have become a part of the dining habit of Singaporeans and thus offer investors stable cash revenue.
The high selling price, however, will not immediately affect, if at all, the rent that the coffee shop operators and stallholders pay because the contracts they signed under the previous owner have yet to expire.
Still, there is no stopping coffee shop operators, who run the space and are the middleman between the coffee shop owners and stallholders, from raising rents when their contracts with the hawkers expire.
Mr Umar Ruddin, 42, manager of Noorul Indian Cuisine at the coffee shop in Bukit Batok, said the price of its prata went up by 10 cents to hit 80 cents for a plain prata about four months ago because he was anticipating an increase in rent following talks of a buyover of the coffee shop at a high price. Rent for the stall rose by $700 to hit $6,000 last month.
[email protected]
[email protected]