Six-storey shophouse in Boat Quay sold for S$37 million

The sale, which has resulted in a nice return for the seller, comes amid a slowdown in shophouse deals

Mar 22, 2023

WAH Loon Engineering founder Alan Chong is understood to have sold a landmark six-storey shophouse in Boat Quay for S$37 million, making a nice gain over the S$21.35 million he paid for the 999-year leasehold property in 2018.

The new owner of 52 Boat Quay is an indirect wholly-owned subsidiary of Tai Tak Estates, incorporated in Singapore in 1954.

Tai Tak, set up by the late banking tycoon Ho Sim Guan, invests in a number of businesses including plantations, listed and private equities, and property. Tai Tak owns other shophouses in Boat Quay and South Bridge Road areas.

The group’s latest acquisition, 52 Boat Quay, is the tallest conservation shophouse along the Singapore River. It is on a 1,119 square foot site and has about 6,446 sq ft total built-up area.

The top two levels, including some roof terrace space, are occupied by Braci, a Michelin-starred Italian restaurant. An Izakaya bar is on the first level, while the second to fourth levels are currently leased to corporates as office space. The property comes with a lift serving all floors. Savills Singapore brokered the sale of 52 Boat Quay.

Yap Hui Yee, the property consulting group’s executive director of investment sales and capital markets, confirmed the firm’s role in the transaction but declined to comment on pricing and other details.

Market watchers generally say that activity in the Singapore shophouse market has slowed this year due to several factors, including rising interest rates, causing many potential buyers to take a pause. Some sellers are sticking to their price expectations, resulting in widening price gap between buyers and sellers.

Year-to-date shophouse transaction value down 7.7%

Based on CBRE’s analysis of URA Realis caveats data downloaded on Mar 20 (with the latest transaction dated Mar 6, 2023), there have been 19 shophouse deals totalling S$212.1 million year to date. This is a 7.7 per cent drop from the S$229.8 million in the same period last year.

For the whole of 2022, there were 189 deals amounting to S$1.61 billion, down from the banner year in 2021 with 254 transactions adding up to S$1.94 billion.

Industry players, however, point out that in addition to the transactions captured via caveats data, there is a sizeable volume of shophouse deals for which buyers have not lodged caveats. (Caveats are claims of interest in property.)

Typically, a property deal involving the sale of shares in a special-purpose vehicle holding the asset does not result in the buyer lodging a caveat. An example would be the 52 Boat Quay transaction.

Even where a shophouse deal involves a direct property sale, the buyer may choose not to lodge a caveat. In any case, the lodging of caveats is not compulsory.

Non-caveated deals

For 2022, market watchers estimate that in addition to the shophouse deals captured in caveats data, there were another 20 to 30 transactions amounting to around S$600 million to S$700 million where buyers did not lodge caveats. These non-caveated deals involved shophouses in locations such as Telok Ayer Street, Amoy Street, Pagoda Street, Mosque Street, Keong Saik Road, Teck Lim Road, New Bridge Road and Geylang Road.

Examples include the following acquisitions by affiliates of Singapore-based property investment group Clifton Partners: 68 and 69 Amoy Street, sold by Singapore Reinsurance Corporation at S$43 million, 97 Amoy Street (sold by a Malaysian individual at S$30 million) and 25 Boon Tat Street, sold by a vehicle linked to Spanish-turned-Singaporean shophouse investor Ricardo Portabella Peralta for S$24.8 million. All three properties are on land with 999-year leasehold tenure.

Fewer motivated sellers

CBRE executive director of capital markets Clemence Lee predicts a drop in transaction volume in 2023 amid a widening bid-ask gap between shophouse buyers and sellers. “Following two strong years of shophouse sales in 2021 and 2022, there are now fewer shophouses available for sale. Most owners have strong holding power and will not sell unless they achieve the price they want.

“On the demand side, however, investors have become more cautious due to the rising interest rate environment. Many buyers are currently sitting on the sideline, hoping for some price correction before entering the market again,” he added.

Savills’ Yap, too, does not expect 2023 shophouse sales to surpass last year’s figures, citing higher pricing expectations from owners. “There are fewer motivated sellers in the market. Most of the buyers who picked up shophouses in the past few years are holding them for mid to long term, which explains the drop in supply in the market,” she said.

However, the head honcho of a shophouse investment group told The Business Times that there are owners who are prepared to adjust their price expectations, resulting in transactions still taking place.

New-to-market buyers

Richard Tan of PropNex Shophouse Elite describes the level of shophouse interest and transactions currently as “still healthy”.

“We have been seeing new groups of overseas buyers after Chinese New Year, still mainly from China but also some from Hong Kong and South-east Asia.

“Some of them have set up family offices here and are sending to us their local staff who are tasked to find S$30-40 million of conservation shophouses, specifically in Districts 1 and 2 (covering the CBD and Chinatown locales). They have already done some research on the shophouse market before they come for viewings; and they gather a lot of information to present to their boards to make a decision.”

Yap, who has also been serving this new profile of potential buyers, says: “These are new-to-market buyers. Decision-making will take slightly longer.”

Lee of CBRE says that with higher interest rates this year, most investors are choosing to put more equity into their shophouse purchase.

“With lower debt, we expect to see more transactions with deal sizes below S$20 million in 2023 compared with 2022. However, prices in terms of per square foot of built-up area are likely to remain stable.”

https://www.businesstimes.com.sg/pro...ld-s37-million