SINGAPORE: Having transformed an ‘invisible building’ into a sleek new office block, property fund manager Pamfleet Group is counting on buy-in from business occupiers. Are they ready to bite?
In all the years that Andrew Moore had visited Singapore and stayed at the InterContinental Hotel on Victoria Street, he had never noticed Bright Chambers even though it was located just across the road.
“I’m usually very aware of my surroundings,” says the Hong Kong-based CEO of Pamfleet Group, a property fund manager, when he was in Singapore recently.
“When it came on the market and I first looked at it, I was taken aback.
It was, even to me, an invisible building.”
The invisibility of the over-30-year-old building proved to be “one of the positives” that convinced Pamfleet to purchase it for $45 million ($1,076 psf of gross floor area) two years ago.
The nine-storey Bright Chambers was the maiden acquisition of a Singapore property by the Pamfleet Real Estate Fund (PREF), a US$200 million ($405 million) fund.
All the other properties in the fund’s portfolio are located in Hong Kong.
Pamfleet spent $10 million refurbishing the old building, giving it a sleek new glass façade and a new identity by renaming it The Prospex.
Refurbishments were completed recently, with the building expected to receive Temporary Occupation Permit (TOP) this month.
“We’ve created something with architectural impact in a very visible location right at the junction of Victoria Street and Middle Road,” says Moore.
The location in Bugis, right on the city fringe, is one of the building’s main attractions.
It is adjacent to Bugis+, which is linked by an air-conditioned pedestrian overhead bridge to Bugis Junction and the MRT station sitting underground.
Bugis Junction is part of an integrated development that includes the Bugis Tower office building and the InterContinental Hotel.
“The InterContinental was my preferred hotel because it sits right on top of the MRT station and is just two stops to Raffles Place,” recounts Moore.
“When it rained, I didn’t have to worry about getting a taxi.
Shopping was great at Bugis Junction and Bugis+, and Bugis Street had all the local eateries.”
Andrew Moore, CEO of Pamfleet Group
‘Bottom-up strategy’
The acquisition and repositioning of Bright Chambers is a classic example of Pamfleet’s “bottom-up strategy”.
The company specialises in identifying and buying buildings in Hong Kong and Singapore and enhancing their value through renovation, rebranding or repositioning.
Of the six properties Pamfleet acquired in Hong Kong in recent years, only one is located on Hong Kong Island; the rest are in Kowloon.
Properties in its portfolio include The Mark, a 60-year-old industrial building in Kwun Tong district in Kowloon East.
Pamfleet, as the appointed asset manager, undertook a six-month conversion of the property into an office building that was completed in 4Q2014.
In 2012, Pamfleet repositioned the former Tsuen Wan Hoover Plaza, a 15-storey commercial building with two levels of “Ginza-style shops” in the basement, in the busy Tsuen Wan district in the New Territories, and renamed it Optimall.
Pamfleet was founded in 2000 as a management buyout of Jardine Fleming’s property fund management business.
“When JP Morgan Chase bought Jardine Fleming in 2000, that was our opportunity to do a management buyout,” says Moore, who is one of the original founding members of Pamfleet.
He had previously worked at Jardine Fleming.
Pamfleet is no stranger to Singapore’s real- estate market, having set up an office here four years ago.
Prior to that, the firm was involved in the purchase of three dormitories from JTC Corp for $153 million in 2008, according to its corporate website.
The dormitories are located in industrial areas, namely Kian Teck Avenue in Jurong, Tampines and Woodlands.
The fourth, Avery Lodge on Jalan Papan, Jurong, cost $100 million to build and was completed in 1Q2009.
It was billed as a “five-star workers’ dormitory”, as it offered facilities such as a living room, fitness corner, minimart and clinic.
The portfolio of four workers’ dormitories has a total gross floor area of 1.6 million sq ft and can accommodate more than 20,000 foreign workers.
The portfolio was a joint-venture project, according to Pamfleet, with Morgan Stanley Real Estate Funds holding a 97% stake.
When Morgan Stanley exited the foreign workers’ dormitories scene in 2010, the buyer of the portfolio was a consortium of local and foreign investors led by Valparaiso Capital Partners, which purchased it for $380 million, with gross yields estimated to be in the range of 9.75% to 10.25%.
It looks like Pamfleet sees opportunity in re-entering the workers’ dormitory sector.
In February, it acquired a 6,000-bed dormitory called Homestay Lodge, located off Kaki Bukit Avenue 3, for $127 million.
The deal is said to have been brokered by JLL.
Homestay Lodge was completed in 2001 and consists of seven residential blocks, two blocks with dining and minimart facilities and an administrative block.
The dormitory blocks sit on two HDB leasehold plots with a total land area of 200,000 sq ft.
The sale is therefore subject to HDB’s approval.
The seller of Homestay Lodge is said to be a privately owned special purpose vehicle of Hotel Properties Ltd’s managing director Ong Beng Seng and his brother-in-law, David Fu.
The Prospex
Betting on strata sales
Pamfleet recently previewed The Prospex, with units offered for strata sales.
This is not a typical exit strategy for Pamfleet’s properties.
However, Moore believes The Prospex lends itself to strata-subdivision, given the shape and size of the floor plates, which allows every unit to have natural light, and easy access from the lift lobby.
The building was completely gutted except for the structural walls, and new mechanical and electrical systems, lifts and other amenities were installed.
“It’s essentially a new building,” says Moore.
“We’ve gone from a Grade C building to one with a Grade A feel.”
The retail podium, which is on the first and second levels and connected via an internal staircase, takes up 4,037 sq ft and will be sold as a single strata unit.
Although the space is not released for sale yet, the unofficial guide for it is about $5,000 psf, or $20 million.
At each of the office levels, from the third to ninth floors, four strata-titled units have been carved up, with sizes ranging from 581 to 1,302 sq ft.
The strata-office units are priced from $1.4 million to $3 million each, which translates into $2,250 to $2,600 psf, says Sammi Lim, associate director of investment properties at CBRE, the marketing agent for the project.
The property previewed this month, with an early-bird discount of 5% for a limited period, she adds.
Buyers can also opt to buy whole strata floors, with sizes ranging from 3,810 to 3,831 sq ft.
Asking prices are in the vicinity of $9.4 million to $9.46 million, or $2,470 psf.
The new owner will have the flexibility to lease or sell the individual strata units on each floor, as they have already been subdivided, with a separate title for each unit.
Most of the buyers of strata-office space today are end-users who prefer vacant units that they can move into immediately, points out CBRE’s Lim.
“We are targeting companies that are taking a longer-term view of the space.
At The Prospex, they can move in once the building obtains TOP next month.”
Micro-market comparables
According to Lim, there aren’t any “brand-new” shops and strata offices in the pipeline for sale in the Bugis-City Hall area.
The nearest comparables are 99-year leasehold mixed-use complexes such as Burlington Square on Bencoolen Street, which was completed in 1998, and Sunshine Plaza, which opened its doors in 2001.
Both buildings have a mix of retail, office and residential components.
Based on caveats lodged with URA Realis, the most recent transaction of a strata-office unit at Sunshine Plaza was in December, when a 1,119 sq ft unit on the eighth floor changed hands for $2.16 million ($1,927 psf).
At Burlington Square, the most recent transaction of an office unit was a 549 sq ft unit on the sixth floor that fetched close to $1.14 million ($2,073 psf) last September.
Rents achieved for office units at Burlington Square and Sunshine Plaza are currently in the range of $6.50 to $7 psf a month, reckons CBRE’s Lim.
The Prospex, being a newer building in a more attractive location, is expected to fetch gross rents in excess of $8 psf a month for office units.
The retail space at The Prospex could see gross rents in the range of $17.50 to $22.50 psf a month.
Based on the rental projections, gross yields could be between 4% and 4.5%, she estimates.
The fact that The Prospex has just 58 years left on its lease is not likely to deter buyers, says Lim.
Banks are still willing to finance commercial properties with less than 60 years on their leases.
Examples of 99-year leasehold buildings containing both shops and offices with less than 60 years to expiry include International Plaza (54 years left), High Street Centre (53 years) and People’s Park Centre (54 years), according to CBRE data.
“Location is key to most buyers, and most are willing to accept the tenure, owing to the excellent location and accessibility,” notes Lim.
She sees interest coming from creative industries, boutique IT firms, educational institutions, professional-service providers such as accountants, architects and lawyers, as well as shipping and trading companies.
While the focus is on strata sale, Pamfleet is said to have received “unsolicited requests” for the purchase of the whole building, from both owner-occupiers and investors, she adds.
This article appeared in the City & Country of Issue 675 (May 4) of The Edge Singapore.