SINGAPORE (EDGEPROP) - By profession, Singaporean Kevin Liang is the founder and CEO of EPS Consultants, a technology recruitment, executive search, talent management and IT outsourcing company. He is also an avid and prolific property investor. Through his corporate entities, he owns office units in strata-titled commercial buildings across the CBD through various companies: from SBF Centre on Robinson Road (where his office is) to Shenton House on Shenton Way, International Plaza on Anson Road and High Street Centre on North Bridge Road.

Liang also owns apartments in the CBD through his investment vehicles. These include apartments in The Sail @ Marina Bay, SkySuites @ Anson and Icon at Tanjong Pagar. “These are long-term investments,” he says. And they give him a good grounding of the property market, particularly the CBD and the rest of the Core Central Region (CCR).

In the CBD, Shenton House is one of the last vestiges of the 1970s still standing along Shenton Way. The 25-storey, strata-titled, commercial development at 3 Shenton Way has 40 shops, 163 offices and a carpark with 225 parking spaces. The property sits on a land area of 36,350 sq ft with a 99-year lease from June 2, 1969. Hence, the property has 45 years remaining on its lease.

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“Even though my company owns several office units at Shenton House, I wasn’t active in the previous collective sale exercises,” says Liang.

However, he is now the chairman of the collective sale committee (CSC) in Shenton House’s latest en bloc attempt. “It took just 3½ months to get 80% consensus among the owners,” he adds. (See potential condos with en bloc calculator)

Past collective sale attempts

Things could not have been more different in Shenton House’s previous attempts. The fourth collective sale exercise in 2017–2019 at a reserve price of $536 million did not take off as it did not garner the requisite 80% support from the owners.

The third collective sale attempt achieved 80% owner consensus, and the property was launched for sale at $530 million in March 2012. However, no buyer emerged.

The second collective sale attempt in 2007–2008 had a target price above $500 million but failed due to the onset of the Global Financial Crisis. The first collective sale attempt in 2005 at a target price above $500 million never took off. Owners were more interested in exploring the possibility of converting their existing ownership for new units in the future redevelopment.

CBD Incentive Scheme, commercial zoning

The CBD Incentive Scheme also propelled Shenton House’s latest collective sale attempt, according to Liang.

Shenton House has commercial zoning and an existing plot ratio of 11.2. Under URA’s CBD Incentive Scheme launched in 2019, Shenton House can be redeveloped into a mixed-use or hotel development with a higher gross plot ratio of 14.0 and 25% more gross floor area (GFA).

With JLL as the sole marketing agent, Shenton Way’s latest collective sale was launched in February 2023 at a reserve price of $590 million. However, the tender closed on April 11 without a bid.

The collective sale was relaunched on June 26 at the same reserve price of $590 million. Even as the relaunch is ongoing, the owners are signing a supplemental joint agreement to lower the reserve price by 8.8% to $538 million. So far, about 60% of the owners have signed based on share value, and 70% according to the strata area, says JLL. The threshold required for the share value and strata area is 80%. The tender closing for this round is on Aug 1.

The $538 million price tag reflects a land rate of $1,898 psf per plot ratio (ppr) after factoring in a higher plot ratio of 14.0 under the CBD Incentive Scheme. The unit land price includes an estimated $427 million cost for the land betterment charge and lease top-up premium to a fresh 99-year lease.

The site’s commercial zoning for a mixed-use development allows for 60% of the GFA for commercial use and 40% for residential units. A minimum of 20% of the residential units must have a net internal area of 70 sq m (753.5 sq ft). If the 7% bonus GFA for balconies is included, the land rate is slightly lower at $1,878 psf ppr. (Find Singapore commercial properties with our commercial directory)

“The beauty of the commercial zoning is that developers do not need to pay ABSD (additional buyer’s stamp duty) when they purchase the site,” says Tan Hong Boon, executive director of capital markets at JLL.

According to Tan, developers have become “very cautious” about the high-end condo market given the latest property cooling measures on April 27, in which foreign buyers are now slapped with a 60% ABSD for residential property purchases, double from 30% before.

Mixed-use in the CBD

Shenton House has a prime 80m frontage along Shenton Way, with another 37m frontage along Park Street and Shenton Lane in the rear.

The new mixed-use development, offering a prime frontage and Grade-A office space with large floorplates, is likely to attract corporate tenants, notes Tan.

“The office component can be kept as a long-term investment,” adds Tan. “Alternatively, some may hold the office component for several years and offload it in the future to a REIT or property fund.”

An example is Asia Square Towers 1 and 2 at Marina View, directly behind Shenton House. Developed by the former private equity and property investment advisory firm MGPA (now part of BlackRock), the towers were designed by Australian architectural firm Dentons Corker Marshall and Singapore-based Architects 61 and completed in 2011.

The 43-storey office tower at Asia Square Tower 1 was sold to Qatar Investment Authority in June 2016 for $3.4 billion. CapitaLand Commercial Trust acquired the office component of Asia Square Tower 2 for $2.094 billion in September 2017.

The 305-room Westin Singapore, which spans the 33rd to 46th storeys of Asia Square Tower 2, was sold to Japanese hotelier and developer Daisho Group for $468 million in 2013, just one month after the hotel opened. The price translates to $1.5 million per key.

Two streets away is the former PIL Building on Cecil Street, which TE Capital Partners and LaSalle Investment Management jointly acquired for $323.8 million in February 2022. The new office development, Solitaire on Cecil, was launched for sale in January this year. All 15 strata-titled office floors in the 20-storey office tower and two retail/F&B units on the first level of Solitaire on Cecil were sold within five months. The strata offices achieved prices of $4,100 to $4,300 psf. Meanwhile, the first retail unit fetched $5,400 psf and the second, close to $6,000 psf.

“The prices achieved at Solitaire on Cecil reflect investors’ and owner-occupiers’ unwavering confidence in quality commercial assets in the CBD,” says JLL’s Tan.

Future luxury hotel?

Alternatively, Shenton House can be redeveloped into a new commercial property with 95% hotel and 5% retail space. A premier hotel like The Westin Singapore and the 233-room Sofitel Singapore City Centre presents a compelling option, too, notes JLL’s Tan.

Based on 95% hotel and 5% retail, and an average room size of 30 to 40 sq m (323 to 431 sq ft), the new luxury hotel could have 729 to 973 keys, estimates JLL.

Assuming a new development with 40% commercial and 60% hotel and an average room size of 323 to 431 sq ft, the new luxury hotel could have 460 to 614 keys, according to JLL.

Chee Hok Yean, Asia Pacific president of HVS, a global consulting firm specialising in the hospitality industry, estimates that luxury hotels such as The Westin and Sofitel Singapore City Centre command room rates of $400 to $500 per night, with average occupancy rates of about 75%.

The latest hotel transaction in the CBD was the sale of the former So/Singapore Hotel in May last year to Ho Chi Minh-based Viva Land through its Singapore-based subsidiary Viva Ventures So Holdings. Singapore developer Royal Group sold the 134-room heritage hotel for $240 million or $1.8 million per key, a record price for Singapore’s luxury hotel segment. The property has been rebranded Hotel Telegraph.

“The minimum price for upper upscale hotels in the CBD is $ 1.5 million today, and for luxury hotels, it is even higher — above $2 million per key,” says Chee.

Meanwhile, the value of upscale business hotels, such as Oasia Downtown, Carlton City Hotel, M Hotel and Amara Singapore, is $1 million to $1.2 million per key, reckons Chee. The average room rates of these hotels are $250 to $350 per night, with average occupancy rates of about 70%, according to Chee.

Further down Shenton Way is OUE Downtown by Singapore-listed real estate group OUE. The hotel and serviced apartment component, previously operated by Oakwood, was sold to a joint venture between Hong Kong property developer Far East Consortium and Hong Kong investment bank AMTD Group for $289 million in 2019. The hospitality asset has since been rebranded Dao by Dorsett and has a mix of 268 studios, one- and two-bedroom apartments.

The recovery in Singapore’s hospitality sector post-Covid also means investors in hospitality assets — serviced apartments, co-living, four-star or luxury hotels — can expect gross rental yields of about 3% to 4%, depending on tenure, grade and condition of the property, Chee estimates.

Earlier this month, Midtown Properties, related to the Worldwide Hotels Group and Hotel 81 chain, purchased the 542-room Parkroyal Kitchener Hotel in Little India for $525 million from UOL Group. It values the hotel at $969,000 per key.

Gentrification of the old CBD

Renewal is taking place around Shenton House. Its neighbours, former contemporaries from the 1970s, such as the former Robina House (built in 1971) at 1 Shenton Way and the former UIC Building (built in 1973) at 5 Shenton Way, have been torn down and redeveloped into shiny new towers.

One Shenton by City Developments is a 341-unit residential development with shimmering 43- and 50-storey gold and silver twin towers designed by world-renowned Canadian Uruguayan architect Carlos Ott. The apartment towers were completed in 2011 and fully sold.

Based on the latest caveats, the last transaction at One Shenton was for a 1,098 sq ft two-bedder on the 39th floor that changed hands for $1.92 million ($1,749 psf) in June. Before that, a 1,141 sq ft two-bedder on the 29th floor fetched $2 million ($1,753 psf) in May 2023.

The former UIC Building has given way to the new UIC Building, a 23-storey office tower, and the adjacent 54-storey, 510-unit apartment tower V on Shenton, by Singapore Land Group (SingLand). The two towers were designed by Dutch architect Ben van Berkel of UN Studio and completed in 2017.

At V on Shenton, the latest transaction was for a 1,528 sq ft three-bedder on the 22nd level that changed hands for $2.91 million ($1,904 psf) in May. In early May, a 484 sq ft one-bedder was sold for $1.13 million ($2,333 psf).

SGX Centre 1 and 2, completed in 2000, are directly across the road from Shenton House. Kajima Overseas Asia developed the twin towers, home to the Singapore Exchange. New York-based Kohn Pedersen Fox designed the towers with Singapore-based Architects 61. Singapore Exchange sold its space to United Overseas Bank (UOB) on a sale-and-leaseback arrangement for seven years in 2007. Today, the towers are jointly owned by UOB and SingLand.

Further down the road is 8 Shenton Way (former AXA Tower). It will be redeveloped into Skywaters Residences, the future tallest tower in Singapore at 305m. The 63-storey tower will contain 215 luxury residences on the uppermost floors and a mix of office and other commercial space on the lower floors. The project is a redevelopment by Perennial Holdings and Alibaba.

No time to lose

The clock is ticking for Shenton House, not just because of its depleting lease but also the upcoming expiry of the CBD Incentive Scheme on Nov 26, 2024, five years from when the Master Plan 2019 was gazetted, notes JLL’s Tan.

Ageing buildings like Shenton House, now over 50, are also under pressure to get sold en bloc. “After a certain number of years, old buildings are bound to have issues, such as spalling concrete,” says CSC chairman Liang. “The lobby looks fine because we refurbished it some years back.” (See potential condos with en bloc calculator)

Things that need to be replaced or upgraded in the building include lifts and escalators. “It is going to be very costly,” says Liang. “Maintenance costs will more than double or triple from the existing level. So it’s better to sell en bloc than retain the existing building.”

Hence, the owners of Shenton House are motivated sellers, says Liang. In this latest exercise, he adds that close to 90% supported the collective sale.

As an owner of multiple strata-titled properties across the CBD, Liang sits on the management corporation strata title (MCST) committee of several and understands the challenges they face. He is the chairman of the MCST at SBF Centre, the secretary of the MCST at International Plaza and an MCST committee member at Icon and The Sail. Incidentally, Liang was also the collective sale chairman for International Plaza in the 2021-2022 exercise at a reserve price of $2.7 billion.

Residential rental demand

Based on his personal and corporate investment portfolio, rental demand for apartments in the CBD remains strong, notes Liang. At The Sail @ Marina Bay, he recently leased his 614 sq ft studio apartment at a monthly rental rate of $5,200 or $8.50 psf. His 883 sq ft two-bedder is leased for a monthly rental rate of $6,800 or $7.70 psf. Both tenants are expatriates working in the CBD.

At SkySuites @ Anson, Liang recently leased a 365 sq ft studio to a Chinese student pursuing his tertiary education. The monthly rental rate agreed on was $3,850 or $10.50 psf. According to Liang, he received two offers for the same unit. The second offer was at a higher monthly rental rate of $4,000. However, he chose the Chinese student as the lease period was longer, while the other was for just six months, he says.

Liang also expects his two-bedder at Icon to fetch a rent of at least $6,000 a month when the lease is up for renewal in a few months.

“Rental demand for smaller office units in the CBD area has been robust in the past year post-Covid,” he adds. “Our portfolio of over 20 office units is fully leased.”

According to Liang, office units at International Plaza can still command $7 psf per month, while rental rates at SBF Centre, which is a newer building, are between $9 and $10 psf per month.

JLL’s Tan feels that Shenton House “presents an interesting proposition” given its location in the CBD and District 1. Units on the high floors can enjoy a view of the sea and the city skyline. “On a clear day, you can see Indonesia,” he says.

Shenton House is also well-connected given its proximity to four MRT stations. Shenton Way MRT Station on the Thomson-East Coast Line is just across the road, while Downtown MRT Station on the Downtown Line is also within walking distance. Tanjong Pagar MRT Station (East-West Line) and Marina Bay MRT Interchange Station (for the North-South, Thomson-East Coast and Cross Island Lines) are also nearby. The future development on the site will be connected to the neighbouring buildings via covered linkways on the second level.

“The Shenton House site is ideal for redevelopment into a prime mixed-use development with Grade-A office space, luxury residences, an upscale hotel or serviced apartments,” says Tan.

“I don’t think there’s another site in the CBD that is more reasonably priced,” he adds.

Check out the latest listings near Shenton House, The Sail @ Marina Bay, SkySuites @ Anson, Icon, Asia Square Tower 1, Asia Square Tower 2, One Shenton, V on Shenton, SGX Centre, Shenton Way MRT Station, Downtown MRT Station, Tanjong Pagar MRT Station, Marina Bay MRT Interchange Station

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