(UPDATE) Cleaning up Orchard Towers, one strata unit at a time
By Cecilia Chow
/ EdgeProp Singapore |
The front block of Orchard Towers at 400 Orchard Road (Photo: Samuel Isaac Chua/EddgeProp Singapore)
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SINGAPORE (EDGEPROP) - French expatriate-turned-Singapore Permanent Resident Andre Sion, remembers when he first arrived in Singapore in late 2008. “It was 1am and I was tired after an 18-hour flight and I told the taxi driver that I wanted to go to Orchard Towers,” he relates. “I didn’t know anything about Orchard Towers then, so I didn’t understand the cab driver when he went, ‘Wow, so you want to go to Orchard Towers.’” (See also: Hiap Hoe owns 59 strata units at en-bloc sales aspirant Orchard Towers)
Sion had flown in from San Francisco, where he had just graduated with an MBA in international business at St Mary’s College in California. It was 2008 and Lehman Brothers had collapsed, sparking the onset of the Global Financial Crisis. “It was very difficult to get a work permit in the US then,” Sion relates. “And I didn’t want to go back to Europe.” He made his way to Singapore instead.
A Singaporean friend in San Francisco told him he could stay with her cousin who has an apartment at Orchard Towers and gave him the address. When the cab driver dropped Sion and his three big suitcases at the front of Orchard Towers, he was immediately accosted by hookers. “It was then that I understood the cab driver’s reaction when I told him where I wanted to go,” says Sion. “I had to make my way from the front block, across the overhead bridge to the rear block, and then try to find the apartment.”
Sion: Given that it has been empty for three years, my strategy was to create a lifestyle destination there, and to get away from the stigma of Orchard Towers (Photo: Samuel Isaac Chua/EdgeProp Singapore)
That was Sion’s induction to Orchard Towers, better known to some locals as the building with “four floors of whores”. “That was literally my first experience of Singapore — from the airport straight to Orchard Towers,” he concedes. “It was eye-opening.” He stayed there for two weeks before he found his own apartment in the River Valley area in prime District 9.
Sion’s first job was with a financial advisory firm. Once he obtained his Singapore PR in 2013, he applied for a real estate license in 2014 and became a full-fledged real estate agent with PropNex the following year. “I like the commercial sector because it requires more strategic thinking; you’re dealing with institutional investors and high net worth investors, it’s all about numbers,” he says.
That has led him full circle back to Orchard Towers 12 years on. This time, it is in his role as associate group director of PropNex Realty. The owner of a 7,000 sq ft ground floor, strata-titled retail unit at the rear block of Orchard Towers contacted him in February 2020. His unit was previously leased to Jasons, a gourmet supermarket brand under Cold Storage, for many years. After Jasons relocated, the unit had remained vacant for three years. He engaged Sion to help him find new tenants to fill the space.
The rear block of Orchard Towers at 1 Claymore Drive is linked to the front block by an overhead bridge across Claymore Drive (Photo: Samuel Isaac Chua/EdgeProp Singapore)
‘Creating a lifestyle destination’
“Given that it has been empty for three years, my strategy was to create a lifestyle destination there and to get away from the stigma of Orchard Towers,” he says.
Built in 1975, the freehold Orchard Towers has two 25-storey blocks: the block fronting Orchard Road has the address of 400 Orchard Road, while the rear block carries the 1 Claymore Drive address. The two blocks are linked by an overhead bridge across Claymore Drive. The front block is purely commercial with five floors of retail units spanning the basement to level 4 and 20 floors of strata office units. (See: Find Singapore commercial properties with our commercial directory)
Recent strata office units at Orchard Towers that changed hands was a 786 sq ft unit on the sixth floor that fetched $1.66 million ($2,113 psf) in April, followed by another 958 sq ft unit on the same floor that went for $1.87 million ($1,953 pf) in May, according to URA Realis. The latest strata retail units to change hands were all done in December 2020, with a 312 sq ft unit on the second lev- el sold for $1.1 million ($3,527 psf), a fourth level unit of 258 sq ft that went for $756,000 ($2,926 psf) and a 269 sq ft unit on the third level went for $900,000 ($3,344 psf), according to Realis.
The rear block has retail space on the first two levels, 361 parking spaces on the 2nd to the 8th floors and 58 apartments on the upper floors. Except for the penthouse on the 25th floor which is 3,978 sq ft in size, all the other apartments are 1,970 sq ft, three-bedroom units. The latest transaction of an apartment was for an 18th floor unit that changed hands for $2.6 million ($1,320 psf) in April. Prior to that, a 12th floor unit fetched $2.55 million ($1,295 psf) in February. The two blocks have a total strata area of 595,066 sq ft and a freehold tenure.
There will be direct access to So France and The Ring from Claymore Road at the rear block of Orchard Towers without having to go into the building via the main lobby (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Direct access from Claymore Road, new tenants
The owner of the strata-titled unit on the ground floor of the rear block at Orchard Towers had obtained approval from both Urban Redevelopment Authority (URA) and Land Transport Authority (LTA) to have an entrance from Claymore Road. “This will allow direct access to his units at the rear block without have having to enter the building’s main lobby,” explains Sion.
The strata owners of the rear block had also voted for the name to be changed from Orchard Towers to One Claymore. The name change is still pending approval from the authorities.
Instead of looking for a single tenant to fill the entire 7,000 sq ft space on the first level, Sion decided to approach two tenants that he knew well. The first was So France, a French bistro and gourmet store operator, whose flagship store of over 5,000 sq ft opened at DUO Galleria on Fraser Street, off Beach Road in May 2018.
About 900 sq ft of the common area has been approved by URA for use as an al fresco dining area by So France (Photo: Samuel Isaac Chua/EdgeProp Singapore)
At Orchard Towers, So France agreed to take up about 4,166 sq ft on the first floor for its dining area and gourmet store as well as an additional 4,200 sq ft in the basement, which is connected to the unit on the first level by a staircase. So France wants to turn the basement unit into a private dining room and a wine tasting room. Previously, Jasons/ Cold Storage had used the basement unit for its wine storage.
So France wanted to convert the outdoor common area into an alfresco terrace. The first application for an outdoor refreshment area was rejected. URA and LTA’s concern was the noise level as the neighbouring area is the posh residential enclave of Claymore Road, Draycott Drive and Ardmore Park. “We assured URA that it’s a proper restaurant and not a nightclub and that it will close the outdoor terrace at 10pm,” says Sion. “We even agreed to install a sound level me- ter.” Last September, URA granted approval for an al fresco area of about 900 sq ft. “For So France, that was the deal-breaker,” says Sion. Renovation is currently under- way, with the new outlet to open sometime in October or November. As the total space taken up will be larger than the one at DUO Galleria, it will be So France’s new flagship outlet, says Sion.
The other tenant who signed up for the remaining 2,817 sq ft space on the ground floor is The Ring boxing gym, founded by Ruch- di Hajjar and Gilles Landais, both from Monaco. The duo opened their first and biggest boxing studio at Kim Yam Road in 2016. The studio has over 7,000 sq ft. The second studio opened at Cecil Street in December 2019 but has since closed due to Covid. The new and third studio at One Claymore Drive opened on August 18. Sion had helped The Ring se- cure all three spaces.
The bistro of So France on the first level of DUO Galleria that opened in 2018; the new flagship outlet at Orchard Towers at One Claymore Drive is scheduled to open sometime in October or November 2021 (Photo:: So France)
The monthly rental rates secured for the two new tenants at Orchard Towers is in the $6 to $8 psf range. “Monthly retail rents along Orchard Road is about $10 to $12 psf today,” reckons Sion. “These units are at the rear of Orchard Road, and it’s Orchard Towers, so you have to give a discount.”
At Orchard Road-Claymore Drive, retail units of more than 300 sqm (3,229 sq ft) in the basement achieved a median month- ly rental rate of $5 psf in 2Q2021, according to URA data. Retail units of 100 to 300 sqm (about 1,764 to 3,229 sq ft) on the first level achieved median rents of $17.61 psf, while larger units of more than 3,229 sq ft, were done at $8.80 psf in 2Q2021.
‘Great catchment’
The area has “a great catchment — with Clay- more, Nassim, Ardmore Park and Draycott in the vicinity”, says Sion. The deals took 1.5 years to complete, partly owing to Covid and partly to the regulatory hurdles that had to be navigated.
The outdoor terrace of So France at Duo Galleria; with the French bistro expected to create a similar one at the rear block of Orchard Towers (Photo: So France)
One was the change of use from retail to F&B use, which required a new kitchen exhaust system and ducting system to be in- stalled. After several attempts, the contractor managed to convince URA that the exhaust duct could be located on the side of the building — next to the small parking lot.
The other hurdle was the water supply. The Ring wanted to install a shower area, bath- rooms and changing rooms within its own unit. For the convenience of its patrons, So France wanted to install washrooms within its own unit too. In addition, it required water supply for its kitchen and bar area. “The concern was whether we needed to upgrade the water pump, which would have cost $200,000,” notes Sion. “But PUB said that the pump was fine, and only the piping system needed to be upgraded.” The units required new mechanical and electrical systems to be installed as well, says Sion.
What helped facilitate the deal was the willingness of the owner to share in some of the fit-out cost and capital expenditure with the tenants. So France is spending $1.5 mil- lion in fitting out its unit. It has signed a 5+5 year lease, with a cap on the rental rate. The Ring has signed a 3+3 year lease term.
The Ring at Kim Yam Road, the boxing gym's flagship studio. The new one at Orchard Towers at Claymore Drive has just opened (Photo: The Ring)
Revival in collective sales of ageing strata mixed-use developments
The owners of Orchard Towers are in the early stages of a collective sale attempt. On August 17, the collective sale committee at Orchard Towers appointed Edmund Tie as the marketing agent and Legal Solutions as its legal adviser, to facilitate the collective sale process. Its next step will be to work out the method of apportionment given that it has commercial units -both office and retail – as well as strata-titled carpark and residential units, as well as the valuation of the property.
Walking around the five levels of the retail podium at Orchard Towers, Sion estimates the vacancy rate to be in the 40% to 50% range. Many of the clubs and KTV bars have not re- opened and some appear to have shuttered. The owners are probably more receptive to a collective sale now, given the challenge in finding new tenants, he reckons.
“We are seeing a revival in the collective sale of many of the older strata-titled, mixed-use or commercial complexes built in the 70s and 80s,” says Mary Sai, executive director of capital markets at Knight Frank. She points to Beauty World Plaza, Bukit Timah Shopping Centre, Tanglin Shopping Centre and International Plaza. “The owners are feeling the brunt of the slower retail traffic, and they face a greater challenge in finding tenants unless they are willing to lower their rents,” she adds. “As the buildings age, they become an eyesore, and that is a push factor motivating owners to attempt a collective sale. Otherwise, they will need to spend money to upgrade the mall and their maintenance cost will also increase over time.”
The existing retail floors at the retail podium of the front block of Orchard Towers (Photo: Samuel Isaac Chua/EdgeProp Singapore)
However, a collective sale takes time, and its success is rarely guaranteed. That stretch of Orchard Road is likely to get an uplift with the relaunch of the Pan Pacific Orchard next door and the rebranding of the former Hilton Singapore to InterContinental Hotel Group’s premium brand Voco across Orchard Road. In the meantime, Sion believes the debut of So France and The Ring could be “the first steps towards rejuvenating Orchard Towers”.
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