Commercial podium at St Michael’s Place on the market for $25 mil

/ EdgeProp Singapore |

September 24, 2020 6:00 AM SGT

SINGAPORE (EDGEPROP) - Six strata-tiled commercial units, which collectively make up a four-story podium at St Michael’s Place at 1 Jalan Taman, are on the market for $25 million. The freehold units occupy a total strata floor area of 12,788 sq ft, and based on the $25 million guide price, this translates to about $1,955 psf. The properties are exclusively marketed by Tristar Properties.

According to Edwin Yip, associate director at Tristar Properties and exclusive marketing agent, the six strata commercial units can be purchased collectively or individually, and they will be sold through an expression of interest exercise that will close on November 5, 2020.

The four-story podium is a standalone commercial block that makes up St Michael’s Place, a mixed-use development off Serangoon Road. The residential component includes 74 apartments. The commercial block has a prominent frontage along Serangoon Road and a dedicated driveway.

Long-term tenant

The six-strata units are currently fully tenanted to Maple Bear Childcare, a Canadian-based international chain of nursery and preschool centres. The sale of the property will not affect the daily operations of the preschool operator, who has signed a 12-year lease for the space. The lease is on a 4+4+4-year lease term, with upward rental revision with each renewal.

Maple Bear St Michael has only occupied the space for the past two years, and the operator has indicated that they intend to remain in the premises for the full length of the lease. The unit sizes range from 1,216 sq ft to 2,852 sq ft, but the childcare operator has optimised the strata units on each floor plate for use as a childcare centre.

The four-storey commercial podium at St Michael’s Place comprises six strata-titled commercial units, which are approved for use as a childcare centre. (Picture: Samuel Isaac Chua/The Edge Singapore)

“This asset offers investors an opportunity to acquire a rare educational asset which offers a resilient tenancy and long-term rental growth. The location has a huge catchment of young families which will see a strong demand for childcare services led by the growth from the redevelopment of the neighbouring Potong Pasir/Sennett Estates and the upcoming development of the Bidadari housing estate,” says Yip.

As the asset is being sold with a tenant in place for a relatively long period, the next owner is assured of certainty of rental income, adds Yip. Given the freehold tenure, the property has strong potential for long-term capital appreciation too, he explains.

Over the past three months, Yip says that enquiries for the commercial podium have been relatively brisk, and on average he receives about two calls a week from investors enquiring about the sale. While the option is open for buyers to purchase the units individually, Yip says that 80% of the enquiries he has received so far relate to a collective purchase of all the six strata-titled units.

Equiries have come from groups of investors and private equity funds, he says. There have even been enquiries from other childcare operators hoping to buy with the intention of taking over the operations. Although that is clearly off the table, Yip says “it shows that such assets attract the interest of not just investors but established childcare operators who view the property as an opportunity to expand”.

Rare spacious layout

It is also rare to find a commercial space that is approved for use as a childcare centre and with such a spacious layout, says Yip. Typically, spaces available for childcare centres range from 3,000 to 6,000 sq ft. Hence, it is rare to have something that is over 12,000 sq ft in size allocated for childcare centre use, he points out.

The six strata-titled commercial units are owned by a private equity fund who purchased the property a few years ago. According to Yip, the fund renovated the asset and obtained approval for change of use to a childcare centre. And they managed to secure Maple Bear as a tenant.

He says that the fund managers have decided that it is a good time to divest the asset and reinvest in alternative investments.

Based on the combined strata area of the commercial podium, the six strata-titled units make up about 26% of the total share value of the whole development. The new owner would have a significant stake if the building goes up for en bloc sale in the future, says Yip.

This is the second time the commercial space is up for sale in recent years. Last year, the property was offered for sale by expression of interest. At that time, the six units were offered for sale collectively.

This time, Tristar is offering the prospect of individual sale of the strata units as well as bulk sale.

The appeal of the property is its gross rental yield of more than 3%, which is higher than the average residential property investment, says Yip.

The property has attracted “a high level of interest” and shows that “the market is hungry for good investment opportunities in Singapore”, he adds.

As the property is still zoned for commercial use, foreigners are eligible to purchase the property, and no additional buyer’s stamp duty or seller’s stamp duty is applicable on the purchase.

Check out the latest listings near: St Michael’s Place,Sennett Estates, Potong Pasir

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