[UPDATE] Fraxtor offers investors opportunity to co-invest in real estate for as little as $20,000
By Cecilia Chow
/ EdgeProp Singapore |
A total of $17 million was raised in 90 minutes as investors subscribed to co-invest in the redevelopment of a bungalow at Mount Rosie, purchased for $43.8 million in May (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - A bungalow sitting on a sprawling 30,659 sq ft, freehold site at 21 Mount Rosie Road in prime District 11 was sold for $43.8 million ($1,429 psf) at the end of May. The plan is to redevelop the property into seven luxury houses for sale. The buyers behind the property are a group of investors led by Daniel Teo, chairman and managing director of Hong How Group as well as a director of Tong Eng Group.
Many of these investors had subscribed for a share in the development via blockchain-enabled real estate platform Fraxtor. More than $17 million was raised, according to Fraxtor in a press statement in early June. This gives the investors a 35% stake in the development at Mount Rosie. “We raise money for specific developments,” says Oliver Siah, co-founder and CEO of Fraxtor. “This project was oversubscribed within 90 minutes of being listed on the Fraxtor platform.”
While Fraxtor Capital is the manager of the project, the appointed architects for the luxury houses at Mount Rosie Road are Wallflower Pte Ltd working in collaboration with Designscape Architects (DS Architects). Due to the Covid pandemic, Fraxtor Capital will only break ground on the site in March next year. Construction is expected to take two years, with the houses slated for completion 2½ to 3 years from now, estimates Edwin Lam, general manager of Hong How and business advisor to Fraxtor.
The houses at Mount Rosie Road are expected to be launched for sale in 2Q2022, says Siah.
Fraxtor’s management team (from left): Oliver Siah, co-founder and CEO of Fraxtor; Edwin Lam, general manager of Hong How Group and Fraxtor business advisor; Rachel Teo, Fraxtor co-founder; and Daniel Teo, chairman and managing director of Hong How Group (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Landed opportunities
This is not the first project in which Singapore-based investors have participated via Fraxtor. Another is a development of three houses on a freehold site at Haig Road in the east coast in prime District 15. It is a redevelopment of a freehold, bungalow site of 8,844 sq ft that was purchased for $8.2 million in January 2020.
The site has been redeveloped into three luxury townhouses designed by Create Architecture. These houses, at 187, 189 and 191 Haig Road, have built-up areas ranging from 6,414 to 7,343 sq ft, and sit on sites ranging from 1,876 to 2,605 sq ft. The houses come with four levels including a basement, six bedrooms, a private lift to every floor, a big entertainment area and two kitchens. The two corner houses, which have bigger land areas, come with a private lap pool each.
The corner house at 191 Haig Road, which sits on a freehold site of 2,535 sq ft, is said to have found a buyer at $7.6 million or $2,999 psf based on land area, although the option has yet to be exercised. The price is expected to set a new high in the area. “We see strong demand, and we are holding the price from $2,900 psf,” says Siah.
Fraxtor’s maiden project in Singapore was a pair of semi-detached houses at 5 and 5A Gardenia Road, a private landed estate off Upper Thomson Road and near Thomson Plaza shopping mall. It is a redevelopment of a former bungalow sitting on a freehold site of 4,335 sq ft that was purchased for $5.35 million ($1,234 psf) in May 2019. About $3.4 million (63.6%) was raised through the Fraxtor platform, says Siah.
One of the semi-detached houses was said to be snapped up even before the foundation for the new houses was completed, notes Hong How’s Lam. Interest in the property spiked after the opening of Upper Thomson MRT Station on the Thomson-East Coast Line at the end of August this year, he adds.
“We saw the rise in demand for landed property a few years ago, and we felt that the landed housing market was a bit undervalued then,” observes Teo. “So we tried our best to make sure that we have a pipeline of projects in the landed property market.”
Based on URA private residential property index, landed property prices have surged 12.5% for the past two years, from 2Q2019 to 2Q2021. Meanwhile, non-landed private residential property has increased 7.2% over the corresponding period.
Artist's impression of the entertainment area on the second level of one of the three luxury houses at Haig Villas (Credit: Fraxtor Capital)
‘Democratisation of real estate’
William Wong, founder and managing director of Realstar Premier, a specialist in the landed property market, reckons prices will continue to soar. While overall landed property prices have increased 12% to 15% since the start of 2020, he sees prime Good Class Bungalow (GCB) prices surge 40% in that time. Meanwhile, the “not-so-prime GCBs” saw prices increase by 25% since the beginning of 2020, adds Wong.
“There is a shortage of land for redevelopment and for each piece of land that comes onto the market, it is not surprising to see four to five bidders,” adds Wong. He sees both the rise in construction cost due to the pandemic, and more positive sentiment contributing to further price increases in the landed property market.
The heightened demand for landed property, especially the high-profile GCB purchases at record prices over the past two years, has also led to “many new boutique developers as well as seasoned developers entering the fray,” says Wong.
Indeed, Fraxtor, an abbreviation of Fractional Investors, allows more individual investors “to co-invest with real estate veterans via the Fraxtor platform”, says Siah.
A former Republic of Singapore Air Force officer and pilot who became an avid real estate investor and entrepreneur, Siah co-founded Fraxtor with Teo’s daughter, Rachel, in January 2017.
“We built the Fraxtor platform to make it easier for investors to access property deals by developers and professional fund managers,” says Rachel. “The platform streamlines the onboarding and subscription process, making investing in real estate hassle-free.”
The minimum investment amount varies, but for most projects, the entry level is as low as $20,000. “It’s about the democratisation of real estate,” says Siah. For most of the landed development projects in Singapore, Fraxtor has a target internal rate of return of 15%, he adds.
Artist’s impression of the living and dining area on the first level of one of the three luxury, six-bedroom townhouses at Haig Villas at Haig Road, priced from $2,900 psf (Credit: Fraxtor Capital)
Alternative investments
Besides houses in Singapore, investors are offered a diverse range of real estate investment opportunities on the Fraxtor platform. These include ZACD Group’s food factory in Mandai. “There’s been a lot of interest in such food processing factory space, especially with concerns about food security,” says Siah.
Besides food factories, Fraxtor and Hong How see opportunities for alternative investments in data centres, self-storage and long-term care homes in Singapore. “We have identified these alternative investment opportunities for investors,” says Teo.
The focus will be on such niche, alternative investments instead of competing with mainstream developers for government land sale sites and collective sale sites. “We do not want to chase prices,” says Hong How’s Lam.
Outside of Singapore, investors on Fraxtor’s platform have access to overseas investments, from long-term care homes in Ontario, Canada, to purpose-built student accommodation in the UK through QIP’s real estate fund.
Tokenisation
In August this year, Fraxtor obtained in-principle approval from the Monetary Authority of Singapore (MAS) for its Capital Markets Services licence. It enables Fraxtor to issue security tokens, including debentures and collective investment schemes that comprise capital market products. In addition to its local pipeline of projects, Fraxtor has plans to partner property fund managers from Europe and Australia to offer real estate security tokens to accredited investors and institutional investors. Prior to this, Fraxtor had been relying on exemptions from MAS regulations.
The Fraxtor platform uses smart contracts (defined as a computer programme which automatically executes, controls or documents legally relevant events and actions according to the terms of a contract or an agreement) to create security tokens on the Ethereum network. “The value for such tokens is not affected by the fluctuations in the cryptocurrency markets but [is] based on the underlying real estate investment,” said Fraxtor in a statement on Aug 10. “The tokens can represent units of debentures, bonds or collective investment schemes.”
The security tokens used on the Fraxtor platform are of the ERC-1404 Security Token Standard, which is the most common tokenisation standard, according to Marcelo Garcia Casil, Fraxtor’s chief technology officer. “It allows our tokens to be compatible with regulated digital asset exchanges. This is an avenue of liquidity for a traditionally illiquid asset.”
Check out the latest listings near 21 Mount Rosie Road, Upper Thomson MRT Station
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