Inside 8M Real Estate’s $400 mil portfolio

/ EdgeProp |

September 9, 2017 9:00 AM SGT

Ashish Manchharam, one of the biggest buyers of conservation shophouses in recent years, talks about his interest in rejuvenating assets and his diversification plans

Manchharam: We’re a property company that focuses on building a portfolio of properties and holding them for the long term

The government is encouraging more people to walk and cycle as part of its effort to make Singapore “car-lite”. Ashish Manchharam, founder and managing director of property investment and development group 8M Real Estate, encourages his staff to walk for quite a different reason.

The company has a portfolio of 31 conservation shophouses, which are predominantly in the CBD and Chinatown area. “Walking is the best way to see what’s going on,” he says.

Last Tuesday, Manchharam made two trips on foot to 28 Ann Siang Road, acquired for $52 million in June. The purchase price translates into $2,167 psf, based on a total gross floor area (GFA) of 24,000 sq ft.

The upper floors of the corner property on Ann Siang Road were operated as The Club hotel by Harry’s International until end-August. Manchharam intends to refurbish the 20 hotel rooms before bringing in a new operator.

The ground floor of the property at Ann Siang Road had two restaurants, with a whiskey bar in the basement. These have since closed. Manchharam has already identified two F&B operators with “new-to-market concepts” for the ground-floor units, and a wine bar for the basement. The rooftop bar, Tiger’s Milk, will continue to be operated by Harry’s until early next year.

“We are repositioning the entire property and rejuvenating that corner of Ann Siang Road, which has been very quiet,” says Manchharam. “By bringing in more established F&B operators, we hope to attract more people to the area.”

8M Real Estate acquired 28 Ann Siang Road for $52 million in June. It is planning to reposition the property

New lease of life for Keong Saik hotels

Besides the former The Club hotel, 8M Real Estate also snapped up the Naumi Liora on Keong Saik Road in June. The 79-room hotel, operated by the Hind Group, occupies 10 freehold conservation shophouses. 8M Real Estate’s purchase price of about $75 million translates into $2,750 psf, based on the GFA of close to 27,300 sq ft.

Manchharam intends to convert all the ground-floor units of the shophouses into F&B space. By bringing together “a bunch of really good F&B operators”, he hopes to create a destination.

Besides F&B, he sees renewal taking place in the boutique hotel scene. Located across the road from Naumi Liora is the 32-room Hotel 1929, which former owner Loh Lik Peng of Unlisted Collection sold for $35 million in 2013 after acquiring the property a decade before and transforming it. Meanwhile, Chinatown Hotel, located on Teck Lim Road, just off Keong Saik Road, was sold for $31 million in July. The new owner of the 42-room hotel is looking to refurbish and reposition it.

Naumi Liora will cease operations early next year, after which 8M Real Estate intends to renovate the property. The renovation and repositioning of these boutique hotels are likely to spark the rejuvenation process on that end of Keong Saik Road, notes Manchharam.

Interest in boutique hotels housed in conservation shophouses has always been strong, according to Clemence Lee, associate director of capital markets at JLL and a specialist in shophouses. “Such properties are rarely transacted because they are typically tightly held by the owners. Supply is further restricted as the authorities are also no longer granting hotel licences in shophouses,” he says.

Most of the boutique hotels sold this year, such as Naumi Liora, Chinatown Hotel and The Club Hotel, have been on the market for quite some time, says Lee. “The transactions took place because the sellers were willing to drop their pricing slightly,” he explains.

Another catalyst for the rejuvenation in the Keong Saik area is the scheduled completion of the Thomson-East Coast Line about three years from now. There will be two stations within walking distance of Keong Saik Road, namely the Maxwell MRT station and Outram Park MRT station, which will become an interchange for the Thomson-East Coast Line and East-West Line. “Greater connectivity will bring more footfalls to the area,” observes Manchharam.

Amoy Street F&B cluster

Prior to starting 8M Real Estate in 2014, Manchharam was at JLL for 12 years, where he focused on investment deals and capital markets, initially in Hong Kong, then Singapore, before returning to Hong Kong. He chose to name his company 8M as “8 represents infinity” and the “M” looks like a doorway, hence the name suggests “infinite opportunities”.

8M Real Estate’s first acquisition was a row of five shophouses at 112 to 116 Amoy Street, purchased for about $50 million in 2014. Based on the GFA of about 27,500 sq ft, that translated into about $1,818 psf. This was followed by the acquisition of the shophouse at 22 Gemmill Lane at end-2014, and 18 Gemmill Lane in 2016.

After refurbishing the properties on Amoy Street and Gemmill Lane, 8M Real Estate introduced new F&B concepts on the ground-floor units. These include fusion restaurant Birds of a Feather; Burger Joint from New York; Employees Only bar concept from New York; Ding Dong, a modern take on Asian cuisine; and Argentinian restaurant Bochinche. At Gemmill Lane, there is French restaurant Bar-a-Thym as well as Luke’s Oyster Bar and Chop House.

“We brought in operators with different concepts but complementary in order to create an F&B destination,” says Manchharam.

The restaurants and bars in the Amoy Steet and Gemmill Lane neighbourhood also benefited from the opening of the Telok Ayer MRT station in December 2013, as it increased pedestrian traffic to the area.

These five shophouses at the corner of Amoy Street have been turned into an F&B cluster that includes fusion restaurant Birds of a Feather; Argentinian restaurant Bochinche; and Asian-inspired restaurant Ding Dong

These five shophouses at the corner of Amoy Street have been turned into an F&B cluster that includes (from top) fusion restaurant Birds of a Feather; Argentinian restaurant Bochinche; and Asian-inspired restaurant Ding Dong

Tanjong Pagar rejuvenation

Another cluster of five adjacent shophouses owned by 8M Real Estate is a corner block at 21 Tanjong Pagar Road with total floor space of about 30,000 sq ft. The freehold property was purchased for about $57.4 million in 2016.

8M Real Estate had purchased the block as part of a portfolio of seven shophouses from property investor Stanley Quek last year. The other two shophouses were at 18 Gemmill Lane ($11 million), and 71 Neil Road ($13 million). At $81.4 million, this was considered the biggest portfolio purchase last year, according to JLL.

The first level of 21 Tanjong Pagar Road isoccupied by bar and event space Kilo Lounge, Hansul Korean restaurant, a Korean tapas bar and Gourmet Market Place. The second level has been taken up by Yoga Movement studio and Fire Fitness gym. The top level is occupied by music streaming company Spotify as its Asia-Pacific headquarters.

Adjacent to 21 Tanjong Pagar Road is Murray Terrace, another block of pre-war shophouses built in the 1920s. It was purchased by real-estate magnate Satinder Garcha of Elevation Group for $75 million in 2012. The property is being refurbished and repurposed into the 160-room The Murray hotel, which is slated to open early next year. The hotel will be managed by Starwood Hotels & Resorts under its Luxury Collection.

Manchharam believes the whole area will be revitalised when The Murray hotel opens. GuocoLand’s $3.2 billion integrated development, Tanjong Pagar Centre, has also rejuvenated the neighbourhood, he points out, as will the new office buildings in the area, such as UIC Building, the upcoming Frasers Tower and Marina One.

The completion of new residential towers at V on Shenton, Marina One Residences and Wallich Residence will also mean more people will be living in the CBD. This will bode well for the Tanjong Pagar and Ann Siang Road neighbourhood, especially with the anticipated opening of the Maxwell MRT station, he adds.

This block of five shophouses at 21 Tanjong Pagar Road was acquired by 8M Real Estate for $57.4 million in 2016

Origins in Arab Street, Haji Lane

The Manchharam family were some of the biggest shophouse owners in the Kampong Glam area many years ago. They were originally textile traders in Gujerat, India. Manchharam’s great-grandfather arrived in Singapore in 1908. Over the years, the family acquired many of the shophouses they operated their business in — not just the freehold properties on Arab Street, but the 999-year leasehold shophouses one street away on Haji Lane, which were then used as warehouses.

Home was one of the shophouses on Bussorah Street. “I was born in a shophouse,” recounts Manchharam. “We lived upstairs, while business operations were downstairs.” Bussorah Street was predominantly residential until the 1980s, when the government acquired the properties. It was rezoned for commercial use and turned into a pedestrian mall in the early 1990s.

By the late 1990s, the Manchharam family had transformed from textile traders into real-estate moguls. Many of the Arab Street shophouses were leased to retailers on the first floor, and office tenants on the upper floors. The warehouses on Haji Lane were also made available for lease in the early 2000s.

A lot of the enquiries for the shop spaces on Haji Lane at that time came from local designers, who wanted to turn them into boutiques and design galleries. That sparked a retail wave on Haji Lane some 15 to 20 years ago. Manchharam reckons that “70% to 80%” of the original retail tenants are still there today. His immediate family still owns 12 shophouses on Haji Lane and “quite a few” on Arab Street.

The catalyst

It was the transformation of Haji Lane that spurred Manchharam’s interest in conservation shophouses. “That opened my eyes to how value can be created over the long term,” he says.

The completion of DUO Tower on Beach Road will mean more office workers in the neighbourhood. Residents are starting to move into the 660-unit DUO Residences, while the 342-room Andaz Singapore hotel is expected to open next month.

Located diagonally opposite DUO is a new, 2ha government land site that was launched for tender in July. The site is zoned for a mixed-use development with residential, hotel and office components. The tender for the site closes at the end of this month. The site is expected to see keen interest from developers and investors, according to JLL national director of research & consultancy Ong Teck Hui.

With the completion of DUO and the largescale, mixed-use commercial development on Beach Road in the pipeline, Manchharam expects increased footfall at the neighbouring Kampong Glam. He is already converting some of the retail spaces on Haji Lane into F&B outlets.

Globe-trotting foodie

“I’m quite a foodie,” Manchharam says. “I like to try quirky new places when I travel to search for new F&B concepts that I think could work in Singapore, and talk to the operators to find out their plans.” One such trip to New York resulted in Burger Joint and Employees Only entering Singapore. Besides New York, he travels frequently to Bali, Hong Kong, Los Angeles, London and other cities in search of the next new thing in F&B.

At Boat Quay, 8M Real Estate also owns three adjoining shophouses, which Manchharam acquired in May for around $32 million. URA has already given approval for all three floors to be used for F&B. Plans are underway to knock down the partition walls of the three units and install a central glass lift that will serve all floors, including the roof terrace. Patrons can enjoy views of the Singapore River and the city skyline from the balconies and roof terrace, notes Manchharam.

Besides bringing in the right F&B operators, it is also important to ensure their sustainability. 8M Real Estate therefore offers its F&B operators leases of five years instead of the two to three years typical of most retail leases. “They are more likely to invest in the business if they can stay longer term in a place,” explains Manchharam.

However, labour issues are a key concern among F&B operators in Singapore, as it has a direct impact on service quality. “That is why a lot of these F&B operators are reluctant to expand even when they have a concept that works,” Manchharam laments.

Diversifying into serviced residences

8M Real Estate’s portfolio of 31 conservation shophouses across 10 locations is valued at more than $400 million today. However, Manchharam feels there is a need to diversify from its primary focus in F&B and secondary focus in office space.

“We see a lot of interest from tech companies because the shophouse space is quite unique,” he says. “We have two recent tenants who moved out of co-working premises as they had outgrown their spaces there. Increasingly, interest is coming from fintech companies as well as co-working operators.”

To reduce its exposure to the cyclical nature of office space, Manchharam experimented with serviced residences last year. A shophouse at 31 Hongkong Street, which 8M Real Estate acquired in July 2015 for $14.5 million, was converted into serviced residences, comprising a studio and three 2-bedroom apartments with an average size of 700 to 800 sq ft.

Branded BASE Residences, the apartments are fully leased until year-end. The studio apartment commands a rent of $1,400 to $1,500 a week, while the two-bedroom apartments are rented out for $1,500 to $2,000 a week. “I feel there is demand for such serviced residences in the CBD, especially in the locations we are at,” says Manchharam.

Tapping the sharing economy, 8M Real Estate has also partnered gyms and yoga studios in the vicinity of BASE Residences. Residents will have access to WiFi, kitchenettes with refrigerators stocked with good-quality healthy snacks and bathrooms with toiletries from New Zealand’s Ashley & Co.

Igloohome is also a partner in providing smart locks and keypads for the residences. “Whether I’m in London or New York, I can just log in and send the guests the code for the keypad to their unit,” says Manchharam. “We don’t need a lot of people to run the place. But we provide cleaning services three times a week.”

According to Manchharam, the residents so far fit the profile of a millennial: aged 25 to 35, mainly single, with couples and young families being a minority.

Manchharam is exploring the possibility of introducing a “limited-service residence” concept for short- and long-term stay at 8M Real Estate’s Ann Siang Road and Keong Saik Road properties.

Long-term play

8M Real Estate is a joint-venture company, with Manchharam as an investor alongside a number of offshore institutional investors. The company is willing to invest in renovating the shophouses, installing new mechanical and electrical services as well as refurbishing the interior spaces.

It is selective about finding the right tenant for the space, he says. A property may therefore have a low initial yield of 2%, but will see a strong uplift in value a few years later because of the enhancements made, he adds. “We’re a property company that focuses on building a portfolio of properties and holding them for the long term. We have no intention of selling at this point.”

If anything, 8M Real Estate is still in a buying mode, although Manchharam says it is becoming “more difficult” with more competitors entering the fray.