Roman Scott, the conservation shophouse investor
By Cecilia Chow
/ EdgeProp Singapore |
The founder of Calamander Group, who is divesting one of his portfolios held in a property fund, has put on the market three shophouses on Stanley Street for $50 million and another shophouse on Tras Street for $11 million
Scott: Singapore conservation shophouses are ideal for those seeking to protect their wealth (Credit: Albert Chua/EdgeProp Singapore)
To Roman Scott, economist and chairman of Calamander Group, curating tenants is the most important part of investing in conservation shophouses in Singapore. “It’s fun curating tenants,” he says. “You get to meet these cool, top chefs, eat their food and help them design their restaurants. I think all shophouse investors try to curate fabulous food concepts because we love to eat. So, why not build it into your shophouse? We are encouraging Singapore to be the centre for top chefs.”
He considers the conservation shophouses along Stanley Street in the CBD’s Telok Ayer Conservation Area to be “the most coveted, gilt-edged real estate in Singapore”. It is the closest to the CBD and the Singapore Exchange, Lau Pa Sat and the MRT station, Scott says. Based on his research, there are only 5,000 such conservation shophouses left in Singapore, and they were built 100 to 150 years ago. Of these, only 3,200 are located in the heart of the CBD.
In 2006, Scott founded Calamander Group and embarked on his quest for conservation shophouses in the CBD. The Singapore Permanent Resident (PR) has led an illustrious career as a former partner and director of The Boston Consulting Group (BCG) as well as senior member of BCG’s Global Financial Services practice. A global economic strategist and bank restructuring expert, Scott served on the Singapore government’s Economic Restructuring Committee Financial Services Task Force in 2001 and her Economic Strategies Committee in 2009. He was on the board of the British Chamber of Commerce Singapore from 2005 to 2011, and the Indonesian government’s Bank Restructuring Agency from 2000 to 2004.
One of the reasons Scott chose to be an entrepreneur and invest in his passion (shophouses) was also because he didn’t want to do any more “cleaning up” of banks in trouble, he says. “They are always getting into trouble. It’s a bit like being an ICU doctor.”
The three adjoining shophouses at 4, 5 and 6 Stanley Street are on the market for $50 million (Credit: Albert Chua/EdgeProp Singapore)
Buying into gentrification
Thirteen years ago, within the Telok Ayer Conservation Area, prices of conservation shophouses at Stanley Street were at $1,200 psf, while those on Telok Ayer Street and Amoy Street were going for about $800 psf, recounts Scott. “Stanley Street was always the Bentley; Amoy Street, Telok Ayer Street and Boon Tat Street were the BMW and Mercedes.”
Thirteen years ago, while checking out a shophouse for sale along Telok Ayer Street, Scott had an interesting encounter. “As soon as you walked in, it was totally dark,” recalls Scott. “Even the agent was weird. I wanted to do my analysis, and I said I needed to see the upper floors of the shophouse, but they were reluctant to show them to me. It was just a warren of rooms, and behind those closed curtains in every room was a naked man. That was Telok Ayer Street then. I came running out, and that was when I realised why it was going for $800 psf.”
Over the past decade, the area has been gentrified. The sleazy brothels and karaoke bars have been replaced by trendy F&B outlets such as Meat Smith, Pantler bakery cafe, Employees Only bar, My Awesome Café; and lifestyle and wellness studios like Beaute Hub spa and salon, CustomMade shoe gallery for men, and high-end barber Jermyn Street.
Prices of conservation shophouses in the CBD have therefore risen at least threefold in that span of time. For instance, 29 Stanley Street, which is 99-year leasehold, was sold for just under $22.1 million or about $3,400 psf in February this year. While Scott’s Calamander Group did not own the property at 29 Stanley Street, his firm had been instrumental in restoring and managing the property on behalf of its previous owner for the past decade. “What excited me were the historic details of the building,” he says. “There’s a beautiful line on the building and we painted it gold.”
Meanwhile, a 999-year leasehold conservation shophouse at 21 Boon Tat Street was sold for $16.5 million ($4,259 psf) last September. The attraction was the tenant on the first level: Michelin-starred Australian fine dining restaurant Cheek by Jowl.
The latest transaction of a 999-year conservation shophouse on Amoy Street was at No 96, which changed hands for $15.7 million ($3,648 psf) last August. Meanwhile, 8M Real Estate purchased two adjacent units, 87 and 88 Amoy Street, for $39 million ($2,664 psf) in February. These two adjacent properties are said to have a balance of about 71 years left on their 99-year leases.
The shophouse at 42 Tras Street is on the market for $11 million (Credit: Albert Chua/EdgeProp Singapore)
‘Women wearing heels’
When Scott started investing 12-13 years ago, he focused on shophouses with 999-year leases or freehold tenure. His initial purchases in 2007 were: a shophouse at 85 Circular Road in the Boat Quay area, which he purchased for $2.65 million in May 2007; followed by 18 Teck Lim Road in Bukit Pasoh for $2.85 million a month later; and 61 Tras Street in Tanjong Pagar for $2.35 million in September.
He has benefited from the detailed analysis he had done while he was in the Singapore government’s economic restructuring committee in 2001. After acquiring the three shophouses in 2007, Scott focused on finding tenants for them. “We started putting in the cool ex-banker from Merrill or Morgan Stanley on the upper floors of the shophouses on Tras Street and Teck Lim Road, and I would give them a good rental rate,” he says.
However, the cool ex-banker needed to hire support staff, such as an office or administrative manager, human resource manager, receptionist and personal assistant. “They would inevitably be Singaporean women who would be coming from the MRT station, dressed in their nice clothes and normally wearing high heels,” observes Scott. “And because of their dressing and those heels, there was a limit to how far they were prepared to walk before they start saying, ‘Hot lah’, ‘Office too far lah’ and ‘I don’t want to work here lah.’”
Therefore, one of his investment parameters when buying shophouses was a five-minute walking distance from an MRT station based on “women walking in high heels”. And he believes that principle still holds today.
Scott speaks from personal experience. His office is currently located on the top floors of his shophouse at 85 Circular Road. The first level is occupied by Mexican-themed Los Amigos Restaurant Bar. At one point, he had considered relocating his office to 18 Teck Lim Road after restoring it. “But all the girls in my office refused to move from Circular Road, which proved my theory,” he says. “They said, ‘We like it here: so central; so easy to walk from the MRT station; a lot of eateries nearby.’ And like all bosses, I was ‘bullied’ by the women in the office and had to do what they wanted.”
Scott still owns 85 Circular Road, where Calamander Group's office is situated (Credit: Albert Chua/EdgeProp Singapore)
Value-added investment
However, Scott always intended to gain a foothold in Stanley Street. He formed Calamander Singapore Property Fund and invited other high-net-worth individuals to invest together with him.
In June 2010, the fund purchased 6 Stanley Street for $4.5 million. Scott put in Nude Wax Parlour as a tenant on the first level, and Veson Nautical, a maritime software provider, as the office tenant on the second and third levels. When the opportunity arose, the fund purchased the adjacent shophouses at 4 and 5 Stanley Street for $16 million in April 2014. F&B tenants he brought in to the first level of the two shophouses are Raku Raku Japanese Dining and White Rocket Bistro.
The second level of 4 and 5 Stanley Street is occupied by Webarre Studio, a wellness gym studio offering workouts that combine ballet, yoga, pilates and strength training.
The Calamander Singapore Property Fund also purchased 42 Tras Street, a 99-year leasehold, conservation shophouse for $2.9 million in April 2010. The F&B tenant on the first level of 42 Tras Street is Teppan Works, which focuses on prime cuts and Wagyu steaks. Meanwhile, the F&B tenant at 61 Tras Street is Chef’s Table by Austrian chef Stephan Zoisl.
“Chef Stephan is my favourite chef,” says Scott. “And now, my other favourite is the Japanese chef at Teppan Works. His Wagyu beef steak is very good.” However, when Scott first purchased the shophouses on Tras Street, “they were all occupied by grotty karaoke bars”, he says.
In July 2016, Scott sold his shophouse at 61 Tras Street for $8.3 million – about 3.5 times the price he paid for it. He also divested 18 Teck Lim Road for $13 million in July 2017, 4.6 times his original purchase price a decade ago. “I sold Teck Lim and 61 Tras Street to further invest in Stanley Street when the opportunity came up to extend the row,” explains Scott.
When Veson Nautical needed to expand, Scott decided to knock down the walls on the top floors of No 4, 5 and 6 to create a cavernous floorplate across all three shophouses. According to Scott, about $450,000 was spent on refurbishment. Another $90,000 went into the addition of a glass mezzanine. The building structural walls were strengthened. A further $250,000 was spent on fireproofing the boards on every floor and enhancing the lighting system.
In July 2016, Scott sold his shophouse at 61 Tras Street for $8.3 million – about 3.5 times the price he paid for it. (Credit: Albert Chua/EdgeProp Singapore)
Time to divest
However, as the other investors in the Calamander Singapore Property Fund are now in their 70s, they want to exit their investments. “I don’t want to sell the shophouses, but I have no choice as the investors in the fund want to sell,” says Scott.
The three shophouses on Stanley Street have recently been put on the market for sale, and so has the shophouse at 42 Tras Street.
The three adjoining shophouses at 4, 5 and 6 Stanley Street have a freehold tenure and sit on a combined land area of 4,031 sq ft with gross floor area (GFA) of 10,998 sq ft. The properties were recently valued at $45 million, and their market price, based on the latest transacted price of about $4,300 psf, is $47.29 million. The total monthly rental income for the three shophouses is $85,200, which translates to gross rental yield of 2.16% to 2.27% based on market price and valuation respectively.
Meanwhile, 42 Tras Street occupies a land area of 1,339 sq ft and has a built-up area of 3,800 sq ft. While the first level is occupied by a Japanese restaurant, the second level is tenanted to a high-end, Japanese gentlemen’s barber. The top floor has been leased to Maritime Technical International, which provides crisis management for shipping, energy and offshore industries.
The asking price for 42 Tras Street is $11 million, which is at valuation. This translates to about $2,895 psf. The shophouse enjoys a total rental income of $25,400 a month, which translates to a gross rental yield of close to 2.8%.
Scott has appointed two agents for the divestment of his shophouses under the Calamander Singapore Property Fund: Simon Monteiro, director of Savills (Singapore) who specialises in conservation shophouses, and Paul Boldy, senior adviser to Taiwan Sotheby’s International Realty.
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The upper floors of the shophouses at 4, 5 and 6 Stanley Street could be converted into a boutique hotel with 35 to 40 rooms, with F&B on the ground floor (Credit: Albert Chua/EdgeProp Singapore)
Next generation of investors
The URA could consider a change of use for the three adjoining shophouses on Stanley Street to a boutique hotel. While the market price is based on recent transacted prices, valuers give a slight premium because of its “huge economic advantage for potential hotel use”, says Scott. Given the GFA of the three adjoining shophouses, the space could be converted into a boutique hotel with 35 to 40 rooms on the upper floors and F&B on the ground floor. As such, the price tag on the Stanley Street shophouses is $50 million.
Scott appointed Monteiro as a marketing because of his specialisation not just in shophouses, but also in handling the sale of boutique hotels. Monteiro was involved in the transactions of the last few boutique hotels, namely Hotel 1929; the former Duxton Berjaya, which has since been converted into the upscale Six Senses Duxton; the former Naumi Liora on Keong Saik Road, which has reopened as KeSa House with a “flexible living” concept and F&B outlets on the first level; as well as the Wanderlust in Little India.
Meanwhile, Sotheby’s Boldy, who is based in Taiwan, is due to speak to 30 agents from List SIR Hong Kong next week. These agents represent high-net-worth individuals, family offices and property funds in Hong Kong, which are looking at the possibility of investing in Singapore.
“These freehold, conservation shophouses are ideal for high-net-worth individuals who are looking at diversifying their risks across different countries,” says Boldy, in a phone interview. “With the growing uncertainty in Hong Kong, Singapore presents an attractive alternative to both Hong Kong and Chinese investors.”
Scott agrees: “Singapore conservation shophouses are ideal for those seeking to protect their wealth. I saw how gentrification has taken place in the CBD and Tanjong Pagar areas. And I’ve seen it happen 20 years earlier. I grew up in London, and I’ve seen how the Covent Garden and the Soho areas have been gentrified.”
Scott’s father was an architect at the Architectural Association School of Architecture, popularly known as AA. “I grew up knocking down houses with my father and fixing them up in London,” he says. “My father would only live in a house if it was 200 years old. So I learnt about historic house renovation from the age of eight. That’s why I have a passion for old buildings.”
While his businesses under Calamander Group are based in Singapore, he divides his time between Singapore, Sri Lanka and the UK, where Scott is restoring old Victorian buildings in the resort town of Scarborough, North Yorkshire and turning them into a hotel under his Historic Hotels & Properties portfolio. Scott also owns resort hotels and historic buildings in Sri Lanka, as well as the Coffee Bean & Tea Leaf franchises in Sri Lanka and Bangladesh.
In Singapore, Scott still holds the conservation shophouse at 85 Circular Road in his personal portfolio. “One day, I would like to buy back those Stanley Street shophouses,” he says.
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