Row of conservation shophouses at Chinatown’s Trengganu Street for sale at $85 mil, down from $110 mil
By Cecilia Chow
/ EdgeProp Singapore |
The block of seven conservation shophouses at 20 Trengganu Street is on the market for $85 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - Tourists have returned to Singapore’s Chinatown, with people milling around the shops of Trengganu Street, Temple Street, Pagoda Street, Smith Street and Sago Street. All the streets are interconnected via Trengganu Street, which, together with the adjacent Pagoda Street, was converted into a pedestrian mall by URA in 1997.
Once upon a time, hawkers on Trengganu Street were famous for serving brewed tonic soups made from a concoction of tortoise, turtle, snake, lizard or fruit bat, according to Singapore Infopedia.
These days, the most exotic brew is coffee at new cafés that opened recently, such as Plus Coffee Joint on Temple Street, Afterwords Café on Pagoda Street, and Rough Guys Coffee and Korean-style café September Coffee along South Bridge Road.
Aerial view of Trengganu Street and Pagoda Street, which were converted into a pedestrian mall by URA in 1997 (Photo: Savills Singapore)
Most street vendors in Chinatown today are peddling souvenir trinkets, clothing, art and antiquities. These are not the only things for sale, however.
In April last year, seven conservation shophouses at 20 Trengganu Street were placed on the market for sale by expression of interest (EOI). The three-storey shophouses have a gross floor area (GFA) of 31,364 sq ft and a plot of 10,444 sq ft. The indicative price was $110 million, according to marketing agency CBRE a year ago. That worked out to $3,507 psf based on GFA. However, the property was withdrawn at the close of the EOI.
The seven shophouses at the corner of Trengganu Street and Temple Street are up for sale again, this time by private treaty. The sole marketing agency, Savills Singapore, has indicated a price “in excess of $85 million” or $2,710 psf based on GFA, which is 22.7% lower than the guide price a year ago.
Royal at Chinatown, the property at 20 Trengganu Street, is on a prominent corner of Trengganu Street and Temple Street (Photo: Savills Singapore)
Fully leased, 3% gross yields
The shophouses at 20 Trengganu Street are fully leased, according to Yap Hui Yee, executive director of investment sales and capital markets at Savills Singapore, who is handling the sale.
The first level has seven shop units, and existing tenants include an antique shop, supermarket, takeaway food counter, clothing store and a fruit stall. The second level is entirely occupied by the Chinese dim sum restaurant Yum Cha, which has been a tenant since 2000.
On the third floor is the 40-room, three-star Hotel 1888 Collection, which has been operating since January 2019. Room rates start from $185 a night for a standard double room. The boutique hotel is paying a monthly rental rate of $50,000, estimates Yap.
The reception of the Hotel 1888 Collection on the third level of the property at 20 Trengganu Street (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The monthly rental rate of the entire property, including the restaurant on the second level and the retail units on the first level, is estimated at $215,000. Based on the guide price of $85 million, that works out to a gross yield of about 3%.
According to an Inlis property title search, 20 Trengganu Street is owned by Royal & Sons Organisation, an entity of the Royal Group of Companies controlled by billionaire Asok Kumar Hiranandani and his son Bobby. Based on a caveat lodged with URA Realis, the Hiranandanis of Royal Group purchased the property in 2007 for $18 million.
The block of seven conservation shophouses at the corner of Trengganu Street and Temple Street is just 150m from the Chinatown MRT station (Source: EdgeProp Inspector)
The block of shophouses will be sold with a 198-year lease from 1872, which means it has a balance lease of 47 years. The shophouses are zoned for commercial use under the Chinatown (Kreta Ayer) Historic Conservation Area in the URA 2019 Master Plan.
“The property at 20 Trengganu Street has a prominent 100m frontage along Trengganu, Smith and Temple Streets,” says Yap. It is 150m from Chinatown MRT Station, an interchange for the Northeast and Downtown Lines. Within a five-minute walk is Maxwell MRT Station on the Thomson-East Coast Line. A five- to 10-minute walk leads to two other MRT stations: Tanjong Pagar on the East-West Line and Telok Ayer on the Downtown Line.
Yap: The property at 20 Trengganu Street has a prominent 100m frontage along Trengganu, Smith and Temple Streets (Photo: Savills Singapore)
Value-add potential
Savills’ Yap believes the asset’s future capital upside lies in its value-add potential through asset enhancement initiatives. The existing approved uses are shops on the first level, a restaurant on the second, and a hotel on the third. The new buyer could convert the second level of 10,382 sq ft into 40 hotel rooms. Combined with the 40 rooms on the third level, the new hotel operator would have 80 rooms — double the existing inventory. Yap adds that the first level can be converted into restaurants and entertainment establishments, “subject to approval from the authorities”.
The owner needs only to apply for a change of use, which costs just $535. And the new hotel operator will have to apply for a new hotel licence, according to Yap.
“We are looking at investors who want to operate hotels or ride the co-living wave, which is seeing robust demand,” she says. “A lot of the private wealth — ultra-high-net-worth individuals and family offices — are looking to buy commercial shophouses with the potential change of use into accommodation.”
The Yum Cha Dim Sum restaurant on the second level of the property at 20 Trengganu Street can be converted into another 40 hotel rooms (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Conservation shophouses are attractive due to their rarity, with just 7,000 in gazetted conservation areas in Singapore. The absolute price of $85 million for an 80-room hotel in a shophouse is lower than a typical hotel building of the same scale, which Yap estimates would command between $200 million and $300 million. “But there’s nothing of that price range as there’s a very limited supply of hospitality assets on the market today,” she adds.
The quantum price is $31.33 million for the first level, assuming $3,000 psf across the floor area of 10,444 sq ft. Deducting $31.33 million from the $85 million price tag means the upper floors contribute to the remaining $53.67 million. And if these two floors are converted into an 80-room hotel, that works out to $670,000 per key, Yap estimates.
One of the 40 hotel rooms at Hotel 1888 Collection on the third level of the property at 20 Trengganu Street (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Riding the hospitality sector rebound
The price per key for the hotel at Trengganu Street is competitive. On Mosque Street, RB Capital’s family office purchased Porcelain Hotel for $90 million in October 2021. Given that there are 138 rooms in the hotel, that translates to about $652,174 per key.
In March last year, Hong Kong-based rental accommodation firm Weave Living and Singapore-listed property developer SLB Development acquired the 88-room Clover Hotel on North Bridge Road in an 80:20 joint venture. The $74.8 million price paid translates to $850,000 per key.
Meanwhile, on Teck Lim Road, off Keong Saik Road, Hilltop Capital — linked to Kimen Group — sold the 45-room Hotel Soloha for $53.38 million in May 2022. That works out to around $1.19 million per key.
On Mosque Street, RB Capital’s family office purchased the former Porcelain Hotel for $90 million in October 2021 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
July 2022 saw Silkroad Property Partners acquire a row of 11 shophouses along Mosque Street as part of a portfolio of 14, including a pair on Pagoda Street and one in Tanjong Pagar, for $110 million. The upper floors of the Mosque Street shophouses have been converted into apartments with services.
“We understand that many of the apartments are tenanted by expatriates on a two- to three-year lease as they love the Chinatown area and the proximity to CBD,” says Yap.
With the lifting of travel border restrictions worldwide, Singapore’s tourism sector is poised for a strong rebound from 2023, notes Yap.
The new Weave Suites Midtown is the former 88-room Clover Hotel, which Hong Kong-based rental accommodation firm Weave Living and Singapore-listed property developer SLB Development acquired in an 80:20 joint venture for $74.8 million or $850,000 per key (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Singapore Tourism Board (STB) expects international visitor arrivals to Singapore this year to be between 12 million and 14 million. Full recovery is expected by 2024. STB’s forecast came on the back of better-than-expected visitor arrival numbers of 6.3 million in 2022, well above the 4–6 million it had initially forecast. Tourism receipts rang in at $14 billion last year.
According to STB, the revenue per available room (RevPAR) in May 2023 was $211, 10% higher than the RevPAR of $192 recorded in 2019, the pre-Covid era. Hence, Yap reckons “it’s a timely opportunity for investors keen to ride on the recovery and growth of the hospitality sector”.
Sales volume to moderate further in 2023
While interest in the shophouse sector remains robust due to solid fundamentals and scarcity of such properties, Yap expects transaction volumes in 2Q2023 and the rest of the year to be lower compared to 2022. “But it won’t be a significant dip,” she notes.
Commercial shophouse sales volume had already moderated in 1Q2023 amid cautious sentiment due to high interest rates, according to PropNex Research. Based on caveats lodged, 28 shophouses were sold from January to March, lower than the 35 deals recorded in 4Q2022 and down by 46% y-o-y compared to the 52 deals recorded in 1Q2022. (Find Singapore commercial properties with our commercial directory)
The mural on Temple Street in Chinatown (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The transaction value of shophouse deals in 1Q2023 was $278 million, down by 11.7% compared to the previous quarter and down by 40.6% y-o-y.
“There is a widening bid-ask price gap, with most owners motivated to sell only at the right price,” Yap observes. “The buyer profile will remain unchanged — high-net-worth families, both locals and overseas, including those from China, India, Indonesia and Taiwan. Shophouses are seen as assets for wealth preservation and long-term capital appreciation. Hence they are drawn to them.”
Despite the more cautious sentiment, there were still several recent eye-popping deals in Chinatown. In January, a freehold shophouse at 233 South Bridge Road changed hands for $15.2 million. The property sits on a land area of 1,486 sq ft, with GFA of 3,013 sq ft. Hence, the transacted price is equivalent to $5,045 psf.
While interest in the shophouse sector remains robust due to solid fundamentals and scarcity of such properties, Savills' Yap expects transaction volumes in 2Q2023 and the rest of the year to be lower compared to 2022 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Nearby, a pair of shophouses on Pagoda Street with a combined site area of 2,500 sq ft changed hands for $5,200 psf based on GFA in July 2022. A caveat has yet to be lodged, but the deal was said to be brokered by Savills.
Yap declined to comment on the transaction, citing a non-disclosure agreement. However, it is a record price psf for Chinatown, she says.
For the future owner of 20 Trengganu Street, the property still has 47 years on the remaining lease, unlike some of the shophouses on Hongkong Street, Carpenter Street and Smith Street, where some of the leases have fallen below 30 years and need to be topped up, according to Yap.
Upscale portfolio
For seasoned property investors like Royal Group, which has held the property at 20 Trengganu Street for 16 years, it is a good time to offload and reinvest the capital. The owners believe this is the right time to sell after receiving unsolicited offers over the years, says Yap.
Royal Group has also been shifting its portfolio towards more upscale properties. Last December, the group purchased the freehold commercial building Ming Arcade in an en bloc deal for $172 million. The building is located at 21 Cuscaden Road, just off Singapore’s premium shopping street, Orchard Road, which is being rejuvenated. (See potential condos with en bloc calculator)
The Ming Arcade site was launched for sale by tender and closed with more than five bids received. “The site was hotly contested,” says Jeremy Lake, managing director of investment sales and capital markets at Savills Singapore, who handled the sale.
Royal Group is expected to redevelop Ming Arcade into a new 20-storey, 170-room hotel (Photo: Savills Singapore)
Based on its existing GFA of 55,046 sq ft, Ming Arcade’s sale price translated to $3,125 psf per plot ratio (ppr), which topped the previous record of $2,910 psf ppr set by Hong Kong-listed Shun Tak Holdings for the en bloc purchase of the former Park House (the upcoming Park Nova) in June 2018. Savills brokered the en bloc sale too. (See potential condos with en bloc calculator)
Royal Group is expected to redevelop Ming Arcade into a 20-storey, 170-room hotel. The group already owns a portfolio of luxury hotels, including Sofitel Singapore Sentosa Resort & Spa and the upcoming second Raffles Hotel, an all-villa hotel in Sentosa due to open early next year.
In the vicinity of Ming Arcade are other new hotels and residences, such as the 142-room Artyzen Hotel by Shun Tak; as well as the 204-room Singapore Edition by Ian Schrager and Marriott International, which is part of a mixed-use development that includes luxury residence Boulevard 88, developed in collaboration with Hong Leong Holdings and City Developments.
The opposite corner of Temple Street and Trengganu Street (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Nonetheless, Chinatown has its appeal, notes Savills’ Yap. “It’s a testament to Singapore’s rich and diverse historical culture. The area has transformed into an eclectic mix of commercial activities with new commercial developments and hip F&B hangouts alongside temples and other cultural treasures,” she adds. (Find Singapore commercial properties with our commercial directory)
Yap notes that Chinatown appeals to international tourists seeking to immerse themselves in the historic enclave. “Given that boutique hotels with such a palatable investment quantum are usually tightly held,” she adds, “20 Trengganu Street is an opportunity for buyers to own this row of corner shophouses in an exciting district.”
Check out the latest listings near Trengganu Street, Temple Street, Pagoda Street, Smith Street, South Bridge Road, Teck Lim Road, Mosque Street, Ming Arcade, Boulevard 88, Chinatown MRT Station, Maxwell MRT Station
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