[UPDATE] Top Global divests strata lots at 15 Scotts for $31.93 mil; Tsao family sells two strata floors at Suntec Tower 2
By Cecilia Chow
/ EdgeProp Singapore |
View towards Orchard Road from 15 Scotts (Photo: Cushman & Wakefield)
SINGAPORE (EDGEPROP) - Real estate player Top Global has sold eight strata office lots out of a total of 23 that it owns at 15 Scotts, formerly known as Thong Teck Building.
The eight strata lots occupy a total strata area of about 8,643 sq ft across the sixth and seventh floors of the nine-storey commercial building located at 15 Scotts Road.
The purchase price of the eight strata lots amounted to $31.93 million and translates to just under $3,700 psf based on strata area, according to caveats lodged with URA Realis.
“It was a collective purchase by several individual buyers, some of whom were high net worth investors and others were family offices,” says Shaun Poh, executive director of capital markets at Cushman & Wakefield, the exclusive marketing agent for the properties.
View towards Good Wood Park Hotel across Scotts Road from one of the office floors (Photo: Cushman & Wakefield)
Some of the office units sold were tenanted, while others were vacant. “Not all were investors,” Poh notes. “Some bought with the intention of using the office units themselves. They were a mix of local and foreign buyers.”
15 Scotts is a freehold commercial building with a prominent frontage along Scotts Road, just off prime Orchard Road. The building underwent a comprehensive $15 million refurbishment that included a retrofit of the common areas and enhancement of the façade to a fully glazed curtain wall in 2013.
RSP Architects, which had been a long-term occupier of the building, was behind the asset enhancement works undertaken at 15 Scotts Road in 2013. After all, the late Albert Hong, founder of RSP Architects, was the owner of the 23 strata lots that were eventually sold to Top Global.
The ground floor lobby of 15 Scotts, formerly known as Thong Teck Building (Photo: Cushman & Wakefield)
Opportunistic purchase
Hong had held the 23 strata lots at 15 Scotts via six special purpose vehicles (SPVs). In April 2019, the six SPVs were sold to Kenneth Low Si Ren, executive director of Allied Technologies. Low, in turn, sold the SPVs to Top Global in September 2019 for $170 million, according to the latter in a Singapore Exchange (SGX) announcement. Incidentally, Top Global is now fully privatised, having delisted from the SGX in August.
The purchases made Top Global a substantial stakeholder of the building, controlling a sizeable strata area of 57,000 sq ft and 54% of the share value, based on the management corporation strata title (MCST) of Jul 2019. Savills had placed the aggregate value of the units at $180 million back then.
Having sold eight strata office lots on Sept 21, Top Global still owns 15 lots: one strata retail lot on the ground floor and 14 strata office lots spread across the second, third, sixth, seventh and eighth floors. The remaining strata lots are now available for sale by private treaty via Cushman & Wakefield.
The exterior of 15 Scotts which underwent a $15 million revamp including a façade makeover in 2013 (Photo: Cushman & Wakefield)
There is a wide spectrum of strata office lots to suit different appetites, from a 614 sq ft unit on the sixth floor to an entire floor plate of 22,227 sq ft on the second floor, points out Poh. Prices of the strata office lots range from $3,356 sq ft to $4,068 psf. The ground floor strata retail lot is listed at $6,611 psf and covers the entire unit on the ground floor, he adds.
Collective sale potential?
Some investors may want to adopt a long-term view: After all, 15 Scotts was built sometime in the 1970s. It sits on a freehold site of 37,241 sq ft. Under the URA Master Plan 2019, it is zoned for commercial use with a plot ratio of 4.9. The current development has only utilised 70% of the maximum plot ratio under the Master Plan. “This presents great redevelopment potential,” says Poh. “Given that the surrounding buildings are zoned for commercial, residential or hotel use, there is a possibility of converting the site from its current use as an office into a mixed-use development, subject to approval from the relevant authorities.” (Find Singapore commercial properties with our commercial directory)
The current strata floor area of the whole building at 15 Scotts is 107,747 sq ft. An investor purchasing just the entire strata floor of 22,227 sq ft on the second level will own 20.6% of the strata area and 20.07% in terms of share value under the MCST. “That is a significant stake especially in any future collective sale opportunity,” notes Poh.
The retail units on the first level are tenanted, and are also on the market for sale by private treaty at a list price of $6,611 psff (Photo: Cushman & Wakefield)
Orchard Road is undergoing a major revamp, as the various stakeholders are using the current lull in the retail and hospitality sector to revamp or even redevelop their properties. Several developments along Orchard Road are also exploring a collective sale — from Orchard Towers to Tanglin Shopping Centre and Far East Shopping Centre.
Long-term bets
“It’s very rare to find freehold strata office units in the prime Orchard Road area in District 9,” says Poh. “It’s attractive to investors, especially Indonesians and those from North Asia who traditionally prefer freehold property in the prime Orchard Road district.”
They are not the only ones. Property funds and developers are keen to purchase the remaining strata lots for the long-term too. “They know that it’s very hard to find a freehold, strata office in the prime Orchard Road area,” Poh adds. “They are betting on future capital upside and collective sale potential.”
Poh: It’s very rare to find freehold strata office units in the prime Orchard Road area in District 9 (Photo: Cushman & Wakefield)
As at September, quoted rents at 15 Scotts are in the range of $7.11 to $7.50 psf, according to Corporate Locations. Based on such rents, gross rental yields are hovering around 2.4%. However, the property funds and developers do not mind low rental yields as they are making a long-term bet on its capital value, according to Poh.
Hive of activity at Suntec City
Demand for prime strata office space has increased among ultra-high networth individuals and family offices. The most actively traded are the office towers at Suntec City Towers. For instance, a portfolio of six strata floors, comprising one entire strata floor at Suntec City Tower 1 and five floors at Suntec City Tower 2, was sold this June. The six floors have a total strata area of 78,491 sq ft and fetched $197 million ($2,510 psf). The buyer was Silkroad Property Partners, and the deal was brokered by Savills Singapore.
At Suntec Tower 2, two other floors were put up for sale by an expression of interest by Cushman & Wakefield. Both floors were owned by entities of IMC Pan Asia Alliance Group (IMC Group) and the Tsao Family Office, which are also headquartered there. Originally International Maritime Carriers, IMC Group was founded by the late shipping tycoon Frank Tsao, who was also the founding chairman of Suntec City Development and led a consortium of Hong Kong tycoons to build Suntec City. The family-owned conglomerate, now in its fourth generation, is headed by Tsao’s son, Chavalit Frederick Tsao, chairman of the family-owned IMC Group.
The strata office units at Suntec City Towers 1 and 2 have been particularly active in the past two years, with prices hitting new highs (Photo: Samuel Isaac Chua/EdgeProp Singapore)
New cadre of family offices, ultra-high networth investors
The group’s 11th floor unit of 14,381 sq ft at Suntec Tower 2 was held under Progress Realty and had changed hands for $38.3 million ($2,663 psf), according to a caveat lodged in June. The buyer is Brilliant Wealth Investments, a subsidiary of AL Wealth Partners, a firm providing independent wealth advisery, fund management and multi-family office services. Brilliant Wealth Investment is believed to have purchased one of the units for its own use, and the others on behalf of a family office.
A local investor purchased the units on the sixth floor of Suntec Tower 2 recently, although a caveat has yet to be lodged. The three units on the sixth floor occupy a total strata area of 14,381 sq ft too and were held by IMC Group under Chesser Pte Ltd. The purchase price for the entire floor amounted to $33.08 million or about $2,300 psf.
Both deals on the sixth and 11th floors of Suntec Tower 2 were brokered by Cushman & Wakefield. IMC Group will lease back the 11th floor until September 2022, while Tsao Family Office will lease back one of the three units on the sixth floor for two years.
Suntec City Tower 1 reception area has been recently revamped (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Suntec City has also undertaken a major revamp of the common areas including the main lobby, lift interiors, security system and washrooms of its office towers. The upgrade of Towers 1 and 4 started in 4Q2019 and was completed in 2Q2021. The upgrading of the common areas at Towers 2 and 3 began in 2Q2021 and is expected to be completed by 2Q2022.
Prices at Suntec City have accelerated since the second half of last year. The latest transaction was for a 3,079 sq ft unit on the 37th floor of Suntec Tower 1. It fetched $10.52 million or $3,417 psf, which is the highest psf price transacted at Suntec City this year, in a deal brokered by SRI. It is also the second-highest at Suntec City to date. The highest was achieved in August last year when a similar-sized unit of 3,079 sq ft on the 43rd floor of Tower 1 changed hands for $10.6 million ($3,443 psf), according to a caveat lodged then.
The lift lobby of Suntec Office Tower 1 has also been revamped (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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