The collective sale of relics from the 1970s capitalizes on the CBD Incentive Scheme
In his profession, Singaporean Kevin Liang is the CEO and founder of EPS Consultants, a technology recruiting, executive search talent management, IT outsourcing firm. He is also a fervent and prolific property investor. through his corporations the owner of office buildings owns strata-titled commercial buildings throughout the CBD through a variety of businesses that range from SBF Centre located on Robinson Road (where his office is located) up to Shenton House on Shenton Way, International Plaza on Anson Road and High Street Centre located on North Bridge Road.
Liang also owns a number of apartments located in and around the CBD by way of his own investment vehicle. They include properties in The Sail @ Marina Bay, SkySuites @ Anson and Icon at Tanjong Pagar. “These are investments for the long term,” he says. They give him a solid foundation on his knowledge of the property market, especially CBD, CBD and the remainder of the Core Central Region (CCR).
Within the CBD, Shenton House is among the last remnants from the 1970s, still in use on Shenton Way. The 25-storey strata-titled commercial property situated at 3 Shenton Way has 40 shops, 163 offices, and an underground parking space with 225 spaces. The property is located on an size of 36,350 square feet and has a 99-year lease that began June 2 1969. Thus the property is left with 45 years in the lease.
“Even although my company owns various office spaces in Shenton House, I wasn’t involved in the last collective sale exercise,” says Liang.
But, he’s now in charge of the committee for collective sale (CSC) for Shenton House’s most recent attempt to en bloc. “It was just 3 1/2 months to achieve the 80% agreement between the owners,” the chairman says.
Past collective sale attempts
It was more different from Shenton House’s previous efforts. The fourth collective sale exercise that took place in 2017-2019 with a reserve value of $536 million didn’t succeed because it failed to get the required 80% approval of the property’s owners.
The third attempt at a collective sale resulted in an 80% owner agreement, and the property was offered to be sold with a price of $530 million on March 12, 2012. However, no buyer emerged.
The second attempt to sell collectively between 2007 and 2008 was aimed at a price of $500 million but was a failure due to the start in the Global Financial Crisis. The first attempt at a collective sale in 2005 with the target price of $500 million was never successful. People were much more concerned with investigating the possibility of swapping their current ownership to new units during the next renovation.
CBD Incentive Scheme, commercial zoning
The CBD Incentive Scheme also fueled Shenton House’s latest collective sales attempt, as per Liang.
Shenton House has commercial zoning and a plot ratio of 11.2. Under the URA’s CBD Incentive Scheme launched in 2019 Shenton House can be redeveloped into a hotel or mixed-use development that has a greater Gross plot ratio 14.0 or the possibility of 25% larger gross floor area (GFA).
With JLL as sole agent for marketing, Shenton Way’s newest collective sale was announced in February 2023, with the amount of $590 million. However, the auction ended on April 11 with no bid.
The sale was revived on June 26 with the same price as the reserve at $590million. Although the relaunch process is taking place, the participants have signed a joint agreement that will reduce reserves to 8.8% to $538 million. As of now, around 60% of owners have signed on the basis of the value of shares and 70% on the basis of the area of strata, according to JLL. The minimum requirement for strata area and share value to be over 80%. The closing date for tenders for this round is August 1.
The price of $538 million is based on a land price of $1,898 per plot proportion (ppr) after adjusting for an increased proportion of 14.0 in the CBD Incentive Scheme. The cost of the land unit comprises an estimate of $427 million expense for the land improvement charge and lease top-up fee to renew a 99-year lease.
The site’s commercial zoning plan for mixed-use development permits 60% from the GFA for commercial use, and forty% in residential properties. Minimum 20% for residential homes need to have an internal net area of 70 square meters (753.5 sq feet). When the 7% additional GFA on balconies added and the land rate is less than $1,878 per sq ft per.
“The benefit of commercial zone is that developers don’t have for ABSD (additional buyer’s stamp tax) when they buy the site,” says Tan Hong Boon Tan Hong Boon, chief executive officer of capital markets for JLL.
As per Tan, developers have become “very beware” concerning the premium condo market due to the recent property cooling measures that took effect on April 27, when foreign buyers are now hit with a 60% ABSD on residential property purchase, up from 30% before.
Mixed-use within the CBD
Shenton House has a prime frontage of 80m across Shenton Way, with another 37m of frontage on Park Street and Shenton Lane at the rear.
The mixed-use development that is being built, featuring a frontage with an enviable view and office space of Grade-A with big floorplates, is expected to draw corporate tenants, Tan says. Tan.
“The office component could be used as a long-term option for investment” Tan adds Tan. “Alternatively one could hold this office portion for a number of years before selling it off in the near future to REITs or a property money fund.”
A good example of this is Asia Square Towers 1 and 2 located at Marina View, directly behind Shenton House. The towers were developed in the past by private equity firm MGPA and property financial advisory company MGPA (now an affiliate of BlackRock) The towers were developed by Australian architect company Dentons Corker Marshall and Singapore-based Architects 60 and were completed in 2011.
The 43-storey office building located at Asia Square Tower 1 was transferred by the Qatar Investment Authority in June 2016 for $3.4 billion. CapitaLand Commercial Trust acquired the office portion in Asia Square Tower 2 for $2.094 billion in September of 2017.
The hotel with 305 bedrooms Westin Singapore is located on the 33rd and 46th floors in Asia Square Tower 2, was transferred in 2013 to Japanese developer and hotelier developer Daisho Group for $468 million in 2013, only one month after it opened. It’s $1.5 million each for keys.
Two streets to the west is the former PIL Building on Cecil Street which TE Capital Partners and LaSalle Investment Management bought together at $323.8 million in February 2022. The new office project, Solitaire on Cecil was officially launched to the market in January of this year. The 15 floors of strata-titled office space within the office tower of 20 stories and two retail/F&B units located on the top floor of Solitaire on Cecil were sold in just five months. The offices in the strata office tower were sold at prices ranging from $4,100 to $4,300 per square foot. In contrast, the first retail unit was valued at $5,400 per square foot and the second retail unit was close to $6,000 per square foot.
“The rates achieved in Solitaire on Cecil represent owners and investors trust in the quality of commercial assets within the CBD,” says JLL’s Tan.
Future luxury hotel?
Another option is that Shenton House can be redeveloped to become a commercial property that will have the potential for 95% hotel rooms and the remaining 5% retail spaces. An upscale hotel like The Westin Singapore and the 233-room Sofitel Singapore City Centre presents an attractive option as JLL’s Tan.
Based on the assumption of 95% hotels and five% retail and a room size of 30-40 sq meters (323 or 431 sq feet) The new luxury hotel may have 729 to 973 keys estimates JLL.
Assuming a brand new development that is 40% commercial and 40% hotel, assuming a new development with% commercial space and 60% hotel rooms and the average size of 323 to 431 square feet The new luxury hotel could be equipped with 460 to 614 keys, as per JLL.
Chee Hok Yuan Asia Pacific president of HVS which is a global consultancy firm that specializes in the hospitality industry believes that hotels with a luxurious feel like The Westin and Sofitel Singapore City Centre charge rates of between $400 and $500 per night. an average occupancy of 75%.
The latest hotel deal within the CBD was the sale of the old So/Singapore Hotel in May last year to Ho Chi Minh’s Viva Land through its Singapore-based subsidiary Viva Ventures So Holdings. Singapore developer Royal Group sold the hotel’s 134 rooms for $240 million, or $1.8 million for each keys, an all-time record for Singapore’s premium hotel sector. The property is now changed to Hotel Telegraph.
“The minimum cost for the most luxurious accommodation within the CBD is currently $ 1.5 million at present and for hotels with luxury that are more expensive than 2 million dollars per key” Chee says. Chee.
In addition, the worth of luxury business hotels such as Oasia Downtown, Carlton City Hotel, M Hotel and Amara Singapore, is $1 million to $1.2 million per key, according to Chee. The room rates at these hotels is $250 to $350 per night with an average occupancy rate of 70% according to Chee.
Then, further along Shenton Way is OUE Downtown owned by Singapore-listed real estate group OUE. OUE Downtown is a hotel with a serviced apartments component, which was previously managed by Oakwood and transferred in a joint venture comprised of Hong Kong property developer Far East Consortium and Hong Kong investment bank AMTD Group for $289 million in the year 2019. The hotel is now changed to Dao from Dorsett and consists of 268 studios with one and two bedroom apartments.
The improvement in Singapore’s hospitality sector following Covid also means that investors who invest in hospitality assets – -including co-living apartments, serviced apartments and luxury hotels with four stars are likely to see gross rental yields that range from three% or 4% dependent on the tenure, grade and the condition of the property, Chee estimates.
This month Midtown Properties, related to the Worldwide Hotels Group and Hotel 81 chain, bought the hotel with 542 rooms Parkroyal Kitchener Hotel in Little India for $525 million from UOL Group. The hotel’s value is $969,900 per key.
Gentrification of the older CBD
Redevelopment is underway in the vicinity of Shenton House. Its neighbors, predecessors from the 1970s, including The former Robina House (built in 1971) located at 1 Shenton Way and the old UIC Building (built in 1973) located at 5, Shenton Way, have been removed and transformed into towers that are gleaming new.
One Shenton by City Developments is a 341-unit residential development featuring a sparkling 43 and 50-storey silver and gold twin towers conceived by the renowned Canadian Uruguayan designer Carlos Ott. The towers of apartments were completed in the year 2011 and were sold out completely.
Based on the most recent restrictions, the most recent transaction in the last transaction at One Shenton was for a 1,098 square feet two-bedder on the 39th floor which was sold at $1.92 million ($1,749 per sq ft) during June. Prior to that one, a 1,141 sq. ft two-bed apartment located on the 29th floor sold for $2 million ($1,753 per square foot) in May 2023.
The UIC Building, which was previously the UIC Building has given way to the brand new UIC Building, a 23-storey office tower and the 54-storey, 510-unit condominium building V Shenton which is owned from Singapore Land Group (SingLand). These two buildings were developed in the hands of Dutch designer Ben van Berkel of UN Studio and was completed in 2017.
at V on Shenton The most recent transaction consisted of a 1.528 square foot three-bedder at the 22nd level that was purchased in the amount of $2.91 million ($1,904 per square foot) during May. In the beginning of May, a 484 square one-bed unit was purchased at $1.13 million ($2,333 per sq ft).
SGX Centre 1 and 2, both completed in 2000, are located directly across the street across the road from Shenton House. Kajima Overseas Asia developed the twin towers that house Singapore Exchange. Singapore Exchange. Based in New York, Kohn Pedersen Fox designed and built the towers along with Singapore-based Architects 60. Singapore Exchange sold its space to United Overseas Bank (UOB) through a lease-and-sale contract for 7 years back in 2007. The towers are owned jointly and operated by UOB together with SingLand.
The next road down there is 8 Shenton Way (former AXA Tower). It will be developed into Skywaters Residences which will be the highest tower located in Singapore with a height of 305m. The 63-storey building will have 215 luxury apartments on the top floors as well as an assortment of office and commercial space in the basement floors. The project is being developed of Perennial Holdings and Alibaba.
It’s not too late to start
The clock is moving in the case of Shenton House, not just due to its lease expiring but also due to the imminent expiration of CBD’s incentive scheme on the date of November 26th, 2024. This is five years after the date that it was announced that the Master Plan 2019 was gazetted according to JLL’s Tan.
Buildings that are getting older, such as Shenton House, which is now more than fifty, also facing pressure to sell en group. “After an amount of years, buildings will have issues, for example, the concrete spalling,” declares CSC Chairman Liang. “The lobby is in good shape since we renovated it a few years ago.”
Things that require to be replaced or upgraded within the building include lifts as well as elevators. “It will cost a lot,” says Liang. “Maintenance costs could exceed the triple or even quadruple from the present cost. Therefore, it is more beneficial to sell the building in a group rather than retaining the structure.”
Therefore, the owners who own Shenton House are motivated sellers according to Liang. In the latest study Liang also notes that close to 90% were in favor of the sale.
As a property owner with multiple strata-titled properties throughout within the CBD, Liang sits on the management corporation’s strata title (MCST) committees of several and is aware of the issues they have to face. Liang is the Chairman of the MCST at the SBF Centre and Secretary of the MCST at International Plaza and an MCST committee member at Icon and The Sail. In addition, Liang was also the general sale chairman of International Plaza in the 2021-2022 exercise, with a reserve value that was $2.7 billion.
Residential rental demand
Based on his own and corporate portfolio of investments, the interest in apartments within the CBD remains high, according to Liang. The Sail @ Marina Bay is one of his properties. the Sail at Marina Bay, he recently contracted to lease his 614 sq ft studio apartment for an annual rental that was $5200, or $8.50 per square foot. The two-bedder, 883 sq ft is available for lease at the monthly rent of $6,800, or $7.70 per sq ft. Both tenants are foreigners working at the CBD.
At SkySuites at Anson, Liang recently let a 365 sq ft studio to an Chinese student who is pursuing university studies. The monthly rental amount that was agreed upon of $3,850 which is $10.50 per square foot. According to Liang the owner, he was offered two offers to lease the identical unit. The second was the higher rate of rent per month of $4,000. However, he picked the Chinese student since the lease term was longer than the other one, which was only six months, he claims.
Liang also anticipates that the two bedder at Icon to earn the minimum rent of $6,000 per month when the lease expires to renew in a couple of months.
“Rental need for smaller office spaces in the CBD region has been booming since the Covid incident,” he adds. “Our portfolio of more than 20 office units is 100% lease.”
According to Liang Liang, office spaces at International Plaza can still command $7 per month in rent The rental rates for SBF Centre that is a more recent building, range from $9 to $10 per month.
JLL’s Tan believes it Shenton House “presents an interesting idea” considering its location within District 1 and the CBD as well as District 1. The units on the upper floors offer views of the ocean as well as the city’s skyline. “On a clear day there is a view of Indonesia,” he says.
Shenton House is also well-connected because of the proximity of Four MRT stations. Shenton Way MRT Station on the Thomson-East Coast Line is located across the street, and Downtown MRT Station on the Downtown Line is also within walking distance. Tanjong Pagar MRT Station (East-West Line) and Marina Bay MRT Interchange Station (for the North-South, Thomson-East Coast and Cross Island Lines) are close by. The development planned for this site will be linked to neighbouring buildings through covered linkways at the second floor.
“The Shenton House site is perfect for redevelopment as an ideal mixed-use development that includes Class A office space, luxurious homes, a posh hotel, or serviced apartments” Tan adds. Tan.
“I believe there is no other site within the CBD that’s more affordable cost-effective,” he adds.