Phoenix Sells Singapore Shophouses to Aberdeen Standard for S$54M

Phoenix Property Investors has disposed of a row of shophouses in Singapore’s Chinatown for S$54 million ($39 million), according to Aberdeen Standard Investments (ASI), which purchased the historically preserved buildings.

The asset management arm of London-listed Standard Life Aberdeen confirmed to Mingtiandi that it had acquired the six adjoining shophouses at 48 to 56 Peck Seah Street through its £500 million ($647 million) Global Real Estate Fund (GREF).

“For investors seeking diversification, we believe that cities in the Asia Pacific region are set to experience very strong growth over the next decade, fuelled by both domestic and foreign immigration to major metropolises along with continued infrastructure spend across the region,” said Ted Roy, deputy fund manager on ASI’s APAC direct real estate team.

The sale of the set of conservation properties earns Phoenix and its investors a mark-up of more than 20 percent over the S$42.8 million the firm paid to purchase the shophouses from Japanese shipping company K-Line in late 2014.

Buy It, Fix It, Flip It

Phoenix is selling the two-storey buildings, which are located opposite the Tanjong Pagar metro station in Singapore’s central business district, after spending S$2 million in 2015 on refurbishing their facades, putting in new air-conditioning and upgrading the interiors.

Based on the properties’ combined gross floor area of 19,938 square feet (214,611 square metres), ASI has paid S$2,708 per square foot for its piece of Singapore’s historic Chinatown. Local Singapore property agent Sakal Real Estate Partners is understood to have introduced the buyer of the shophouses, while the properties were put on the market last year at an asking price of S$57.82 million with Colliers and JLL acting as marketing agents.

The 1900s-era row of shophouses are fully let to kitchen and bathware brand Kohler, insurer NTUC Income and the Fat Prince restaurant.

Zoned for commercial use with a leasehold tenure of 99 years effective from 1994, market rents for shophouse offices in the area fetch up to $7.50 per square foot, while ground floor F&B units rent out for between S$11 to S$13 per square foot.

ASI’s Roy said that over the medium-term, the firm would be targeting a range of sectors in key gateway cities including residential, urban infill, logistics, and offices, as well as the age-care sector in Japan.

The Scottish firm, which managed $47 billion in real estate assets as at June last year, has secured its slice of colonial era charm at a yield of above 3 percent, according to JLL and Colliers’ marketing materials for the property.

Rising Shophouse Rents Boost Investor Interest

ASI is homing in on Tanjong Pagar for what is GREF’s first investment in Singapore as shophouse rents in the city are on an upward swing, according to Colliers and JLL.

With leasing rates on the rise, investors purchased S$200 million in shophouses in 2019 — a 79 percent increase over the previous year, according to a report released last week by Colliers.

Local shophouse specialist 8M Real Estate, which has a property portfolio of S$800 million, made over S$70 million worth of purchases on Tanjong Pagar Road and South Bridge Road just over a month ago, according to The Business Times.

With the oldest buildings dating back to the early nineteenth century, Singapore’s shophouses have been targeted by small and medium-sized businesses seeking a “boutique” identity such as sportswear brand Lululemon and local coworking operator the Working Capitol as well as global outfits such as Savills Investment Management, which have all set up in Tanjong Pagar shophouses.

Phoenix Notches Another Sale

Phoenix is cashing in on its Singapore investment a month after announcing it had sold an apartment building in Tokyo for JPY 20 billion ($180 million).

That divestment on behalf of its Phoenix Asia Real Estate Investments V fund saw the firm selling Oakwood Residence Shinagawa to a Korean institutional investor just 30 months after acquiring the serviced apartment complex for JPY 14 billion.

The successful divestment of 48 to 56 Peck Seah Street to Aberdeen Standard comes three months after the private equity firm joined the $1 billion fund club with a $1.15 billion close on its latest opportunistic fund.