SilkRoad Property Partners picked up a portfolio of 14 shophouses in central Singapore’s Chinatown area for over S$110 million ($80 million) in the latest acquisition on behalf of its value-add strategy, according to market insiders who spoke with Mingtiandi.
The deal, which was completed on Friday, adds a row of 11 adjoining properties on Mosque Street, a pair of buildings one block to the south along Pagoda Street, and a Tanjong Pagar shophouse to SilkRoad’s portfolio, with the regional fund manager acquiring all 14 properties from privately-held investment firm ACT Holdings on behalf of one of its value-add funds.
Currently occupied by residential, retail and office tenants, Singapore-headquartered SilkRoad now plans to upgrade or reposition the 43,464 square foot (4,038 square metre) portfolio, Mingtiandi understands. CBRE is understood to have brokered the deal but representatives of the property agency declined to comment.
The multi-asset transaction comes as Singapore’s shophouse market is on track to set a fresh record in 2022 after last year setting an all time high of S$1.94 billion in deals, according to a recent report by Knight Frank.
The purchase price for the deal, which was first reported by the Business Times, is around 22 percent lower than the S$141 million price which ACT had set when it put 13 of the 14 assets on the market in January 2020, with the Tanjong Pagar property having since been added to the set.
Located near Chinatown MRT station, the row of 11 four-storey shophouses at 42, 43, 44 and 45 Mosque Street span 34,238 square feet in combined floor space. The row is located next to the boutique Porcelain Hotel Singapore, which the RB Family office, a private investment vehicle for tycoon Raj Kumar and his son, bought for S$90 million in late 2021.
54 and 56 Pagoda Street add another 9,226 square feet to the set, while the single shophouse in the Tanjong Pagar Conservation Area occupies a 1,558 square foot site at 42 Craig Road.
The shophouses in the portfolio have from 66 years to 79 years left on their respective 99-year land tenures, with SilkRoad understood to still be finalising renovation plans.
Tricia Song, head of research for Southeast Asia at CBRE told Mingtiandi that shophouses in Chinatown will likely benefit from increased visitor arrivals now that Singapore has reopened, given the area’s popularity among tourists.
At a time of rising interest rates and tight yields, she said “shophouses could also be seen as a store of wealth or a hedge to inflation due to its vintage charm and scarcity value.”
ACT is the private investment office for the family of the late tycoon Toh Aik Choon, also known as AC Toh, who headed local trading and property firm Sim Lim Group before setting up manufacturing joint ventures under ACT.
SilkRoad Adds to Strategies
SilkRoad’s shophouse acquisition comes 18 months after the regional fund manager hit a $549 million final closing for its Silk Road Asia Value Partners II, which aims to acquire value-add properties with value-add potential in Singapore, Hong Kong and Tokyo, as well as in key mainland cities.
Among the assets it acquired for the strategy last year were the Smile Centre industrial building in Hong Kong’s Fanling area, which it purchased for $41.4 million in February 2021, and the Hang Wai Industrial Centre in Tuen Mun which it picked up for $167.1 million last October.
In a bid to expand beyond its traditional value-add strategy, Silkroad earlier launched its first ever core-plus Asia real estate fund and announced a $144 billion first closing in February of this year.
Shophouse Deals Hit S$940M
The Chinatown-Tanjong Pagar portfolio sale follows the 114 shophouses that changed hands between January and June for a total of S$938.8 million, based on data from Knight Frank. While the first half total slightly exceeds the S$919 million tally from the same period last year, it was 8 percent less than the S$1.02 billion worth of deals reported in the second half of 2021.
Knight Frank predicts that shophouse deals will reach reach nearly S$2 billion in 2022 as the post-pandemic rebound in tourism will likely support continuation of the “upbeat sales performance” in the first half.
“The shophouse market retained its popularity in H1 2022, after the record-breaking total value in 2021,” said Mary Sai, executive director of capital markets for Singapore with the agency. “Given that conserved shophouses in Singapore are limited in stock, the demand for this asset class is unlikely to fade any time soon.”
The report said relaxation of travel restrictions may bring a new wave of investors to Singapore’s shophouse market, given the city-state’s reputation as a safe haven.