Singapore’s light industrial assets continued to find favour with investors last week as a developer listed on the city’s Catalist exchange picked up a plot in the city’s Bukit Merah district for S$112,500,000 ($83 million).
SLB Development has agreed to purchase the Thye Hong Centre, which occupies a 5,952-square metre (64,000 square foot) freehold site in southwest Singapore, with plans to redevelop the plot, according to a stock exchange announcement.
SLB chairman Matthew Ong, a scion of the family that controls SGX-listed Lian Beng Construction, sees the off-market acquisition potentially as a way to meet ongoing demand for light industrial space in a city where much of the economy continues to be driven by small companies involved in production and manufacturing, while also keeping his options open for other opportunities.
“We’re still very reliant on SME manufacturing, so there’s always demand for small industrial space, as well as back office space and for storage,” Ong told Mingtiandi.
At the same time that he underlined Singapore’s industrial demand, the SLB boss, who has previously developed residential four residential projects via the Lian Beng spin-off, held open the possibility of pursuing a housing opportunity on the site, which is within walking distance of Redhill MRT station and a short drive from Orchard Road.
The workshop location is currently zoned as B1 industrial, which allows for a variety of light industrial and commercial activities on properties located close to residential areas.
“We’re looking at either developing a new B1 building, but we are also considering an application for rezoning to develop a residential project,” Ong said. “As a residential project it would be located in a prime city fringe area, and homes in the area are currently sitting at around S$2,300 or S$2,400 per square foot.” Ong indicated that SLB will begin weighing its options for the site within approximately 18 months as leases for current occupants expire.
In its location along a strip now dominated by car dealerships, the Thye Hong Centre fronts both Leng Kee Road and Alexandra Road where they intersect with Tiong Bahru Road, and is within a few minutes’ walk of luxury condo complexes such as The Metropolitan on Alexandra View and the Tanglin Regency on Tanglin Road.
Sales of non-landed homes grew at 16.3 percent in August to reach an 11-month high after transaction volumes climbed for the fourth straight month.
Should SLB opt to pursue an industrial opportunity for the site, it has multiple avenues to realise capital gains with the company saying its stock exchange announcement that, “The Group does not intend to keep the Development for long-term rental income.”
Ong, who is a grandson of Lian Beng founder Ong Sek Chong and son of the group’s current chairman and managing director Ong Pan Aik, sees Singapore’s high rents for commercial offices as creating an opening for workshop properties approved for office applications.
“Costs are so tight we see a lot of offices moving into industrial space as well,” Ong told Mingtiandi. “A traditional office can run S$11 to S$12 per square foot per month, versus a more fiscally responsible S$3 to S$4 in an industrial space, so that industrial-office space is gaining traction.”
City guidelines for industrial properties in the area allow for development at a plot ratio of 2.5, however, according to analysts at Colliers International, Thye Hong Properties in 2000 had received permission from Singapore’s Urban Redevelopment Authority (URA) to boost the property to a 3.0096 ratio.
If the vendor had made use of that permission in the years since, SLB could redevelop the site into as much as 192,816 square feet of floor area, making the acquisition equal to S$583.46 per square foot of finished space.
In a deal which preceded SLB’s announcement of its acquisition of the Thye Hong Centre by just a few days, an unnamed buyer reportedly paid more than S$90 million to acquire a 101,550 square foot bungalow property in Singapore’s district 10 belonging to the Lee family that controls Thye Hong Properties. Lee Boon Leong, patriarch of the Lee family which made its fortune producing biscuits on the current site of the Thye Hong Centre, passed away earlier this year.
Singapore Industrial Stays Hot
Industry analysts see industrial demand across the city, as well as the project’s location, as reinforcing its value.
“The breakeven cost is around $900 per square foot,” noted Steven Tan, senior director for investment services at Colliers in Singapore. “The selling price for new strata units are probably around $1,000 psf. This is a good buy for SLB as freehold sites located in this vicinity are hard to come by.”
Apart from the opportunity to sell on to individual investors on the strata market, Industrial properties have also been popular with international fund managers with Prudential affiliate PGIM recently paying S$75 million to purchase another light industrial asset, the Luxasia Building in Paya Lebar.
Adding to a Cross-Sector Portfolio
Having signed the sale and purchase agreement for the Thye Hong Centre on 25 August, SLB expects to close the transaction within three months, which would add the property to a rapidly growing portfolio.
SLB, which has invested in residential, commercial and industrial projects in Singapore, including cooperation with Oxley Holdings on the condo projects Affinity at Serangoon and Riverfront Residences in Hougang, was incorporated as an entity independent of Lian Beng Group in 2017 and listed on Singapore’s Catalist board in April 2018.
In September 2019 SLB diversified into fund management by investing GBP 2 million in the UK-based Pinnacle Residential Fund, managed by Pinnacle Investment Management Limited, and in June 2020 purchased a 20 percent stake in the fund manager, which focuses on private rentals, according to The Business Times.
The company is also an investor in 32RE, a Singapore-based real estate fund manager established last year by former BlackRock executive Jeremy Choy.