Hong Kong’s Wharf Puts Mall in Singapore’s Orchard Area on Market for $338M

Hong Kong-based real estate firm Wharf Real Estate Investment Company (Wharf REIC) is marketing a luxury mall along Singapore’s Orchard Road for S$450 million ($338 million) as the rejuvenation of the premier shopping strip gathers speed.

Its Singapore development subsidiary, Wharf Estates Singapore, has appointed Savills to market the 130,875 square foot (12,160 square metre) boutique retail podium of the Scotts Square mixed-use development near the junction of Orchard and Scotts roads.

Jeremy Lake, managing director of the investment sales and capital markets team at the property agency, points to the opportunity for a new owner to enhance the asset’s value by freeing up more leasable space and improving the tenant mix to boost rental income, at the same time that the Orchard Road area is receiving a boost from a government rejuvenation initiative.

“A sale at this moment is timely for buyers to ride on the rejuvenation of Upper Orchard Road and the great shopping all year round particularly as visitor arrivals to Singapore are increasing rapidly and more PRC visitors are expected in 2024 as visa free travel will start soon,” Lake said.

Luxury to Lift Leasing

Passing rents in the mall are currently below market levels at around S$10 per square foot per month, despite its location at the heart of the Orchard area. Savills said in a statement on Friday that it expects strong interest for Scotts Square, which is located between the Marriott Tang Plaza and Grand Hyatt Singapore hotels, considering the limited supply of freehold retail properties in prime locations.

Once among the city’s highest-end destinations, some of its earlier tenants, including fashion brands Hermes and Christian Louboutin, have moved to Liat Towers and ION Orchard, respectively. It is currently 98.8 percent occupied, with tenants including high-end electronics retailer Bang & Olufsen, furniture shop Planet Plus and brunch restaurant Wild Honey.

Wharf Estates is reported by market sources to have privately marketed the property to prospective buyers over the last few years at an asking price of around S$500 million.

In the last two years, Scotts Square has been deprived of footfall from guests of the neighbouring Grand Hyatt, which has been closed for renovation since October 2021, and is expected to reopen early this year. Just three years into its operation, the mall had struggled to attract and retain quality tenants, in what was described by The Straits Times as an “exodus of retailers”.

At S$10 per square foot, rents at Scotts Square represent a 55 percent discount when compared to the third quarter average of S$22.40 per square foot in the Orchard area, according to Savills data.

Rents in the mall could be nearly doubled to around S$19 per square foot by attracting the right mix of tenants, Lake said. The mall’s net leasable area could also be increased by 10 percent by reducing the size of corridors and common spaces, he added.

Repositioning the asset, which could cost around S$5 million, would align it with an ongoing rejuvenation in the Orchard area where a series of major projects are already lined up, including the planned redevelopments of the Far East Shopping Centre by Bright Ruby Resources and Ming Arcade along Cuscaden Road.

As part of its latest master plan, Singapore’s URA has proposed a scheme to rejuvenate Orchard Road, traditionally Singapore’s high-end shopping strip, to create a green corridor lined with modern commercial projects and residential space, making it more attractive to residents and visitors.

Scaling Back in Singapore

Exiting Scotts Square will leave the 21-storey Wheelock Place office and retail complex at 501 Orchard Road as Wharf REIC’s sole asset in Southeast Asia’s wealthiest city.

The firm acquired Scotts Square and Wheelock Place in December 2019 from its Hong Kong parent company, Wheelock & Co, in a HK$6.42 billion deal. With that transaction having valued Scotts Square at S$256 million, a disposal this year at the current guide price of S$450 million would see Wharf REIC achieving a 76 percent mark-up in just over four years.

Mingtiandi understands the firm has no immediate plan to offload Wheelock Place, which is located just a few blocks away from the mall and currently serves as headquarters for Wharf Estates Singapore.

The expression of interest exercise on Scotts Square will close on 6 February.

The sales effort follows Wharf REIC having achieved what it referred to as a “modest recovery” in the first half of 2023 as it booked a HK$1.78 billion net profit after suffering a HK$1.53-billion loss a year earlier.