UK private equity firm Schroders has agreed to buy a northern Singapore mall for S$208 million ($154.8 million), as neighbourhood retail continues to attract property investors during the COVID-19 era.
The British finance firm, which took over Hong Kong’s Pamfleet in 2020, is buying the Wisteria Mall, which forms the retail podium below the Wisteria condo complex in the Yishun area, from a unit of Singapore-listed builder BBR Holdings, which announced the sale in a filing with the Singapore Exchange.
While retail investments have lost favour in recent years with investors pursuing the e-commerce-powered appeal of warehouses, Schroders — which has a track record in the region of acquiring and repositioning less-loved assets — sees the Wisteria Mall as providing opportunities that complement online channels.
“Online retail is still a threat to the general retail sector, but instead of fighting it we should embrace it,” Allan Lee, Schroders’ head of Asia ex-China for real estate, told Mingtiandi. Lee pointed to the high density in Yishun, which is home to several large public housing estates, and the mass-transit stations encircling the Wisteria Mall, as providing a built-in catchment for the project.
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Schroders is acquiring the Wisteria Mall, which has a strata lot area of 17,328 square metres (186,517 square feet) on a 99-year leasehold site, for the equivalent of nearly S$12,004 ($8,924) per square metre.
A sale and purchase agreement for the asset at 598 Yishun Ring Road has been signed and the transaction is expected to close in February, according to the parties.
With BBR having already fully sold out the 216 units in the residential portion of the Wisteria mixed-use project, Schroders is focusing on ways to boost the property’s ESG credentials as it deploys its value-add playbook.
Lee said that the firm, which teamed with Manulife and Gaw Capital to purchase Hong Kong’s Cityplaza One office tower for $1.27 billion in 2020, will work with Wisteria Mall’s tenants to reduce waste, improve hygiene systems in washrooms and install climate control with monitoring sensors to save energy in the two-storey lifestyle mall.
The 2018-vintage property — which is home to a FairPrice Finest supermarket, a food court and other restaurants and retail shops serving the local community — will remain open during the refurbishment, Lee said, adding that Schroders hopes to bring in more service-related trades like medical care.
Schroders is acquiring the asset through the firm’s Pamfleet Real Estate Fund III, which in 2019 closed on $450 million in equity for value-add projects in Hong Kong and Singapore before Pamfleet was acquired the following year. Earlier this week, Mingtiandi reported that a Schroders joint venture had sold the Travelodge Central Hollywood Hotel in Hong Kong’s Central district for $109 million.
Real Capital Analytics reported in December that community retail transactions helped Singapore’s commercial real estate market rebound sharply last year, with $9.6 billion in deals recorded across all property types.
Big-ticket retail deals involving neighbourhood malls in early 2021 included Hong Kong-based Arch Capital buying the YewTee Point mall from Frasers Centrepoint Trust for $164 million and Firmus Capital picking up Le Quest Mall from Qingjian Realty for $148 million.
Last June, local developer Low Keng Huat announced that it would purchase investment firm Sun Venture’s 45 percent stake in the Paya Lebar Square mall for S$90.5 million ($67 million).
“As Singapore gradually emerges from the pandemic, neighbourhood malls with strong fundamentals are very desirable as they offer essential services and thus generate an attractive property yield,” Galven Tan, deputy managing director of investment sales and capital markets at Savills Singapore, said at the time of the Paya Lebar Square deal.