SINGAPORE — As attention turn to commercial properties after the latest property cooling measures cast a pall on residential en bloc sales, some owners at The Arcade are gearing up for another collective sale.
This will be the second attempt by the owners of the 39-year-old commercial building in the heart of Raffles Place, after they failed at their first shot five years ago due to a too-high asking price of S$868 million.
When asked, collective sale committee chairperson Moeez Nakhoda declined to reveal the current reserve price to TODAY, stating that the owners of the strata-titled commercial development have yet to be informed.
He added that the draft collective sale agreement will be mailed out to owners over the next two weeks, and the first extraordinary meeting with all owners is expected to be held at the end of the month.
However, TODAY learnt from Mr Thamim Kassim, 60, owner of money changer business Crown Exchange, that retail units are going for at least S$11,000 per square foot, while office units are at S$3,000 psf.
The Arcade is sitting on a 21,900 sq ft site with a land tenure of 999 years held by property developer City Developments, though the units were sold to individual owners on a 99-year lease.
City Developments currently owns 30 per cent of the building, which has a built up area of about 157,000 sq ft. The 20-storey commercial building has three levels of retail space.
Despite the 2013 en bloc attempt failing due to owners setting too high an asking price, Mr Nakhoda said there should still be interest in the prime commercial building.
Mr Nakhoda said that market for commercial properties now is “very buoyant” and that the 20-storey building can redeveloped up to 50 storeys.
Citing the age of the building and the clock ticking down on the units’ 99-year lease, he added that owners are worried that the value of their property will go down if they don’t secure a buyer soon.
Indeed, owners like Mr Kassim, whose family owns a total of 10 properties in The Arcade, are looking to “cash out” since the building was already so “old”.
Despite being one of the first few owners in the property when it opened in 1979, the 60-year-old said there is no need “to be sad” at the prospect of leaving the property.
“Already sitting here 30, 40 years, what is there to be sad or happy,” he added, telling TODAY he is not too concerned about how relocation would affect his money changer business.
While the asking price of S$11,000 psf for a retail unit is “very good”, ZACD Group’s executive director Nichols Mak said that there are certain challenges in redeveloping the Arcade site.
“It’s in between two buildings, it’s a fairly built-up area. Not sure how are they going to do that. … It’s also on top of a major MRT exchange. That adds on to the challenges,” he added.
Still, not all owners are eager to sell, as TODAY found out.
A member of staff at Loo & Ng Trading and Money Changers who did not wish to be named said the owners did not agree to the collective sale earlier in 2013 and would likely stick to the same stance this time around due to its good location and strong traffic flow.
The owner of Raffles Money Change, who wanted to be known only as Mr Lim, also said he would not be interested in the en bloc as he set up shop in the building only in 2016.
Another owner of a retail unit who did not wish to be named said that he would probably not agree to the en bloc as he heard that the asking price would be similar to the previous round, which was “not a good enough offer” for his 400 sq ft retail shop.
He said, based on the previous method of apportionment, he was supposed to get about S$4 million for his unit if the 2013 attempt was successful. But owners of office units had a “bigger apportionment”, which was not fair to people like him, he argued.
“The apportionment was not so good. Look at retail units, they gave us less the last time round. … For individual owners like us, it was a bad deal,” he said.
BIGGER EN BLOC MARKET FOR COMMERCIAL PROPERTIES
Well known by Singaporeans as the go-to destination for competitive exchange rates, The Arcade’s second collective sale attempt comes as capital has shifted more to commercial properties, away from residential ones after the July 6 cooling measures, said a property analyst.
The Government increased Additional Buyers’ Stamp Duty (ABSD) by 5 per cent for individuals buying their second residential property onwards and 10 per cent for entities buying residential properties.
In addition, developers have to pay an additional 5 per cent ABSD that is non-remittable if they buy over residential sites for housing development.
“If you want to place money, you don’t want to be paying extra tariffs,” said CBRE’s head of research for Singapore and South-east Asia Desmond Sim.
On Monday (Oct 9), CBRE announced that 59 freehold shop units in Ming Arcade were launched for collective sale. The commercial building at Orchard Road is going for an asking price of S$51 million, which translates to S$4,470 psf.
In August, The Straits Times reported that the iconic Golden Mile Complex on Beach Road has launched a collective after at least 80 per cent of owners agreed to it.
While there may be greater interest in commercial properties, Mr Mak however said that there are still not many successful en bloc of commercial buildings.
“Even bringing to market is challenging enough,” said Mr Mak.
Analysts say owners of strata-titled commercial buildings face greater challenges in securing an en bloc sale launch compared to a residential property.
According to Mr Sim, there are “more checkboxes to tick” for a commercial building to go en bloc as the market value of retail units are not derived in a straightforward manner as residential properties.
Instead of utilising the strata value, market valuation comes into play.
This is because more so than in residential units, valuations can vary widely for commercial units on different levels and with different frontages.
For instance, a 43 sq ft ground floor shop at The Arcade made the news in 2015 when it was sold for S$1.4 million, or over S$32,000 psf, in what is believed to be the highest psf price for a commercial property in Singapore.
Since then, other units in The Arcade, ranging from 65 sq ft to 291 sq ft, have been sold for between about S$4,200 and S$15,000 psf.
TENANTS RAISE CONCERNS
Most of the tenants at The Arcade that TODAY spoke to expressed concerns that a collective sale would likely affect their business as they would have to relocate if it does go through.
The seller of a lunchtime crowd favourite fish soup at Hup Lee Cafeteria, Mr Eric Lee, 35, who has been operating his eatery at the commercial building for the past 15 years, said he hopes that the en bloc would not go through as he has regular customers in the area.
Wanting to be known only as Mr Habib, 50, the owner of money changer Vestin Exchange has been renting a shopfront in The Arcade since December last year. Certain that he would definitely lose customers, Mr Habib laments that he would have “no choice” but to move if the en bloc is successful.
The owner of a tailor shop, 1968 Man’s Wear, Mr Robert Chow, 70, who started renting at the Arcade since 2014, said most of his customers are regulars and he would have to build up his clientele from scratch if he has to move.
Ms Wendy Lee, the founder of high-end jewellery store Moonlight Joaillerie, said she has developed an established clientele after signing a two-year lease in June 2017 and it would be “inconvenient to change routine”.
She was so fond of her third-floor shopfront that she even offered to buy the 250 sq ft unit from the existing owner for over S$1 million.
However, with the en bloc in process, the owner is unsurprisingly unwilling to sell. So her plans, along with other tenants, might have to be put on hold, as they await the outcome of the collective sale.