Tuesday, December 4, 2007

$12M: Coffee Shop In Jurong Fetches Record Price

Source : The Strait Times, Dec 04, 2007

A COFFEE shop in an HDB parking building has sold for a record-breaking $12 million.
The eatery called VariNice is just a stone's throw from the Jurong East MRT and bus interchange.

TOP DOLLAR: Bought by foodcourt operator Koufu, the sale price for the 4,700 sq ft VariNice coffee shop in Jurong East works out to $2,553 psf - well above the old record set by a coffee shop in Ang Mo Kio, which sold for $2,225 psf in 2004. -- ST PHOTO: MUGILAN RAJASEGERAN

Its huge catchment area of residential blocks and business parksnearby makes it a prize location, said property analysts.

The eatery - which boasts 12 stalls selling a variety of food from duck rice, to seafood and western food - has been going for about 20 years.

It was sold off by the Government in the 1990sand changed hands again in 2000 for about $10 million.

Its latest buyer is well-known foodcourt operator Koufu, which runs 37 food and beverage outlets across Singapore.

Lianhe Wanbao reported yesterday that Koufu was believed to have paid $13million for the premises, and is collecting $12,000 a month in rent from each stall.

But Koufu founder and managing director Pang Lim told The Straits Times last night that the price tag and rental were less than that. The firm paid about $12 millionand collects monthly rent of $6,000 from each stall.

The sale price works out to $2,553 per square foot for the 4,700 sq ft premises - well above the old reported record set by an 8,000 sq ft coffee shop in Ang Mo Kio which sold for $17.8 million, or$2,225 psf, in 2004.

The payback period for Koufu's latest buy is about 13 to 14 years.

Mr Pang said the deal was its biggest purchase but added that it was a long-term investment.

'It was a high price, but we need good locations and in the longterm, it'll be worth it,' said Mr Pang.

PropNex chief executive Mohamed Ismail told The Straits Times that the value of coffee shops depends purely on traffic. 'Good business locations will always command a premium,' he said.

Mr Nicholas Mak, headof research and consultancy at Knight Frank, said bullish market expectations paved the way for the record deal.

This was especially so as the recent slowdown in residential property has not touched the retail and food and beverage scene.

'This islikely to be few and far between, however,' he added, 'as few shops get transacted at such a high price.'

Earlier this year, a coffee shop in Block 501, Jurong West Street 51, sold for $9 million.

Three coffee shops - in Tampines, Yishun and BukitBatok - are on the market for $15 million apiece with no takers to date.

Keppel Land Markets India Projects Here

Source : The Business Times, December 4, 2007

The company is also looking to expand to other Indian cities

Keppel Land is looking to sell its residential properties in India to Indians based in Singapore, the developer told BT.

'In Singapore we see a growing non-resident Indian (NRI) market,' said Ang Wee Gee, KepLand's director of regional investments.

'In the past we have not been selling in Singapore. But now - with more Indian professionals coming here to work and live - we have decided to.'

KepLand showcased its India properties in Singapore last weekend.

About 300 people visited the company's booth and about 40 of them are 'serious buyers' the developer will follow up with, Mr Ang said.

KepLand is now marketing two projects in India - the 1,573-unit Elita Promenade in Bangalore and the 1,376-unit Elita Garden Vista in Kolkata.

It also has another project - the 1,168-unit Elita Horizon in Bangalore. The project is expected to be launched soon.

KepLand has so far sold 86 per cent of 1,340 units launched at Elita Promenade. Units went for between 3,000-3,400 rupees per square foot - a jump of more than 30 per cent since the project was first launched in 2005.

At Elita Garden Vista, the company has sold about 60 per cent of the 250 units launched. Prices were 2,600-3,000 rupees psf, Mr Ang said. The project was launched a few months ago.

About 15 per cent of all the units sold at both projects were bought by NRIs, Mr Ang said.

But most of these people are not from Singapore - they are from places such as the US, the UK and Hong Kong.

However, this is set to change as KepLand is seeing more interest among NRIs based here. 'We have an advantage here - they know us and can see the projects we have launched here,' Mr Ang said.

KepLand is upbeat about its future in India, where it has had a presence since 2003. More residential projects are planned there. 'Definitely, we would want to expand,' said Mr Ang.

'Apart from Bangalore and Kolkata we are also looking in Hyderabad, Chennai and the gateway cities of Mumbai and New Delhi.'

Office Occupancy Rates To Stay In The 91-95% Range

Source : The Business Times, December 4, 2007

Occupancy levels for office space in Singapore will remain in the 91-95 per cent range over the next five years, CB Richard Ellis (CBRE) said in a new report released yesterday.

At the end of August 2007, potential supply of office space - the total of known supply from the private sector and awarded government land sales (GLS) sites as well as potential supply from expected future land sales - stood at some 10.8 million sq ft for 2007-2012, the property firm said.

This reflects a 147 per cent increase from the potential supply of 4.4 million sq ft identified at the beginning of 2007.

The potential supply works out to an average annual supply of 1.8 million sq ft for the next six years, exceeding the average supply of 1.5 million sq ft a year seen over the past decade.

CBRE said that an estimated 788,000 sq ft will come on stream in 2008, while the majority of the new space will enter the market in 2010-2011.

And based on projected average annual take-up of 1.6 million sq ft for 2007- 2012, even if full potential supply materialises, 'we anticipate relative equilibrium between supply and take-up over this period', CBRE said.

It said occupancy levels for office space will remain in the 91-95 per cent range over the next five years.

CBRE's report comes as other experts predict that Singapore could see an oversupply of office space going forward.

Citigroup, for example, warned in a report last week that Singapore is in danger of seeing an oversupply of office space from 2010 onwards.

Based on the bank's estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.

Prime office rents in Singapore averaged $12.60 per square foot per month (psf pm) in the third quarter of 2007, increasing 16.7 per cent quarter-on-quarter and 82.6 per cent year- on-year, CBRE's data shows.

Rents now exceed the 1990 historical high of $11.50 psf pm.

While further rental increases are expected, the pace of growth should ease, CBRE said.

Fewer Sub-Sales But Value Hits All-Time High

Source : The Business Times, December 4, 2007

Median Q3 sub-sale prices also hit record of $1,246 psf, up 25% year-on-year

The level of sub-sale activity may be just about half of what it was in 1995 but the value of sub-sale apartments transacted in the first three quarters of this year is already at an all-time annual high of $6.7 billion.

An analysis of data by DTZ Debenham Tie Leung reveals that although the number of sub-sale transactions actually fell to 1,374 in the third quarter of this year - representing a quarter-on-quarter (qoq) decline of 23 per cent - sub-sales made up 19 per cent of the volume, up from 16 per cent in the second quarter.

Equally significant is the fact that median sub-sale prices also hit a new record high of $1,246 psf, a qoq increase of 13.6 per cent and a year-on-year increase of 25 per cent.

The value per transaction of sub-sale apartments is also at a record high this year at $1.71 million per transaction.

But while the level of sub-sale activity can sometimes be an indicator of market bullishness, DTZ executive director Ong Choon Fah points out that factors driving up numbers in the third quarter may have more to do with real demand in the light of short supply and with various new developments becoming available for immediate occupation.

The Icon for instance, has consistently been one of the top two developments in terms of sub-sales this year with its median sub-sale price increasing 26 per cent qoq to $1,495 in Q3. But as Mrs Ong notes, Icon has recently received its temporary occupation permit (TOP), and other attributes like its inner-city location and the affordability of its small units do make it popular.

Another popular development among sub-sellers is The Sail @ Marina Bay which increased 21 per cent qoq in terms of median sub-sale price in Q3 to hit $2,093 psf.

Interestingly, according to DTZ's analysis, the number of units at The Sail and Icon that have been sub-sold is now 512 and 370 units respectively. And assuming that units were not repeatedly sub-sold, DTZ suggests that almost half of the units in these developments have changed hands already.

More telling perhaps is that of the recent launches, only The Lakeshore, which has received TOP for some phases, and One-north Residences registered a significant number of sub-sales.

The number of sub-sale apartments in the luxury band fell 41 per cent to 317 transactions but it still makes up 45 per cent of sub-sale transactions.

DTZ believes that while the sub-sale market is increasingly competitive and sub-sale activity is not likely to accelerate further, the overall value of sub-sale apartments in 2007 is expected to increase further, backed by potential price increases.

And foreigners could be helping to boost the sub-sale market. DTZ's report reveals that although the number of foreigners buying sub-sale apartments in Q3 fell by 20 per cent qoq to 460 transactions, this number exceeds that of apartments bought directly from developers.

Indonesians made up 38 per cent of these buyers, followed by Malaysians and Koreans who made up 15 per cent and 9 per cent respectively.

Again, The Sail and Icon proved to be the most popular with these buyers with foreigners buying 26 and 25 units (41 and 36 per cent) respectively in the quarter.

DTZ believes the sub-sale market will continue to receive interest from buyers seeking immediate occupation with some investors looking to realise returns earlier by tapping on the buoyant leasing market. But with the withdrawal of the Deferred Payment Scheme, sub-sale activity may slow and deals look set to be more sustainable.

Three Of Asia's Biggest Deals Done In S'pore

Source : The Business Times, December 4, 2007

Value of the 3 total US$1.77b, or about 20% of the Top-10 transactions

The Top-10 real estate investment deals in Asia in the third quarter of 2007 amounted to US$9.3 billion, and three of those deals concerned Singapore properties.

A report by CB Richard Ellis (CBRE) shows that two of the Singapore deals involved stakes in One Raffles Quay while the third involved the sale of Chevron House. The total value of these deals came to US$1.77 billion or about 20 per cent of the value of the Top-10 deals.

CBRE also said that foreign investors have shown no sign of scaling back Asian real estate investment activity, 'especially given the relative scarcity of investment grade properties'.

As a general guide, investors will look at property yields when shopping for real estate and the 4.3 per cent yield for office property here is competitive with cities like Hong Kong where the yield is 4.5 per cent.

Cities like Manila and Jakarta do offer the potential of higher yields of around 11 per cent but as CBRE executive director Jeremy Lake notes: 'Yields reflect many factors, including risks.'

Mr Lake explains that these 'risks' usually include aspects of a country's legal, political and fiscal policies.

Singapore is more likely to attract investors seeking lower risk and and perhaps lower yields, Mr Lake added.

A low-risk/low-yield dictum may not be a bad thing in volatile times.

CBRE notes that some foreign capital is being redirected to Asian property markets, seeking to benefit not merely from the natural appreciation of real estate in dynamic economies, but also from appreciation of Asian currencies against the US dollar, particularly the Chinese renminbi.

Mr Lake also pointed out that investors are drawn to markets where the cost of borrowing is lower than the property yield, explaining why Tokyo saw the largest real estate investment deals in the quarter, with the Top-three commercial real estate deals totalling US$3.95 billion.