Tekka Place on the market, with S$450 million asking price

A BUMPER crop of retail and hospitality assets in Singapore is being offered in the market, with sellers more confident of finding buyers, now that there is light at the end of the tunnel in terms of lower borrowing costs.

These assets include Tekka Place, a mixed-use retail and serviced apartment complex owned by a joint venture (JV) between Lum Chang Holdings and LaSalle Investment Management.

The Business Times understands that the JV has appointed CBRE, JLL and Knight Frank to help find a buyer for the asset, which is on a site with a balance lease term of about 71.5 years.

The asking price for the entire property is said to be S$450 million. The owner is also open to selling the mall and the serviced residence component Citadines Rochor Singapore separately, with the respective asking prices of S$150 million and S$300 million. The 320-key Citadines Rochor has a hotel licence (which allows a minimum stay of one day).

Near the other end of Little India, Low Keng Huat’s 285-key lyf Farrer Park serviced apartment block along with seven strata commercial units on the street level were marketed by CBRE and Savills via an expression of interest exercise that closed recently. Discussions are said to be ongoing with a couple of parties. The asking price is S$240 million. It is part of a project on a site with a balance lease of about 92 years.

Also expected to be offered for sale are Keppel’s i12 Katong mall at the corner of East Coast and Joo Chiat roads, and SC Capital Partners’ Rivervale Mall in Sengkang.

A seasoned property consultant said that last year, many property owners were not confident enough to pull the trigger and become sellers as “there was no real light at the end of the tunnel on inflation”.

The higher-for-longer interest rate environment would result in negative carry – borrowing cost exceeding net property yield – for potential acquisitions in many instances.

“But now, we have a clearer sight of interest rate cuts because inflation appears to be easing. So more owners have decided to become sellers, appointing brokers to market their properties,” he added.

According to some market participants, it is possible for the buyer of a commercial property to secure an all-in borrowing cost of 4 per cent, or even less, these days, depending on the quality of the borrower, the property and the loan-to-value ratio. A year ago, the borrowing cost would have been close to 5 per cent.

A lower borrowing cost may not be sufficient to ensure a sale, especially if it substantially exceeds the net property yield. “There’s still a buyer-seller price gap,” noted the consultant.

Another property consultant said that retail properties that are too “core”, that is, focused on stable income generation, may have negative carry and be tough to transact. Assets with value-add potential may offer higher yields and be more sought after.

“For Singapore hospitality assets, the possibility of resizing rooms and carving out additional rooms, or converting the property to a co-living facility, may provide an appealing angle for some investors. An opportunity to change the operator may also interest some buyers,” he added.

Tekka Place, which was built on the site of the former The Verge mall, would be an example.

The property comprises a 10-storey main block and a seven-storey annexe block.

The Citadines Rochor is on levels 3 to 10 of the main block. The Citadines’ lobby, swimming pool, gym and laundry facilities are on Level 3.

The roughly 68,800 square feet (sq ft) net lettable area (NLA) of retail space is from Basement 1 to Level 2 of the main block, and on Level 1 (with mezzanine) and on the rooftop of the annexe block. There is parking space for 350 cars on levels 3 to 7 of the annexe block.

Market watchers note that retail continues to be challenging at Tekka Place. The strong point about the development is its proximity to Rochor MRT station on the Downtown Line. Riding on its location near educational institutions, Tekka Place could be repositioned as a campus for an international school and/or student accommodation. There may also be potential to convert some car parking space into usable space.

Another strong point for Tekka Mall is that it is on a site that is zoned white, which allows more flexibility for change of use. It could provide an opportunity to landbank and redevelop the site into a residential project.

The serviced apartment component is managed by The Ascott under the Citadines brand. There is an option to end the management contract after December this year.

Near Farrer Park MRT station, the lyf Farrer Park serviced apartment block has 240 units comprising studio, studio twin and two-bedroom units. It is part of a development built on a site zoned residential with commercial use at the first storey. According to mainboard-listed Low Keng Huat’s website, lyf Farrer Park has co-living features such as a social kitchen and lobby that can be converted into spaces for events and meetings.

Meanwhile, Keppel is understood to have appointed agents ahead of preparations for its i12 Katong mall to go on the market soon. Some industry observers estimate that the owner’s asking price may be about S$460 million, which works out to roughly S$2,270 per square foot on NLA of around 202,400 sq ft (excluding bonus space under the Urban Redevelopment Authority’s Community/Sports Facilities scheme).

The property, on a site with a balance lease of 54 years, is about 200 metres from Marine Parade MRT station on the Thomson-East Coast Line. Tenants at i12 Katong include a CS Fresh supermarket, Golden Village, Climb Central and PS. Cafe.

SC Capital Partners, too, has appointed agents to find a buyer for the three-storey Rivervale Mall in Sengkang. Word in the market is that the asking price could be close to S$300 million. The property’s NLA is about 80,675 sq ft. Rivervale Mall, which is on a site with a balance lease term of about 72 years, is near Rumbia LRT station. NTUC FairPrice and Food Junction are among the mall’s major tenants.