8M Real Estate’s shophouse portfolio value soars from $400 mil to $1.4 bil in six years
By Cecilia Chow
/ EdgeProp Singapore |
Manchharam: When we first started acquiring shophouses in 2014, none of the properties was above $100 million. Today, we have a handful of properties above $100 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - It has been nine years since Ashish Manchharam, founder and CEO of 8M Real Estate (8M), burst into the conservation shophouse scene with his maiden purchase of a row of five shophouses at 112 to 116 Amoy Street. He paid $50 million for these shophouses in the CBD back in 2014. Based on a gross floor area (GFA) of 27,500 sq ft across the five shophouses, the $50 million purchase price translated to $1,818 psf.
Today, those five shophouses at Amoy Street are valued at over $110 million or $4,000 psf. “When we first started acquiring shophouses in 2014, none of the properties were above $100 million,” says Manchharam. “Today, we probably have a handful of properties above $100 million.”
Recent shophouse transactions at Amoy Street: EdgeProp Research Tool
The shophouses on Amoy Street, owned by 8M, have a leasehold tenure, with 99-year leases from 1990. Prices of the 999-year leasehold and freehold conservation shophouses in the CBD and Chinatown in prime Districts 1 and 2 have risen even further.
Purchased for $50 million in 2014, the row of five shophouses at 112 to 116 Amoy Street is now valued at over $110 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)
In November 2022, a shophouse at 94 Amoy Street changed hands for $18.688 million or $6,028 psf based on a GFA estimated at 3,100 sq ft and a 999-year leasehold site of 1,856 sq ft. Five months later, in early April, another caveat was lodged for the same shophouse for $21.8 million or $7,032 psf. The buyer was NC Properties, an entity linked to Hong Kong’s New Century Group. NC Properties is said to own other conservation shophouses in Telok Ayer and Circular Road as well.
“The transaction on Amoy Street has set a new benchmark for prices of 999-year leasehold and freehold shophouses in the CBD and Chinatown area of Districts 1 and 2,” says Richard Tan, senior group district director from PropNex Shophouse Elites and a specialist in conservation shophouses.
Price trends for Shophouse: EdgeProp Market Trends
8M has been a significant beneficiary of the run-up in prices of conservation shophouses. In 2017, the real estate company’s portfolio of nine shophouse investments with a tally of 30 shop lots was worth $400 million. Six years on, 8M has amassed 30 shophouse investments across 72 shop lots, and the portfolio is valued at close to $1.4 billion today.
8M’s recent purchase is the four-storey shophouse at 28 Stanley Street for $29 million ($4,472 psf) [Photo: Samuel Isaac Chua/EdgeProp Singapore]
‘Long-term investor’
“We are a long-term investor,” says Manchharam. “8M is an unlisted property company that targets owning properties for a long time.” The company is self-funded and backed by himself and institutional investors from overseas. “We haven’t had to do any external fundraising,” he adds. “Unlike a property fund, we are not required to exit at a certain time unless we deem a property non-core to our portfolio.”
Many had anticipated an influx of foreign buyers in the conservation shophouse sector, especially following the property cooling measures that came into effect on April 27. According to property agents, there is interest in conservation shophouses from a diverse mix of foreigners from China, Hong Kong, Taiwan, India and Indonesia.
However, local investors remain active, says PropNex’s Tan. “Prices are much higher now. They [local buyers] cannot readily accept such prices.” Interest rates are also higher, adds Tan, which means higher borrowing costs. Transactions today will be driven by “all-cash buyers or those who take very little leverage”.
The shophouse at 94 Amoy Street changed hands for $21.8 million or $7,032 psf in early April and set a new price benchmark for the CBD and Chinatown area in prime Districts 1 and 2 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
One such buyer is 8M, which purchased the four-storey conservation shophouse at 28 Stanley Street for $29 million in mid-April in a deal brokered by JLL. The property sits on a freehold site of 1,729 sq ft with a floor area of 6,485 sq ft and was sold with vacant possession. The price works out to $4,472 psf.
“It’s not cheap,” says Manchharam, “but based on where prices are today, the price point was okay.” He is acquiring the vacant shophouse in an all-cash deal. “No point buying a vacant building with no income and paying high-interest costs. We hope interest rates will drop, and we can refinance.”
Based on market rents today, rental yields are estimated at 2%, while borrowing costs are at 5%, adds Manchharam. This could explain the more cautious sentiment and the 46% y-o-y contraction in transaction volume from 52 shophouse deals in 1Q2022 to 28 in 1Q2023, says PropNex in its 1Q2023 shophouse report published on April 26. The transaction value of deals in 1Q2023 stood at $278 million, an 11.7% drop from the previous quarter and a 40.6% y-o-y drop compared to $467 million in 1Q2022.
The shophouse at 10 Stanley Street, which 8M purchased in June 2016 for $9.2 million and converted into a serviced office (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Patience in buying real estate
Notwithstanding the current market conditions, 8M is sticking with the long game. “You have to be patient when you buy real estate,” says Manchharam, who adds that the purchase of 28 Stanley Street was not opportunistic. He had been tracking the shophouse at 28 Stanley Street for five years, waiting for the owner to sell. It finally entered the market last year. “The owner was an individual who held the asset for a long time.”
8M intends to renovate the shophouse at 28 Stanley Street. The first two levels have been approved for restaurant use and have a combined floor area of about 3,000 sq ft. “It’s quite hard to find that kind of space in the area,” says Manchharam. “We have a few F&B operators lined up for the space.” The two upper floors will be leased as office space.
He sees “some synergies” with Solitaire on Cecil, a new, freehold, 20-storey, Grade-A office development across the road on Cecil Street with strata-titled floors for sale. It is a redevelopment of the former PIL Building by TE Capital Partners and LaSalle Investment Management. In late April, the top three floors spanning levels 17 to 20 were sold for $162.8 million or an average of $4,300 psf across the total strata area of 37,857 sq ft. The topmost floor (20th) hit a new high of $4,325 psf. Savills Singapore brokered the deal.
The portfolio of five shophouses at 109 to 117 Jalan Besar that 8M Real Estate acquired for $40 million last September (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Nearby, 8M also owns 10 Stanley Street, which it acquired in June 2016 for $9.2 million. It is now a serviced office.
Another property that Manchharam had been eyeing for “a long time” was the portfolio of five shophouses at 109 to 117 Jalan Besar. Last September, 8M scooped up the five shophouses for $40 million in a deal brokered by Simon Monteiro, associate vice president of List Sotheby’s International Realty. The five shophouses sit on a 6,584 sq ft site with a 999-year lease from 1926.
The seller was TSG Group, founded as Teo Siok Guan Pte Ltd in 1950. Teo Siok Guan had previously owned Guan Hoe, the distributor for Suzuki motorcycles in Malaysia and Singapore, in the 1960s. Over more than half a century, TSG accumulated an extensive real estate portfolio. In 2017, TSG Group offered its portfolios of shophouses at Tembeling Road and Joo Chiat Place for sale. The shophouses in Jalan Besar were the last to be put up for sale. “But we knew it was coming because we had been eyeing it for the last five years,” says Manchharam. It never made it on the market as 8M jumped in and purchased it before it was listed for sale.
Artist's impression of the row of five shophouses at Jalan Besar after refurbishment (Picture: 8M Real Estate)
Amassing portfolios
In late 2022, 8M Real Estate scooped up another row of four shophouses at 25, 27, 29 and 31 Tanjong Pagar Road for $75 million. The sellers were two parties, Silkroad Property Partners and Clifton Partners, who owned two shophouses each. 8M’s purchase price was $3,700 to $3,800 psf based on the GFA across the four shophouses with 99-year leases from 1994.
“The values of 99-year leasehold shophouses in the Tanjong Pagar area are now in the high $3,000 psf to $4,000 psf,” says Manchharam. The acquisition of the four shophouses at 25 to 31 Tanjong Pagar Road gave 8M Real Estate ownership of the entire row of 15 shophouses bookended by 15 Tanjong Pagar Road and 43 Tanjong Pagar Road.
He had acquired the shophouses on Tanjong Pagar Road in three block purchases over five years. 8M made the first bulk purchase of five adjacent shophouses at 15, 17, 19, 21 and 23 Tanjong Pagar Road for $57.4 million in March 2018. Based on the GFA of 26,500 sq ft, that works out to $2,166 psf.
The acquisition of four shophouses at 25, 27, 29 and 31 Tanjong Pagar for $75 million late last year has given 8M ownership of the entire block of 15 shophouses from 15 to 43 Tanjong Pagar Road (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The five shophouses at 15 to 23 Tanjong Pagar Road were purchased from property investor Stanley Quek as part of a portfolio of seven shophouses for $81.4 million in 2018. The other shophouses were at 18 Gemmill Lane ($11 million) and 71 Neil Road ($13 million).
8M made a second bulk purchase of six shophouses at 33, 35, 37, 39, 41 and 43 Tanjong Pagar Road for $80 million in February 2019, based on a caveat lodged. The seller was Arcc Holdings CEO Tony Chen, another long-term investor in conservation shophouses. “We did a swap deal: We bought 33 to 43 Tanjong Pagar Road from him, and we sold him 71 Neil Road, next to a property he already owns,” says Manchharam.
With the last four shophouses in the middle of the row at 25 to 31 Tanjong Pagar Road purchased late last year, the entire row now has a GFA of 80,000 sq ft, of which 50,000 sq ft comprises office space and 30,000 sq ft retail space. Its value is estimated at $350 million, making it “by far, our largest asset right now”, reckons Manchharam.
The shophouses were at 18 Gemmill Lane purchased for $11 million as part of a portfolio of seven that 8M purchased from Stanley Quek in 2018 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Another significant portfolio purchase was in February 2018: nine conservation shophouses and one commercial building at Boat Quay, Circular Road and New Bridge Road for $82.5 million. The seller was Lee Brothers (Wee Kee), a company controlled by the family of the late philanthropist and entrepreneur from Guangdong, Lee Wee Nam. (Find Singapore commercial properties with our commercial directory)
The portfolio included five 999-year leasehold shophouses at Boat Quay and Circular Road for $45.5 million or $3,150 psf based on a GFA of 14,445 sq ft. The shophouses have a combined land area of 6,002 sq ft across 61 Boat Quay, 77 Boat Quay, 17 Circular Road, and 45 and 46 Circular Road.
The sole commercial building in the portfolio was the five-storey, freehold property at 23 New Bridge Road, which is adjacent to four 99-year leasehold conservation shophouses at 27, 29, 31 and 33 New Bridge Road. 8M’s purchase price for the properties on New Bridge Road was $37 million.
The block of shophouses at 27 to 33 New Bridge Road that is under refurbishment, with a new rear extension, will reopen as a 48-room hotel later this year (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Artist's impression of the new 48-room hotel designed by WOHA Architects at New Bridge Road (Picture: 8M Real Estate)
Selling non-core, repositioning assets
However, 8M sold three of the shophouses in the portfolio, starting with 61 Boat Quay for $11.2 million in June 2021, followed by 17 Circular Road for $10.7 million in October 2021 and 77 Boat Quay for $16.188 million sometime in 1Q2022. The three shophouses were individual units and, therefore, “non-core assets”, says Manchharam.
8M retained the adjoining units at 45 and 46 Circular Road and the corner block at 27 to 33 New Bridge Road. He adds that the row of four shophouses at New Bridge Road will likely be valued at over $100 million.
A new rear extension has been added to the four shophouses at 27 to 33 New Bridge Road as part of its conversion into a 48-room boutique hotel. Designed by acclaimed architecture firm Woha, it will have a rooftop pool, a landscaped garden on the third floor, and two restaurants on the ground floor. He is keeping the property under wraps for now and targeting to unveil it later this year. “It will be one of our most iconic buildings, like the Eu Yan Sang Building on South Bridge Road,” says Manchharam.
The Eu Yan Sang Building at 265 to 271 South Bridge Road has been refurbished and leased to The Great Room as a 22,000 sq ft co-working space across four floors (Photo: Samuel Isaac Chua/EdgeProp Singapore)
8M purchased the Eu Yan Sang Building across four conservation shophouses at 265, 267, 269 and 271 South Bridge Road for $54 million in December 2019. The seller was Eu Realty, who sold the property on a 199-year lease, even though the underlying property has a 999-year lease.
After refurbishing the property, co-working operator The Great Room has leased the Eu Yan Sang Building for 10 years. The co-working space opened in April with 22,000 sq ft across four floors. According to Manchharam, 8M signed a 10-year lease with The Great Room.
Besides the upcoming 48-room hotel at New Bridge Road, 8M has three other hospitality-based properties: Ann Siang House on Ann Siang Hill, Kesa House on Keong Saik Road and Wanderlust on Dickson Road in Little India. Global serviced apartment operator Oakwood Worldwide has managed these assets as the Unlimited Collection since 2019.
The hotel at Wanderlust is one of three properties managed as the Unlimited Collection by Oakwood (Photo: Samuel Isaac Chua/EdgeProp Singapore)
In July 2022, CapitaLand Investment acquired Oakwood from Mapletree Investments for an undisclosed sum. The acquisition of Oakwood brings the management of 8M’s Unlimited Collection into CapitaLand’s lodging business unit, Ascott.
8M also has shophouses at Hongkong Street and Gemmill Lane, operated by Cove as co-living residences. 8M also owns 70 to 72 Boat Quay, three adjoining three-storey shophouses purchased for $23 million in May 2017. The shophouses have a floor area of 8,600 sq ft on the upper floors and were recently leased to a hostel operator, says Manchharam.
The hospitality, co-living, and serviced apartments segment contributes to just 20% of 8M’s overall income, according to Manchharam. About 40% of the income still comes from office space and another 40% from retail and F&B. “Our portfolio is still predominantly office and retail,” he adds.
Ann Siang House is also managed under the Unlimited Collection by Oakwood (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Check out the latest listings near Amoy Street, Stanley Street, Tanjong Pagar, Telok Ayer, Jalan Besar, Boat Quay, Circular Road, South Bridge Road, Hongkong Street, Gemmill Lane
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