Katong Junction, a commercial building that sits four stories high on Joo Chiat Road, was sold for $55.28 million. The building is comprised of a total of 47,558 square feet, which means that it sold for a little more than $1,162 per square foot.
The retail property, which will eventually evolve into food and other consumer outlets, was sold to East Coast Holdings. The company is owned by real estate investor Kishore Buxani as well Seychelles-based Capital Management Group’s Mukesh Valabhji . Check out Mr. Valabhji’s Flickr page to learn more about his background.
Katong is an area of Singapore that was once populated with coconut plantations and known as a weekend getaway for wealthy city residents. The area has since become a booming residential suburb, developed in the 20th century.
The neighbouring area, Joo Chiat, was originally named after a wealthy Chinese landowner, Chew Joo Chiat, in the 20th century. It was officially recognised as a national heritage conservation area in 1993 by the Singapore government.
The area is especially known for its beautiful pre-war architecture, adorned with radiant and colourful terrace houses and shophouses that are decorated with ornate facades and ceramic tiles. Joo Chiat is considered one of the most popular foodie destinations in Singapore and visited by many travellers.
The Katong Junction property was originally owned by a company under the umbrella of Tan Suat Hua, a well-respected architect who also happens to be one of the first shareholders of Singapore Healthpartners Pte Ltd. The company is well known for the Connexion development, which is a health care and hotel complex. Her stake in the company was sold some time later.
The purchase of Katong Junction was handled by CBRE, which listed the building through a tender exercise that is no longer in business. At the time of the sale, Katong Junction was nearly at full occupancy, as several restaurants took up the main level of the building with offices on the remaining floors above.
When the sale went through, Mr. Valabhji had high hopes for the building, as he planned to make some improvements to the building and repurpose it for mostly retail use, including adding more restaurant and other food outlets. His vision was to model after and compete closely with F&B outlets, which are popular and widely visited on the East Coast. He said he also gravitated toward the particular building due to the 30 car parking lot that sits in Katong Junction’s basement.
At the time of the sale, Katong Junction was able to secure roughly $3-4 per square foot in rental income. This put the building in an excellent position to make a significant profit after a repurposing renovation. In fact, the building has the potential of earning as much as $10-20 per square foot, based on the fact that F&B outlets at 112 Katong in East Coast Road were gaining similar profits. Mr. Buxani also considered selling individual units of the building rather than leasing them.
Katong Junction was originally constructed in the late 1990s. And in 2007-2008, the building underwent a refurbishment. The space exceeds 47,500 square feet of total space on land that is roughly 13,300 square feet. At the time of the purchase, the site was zoned to be used as a commercial property.
Mr. Valabhji and Mr. Buxani are now doing a complete renovation of the building at accost of approximately $19 million, to be completed in July 2015.
The property is Valued, after renovation in excess of $ 115 million.
There has been a lot of interest by various investors to acquire this property from Mr. Valabhji.
Mr. Valabhji and Mr. Buxani are not too keen on selling, they prefer to lease out the building.
Experts and real estate enthusiasts compared the purchase price to the rest of the market and considered the price of $1,162 per square foot to be quite reasonable. Comparatively, Oxley Holdings purchased the GRTH Building at 66 East Coast for $76.1 million, which came to $1,298 per square foot of usable and profitable space. However, the purchase price of $55.28 million for Katong Junction fell 10.8 percent below the assessed property value that was conducted in August before the sale. At that time, the building was valued at $62 million, which is approximately $1,300 per square feet.
This is not the first time that Mr. Buxani has partnered with Mukesh Valabhji and the Capital Management Group. In fact, he has worked with Capital Management on several other Singapore property investments. For example, just before the Katong Junction sale, the two partnered to purchase a 51 office units at Parkway Centre, located in Marine Parade Central. The purchase price for the units was $53.375 million, a little more than $1,000 per square foot. Subsequently, 10 of the 51 units were sold at a median price of $1,600 per square foot.
In 2007, the Mr. Buxani and Mr. Valabhji also bought six floors of the Church Street’s Samsung Hub. The acquired the floors from OCBC Properties for a total of $122.4 million, which averages to $1,560 per square foot. The two later sold one of the floors at $2,800 per square foot to a Chinese investor and received a $3,000 per square foot offer for another.
In addition to these properties, Capital Management also co-owns a half stake of the Finexis Building with Mr. Buxani.
Check out our previous post about Mukesh Valabhji partnering with Buxani to Purchase Parkway Centre Offices.