A unit of well-known Singapore brand – Eu Yan Sang, has sold its 2 shophouses at 273 & 275 South Bridge to Top Global Limited, a Singapore real estate company linked to the prominent Indonesian conglomerate – Sinar Mas Group. The 2 shophouses have 999-year leasehold tenures that commenced from 1823 & 1827 and have a combined gross floor area of 10,027 sq ft. The purchase consideration of S$26.5 million is 7% below the original asking price of the vendor and this works out to be around S$2,643 psf on GFA.
Several condition precedents need to be met and the conclusion of the transaction is subject to the satisfaction of these condition precedents, that includes terms such as verification of the GFA, change of use of 2nd to 4th floor as hotel or hostel and leaseback of ground floor units to Eu Yan Sang.
Upon successful conversion of the use of 2nd to 4th floor, Top Global will asset enhance the space that will be used for its hostel business under the “5Footway Inn” brand. “5Footway Inn” is already operating in 5 locations in Singapore, in the heritage zones of Chinatown, Ann Siang, Boat Quay and Bugis. This new property will be its 6th hostel location and the 4th one to be located in Chinatown/Ann Siang area.
The investment by Top Global seems to be a savvy one. Converting the use from office to hotel/hostel does have a higher risk due to the cyclical nature of the business and poorer earnings visibility but it could potentially generate greater upside returns to the group. The leaseback of ground floor units to Eu Yan Seng would probably be the best use of the prime ground floor space (instead of using it as a lobby area) and would also help to improve the asset yield. Moreover, 999-year leasehold asset in the central area is a scarce commodity and this is a great opportunity to acquire a good asset.
A good deal for Top Global?