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Katong Shopping Centre's second shot at en bloc sale

Katong Shopping Centre has launched its second attempt at en bloc sale, and the asking price could be higher than the $445 million price tag in the first attempt in 2011.

SINGAPORE: Katong Shopping Centre has launched its second attempt at en bloc sale.

Channel NewsAsia understands that the mall along Mountbatten Road has formed a sales committee in April and is in the midst of appointing a marketing agent.

Opened in the 1970s, Katong Shopping Centre is now home to a mix of offices, employment agencies, eateries and tailoring services. It was the first air-conditioned mall in Singapore.

The strata-titled mall is reviving efforts for an en bloc sale. The asking price could be higher than the $445 million price tag in the first attempt in 2011.

That's according to a shop-owner who is involved in the previous and current sales committee.

Back then, the apportioned value to each owner was an average of $2,000 to $2,800 per square foot if the deal had gone through.

The shop-owner also said that over half of the owners (including office and shop owners) are supportive of the latest move.

In order to call a sales tender, at least 80 percent of owners must approve the sale.

The committee, which has interviewed five prospective marketing agencies so far, is due to meet some time next week.

A casual chat with some tenants and shop owners at Katong Shopping Centre found that talk of a collective sale has been around for many years.

But pricing has been a big issue and could continue to be a sticking point, with some units at the mall transacting at attractive prices recently.

According to Squarefoot Research, a small shop unit at the mall was sold for a record price of more than $6,300 per square foot in May. Two months earlier, another shop fetched over $4,200 psf.

Overall, analysts say retail median prices in Singapore have moved up this year.

Desmond Sim, head of CBRE Research Singapore, said: "Generally, to go into a collective sale, the owner would expect some premium over what's being transacted in the market. If the current market is flushed with equity and people are buying units at an increasing rate, in terms of capital value, that would be a stumbling block to go into a collective sale."

CBRE said there were few successful collective sale deals for retail malls in the last eight years.

They included Midlink Plaza, Paramount Shopping Centre, Katong Mall and Kim Seng Plaza.

Collective sales of retail malls are typically more difficult to execute.

JLL Singapore's head of investments and residential, Karamjit Singh, said: "For some of the occupants who may perhaps be owning and operating on the ground-floor prime space, to a bystander the place may look run down, for all you know, they may be doing good business.

"And it is very difficult to quantify the loss of goodwill in giving the property up. So their perspective towards a sale may not necessarily be quantifiable as compared to the rest of the owners, perhaps, (an owner) who is operating out of a 4th-floor unit or an apartment above that mall.

"Each of them will have a different perspective towards measuring the merit of a collective sale."

Century 21 Singapore's CEO Ku Swee Yong, said: "With the retail rental doing well and vacancies being low at around 5 percent, I think many current owners of retail shops do not feel like selling, because the income and cashflow stream is too attractive.

"Even if you are not an owner operator, you wouldn't want to be considering a sale unless the windfall from the en bloc process is really significant."

Analysts say examples of ageing malls that have tried and failed at collective sale include Tanglin Shopping Centre along Orchard Road and Peace Centre in Selegie. 

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