Could the increasing competition in Orchard Road lead Wharf Group to sell Scotts Square?
Wheelock Properties purchased the Scotts Shopping Centre, and The Ascott Singapore Serviced Residences located above in 2004. It converted the building which was Singapore’s very first food court Picnic into Scotts Square.
Wharf Real Estate Investment Company Limited (REIC), a Hong Kong-listed company, owns 100% of WES. Wharf REIC has a major stake in Wheelock and Company. The company is connected to Hong Kong billionaire Woo’s family.
Wharf REIC appears to not be facing financial strain. The group’s results presentation for the H1 FY2023 that ended on June 30, 2023 stated its net debt to be the lowest it has been in four years. It also had a Moody’s credit rating of “A2”.
Wharf REIC’s net debt/equity ratio was approximately 20 percent as of end-June, 2023. In H1 FY2023, Wharf REIC was profitable, and it paid an interim distribution.
Wharf REIC’s property portfolio focuses on Hong Kong, and includes assets such as office space, retail and hotels. Hong Kong faces a challenging property market, so diversifying by acquiring Singapore assets is a good idea.
Wharf REIC may expand rather than reduce its presence. Link Real Estate Investment Trust (Hong Kong) completed its purchase of Jurong Point Mall and Swing By @ Thomson Plaza, Singapore’s largest mall, in 2023.
According to marketing agent Savills Singapore there is also the potential for Scotts Square to increase its net lettable area as well as rents.
Wharf REIC is expected to be able enhance and reposition Scotts Square. The group is known for its flagship Harbour City, located in Tsim Sha Tsui’s commercial hub, Hong Kong’s largest shopping, entertainment and dining centre.
Wheelock Place against Scotts Square
Wharf REIC could have good reasons for keeping Scotts Square and selling off Wheelock Place.
Orchard Road will be revitalized by new developments. This area is expected to benefit from the increasing number of tourists to Singapore as a result of growing prosperity in this region.
Hotel Properties Limited, owned by Ong Beng Seng and voco Orchard Singapore (HPL), could turn its Forum The Shopping Mall and HPL House in Orchard Road’s western end into a large mixed-use redevelopment, including a luxury hotel, retail space, and offices.
Far East Shopping Centre could also be renovated. It is located next to the voco Orchard Singapore. The property was purchased in a collective auction by a company associated with Bright Ruby Resources and Chinese businessman Du Shuanghua.
Pacific Eagle Real Estate’s Pacific Eagle Shopping Centre could be developed into a new landmark nearby. It was purchased in a group sale by the Tanotos.
Singtel :Z74 0% partnered Lendlease, a real estate company, to redevelop the Comcentre Headquarters at the opposite end of Orchard Road.
Scotts Square, it is argued, may not have the size or be located in the best location to be competitive on a long-term basis.
Long-term Investment Asset
Scotts Square is one of the few freehold assets left in existence, as most new commercial sites are sold by the government on 99-year leases.
Wharf REIC is also happy with the performance at the mall. Wharf REIC’s interim report for the first half of FY2023, Wharf REIC, said that Singapore is booming.
Wheelock Place and Scotts Square in the Orchard Road region have experienced a thriving foot traffic, and a high occupancy rate. As of end-June 20,23, the retail occupancies were 99 and 98 %, respectively.
According to Wharf REIC’s most recent annual report on 99-year leasehold Wheelock Place, the building has 221,800 square feet of office space as well as 243,900 square feet of retail space. Wheelock Place has a combined GFA of office and retail space that is 3.5x greater than Scotts Square.
Wheelock Place, which is situated in the heartland of Orchard Road and where HPL and Pacific Eagle may develop new projects, can be a complement to the existing offerings of leading malls, such as Ion Orchard Ngee Ann City Paragon.
Scotts Square is situated in the Scotts Road, which could be bypassed.
Scotts Road could benefit from the redevelopment and expansion of Far East Plaza. The freehold strata retail unit owners of Far East Plaza may not agree to redevelop this mall.
Wharf REIC has long had ties with Singapore, particularly the Orchard Road area where Wheelock Properties developed the Ardmore Park luxury condominium.
Wharf REIC might be right in its decision to leave the area.
The competition in this area could be fiercer as newer developments are built. Orchard Road’s revitalization could lead to a split – some shopping malls may shine, and others will struggle.
Scotts Square’s future will be difficult to ensure, as competition is heating up in the area.
Major changes may be afoot in Singapore’s Orchard Road Shopping Belt, and one of its most renowned malls, Scotts Square could soon change hands.
Wharf Estates Singapore – formerly Wheelock Properties – has put the freehold podium at Scotts Square on sale for a guide price of S$450 million.
Scotts Square, located next to Grand Hyatt Singapore on Scotts Road, is a part of an integrated development which includes residential units. The price guide translates into a rate S$3,438 for each square foot of the plot ratio based on 130,875 square feet of gross floor area.
But one can’t help but wonder what the owner of the mall is thinking by selling it.
