Could Wharf’s desire to sell Scotts Square be due to increased competition in Orchard Road

Wheelock Place or Scotts Square

Wharf REIC has good reason to keep Scotts Square but sell off Scotts Square.

Orchard Road has seen new developments which will revitalize the area. It may benefit from rising numbers of visitors due to the growing prosperity within the region as well as massive investment to improve Singapore’s tourism offer.

Hotel Properties Limited: H15 0%, the company owned by Ong Beng Seng could be transforming its Forum The Shopping Mall, voco Orchard Singapore, and HPL House to a mixed-use project with a new hotel, luxury homes and retail and office elements.

Far East Shopping Centre near voco Orchard Singapore may also be redeveloped. The company that bought the property in a joint sale with Bright Ruby Resources was owned by Chinese tycoon Du Shuanghua.

Pacific Eagle Real Estate owned by Tanoto’s family could turn the Tanglin Shopping Centre in nearby Tanoto into a landmark.

Singtel partnered Lendlease in redeveloping its Comcentre headquarters, located at the other end Orchard Road.

Scotts Square might not have enough size, or may be in an unsuitable location to remain competitive for a long time.

Wharf REIC has released its latest annual report. The 99-year leasehold Wheelock Place contains 221,800 sq. ft. of office and 243.900 sq. ft. of retail area by GFA. Wheelock Place boasts a combined GFA (gross floor area) of over 3.5 more than Scotts Square.

Major changes will soon be taking place along Singapore’s Orchard Road. One of the most well-known shopping malls there, Scotts Square is likely to change ownership.

Wharf Estates Singapore is selling the freehold retail platform at Scotts Square for S$450,000,000.

Scotts Square is located on Scotts Road near the Grand Hyatt Singapore. It’s part of a mixed use development with residential units. Its guide rate is S$3,438/sqft per plot ratio. This is based on an area of 130.885 square feet.

The long-time owner of the shopping center is selling off the asset.

Wheelock Properties acquired the Scotts Shopping Centre (then Scotts Shopping Centre) and The Ascott Singapore Serviced Residences (then The Ascott Singapore Serviced Residences) in 2004. Scotts Square was developed from the building, which once housed Singapore’s premier food court Picnic.

Wharf Real Estate Investment Company REIC, listed in Hong Kong, is the sole owner of WES. Wharf REIC’s largest shareholder is Wheelock and Company. It is affiliated with the Hong Kong billionaire Woo clan.

Wharf REIC’s financial situation does not seem to be in danger. In its results report for H1 of FY2023 which ended June 30, 20,23, the group reported that its net-debt was at its lowest level in four year and had received a Moody’s rating of A2.

Wharf REIC’s Net Debt to Equity was about 20 per cent as of the end of June 2023. For the first half of FY2023, group profits were positive and an interim dividend was paid.

Wharf REIC must be able of improving and repositioning Scotts Square. The group has a flagship Harbour City located in Tsim Sha Tsui. This is Hong Kong’s most popular shopping, dining and entertainment area.

Wheelock Place’s location is crucial. It sits at the center of Orchard Road. This means that new developments by HPL, Pacific Eagle, and other developers can enhance the offerings offered by existing major malls including Ion Orchard Ngee Ann City Paragon.

Scotts Square and the Scotts Road area are at risk of being overlooked by shoppers.

landmark floor plan

Scotts Road can benefit from redeveloping Far East Plaza. Far East Plaza is not likely to be redeveloped as the strata freehold retail units are owned in different ways.

Wharf REIC & the Woo family are longtime friends of Singapore and Orchard Road, where Wheelock Properties constructed landmark developments such as Ardmore Park.

Wharf REIC’s decision to withdraw from Orchard Road could be justified.

In the future, as more and newer developments come up in that area, smaller and older assets could suffer from increased competition. Orchard Road, a revitalized area of Singapore’s city centre, could be split in two. Some malls might shine and others may struggle.

Scotts Square faces a difficult task, given the fierce competition that is raging in its vicinity.

Investment asset for long-term

Scotts Square, a freehold property, is becoming increasingly rare. The government sells most of its new commercial development sites on 99-year-lease agreements.

Wharf REIC also seems pleased with the mall’s success. Wharf REIC reported that Singapore’s economy has boomed since 2022.

Wheelock Place in Orchard Road and Scotts Square are two of its assets that have enjoyed a strong foot traffic. Retail occupancies of the properties at end-June 2020 were respectively 99 and 98.

Wharf REIC’s portfolio of properties is Hong Kong-centric, and it includes asset types such as retail office and hotel. Hong Kong property is in a tough market and diversification via Singapore assets should be considered desirable by the group.

Wharf REIC might expand here rather than possibly shrink. Link Real Estate Investment Trust of Hong Kong entered Singapore mall ownership when it bought Jurong Point in 2023 and Swing By@ Thomson Plaza.

Savills Singapore’s marketing agent says that Scotts Square has the potential to increase net lettable areas and rents.

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