Luxury watch retailer The Hour Glass has exercised their purchase options for units in Tong Building for $68.5 million. The company will be acquiring units #09-01 to #09-04 and #10-01 to #10-04 in the building as stated in a recent bourse filing on Sept 26. The deal was facilitated by Yap Hui Yee, executive director of investment sales and capital markets at Savills Singapore. Yap comments that the freehold status of the office floors adds significant long-term value, making it a compelling investment choice for those looking to preserve their wealth.
In a separate transaction earlier this month, Yap also brokered the sale of the entire sixth floor of Tong Building to Parkway Hospitals Singapore for $31.33 million, which amounts to $4,562 per square foot. This is currently the highest price per square foot for an office space in the prime districts.
Each level of the property has a strata area of 638 sqm (6,867 sq ft) and is a part of the premium-grade office property with a freehold status. These units are located near The Hour Glass’ corporate offices within the building. The company states that this acquisition is in line with their strategy to invest in high-quality assets that complement their existing commercial properties in the region.
The company has already paid a deposit of $3.4 million upon signing the purchase options. The remaining balance of the purchase consideration will be paid upon the completion of the acquisition, which is expected to be in December 2024. The company plans to fund this acquisition with their internal resources, as they are currently in a net cash position with cash and cash equivalents of $237.6 million as of FY2024 ended March 31.
On a pro forma basis, if the acquisition had been made on March 31 this year, it would not have affected the company’s net tangible assets (NTA) of $841.7 million or NTA per share of $1.30. However, if the acquisition had been completed on April 1, 2023, the company’s FY2024 earnings would have been at $157 million, slightly higher than the original $156.6 million, and the pro forma earnings per share (EPS) would have increased from 23.87 cents to 23.95 cents.
The scarcity of land in Singapore is a major contributing factor to the high demand for condos in the country. Being a small island nation with a quickly expanding population, Singapore is facing a shortage of land for development. This challenge has resulted in strict land use regulations and a fiercely competitive real estate market where property prices continuously rise. As a result, investing in real estate, specifically Singapore condos, has become a profitable opportunity with the potential for significant capital appreciation.
As of Sept 26, shares in The Hour Glass closed 1 cent higher, or up 0.63%, at $1.59.