BTO: Courts Bt Timah store in sale, leaseback deal

Business Times - 03 Apr 2009

Courts Bt Timah store in sale, leaseback deal

Sim Lian pays $25m for property, expected to enjoy at least 6% yield

By KALPANA RASHIWALA

 

FURNITURE and IT retailer Courts Singapore has sold its 30-year-old freehold store in Upper Bukit Timah Road for $25 million. But it will lease back the premises from buyer Sim Lian Holdings Pte Ltd for two years.

 

Courts CEO Terry O'Connor said: 'We're on the lookout for a megastore location in the western part of Singapore.

 

'The Bukit Timah store is just too small to allow us to provide the opportunities the full megastore concept offers.

 

'It's in a relatively lightly populated area. From our perspective, places like Tampines, Jurong and Woodlands are regional centres and offer much more dense population catchment areas.'

 

Courts has 10 stores in Singapore. The company is owned by a joint venture that involves Kuwait's The International Investor and Baring private equity fund.

 

A couple of years ago, Courts sold its former Pandan Road headquarters for about $3.5 million. The latest sale of the Bukit Timah store was brokered by Jones Lang LaSalle. The property has a land area of 37,315 sq ft.

 

Market watchers reckon Sim Lian could pocket a net annual yield of at least 6 per cent from leasing the property back to Courts.

 

Sim Lian's $25 million acquisition cost works out to about $480 per sq ft of gross floor area, says its executive director Ken Kuik.

 

The existing property is built to the maximum gross floor area allowed for the site, which has a 1.4 plot ratio and is zoned for commercial use.

 

Assuming Sim Lian were to redevelop the plot, its breakeven cost could be about $900 to $1,000 psf of net lettable area. No development charge is payable.

 

Mr Kuik said Sim Lian will explore its options after its two-year lease with Courts runs out.

 

One option would be to redevelop the property and either sell or lease out the new asset. Another would be to keep the existing property, spruce it up and rent it to new tenants. Mr Kuik is also keeping an open mind on the possibility of leasing the premises for a further term to Courts.