Straits Trading selling 10 apartments

Source : Straits Times - 8 Apr 2009

INVESTORS are being offered 10 units in the 12-year-old Farrer Road district residential development Gallop Gables at the knock-down price of around $3 million each - complete with a rental guarantee.

The seller is Straits Trading, which has had a year to conduct a strategic review of its assets after Ms Chew Gek Khim’s Tecity group took over as a controlling shareholder.

The firm’s new executive vice-president Eric Teng told The Straits Times the sale is to enable it to invest in distressed assets that may surface locally and regionally - even though the sale itself is being done at a reduced price. ‘This is just our financial discipline. Before you buy something, you should sell something,’ said Mr Teng.

The average sale price per sq ft (psf) is about 23 per cent lower than what Straits Trading was seeking for the units last July.

Gallop Gables is a freehold four-storey 140-unit development near the Botanic Gardens. It has seven low-rise blocks.

For each of the 10 units, Straits Trading is offering a guaranteed rental yield of 7 per cent for two years. It will also absorb the maintenance fee for two years.

The units are fairly big, from 2,800 sq ft to 3,200 sq ft each. The firm said it is offering investors a ‘rare opportunity’ to invest in ‘a solid piece of real estate, with an unprecedented yield of 7 per cent a year or 14 per cent for two years’.

At that kind of yield, the rent should be about $12,000 to $13,000 a month. But right now, the yield for the estate should be only around 4 to 5 per cent, said a property expert who declined to be named.

The firm’s average asking price for the 10 units is $1,156 psf, slightly above the average $1,130 psf registered for two recent deals in the development.

Last July, the firm invited expressions of interest at $1,500 psf, or about $4.5 million each, for 38 tenanted units there. The property market has since deteriorated markedly.

That sale bid had come about three months after Tecity gained control of Straits Trading. Tecity is the parent of a group of investment companies built by the late Tan Chin Tuan, former OCBC Bank chairman - Ms Chew’s grandfather.

He had helped OCBC acquire Straits Trading in the 1950s.

In the 1980s, Straits Trading’s share price was more than $4, almost twice its price between 1995 and 2003. Tecity paid $6.70 a share for Straits Trading.

Yesterday, the shares closed five cents higher at $3.20 each.

In a separate announcement, Straits Trading said Mrs Victoria Tse will be retiring as the senior executive vice-president and group chief financial officer on July 7. She will be succeeded by Mr Eldon Wan, financial controller of Tecity, from yesterday.

It has also appointed Mr Iqbal Jumabhoy, who has more than 20 years of executive management experience, as chief executive of hospitality to oversee its hospitality management arm and hotel assets.

Mr Teng was named executive vice-president of property sales and leasing as well as adviser, corporate communications. He retains his role as adviser to Tecity and CEO of Tan Chin Tuan Foundation.

Mr Teng will oversee the sale of completed residential property owned by the group as well as the leasing of the Straits Trading Building in Battery Road. This office block will be ready by the end of the year and is now about 25 per cent leased.

Straits Trading was founded in 1887. Apart from hotels and property, its other business is in tin mining.