Coffee Shops fetches Record Price

Dec 4, 2007

$12M: Coffee shop in Jurong fetches record price

A COFFEE shop in an HDB parking building has sold for a record-breaking $12 million.
The eatery called VariNice is just a stone's throw from the Jurong East MRT and bus interchange.

Its huge catchment area of residential blocks and business parks nearby makes it a prize location, said property analysts.

The eatery - which boasts 12 stalls selling a variety of food from duck rice, to seafood and western food - has been going for about 20 years.

It was sold off by the Government in the 1990s and changed hands again in 2000 for about $10 million.

Its latest buyer is well-known foodcourt operator Koufu, which runs 37 food and beverage outlets across Singapore.

Lianhe Wanbao reported yesterday that Koufu was believed to have paid $13 million for the premises, and is collecting $12,000 a month in rent from each stall.

But Koufu founder and managing director Pang Lim told The Straits Times last night that the price tag and rental were less than that. The firm paid about $12 million and collects monthly rent of $6,000 from each stall.

The sale price works out to $2,553 per square foot for the 4,700 sq ft premises - well above the old reported record set by an 8,000 sq ft coffee shop in Ang Mo Kio which sold for $17.8 million, or $2,225 psf, in 2004.

The payback period for Koufu's latest buy is about 13 to 14 years.

Mr Pang said the deal was its biggest purchase but added that it was a long-term investment.
'It was a high price, but we need good locations and in the long term, it'll be worth it,' said Mr Pang.

PropNex chief executive Mohamed Ismail told The Straits Times that the value of coffee shops depends purely on traffic. 'Good business locations will always command a premium,' he said.
Mr Nicholas Mak, head of research and consultancy at Knight Frank, said bullish market expectations paved the way for the record deal.

This was especially so as the recent slowdown in residential property has not touched the retail and food and beverage scene.

'This is likely to be few and far between, however,' he added, 'as few shops get transacted at such a high price.'

Earlier this year, a coffee shop in Block 501, Jurong West Street 51, sold for $9 million.

Three coffee shops - in Tampines, Yishun and Bukit Batok - are on the market for $15 million apiece with no takers to date.

Source: The Straits Times