Too much for a coffee shop?

Too much for a coffee shop?

SINGAPORE - Earlier this week, a nondescript Hougang coffee shop was sold for the eye-popping sum of $23.8 million.

"Why so much?" went the headline in a tabloid paper. But, some experts here are not surprised at the not-quite-kopi-money price.

Expensive coffeeshops in the neighbourhoods

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    The Yong Xing Coffee Shop in Block 155, Bukit Batok Street 11 was sold for a staggering $31 million, making it the most expensive coffee shop to be sold in an HDB estate.

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    The 4,521 sq ft coffee shop, which is about the size of three executive HDB flats, was sold to a new company, EH 155.

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    A coffee shop in Hougang has been sold at a record price of $23, 888,888, Lianhe Wanbao reported on Sunday.

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    This is the highest ever paid for a Housing Board coffee shop. The previous record was $15 million.

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    The buyer of the Coffee Express 2000 coffee shop at Hougang Avenue 4 is Broadway Group, which owns a chain of eating establishments known as Broadway Food Centre in various parts of Singapore.

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    While a caveat for the 17-stall coffee shop was filed in March, the transaction will be completed only in September.

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    Some tenants at Coffee Express 2000 told Wanbao that they were worried the sale would affect rents, and force prices at the coffee shop to go up. If this happens, patrons might choose to eat at other coffee shops in the area, one tenant said.

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    Broadway has declined to respond to media queries so far, the Chinese daily reported.

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    Analysts the paper spoke to said that the group might have seen value in the high traffic flow at Hougang. There is also a lack of food centres within the vicinity the 4,025 sq ft coffee shop is located in.

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    One reason for the $23,888,888 figure could be that it sounds auspicious when said in Cantonese.

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    Lianhe Wanbao said in its report that this was not the first time Broadway Group had forked out a big sum of money for a food establishment.

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    In 2012, the 16-year-old group purchased the basement food court and shop spaces in Sim Lim Square for $38.8 million.

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    Coffee Express 2000 at Hougang Ave 4.

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    Broadway group bought the coffee shop at a record $23.8 million.

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    A coffeeshop at Tampines Street 91 with an asking price of $10 to 12 million in September 2013.

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    It is on the ground floor of Block 915, Tampines Street 91, and next to a salon and education centre. It is also a short walking distance from a few schools.

English-language newspapers reported last Monday on the record-breaking sale of Coffee Express 2000 in Hougang Avenue 4, with 4,025 sq ft and 17 stalls, for that hefty sum. The buyer, Broadway F&B Management, runs 15 eating houses, food courts and a restaurant here.

When contacted, Broadway declined to comment. The coffee shop is not in a prime area, near an MRT station or shopping mall which generates human traffic. But experts interviewed say the sale should be seen as more than a real-estate transaction.

Associate Professor Sing Tien Foo of the National University of Singapore's department of real estate says that transactions involving coffee shops should not be seen purely as real-estate deals.

Says Prof Sing, 46: "You are looking at a business. There are other factors involved, such as economies of scale for big food chains and the smaller operation risks for those with expertise in running coffee shops."

Property analysts who spoke to Sunday-Life! say that paying a high price for commercial property is not as counter-intuitive as it sounds.

International Property Advisor chief executive Ku Swee Yong says that a $23.8-million price tag for the Hougang coffee shop is "reasonable" if it can yield a 4 per cent annual return which he adds, is a reasonable expectation of retails shops in general.

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