SINGAPORE - A coffee shop in Tampines changed hands for a record $41.68 million, and some tenants are thinking about terminating their agreements following a surge in rent.
A firm called G&G (21) lodged a caveat with the Singapore Land Authority in April for the coffee shop, 21 Street Eating House, in Block 201 Tampines Street 21.
The transaction is expected to be completed next month, local media outlet 8world reported on Wednesday (June 15).
The deal topped the previous reported record of $31 million for a coffee shop in Block 155 Bukit Batok Street 11 in 2015.
Based on Accounting and Corporate Regulatory Authority records, G&G's director, Mr Kiong Tai Weng, owns several other businesses including the 7 Stars coffee shop chain and U Stars supermarkets.
In 2014, he bought the Hong Kong Street Zhen Ji foodcourt in Block 151 Ang Mo Kio Avenue 5 for $7.4 million as the late founder was his mentor, The New Paper reported.
The 604 sq m Tampines coffee shop, which has 18 stalls, has 76 years left on its lease, according to a property title information search.
The purchase price of $41,682,168 works out to about $6,411 per sq ft (psf) - almost on a par with the average of $6,964 psf for ground level retail units in Far East Plaza and Lucky Plaza in Orchard Road sold this year, data from ERA Research and the Urban Redevelopment Authority showed.
Some tenants at the Tampines coffee shop told The Straits Times that rents there have surged since a new operator took over in April.
The owner of Zaleha Food Corner, who wanted to be known only as Madam Zaleha, 66, said rent doubled from $6,000 to $12,000.
"I've been doing business here for 23 years, but I think we cannot afford the rent now. Maybe I'll have to close my stall."
Madam Zaleha added that she has had to raise prices by between 20 cents and 50 cents, and worries she cannot pay her five workers their salaries.
The owner of Kumamoto Ramen, who wanted to be known only as Ms Jacquelyn, had to let two workers go, leaving one worker to man the stall since April.
"We've been making a loss since rent doubled and we can't increase our prices. That's why we're thinking of pulling out," said Ms Jacquelyn, who is in her 40s, adding that she is now paying nearly $10,000 in rent, which used to be about $5,000.
Another tenant, who declined to be named and runs two stalls at the coffee shop, said rent rose 30 per cent and he had to fork out an additional $10,000 in total for both his stalls.
"The location is good, but business is not great. We've been making a loss since April," he said.
Mr Nicholas Mak, ERA Singapore's head of research and consultancy, said there is optimism in the market as lunch and dinner crowds in food and beverage establishments have nearly returned to pre-pandemic levels.
He noted that the Tampines coffee shop is surrounded by Housing Board blocks, which is a good catchment area for potential customers.
"But it also faces competition - there are about four other coffee shops within a 10-minute walk," said Mr Mak.
"The buyers should be mindful of the competition. If they raise rents too high, tenants will just go elsewhere."
But the $12,000 rent did not deter the owner of Hua Xiang Mala Kitchen, who set up shop there in April.
The owner, who declined to be named, said business is stable.
The supply of coffee shops is limited as HDB stopped selling them since 1998, noted Huttons Asia's senior director of research Lee Sze Teck.
As most coffee shops have about eight to 10 stalls, the 18 stalls at the Tampines coffee shop could have pushed prices higher, he added.
"Buyers usually hold coffee shops for stable rental returns and seldom let go unless they receive a very good offer. Individuals and coffee shop chains are always on the lookout for such prized assets," he said.