The Great Room and owners of Afro-Asia i-Mark adopt revenue-sharing model

/ EdgeProp Singapore
October 11, 2019 10:12 AM SGT
SINGAPORE (EDGEPROP) - When Jalle Ang, CEO and co-founder of hospitality-based co-working provider The Great Room, viewed the location at the upcoming Afro-Asia i-Mark Building on Robinson Road, she was initially “very cautious”, she confesses.
This was because other co-working operators had already established a foothold in the Robinson Road-Shenton Way area, for instance JustCo’s flagship space at 120 Robinson Road just across from the building; WeWork at 71 Robinson Road next door; The Work Project at Downtown Gallery and Capital Tower (formerly Collective Works before it was subsumed under The Work Project).
However, Ang signed up for the space. “We like the CBD location,” she says. “It’s going to be the newest building there and a landmark.”
Taking up 37,000 sq ft at the new building also gives The Great Room the opportunity to create “a differentiated product”, adds Ang. “We have a good canvas to play with – the high ceiling, the good light. It is consistent with our vision of delivering a premium product.”
The Great Room at Raffles Arcade opened in August and is over 80% leased (Photo: The Great Room)

‘Premium market positioning’

Even though the co-working space is very competitive, “The Great Room stands out and has a premium market positioning compared to other players”, notes Tan Cheng Gay, who represents the Tan family of Afro-Asia Shipping Co, joint developers of the new Afro-Asia i-Mark Building with Shimizu Corp. “It has a unique proposition and should perform well. Jaelle’s training as an architect and her attention to detail – these are some of the factors that have made The Great Room a success.”
Tan also likes the fact that The Great Room has plans to open more spaces in the region. He remains positive about the co-working business. “The way these millennials work, they are carrying their entire office with them on their laptops,” he says. “They can work anywhere. They want to interact with people from other industries and exchange ideas. That’s why co-working – given the right ingredients – will continue to grow, despite the recent setback of WeWork.”
Tan sees the collaboration with The Great Room as a partnership. “We are hopeful that this partnership can turn out to be a win-win for all parties,” he adds.
The Great Room at Raffles Hotel is the fourth location in Singapore with the fifth at Afro-Asia i-Mark Building to open in 2Q2020 (Photo: The Great Room)

Aligning interests

Instead of a straight tenant-landlord lease agreement, The Great Room and the owners of Afro-Asia i-Mark Building have a revenue-sharing model. On top of that, the owners of Afro-Asia Building will undertake the capital expenditure for fitting out the space, which can run into the millions. “This is an industry first,” says Ang. She likens the relationship to that of a hotel owner and operator, with The Great Room as the brand owner and operator having the expertise to design, build and manage the space as well as deliver the margins for the asset owner. “We want to work for, and with, the asset owner,” she says. “That has always been our vision.”
The first time The Great Room adopted a revenue-sharing model was at its flagship property at One George Street with landlord CapitaLand Commercial Trust. The Great Room had originally taken up half a floor of 10,000 sq ft in 2016, and the whole floor of 20,000 sq ft by the following year. It has since increased its space to another half floor, bringing the total space at One George Street to 30,000 sq ft.
“Revenue-sharing is the direction we’re going,” says Ang. “By aligning our interests with that of the asset owners, we are riding the property cycle with them. Everybody takes a hit in a downturn, but when you’re doing well, everyone benefits from the upside. I believe that’s a sustainable model. And we’re the first to do so in the prime CBD in Singapore.”
Advanced negotiations are underway in both Hong Kong and Singapore. “The target is to sign two more such revenue-sharing deals and we’re on track,” she adds.
Ang: Revenue-sharing is the direction we’re going. By aligning our interests with that of the asset owners, we are riding the property cycle with them (Photo: The Great Room)

Long-term lease

The Great Room’s lease for the space at Afro-Asia i-Mark is a 10-year term, with the option to renew for another five years. “We only do long-term leases,” says Ang. “It’s not just about how much we invest financially, but it’s about building a community that wants to stay here. That requires energy and resources. This is not a hit-and-run.”
The latest space at 63 Robinson Road will bring the number of The Great Room locations in Singapore to five: The Great Room at Raffles Arcade in the newly reopened Raffles Hotel on Beach Road was the fourth. Since it started operations on Aug 1, the 15,000 sq ft space has been operationally profitable and over 80% taken up.
The first three locations at One George Street, Centennial Tower and Ngee Ann City, which opened in 2016, 2017 and 2018 respectively, are already running at an average occupancy of over 90% today. With little inventory left in Singapore until the new Afro-Asia i-Mark Building opens in the middle of next year, Ang is now rate-driven rather than occupancy-driven: “Our locations are profitable and we’re not in a cash-crunch. We are probably just a few months away from being profitable as a group.”
Besides Singapore, The Great Room operates a space at Gaysorn Tower in Bangkok and One Taikoo Place in Hong Kong.

Flexibility in growth and downturn

Potential occupiers at The Great Room in Afro-Asia i-Mark are likely to be “grown-up tech companies”, well-funded startups, small- and medium-sized enterprises, hedge funds, private equity funds and family offices, says Ang.
Co-working provides flexibility not just for growth but downsizing too. “In a downturn, some big companies may be consolidating their headcount and they can’t move to the boondocks,” says Ang. “They still need to be in a CBD address to be close to their clients. So, it’s about managing flexibility, not just growth.
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