Metro builds on global ambition – stake by stake
By Cecilia Chow
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - 351 On Braddell — a new seven-storey, high-spec industrial building that was completed in March last year — suddenly looked a lot cooler after Secretlab, Singapore’s homegrown gaming chair manufacturer, moved in. Secretlab has taken up 44,000 sq ft of space within the building, including 7,000 sq ft for its R&D centre. Besides Secretlab, other tenants in the building include NETS and Electrolux. Developed by Boustead Projects and designed by RSP Architects, the property became the latest acquisition in the portfolio of Boustead Industrial Fund (BIF) last October.
Singapore-listed Metro Holdings has a stake in 351 On Braddell too, through its subscription of 26% of the units in BIF as well as 7% notes due in 2031. Metro had paid $76.6 million for its stake at the end of 2020. “It gave us the opportunity to enter the logistics business, with Boustead as the operator and Metro as an investor,” says Yip Hoong Mun, group CEO and executive director of Metro Holdings.
The addition of 351 On Braddell last October brings BIF’s portfolio to 15 properties, from 14 previously. Metro’s 26% stake via its subscription of units reflects an additional investment of $17.58 million.
The addition of 351 On Braddell last October brings Boustead Industrial Fund's portfolio to 15 properties, from 14 previously. Metro has subscribed to 26% of the units in the fund (Photo: Metro Holdings)
The investment in BIF is one of the latest moves by Metro as it metamorphosises into a diversified property player with investments in commercial buildings, malls, residential properties, mixed-use developments, student accommodation as well as logistic and industrial properties. It has a presence in five countries: Australia, China, Indonesia, Singapore and the UK. And Metro is contented with taking a minority stake in its investments. “We don’t need to own 100% of an asset,” says Yip. “We believe in working with partners.” (Find Singapore commercial properties with our commercial directory)
Its origins had been in retail 65 years ago, and at its peak, it had five department stores on Orchard Road alone. Today, it is down to just two stores in Singapore: at Paragon on Orchard Road and suburban mall Causeway Point in Woodlands. Yet, many in Singapore continue to associate the homegrown Metro Holdings with just the department stores, observes Yip. “It’s only natural, because the first thing that comes to mind when people think of Metro is the department store.”
Metro closed its biggest store, across six levels at Centrepoint, in September 2019. “We felt that we already have a presence at Paragon on Orchard Road, and when the five-year lease was up, we decided not to renew it,” says Yip.
Metro has been at Causeway Point since 1998 (Photo: Metro Holdings)
In 2019, Metro also exited from its portfolio of 11 Metro stores when it sold its 50% stake in PT Metropolitan Retail Mart to its joint-venture partner, CT Corp.
Metro’s latest financial results in 1HFY2022 (ended September 2021) already reflects how the company’s earnings contributions have changed as it deepened its investment and development portfolio in recent years, while reducing its retail operations — even prior to Covid. Revenue in 1HFY2022 was $40.8 million, compared to $36.7 million a year ago. Net profit was down slightly to $18.4 million for 1HFY2022, relative to $19.8 million in the corresponding period a year ago.
The property segment, excluding associates and joint ventures, reported a profit of $6.3 million for 1HFY2022, compared to $9.7 million the year before. Meanwhile, the retail division reported a loss of $0.7 million in 1HFY2022, compared to $0.8 million for the previous half-year.
Daiwa House Logistics Trust has a portfolio of 14 logistics and industrial properties in Japan. Metro is a cornerstone investor in the trust through a subscription of 51.625 million units or 7.65% of total issued units (Photo: Bloomberg)
Logistics play
To expand its footprint in logistic assets, Metro signed a memorandum of understanding with Tokyo Stock Exchange-listed Daiwa House Industry Co in January. The tie-up will see the partners collaborating in investments across various asset classes, with an initial focus on logistic properties, commercial, housing and other asset classes in Japan, Singapore and the Asia Pacific region or beyond.
The collaboration came about following Metro’s cornerstone investment in Daiwa House Logistics Trust, through a subscription of 51.625 million units or 7.65% of total issued units for $41.3 million. Daiwa House Logistics Trust has a portfolio of 14 logistics and industrial properties in Japan.
Yip and his team at Metro have not been able to travel over the last two years due to the pandemic lockdown across the world, but with borders opening up, they will be hopping on planes soon. “We used to travel frequently — at least once a month — to see our partners in different countries, so we are familiar with the various markets we have invested in,” he says.
However, competition for good assets has become more intense as borders reopen, Yip concedes. “Because of liquidity, there’s more money chasing good assets,” he says. “Yields are becoming even more compressed. It’s hard to find a commercial property in the UK with a 5% yield; most are around 4% today.”
In 2018, Metro, together with Lee Kim Tah Holdings, another Singapore property company, jointly acquired a freehold office property at 5 Chancery Lane, London, for GBP148 million (Photo: Metro Holdings)
From developments to student housing in the UK
Metro has been in the UK since 2014, via its partnership with Scarborough Group in three projects. Two of these projects are in Manchester and are predominantly residential. One of them is Milliners Wharf The Hat Box, where the first phase of 114 apartments has been sold, with planning approval submitted for the second phase of 60 apartments. Metro has a 25% stake in the development.
The other project is a GBP700 million ($1.26 billion) mixed-use scheme, Middlewood Locks. Metro has a 25% stake in the 2,215-unit development, which has a mix of commercial spaces including offices, hotels, shops, restaurants and a gym. The project has a total gross floor area (GFA) of 2.4 million sq. ft. The first phase of 1,571 units has been completed and handed over. Of the units, 227 units in phase 1 and another 546 units in phase 2 were sold to Get Living, a UK private rented sector operator. Planning for Phase 3 is underway.
The third project with Scarborough is the GBP40 million Sheffield Digital Campus in Sheffield, where Metro’s stake is 50%. On the site are two office buildings with a total GFA of 142,645 sq ft. The first building, Acero Works, with 80,300 sq ft of space, was sold in May 2018. Development works are underway at the second office building, Endeavour, with 62,345 sq ft space.
Dean Street Works, Bristol, was acquired in January 2021 for GBP30.1 million, and has 44 studios and 181 en suite beds (Credit: Metro Holdings)
In 2018, Metro, together with Lee Kim Tah Holdings, another Singapore property company, jointly acquired a freehold office property at 5 Chancery Lane, London, with each holding equal stakes. The 84,842 sq ft property is valued at $148 million. (Check all latest Singapore property Market Trends)
In December 2020, Metro also established a purpose-built student accommodation (PBSA) fund, Paideia Capital UK Trust, through a strategic partnership with Lee Kim Tah and Woh Hup Holdings, to further expand in the UK. Its seed acquisition in December 2020 is the Red Queen, Warwick, purchased for GBP21.5 million. The property has 210 beds, and was 90% occupied as at end-March 2021.
The other property, Dean Street Works, Bristol, was acquired in January 2021 for GBP30.1 million, and has 44 studios and 181 en suite beds. It was 100% leased as at end-March, 2021. Yip intends to expand the PBSA portfolio across England, Scotland, Wales and Northern Island.
Artist's impression of Trans Park Juanda, Bekasi, which is a mixed-use development with 5,622 units in five 32-storey towers. All five residential towers have been topped-out and apartment sales are ongoing (Credit: Metro Holdings)
Placing bets in different sectors
In Indonesia, Metro has a 90% stake in two residential developments in Jakarta. One of them is Trans Park Juanda, Bekasi, which is a mixed-use development with 5,622 units in five 32-storey towers. All five residential towers have been topped-out and apartment sales are ongoing. The second development is Trans Park Bintaro, with two residential towers comprising 1,260 apartments and 170 Soho units. The two projects are over 70% sold across the board. Metro has also appointed CapitaLand’s lodging business, The Ascott, to manage its M+ serviced apartments at Trans Park Juanda Bekasi.
In Singapore, Metro had a 40% stake in the development of The Crest at Prince Charles Crescent. Singapore-listed property developer Wing Tai Holdings held the remaining 60% stake in the 469-unit, 99-year leasehold project that was completed in 2017 and fully sold.
While Metro is keen on developing more residential projects in Singapore with partners, Yip has been observing bids at recent land tenders. “We see companies making forward assumptions on the selling prices,” he says. “The residential market here is becoming costlier, and riskier.”
In Singapore, Metro had a 40% stake in the development of The Crest at Prince Charles Crescent, where all 469 units have been sold to date (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The housing sector is not the only one that Metro is seeking opportunities in. The company is interested in pursuing opportunities in the industrial and commercial sectors in Singapore too. For instance, Metro and Evia Real Estate each own a 50% stake in Asia Green, two blocks of premium Grade-A office towers in Tampines. The 99-year leasehold property was 89% leased and valued at $405 million at the end of March 2021.
In Australia, Metro acquired Cherrybrook Village Shopping Centre in New South Wales, jointly with Sim Lian Group, last October. The freehold mall was purchased for A$132.8 million ($133.9 million). This latest acquisition brings the partners’ portfolio of freehold properties in Australia to 16, of which four are office buildings and 12 are retail centres, with a presence in New South Wales, Victoria, Queensland and West Australia. The portfolio was last valued at A$1.07 billion.
After the acquisition of Cherrybrook Village, Metro has increased its stake in the joint venture to 30% from 20% before, with Sim Lian holding the remaining 70%.
In Australia, Metro acquired Cherrybrook Village Shopping Centre in New South Wales, jointly with Sim Lian Group, last October (Photo: Metro Holdings)
In fact, Metro’s total asset size is $2.5 billion today. For now, it is in China that Metro has the most assets. Some are legacy assets developed more than 20 years ago, as Metro had ventured into China in 1988. Its first development was GIE Tower, a 35-storey office tower in Guangzhou that was completed in 1993. And Metro has 100% stake in the building, which it still owns today.
Retail origins
Metro started as a 2,691 sq ft textile store on High Street in Singapore back in 1957. Metro’s founder, the late Ong Tjoe Kim, had a penchant for movies made by movie studio Metro-Goldwyn-Mayer, and named his first store Metro. The group is celebrating its 65th anniversary on March 8.
Listed on the Singapore Exchange in 1973, Metro was operating three department stores then. Ong’s son, Jopie Ong, who assumed the role of group managing director in 1973, had been instrumental in the diversification of the group’s businesses, from luxury brands such as Cartier and Piaget to Singapore at one point, to setting up Hour Glass in 1979, which it subsequently divested in 1988.
The original Metro store that opened on High Street in 1957 (Photo: Metro Holdings)
Jopie Ong also ventured into property development and investment. Through Orchard Square Development Corp, Metro owned a prime leasehold plot of land on Orchard Road, which was subsequently developed jointly with Ngee Ann Kongsi into Ngee Ann City retail mall and office complex. Metro had a 27% stake, which it securitised in 2003.
Yip intends to further deepen investments in Metro’s existing markets while gaining exposure to Japan through its collaboration with Daiwa House. “From a little red dot in Singapore, we now have a presence in five countries,” he says. And his plan is to extend Metro’s presence even further in the coming years.
Metro City Shanghai features ‘Globe’ centrepiece
The 50m crystalline LED globe-shaped screen is now the centrepiece of Metro City shopping mall in Xiujiahui, and a landmark in Shanghai’s business district (Photo: Metro City Shanghai)
Metro City Shanghai’s “Globe” was repurposed into a multimedia screen two years ago. The 50m crystalline LED globe-shaped screen is now a landmark at Metro City shopping mall located in Xuijiahui, Shanghai’s business district. Since then, it has been the site of many creative campaigns by international companies.
Last year, Japanese company Anessa collaborated with Pokémon to turn the globe at Metro City into a giant Poké Ball to promote a special line of Pokémon-themed sunscreens. Leading Japanese household goods specialty store Loft, which operates 131 branches in Japan, launched its first store in China, Loft at Metro City, two years ago.
Last year, Japanese company Anessa collaborated with Pokémon to turn the globe at Metro City into a giant Poké Ball to promote a special line of Pokémon-themed sunscreens (Photo: Metro City Shanghai)
Metro City Shanghai is a nine-storey mall with 430,560 sq ft of retail space, and linked directly to the underground subway station. Completed in 1998, the mall is 60% owned by Singapore-listed Metro Holdings. The mall is 98.3% leased as at end-March 2021.
Next door to Metro City is the 26-storey office block, Metro Tower. With 640,000 sq ft of office space, the tower was completed in 1997, and Metro owns a 60% stake in the building too.
Leading Japanese household goods specialty store Loft, which operates 131 branches in Japan, launched its first store in China, Loft at Metro City, two years ago (Photo: Metro City Shanghai)
In fact, Metro has been in China since 1988, when it entered a joint venture in the development of a 35-storey office tower in Guangzhou, GIE Tower. It was completed in 1993 and is 100% owned by Metro today. In 2007, Metro took a stake in the development of Metro City Beijing, which was completed in 2007.
Other investments in China include The Atrium Mall, a commercial mall in Chengdu, where Metro has a 25% stake. The building has a net lettable area (NLA) of 271,102 sq ft, and a 40-year lease from 2007. Asset enhancement works were completed at the end of 2020, and the mall officially opened in December that year.
Metro City Shanghai is a nine-storey mall with 430,560 sq ft of retail space, and linked directly to the underground subway station. Completed in 1998, the mall is 60% owned by Singapore-listed Metro Holdings (Photo: Metro Holdings)
In Shanghai, Metro has a 30% stake in an office building located in New Jiangwan City, Yangpu District, called Bay Valley, Shanghai. The building has NLA of 632,202 sq ft, and is fully leased. Another investment property in Shanghai is Shanghai Plaza at Huai Hai Zhong Road in Huang Pu district. The mall has 423,079 sq ft NLA and opened in September 2020 after asset enhancement works were completed. Metro’s stake in Shanghai Plaza is 35%.
“Metro has been quite entrepreneurial in China,” says Yip Hoong Mun, group CEO and executive director of Metro Holdings. “In Shanghai, the most significant mall is Metro City. We developed the mall, but we don’t operate a department store there. We are just the landlord, and the mall is doing very well.”
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