Shoppes price tag may still draw some investors

Feb 6, 2017

Grace Leong

The US$3.5 billion (S$4.9 billion) price tag for a slice of the plush mall at Marina Bay Sands (MBS) may be too rich for some, but large pension funds seeking investments in markets where the local currency has remained strong could be interested.

Chesterton Singapore managing director Donald Han said Singapore stacks up as one of Asia's best property markets because the relatively strong Singdollar enables investors to preserve their capital.

Many local analysts baulked at the asking price thrown out by casino mogul Sheldon Adelson, who said that the price of US$3 billion to US$3.5 billion for a 49 per cent stake in Shoppes at Marina Bay Sands makes the centre the "most expensive mall in the world".

But sovereign wealth funds and private equity giants may be willing to pay a massive premium to own a stake in such a high-profile asset.

"The property has to be assessed based on yield or the operating income from the mall, and how it stacks up against market expectations... But buildings that have a certain character or iconic stature, and are one of a kind, are also worth a premium," Mr Han said.

Another selling point is that there are few quality malls on the market, and little prospect in the near term of more land being released for such large developments, said Savills Singapore research head Alan Cheong.

The proposed sale is subject to approval from the authorities, under an agreement that allowed United States gaming giant and MBS parent Las Vegas Sands (LVS), as well as Genting Singapore, to exclusively operate in Singapore for 10 years. The agreement stated that LVS cannot sell any part of its 800,000 sq ft mall for that period, and only then after government approval.

That 10-year duopoly, which also applies to Genting's Resorts World Sentosa, expires next month.

Mr Adelson said the mall sale proceeds could be used in the firm's next investment in Japan or South Korea. If the property does sell at around US$3.5 billion, that could ignite more interest in the Singapore retail scene, analysts say.

The $3.4 billion sale of Asia Square Tower 1 in the Marina Bay financial district to sovereign wealth fund Qatar Investment Authority last June helped spark more interest in prime office assets here.

"Investors tend to look at prestige, cash flow and stability of income to determine the property's worth," said Knight Frank executive director Ian Loh. "Ultra-high net worth individuals and sovereign wealth funds would definitely be attracted to its prestige and the prospect of capital appreciation."