Bulk of Farrer Sq medical suites taken up in 2 deals

[SINGAPORE] Nearly 85 per cent of the 27,500 sq ft at the medical tower of the Farrer Square project in Little India has been committed in two bulk deals.

One involves a bulk sale of three floors and the other, a long-term lease of another three levels.

Farrer Square's medical suites will span the upper eight levels of a 12-storey tower in the project, which will also include a 20-storey hotel with 300 rooms.

BT understands that the bulk sale, involving the lowest three levels of medical suites - on Level 5 to Level 7 - was done at slightly over S$44 million. This would work out to around S$3,800 per square foot (psf) of the total strata area of 11,674 sq ft, based on information listed in the project's brochure.

The buyer is believed to be high-end Malaysian medical group HSC Healthcare, whose headquarters are at Menara HSC building in Jalan Ampang, Kuala Lumpur. The HSC Medical Centre is a high-end, one-stop medical, heart and diagnostic centre.

Housed within the same development is Somerset Ampang KL, comprising 207 serviced apartments - making the location an upmarket medical tourism hub. Somerset Ampang KL is owned by Singapore-listed Ascott Residence Trust and managed by The Ascott Limited.

In another deal, RB Capital, the developer of Farrer Square, is understood to have granted a long-term lease of nearly 20 years on the medical suites on Level 8 to Level 10 adding up to 11,685 sq ft to "a group of top specialists".

Market watchers are of the opinion that the structure is likely to involve a blend of upfront lump-sum payments to RB Capital before the project is completed, followed by regular monthly rental payments after the project receives Temporary Occupation Permit, which is likely to be in the second half of 2016.

When contacted, Farrer Square's marketing consultant JLL said it will be launching the final phase of six strata medical suites on the top two levels. Level 11 comprises five strata units ranging from 527 sq ft to 753 sq ft - totalling 3,163 sq ft for the entire floor. The sole penthouse unit on Level 12 has an area of 1,012 sq ft.

"Negotiations for one of these units are underway in the region of S$5,000 psf," said Karamjit Singh, head of investments and residential, at JLL.

In all, the eight floors of medical suites comprise 42 strata units.

Knight Frank executive director Mary Sai said the S$3,800 psf achieved for the bulk sale is in line with the market, reflecting an en-bloc element.

Owners of the completed strata medical units at the Connexion project opposite Farrer Square are asking for S$4,000-S$4,300 psf, she noted. Both projects are on 99-year leasehold sites, with the lease term starting from December 2007 for Connexion and July 2012 in the case of Farrer Square.

The latter will also include the 300-room Park Hotel Farrer Park. Connexion includes a hospital and a hotel. Both projects are above Farrer Park MRT Station.

Ms Sai added that it made sense for RB Capital to enter into bulk transactions for the medical suites with doctors instead of selling strata units individually.

"The fear, when you sell to individual investors, is that if they are not able to lease out the units because of high rental expectations, it will create pockets of vacancy in the development. And because these individual strata units will be rented out to tenants willing to pay the highest rents, you may end up with a hodge-podge - for example, a dental practice, an aesthetics clinic and a sleep disorder clinic on the same floor," she added.

Inking a bulk sale and a bulk lease to parties involved in the medical field and who will be occupying the space themselves will help to "uphold the integrity of the medical centre", Ms Sai reckons.

Farrer Square will also have about 4,000-plus sq ft of retail space on the ground floor which RB Capital is likely to keep for rental income and lease out, probably to one or two tenants that would complement the project - such as a pharmacy.