Jurong Point sale likely to break records

Mercatus is poised to buy the mall for $2.2b.

According to DBS Group Research, this implies a robust price of $3,343 psf and a 4.2% net yield.

"Based on our analysis of comparative valuations of similar-sized suburban malls across Singapore, at the transacted price, the returns for Jurong Point will be one of the tightest yields achieved for a sizeable suburban mall," said DBS Group Research.

More so, given the lack of available opportunities to acquire a sizeable retail mall in Singapore, DBS Group Research reckons that the price tag reflects Mercatus' familiarity with the asset. Marcatus is optimistic with the asset's ability to drive higher returns in the medium term.

"We believe that its entrenched position within Jurong West with a sizeable population catchment also gave Mercatus further confidence in the ability of the mall to continue attracting tenants amidst strong footfalls and sales," noted DBS Group Research.

Here's more from DBS Group Research:

Whilst we believe that the final transacted price could be idiosyncratic to Jurong Point, it proves that the market is receptive to pay a premium for properties with good quality and scalability.

The transaction should set a positive tone and support retail REITs’ current premiums to NAVs. In fact, we could even see tighter cap rates for properties with sizeable scale and specifications (i.e. Causeway Point, Northpoint, VivoCity, Tampines Mall) going forward.

Photo from Wikimedia Commons.

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