Ep 11: What Are Some Important Matrixes & Thought Processes Behind Shophouse Investing? – Jacqueline Wang from JMD

Troy: Welcome back to another day on the Coconut Avenue. Join us as we explore various property insights, investment strategies, and challenging property myths out there today. We’ll be bringing on investors and experts in the game to share with us their insights and stories to better prepare us for our journey. Whether you’re looking at your first property or building a bucket of gold through properties, there’s something for you here. Ultimately it’s about helping you find your unique game plan. 

Our guest is from JMD today. JMD has built outstanding investment properties in Malaysia, Hong Kong, and Singapore. They’re headquartered in Singapore and their expertise focuses on major commercial properties with strong experience in the shophouse sector. 

The company was built from scratch. And today it’s our great pleasure to have none other than JMD’s co-founder, Jacqueline Wang, to share her wisdom about commercial properties with us. 

Jacqueline, you are an expert in this field of properties, which is shophouses. How did you get started in the first place?

Jacqueline: We started 12 years ago into property investment. Our first investment was into commercial offices and not shophouses. Shophouses we went in about 7 years ago. When we saw that there was a gap in the market. And also that the shophouse is very fragmented, so we wanted to went in and to hold the asset for a long-term basis. Yeah. 

Reggie: So in what sense is the market fragmented? Can you just give us an idea? Like, what do you mean by fragmentation? 

Jacqueline: So in the past the shophouse are generally hold by the older generation owners. In the past, probably they are in rice trading or spices trading, and then they buy over the shophouse and then continue to own and to operate.

Reggie: Is that why there are so many shophouse, I walk past the shop I’m like, “这个东西怎么 (how to) survive?” So actually they own the thing is it? Ah, okay, that makes more sense. [laughs] 

Jacqueline: [laughs] So, and back then, shophouses only cost maybe 10 – 20,000 than it is today. So, so when I say fragmented, meaning one owner doesn’t own a majority of assets. It’s held by a lot of individual owners. Caveat, there are owners who own multiple assets such as the banks and stuff, but on the whole general scheme of things, it’s held by mainly individuals. Yeah. 

Reggie: So why is there an opportunity here when it’s held by multiple individuals? 

Jacqueline: Okay. So the opportunities lies in when you hold an asset, say when you’re young, you hold an asset, all you think about is income generation. Okay. So whether I can rent out, I can pay my mortgage, et cetera. If you are a business owner who owns the asset to operate your space, then you wouldn’t think so much of it, right? So it’s two different kind of target market. 

So when you are young, you buy for investment purpose. And after you pay finish your loan, you are sitting on the property. You have no incentive to continuously asset enhance it or generate income. 

So then back to the shophouse. The owners have held it for say, 40, 50, 60 years. They are generally very comfortable. So if the shophouse is already 50 years old, are they going to come out 3 million to redo the whole, entire property? They wouldn’t, right? I mean, not that all don’t, but… 

Reggie: Based on your experience, most people don’t. 

Jacqueline: Yes, yes. So at that point of time we saw that gap, and a value to enhance the asset, to bring up to a better standard today. So I am that young person now, looking to buy the asset and then to extract some value out of it.

Troy:  Mostly from all these older generation, is it? 

Jacqueline: Yes. Yes. So how we started out is to look for rundown shophouses. Rundown meaning… I ever went to a shophouse, the ceiling was already dropping, the third floor is flooded…

Reggie: Wah, like movie, ah. 

Jacqueline: Yeah. And the fourth floor, you cannot even access. 

Troy: So you love those type of shophouses? 

Jacqueline: Yes. Because you can get it at a decent price, and then you put in all your heart, sweat and stuff to bring it up to standard, and then subsequently release it out. So that’s how we extract value out of that.

Reggie: Okay. So, so in that sense, I think on property, as an investment, right, there’s always the land value and the building’s value. Right? So, am I sensing that when you go into the market, right, you’re merely just matching the land value when you buy from them? Because the building is cui (in ruins) already, there’s nothing from that building anymore. Is that kind of what it is? 

Jacqueline: Yes, so, so basically the process, or what behind the thought about valuing that particular asset, we look at what is the condition, whether is there even a house or even a place, right? If not, then we look at fundamental land value and then, then I would then compare, what’s the land value beside? Can I get a few of it?

Is it through the government land sales? A residential kind of land sales? It’s land after all, right. Or commercial government land sales. And then we look back at the shophouse. What is it trending? And also a couple of other factors such as if I want to put in 3 million out of it, how much rent can I charge from…  

Rental would then be… at this existing state, maybe it’s rented at $2. Because one, the owner is not incentivized to do any better, right? To him $2, he already paid up his loan, $2 is into his pocket. And then I will look at the office just opposite. The office is renting at $6.50, at the same exact value. 

Reggie: Just opposite…

Jacqueline: Of course the specs is different. So how much discount value do you want to give to the specs and stuff? Then if it’s a really torn down building, then I would then look at the land value.

Yeah. So it’s different factor. Different asset, I give it different weightage and stuff. 

Reggie: Can you give me a little idea why you look at the building next door in terms of the psf (per square foot), like the offices? How does that translate to your shophouse strategy when you go in? 

Jacqueline: Okay. So first I look at the shophouse, what is the use for, who is using it for. 

Reggie: Like rice grain, trading. [laughs] That shop at, where’s that? Ayer Rajah, right, there a lot of area like all of these shops down here, like… 

Troy: Sell bread. 

Reggie: Yeah, like, can survive meh? 

Jacqueline: Yeah, okay. 

Reggie: Okay, now I know, now I know…

Jacqueline: So when I evaluate, I ask myself, if I were to put in 2, 3 million dollars, whatsoever amount that you stipulate, right. Who can I rent this out to? Who is my competitor within that? If say, TFC. 

Reggie: Thank you. Thank you. 

Jacqueline: Right? You want a, you want a space, 300 square feet space. Where would you rent to? If I can rent you my shophouse, would you take it? How much budget would you have? Would you go to a building just nearby? Is location very important to you? And all this formulate to our investment process. How do I look at it and what kind of rent prices. So, of course the convenient way is to look at your competitor just around you, so the building opposite. 

But if the building opposite you is a Grade A office and you are a shophouse, then is that a fair comparison? Maybe yes, maybe not. Then we’ll look into how big is this office space. Is a 20,000 square feet. Ah, then the tenant who goes to occupy 20,000 is not my target market. Yeah. But for the location, we talk about land value. It should not be far way off, it’s at the same location, one street away. So in terms of land value, I will look at what’s nearby. 

In terms of my tenant, I will also look nearby. If not, I will ask myself, this tenant got how much budget… If let’s say he’s happy with a good office in Lavender, he can pay $3,000. But I give him a shophouse place. Good enough for him to operate his business. And I tell him it’s $3,000 also, but he’s much nearer to the CBD. It’s much nearer to his target market, would he want? Yes, he would, then that makes sense for me. Yeah. 

Reggie: Nice. 

Troy: So a lot of it has to do with your target audience profiling. 

Jacqueline: Yes. So target market profiling. Who’s my end-user? Who ultimately am I building it for? So to us, because we are a long-term holding company, we hold our assets for long term.

So for that, we will look into who are our tenants, what kind of tenants do we want to target? We build a certain product to be able to target for them. Yeah. That differs from a trading kind of mentality. 

Reggie: Yeah. I’m sensing that because you don’t talk about land value, you know. So I, I sense that in your matrix, right, you’re probably expecting land value to be resilient and that is not your game. So when you go in, it’s about upfront capital 3 million, we’re going to refurbish this place, how much cashflow I can generate. So you’re more concerned on that part. It’s a very “business-y” way of doing things. 

Jacqueline: Yes. So we look at this as a business. So we are here in the long term. We are here for active management and we are not here just to do a one-time gain. Right. So different companies operate different ways, but for us is a long-term vision. So we also hold assets like shopping malls, we also have commercial offices and not just shophouses.

It’s just over the last seven, eight years I’ve been particularly interested in shophouse because of the extraction of value. And rarity. So yeah. 

Reggie: 没有了 (No more). That’s it already. 

Jacqueline: Yeah. I mean, in Singapore, there’s only so much that is caveated as conservation, and hence if you want more, you can’t have – just like your GCB, and some people would then compare it to the likes of wine and arts and stuff, right. But to me is, can I replicate this? If I can’t replicate, can I make better out of it? And can I increase my demand market share? ‘Cause in the past, the end user may not consider shophouses because there is no proper space for them to operate their businesses. So back to the story about leaking roof and stuff.

Reggie: Yeah, it’s very iconic for shophouses. Always got this kind of problem. 

Jacqueline: Yeah. So most of the shophouse and tenant that I interview, they say, I love the shophouse, I love the architecture, I loved the facade. But I don’t love the maintenance because the landlord asked me to maintain myself. Right? 

So truth be told, shophouse has a lot of maintenance. So if you’re just a passive owner, you would just want to pass everything to your tenant. But if you are active and then you will look at –  Oh, if I were to do up a nicer space, can I extract a better value? Can I rent, instead of $4, can I get $6? How much more do I need to pump in? With this can I recover my cost within two years or, you know, what say you lah, maybe one year or two years. Yeah. 

Reggie: Okay. So give me a better idea, right, so 3 million in, let’s say the budget to, to capitalize this whole, old building, this old shophouse, $3 million. Then you can raise your PSF in that sense, right? Because you’re profiling a client for a certain use and you’re comparing with the next door office. So they charge 6.5, at least you can do somewhere like 4.5 to 5 PSF, something like that. 

So at what price, at what percentage yield will you enter a project like that? What is your average that you’re comfortable with? Is it 20% year-on-year, so that five years you cap back? Or, you know, just give me a ballpark so I get a general understanding of what is the strategy like. 

Jacqueline: To us when we, when we first purchase a shophouse, if it’s a rundown – so I take back the example of a rundown shop house – you know, that there’s no income. 

For hypothetical, say it’s a $5 million shophouse, right? You need to put in CapEx of $3 million. Then good space, office space is trading at $7 per square feet. I give a discount. I say, you know, at $6 or at $5, can I rent it out? So at $5 then I will do my whole assumption. $5 over 12 years is $60 over the entire cost of the property. So the cost of property is $8 million. So cost me $1,000 per square feet. Now you don’t get that right? Yeah, but back in the days you put in everything, it costs you $1,200. You can get $6. You’re probably about 6 to 7% kind of yield. 

Reggie: Okay, that’s good. Sounds like pretty good yield. 

Jacqueline: Yeah. So then we ask ourselves, at 6 to 7%, would people appreciate us and give us 4% later on in say four years later, five years later or ten years later, would there be kind of capital appreciation or cap compression kind of game? So if there is, then you should hold it for long term and then wait for the capital compression. At the same time, we just continue doing the rental escalation, rental control, asset enhancement, tenancy maintenance and stuff. Yeah.

Troy: What is capital compression? 

Jacqueline: Capital compression means that today, say I get 6% kind of yield, interest rate is say, at 2%, right? What happen is I put a risk factor of 4%, right, to be able to get 6%. But the development is done up already. The tenant is all in place. There’s a stable tenant, property is back in a much pristine condition.

Then the buyer would then think that I don’t have much risk, I only have tenancy risk. So instead of a 4% risk factor that you put on, you put on 1% or 2%, my cost of capital, whatsoever. Then they’re willing to pay the shophouse for 4%. You are able to sell this property at 4%. Today you are holding it for 6%. You have a capital compression of 2%.

And then after that, you translate to the capital gain. 

Reggie: So, so correct me if I’m wrong. If the property values at $10 million, right? So the yield’s at 6% and today’s interest rates are 2%, right? So the risk factor is 4%. If someone comes in to buy it, they are willing to pay you a 4% premium on top of your $10 million.

So that’ll be 10 million and 400 thousand, in that sense. Is, is that kind of what I’m getting, or are we talking about like the whole year…? 

Jacqueline: So for simplicity sake, $10 million of property, you get 6% yield is 6… 600,000 , right? So your rental income is 600,000. A new buyer today… I am buyer. I’m a buyer. I don’t know how to build a shophouse. I don’t know how to do asset enhancement. 

Reggie: I’m a celebrity from Hong Kong, right? I just want to buy something. 

Jacqueline: Wow. This shophouse, wow, already do up nicely. Already have a good tenant and 600,000 per year. I want to buy this. Then I ask myself, what kind of yield do I want? I look at the interest rates it’s 2%, I hope to make another 2 more percent, it’s 4%.

So then you use 600,000 divided by 4%. Then that would translate to… 600,000 divided by 4%, is 15 million, right? So he’s willing to pay 15 million on this property. On the income generated. So to me that cap compression of 6 to 4, have already earned me a capital appreciation of $5 million. 

Reggie: Nice. 

Jacqueline: Yeah, basically using risk towards different people, different profile of risk. And then after that you have a good capital compression, yield compression. And then after that, you’d get your capital gain. Yeah. 

Reggie: Essentially the buyer is factoring that advanced capital, the cashflow that they can get into the property price that they’re willing to pay. And so if you can engineer a higher yield, you can raise the whole property price. That’s the base idea, right? Okay. 

So is that only in commercial properties or can that be replicated in other spaces? Or is it shophouse-specific? 

Jacqueline: It’s more on the, in the commercial spaces, in the office spaces. People tend to look at what’s the underlying rental collection that you get, what kind are yield do you get in terms of the whole investment cost and stuff. 

But when you talk about residential, I think that’s a totally different mentality then and push factor and you know, other factors – location, whether near school or not near school, and motivation. 

Reggie: So the buyer profile is different, right? 

Jacqueline: Yes. So I don’t see that in the residential sector. People buy from emotions. But in our space we can’t buy something out of just emotion. Because 会输钱 (will lose money).  

Reggie: We’re investors. Yeah, we’re investors, we’re here to make money, right? 

Jacqueline: I mean, yes, you must have a certain gut feel what you can do. You can, you must vision how you are going to change this asset. How are you going to put in good tenants into the asset and then stabilize the whole cash flow. 

But residential is about your hierarchy needs, right? Yeah. You want it or you need it and stuff. It’s like, you know, achievement. So it’s a different kind of… I guess, different decision…

Reggie: Good, good, I like the clarity.

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Troy: You mentioned about location right, just now, because you’re talking about residential. I think you mentioned before you are moving out from CBD shophouses to… out of CBD by still nearby, but why the shift? 

Jacqueline: Okay. 

Reggie: 没有了 (No more already), huh? No good deal in town.

Jacqueline: There are, but you see, sometimes when you want to find opportunity, you also tend to open up a certain market. So when we were doing the shophouse spaces, other players would then see – oh, this is what it can be done. Actually it’s not that difficult after all, then you invite people into the space… 

Reggie: You never invite, but they just come back, copy, is it? You never openly say “来来来 (come, come come), do this!” But I know what you mean, it’s very common. 

Jacqueline: Yeah. But it’s an approval to what you believe, right? That’s why people also come into the space, so… So in the CBD, we will also see that for the, you know, for a good seven, eight years, there are so many other players coming into CBD because it’s core, it’s central. You can’t get a location out of that.

So bidders tend to get more, you got more bidders and stuff. So yeah, if you ask me, I think we’ve got quite a lot of good competitors out there who also have the same vision as us. And the extraction of value went much faster pace than we expected it to be. We thought it might take 10 years or 15 years to rejuvenate. 

And back to the point, right, we also seen that after we did a number of shophouses, the single owner, let’s say the retiree, probably have some other… 

Reggie: They hear from the neighbour, eh like quite good, huh, like that!

Jacqueline: Yeah. Or some, or maybe, since our capital value was 20, 30 thousand in the past, hey, we can do that, and then we might be able to sell 12, 13 million.  

And that sparks us to continue looking, where’s the next value extraction. Where has not been looked at, is there other spaces where we can do some tender, loving care. So we start looking out of the CBD, and we realized that actually, interestingly, out of the CBD, there are a lot of other players like us where they started small and then, and then start buying and start changing the whole…

Jalan Besar has quite a lot of interesting idea. Kandahar at Arab street, you know, over the years has also changed. 

Reggie: Arab Street has been a lot more developed now with the old… what is that… Duo building next to it. 

Jacqueline: Yeah. So talking about, if you look at competition, so you look at Duo, you know that, hey, I’ve got so many people going to stay in this vicinity. If I can turn this shophouse into a trendy shophouse with a good concept below, I can also target people who stays around there or who works around there, who needs to eat and play. So, Arab Street is a good area of rejuvenation that they have done. Yeah. 

Reggie: So that makes shophouses a very mixed play, right? And based on what I’m hearing, it’s not just offices anymore, right? It’s like, oh now downstairs we got to look at retail, or we look at like F&B. It becomes a bit of like commercial, like that kinda storefront kind of stuff. And does that change the pricing? Does that change the game? How does that play into the mix? 

Jacqueline: So back to just now when I share, we envision what kind of traits is good for that space. And as when we are leasing out, we realize that initially we might have thought that this is a full commercial offices, but we realize that hey, first floor there’s frontage, the extraction of value would probably be better for a F&B operator or a cafe. They want the frontage and you know, if they want to do delivery, the person can just stop at the shop front and then they can just deliver food over there. 

So different mix as you go along. You realize that, okay, first floor, maybe shouldn’t be just office. The better value is renting to a restaurant. So a office space, for discussion sake, let’s say you price in $5 to $6. You think an end user will pay you $5 to $6, but a restaurant is different. They need the turn and stuff like that. They can pay you $8 or $9. So then they are the better fit on the first floor.

Reggie: Because you get more yield out of it. 

Jacqueline: You get more yield but also I will have to say there’s no free lunch out there. Right? If you want to charge him $8 to $9, there must be a reason. And what is the reason? If F&B restaurant operator come in, they want a powerhire. 

Reggie: Oh yeah. Expensive.

Jacqueline: They want 100 amp. Office is only 60 amp so I have to upgrade the power. I have to put in CapEx again. They want exhaust. My exhaust got to run all the way to rooftop. 

Reggie: Very expensive. 

Jacqueline: So you can only charge higher because it, you provide the space and that M&E provision or whatsoever, inside this space, different. And we cater into the different mix. Yeah. 

Reggie: Nice. That’s cool. Are you seeing more interesting use of shophouses these days?

Jacqueline: Yes. Okay. So, I can share with you that there was one particular shophouse that we bought in the East side. When we first bought the shop house, we asked ourself what kind of trade is best on the first floor. Again, that, that process I have shared. We put in restaurant and operator. 

But on the second floor, can we put offices? Or what is the best use? And we ask ourselves, what kind of trade would want to be in the East side? Not near to the bank, not… you know. 

Reggie: Not at Changi Biz Park.

Jacqueline: What kind of demand would we get? But in the East side, people are all about residential, about living space. So we ask ourselves then can we do upstairs as a live-and-play? So you live upstairs, you play, you have your restaurant downstairs.

So when we started our research on, okay, residential what is the gap and stuff, then we went in for the second floor, we decided to… could we then do living spaces. And then we transform upstairs to a living spaces. And one that is affordable to the end user. So in today context, which a lot of people would have known, it’s called the co-living concept.

Reggie: Yeah, it’s a thing now. Yes. 

Jacqueline: Yes. So we went in, we re-renovate the entire space, and then after that we got in tenants. Yeah. But subsequently we realized this is a operation game. Operator kind of game. 

Reggie: Yes. You must be an operator to really make money in this space. 

Jacqueline: Yes. So as an operator if I only got 10 rooms or 16 rooms, I don’t have the economy of scale to put in big advertising or to capture market. So, end up after we spend our CapEx, we decided to work with an operator. Yeah. 

Reggie: And they’re only a few of them here. The bigger ones here. Oh, that’s cool. That’s cool. 

Jacqueline: Interestingly there are a lot of other smaller operators, they have unique concepts. Yeah, I just met one particularly interested in shophouse. 

Reggie: Okay. What is the uniqueness of the concept? Just kind of give us some… how to envision the future use of shophouses. 

Jacqueline: So they are a very interesting player. They also see what we see. Their vision is that shophouse is a legacy asset. It can withstand time and it’s a long-time asset. And they are so beautiful in terms of architectural.

Reggie: [sighs] We destroyed so many. 

Jacqueline: Yeah. And now it’s… now it’s a… 

Reggie: Now cannot even build.

Jacqueline: You know what? The URA would give us the old picture and expect us to try to transform it back to the old times. 

Reggie: Really? 

Jacqueline: Yes, yes. So for the conservation. So what he wanted to do is to transform living spaces in the shophouse, let the younger people be able to live in a shophouse and live in a, like kampong kind of spirit, right? First floor is one user, second floor is one user, third floor is one user and then for the ground floor it’s a communal space. 

So I see a lot and entrepreneurs in that field coming out with different concepts. And I love it when people tell me they want to do a certain concept in shophouses. 

Reggie: Nice. That’s cool. But you know, when you talk about shophouse as a legacy asset, right, I’m sure like architects and engineers, will not sign a 99-year kind of building and over. So does it play into the depreciation value of the infrastructure integrity of the shophouses? Because now it’s like all so sexy and like, wah shophouse can do, you know. But does that play into that consideration? 

Jacqueline: So most of the shophouse, a big majority of the shophouse, are actually freehold in value. So URA and the conservation department also understand that these are long-time assets. 

Reggie: Long, long time already. 

Jacqueline: Yes. Is the structural integrity good enough? So they expect the owner, every five years to actually engage a structural engineer, to come in, to check the integrity, provide a report, and if the report has any findings, the owner is supposed to rectify the findings and submit back to URA. So this helps to support the structural integrity. 

So why I say is legacy asset, because you can’t replicate, it’s not easily replicate. Anything that’s not easily replicate has limited supply.

Reggie: That’s its beauty. Yeah. 

Jacqueline: Yes. So it can withstand the test of time, right. But the building itself, you constantly need to asset enhance, else, back to my older generation owner, you just sit there. But then maybe your neighbor who has put in CapEx and able to generate $6, your building, $2 nobody wants to come and rent it from you, right?

Reggie: Fair. Interesting. 

Troy: Going back to the operator. You mentioned only operators are coming in to do the co-living space. But let’s say if I’m a retail investor, right, so I cannot rent a shophouse to rent it out again? Like, would that be possible? 

Reggie: Oh, that means a lease-to-lease concept? Like in the commercial, in the shophouse space? 

Troy: Yeah. 

Reggie: Okay. I think that’s very popular in the residential space, right, lease-to-lease. 

Jacqueline: Yes. So of course I think there are demand out there. I mean, even in the residential market, you lease a 3-bedroom, and then you sub-lease it out. 

Reggie: Or you lease a whole bungalow and you cut it up right? I think that’s the interesting concept there.

Jacqueline: Yeah. Yes. So feel that is. It’s just what is the story and who are the target market? Because what is stopping a landlord, after seeing that you have done up everything, to say, two years later, I don’t lease to you, I take back the unit? 

Reggie: Oh yeah.

Troy: Yup, yup.

Jacqueline: I’ve seen kopitiam, right, that particular stall, fishbowl noodles selling very well, the owner doesn’t want to renew his lease. And then after that take another Malaysian put there and then start selling. 

Reggie: Do the same thing. 

Jacqueline: Yeah. So for retail, for individual, in an asset-light model, you paid to a landlord, get the cheapest rental value that you can, re-renovate the space – you must have a value add proposition inside, right – and then after that you sub-lease out to individual and then you collect that differential.

The only thing that one needs to understand is how sticky is your end-user to you. If they are not sticky to you, then what’s stopping the landlord to come in to this space and do it better than you? Because their differential would be much more. 

Troy: So that single factor of, between owning that shophouse and renting that shophouse will make the difference in the results. Because you can rent it but if let’s say, like what you said, you spend all the CapEx, but in the end, it goes back to the owner, then there’s no security over there. 

Jacqueline: Yeah, so it depends on the operator or whoever who wants to come in to operate, right. Let’s say, for simplicity sake, you say you want a botanical… you want to transform this place to a…  

Reggie: Botanic vibes ah?

Jacqueline: No, nature retreat – that means every room is a…

Reggie:  Bali, Bali, we’re going for Bali. 

Jacqueline: Okay, Balinese-style, right? So you need to… the landlord is only going to give you four piece of wall. The walls and the ceiling and the space. For you to transform your vision you need to put in something. Then because you know that you have a end user that is going to lease from you. 

Troy: Yeah. 

Jacqueline: Yeah. Who love this. 

Reggie: Better make sure that a lot Balinese people. They love the vibes. But I get what you’re saying. Essentially, that risk factor is not as big in a residential, you know, rent-to-rent structure compared to a commercial space, because there’s just so much more that you’ve got to put in and people are relatively less sticky in this structure. Easier for the landlord to just take back. 

Jacqueline: Yeah. Just like co-working office, right? Essentially what they do is they go to a landlord say, you know, you do not need to worry this one whole floor’s floor plate. I lease it out from you. They would have calculated that maybe this owner, their interest cost whatsoever to break even as a landlord, say it’s $4. He rents from you, 4.50 . And then after that he went to fit out the entire space. 

So my question then is, yes, an operator can do that, but they have to bring more value to the property, else it’s not sustainable in the long run. 

Troy: Going back to you, moving out from the CBD to the non-CBD areas, right? Earlier you mentioned, you know, you will check shophouse in their condition, and then refurbish. So is the playbook, you know, the matrix that you look out for, out of the CBD area, the same as what you were doing in the CBD, or there are certain differences over there? 

Jacqueline: Underlying factors will still be the same. There won’t be much difference. We will still look at if that particular shophouse say, in Jalan Besar area, what is the price, what is the land value, is there the building costs up there? If there’s no building costs, then how much I need to put in? What is the rent that I can extract out from there? So the matrix and the whole process, investment process, is still the same. Maybe it’s easier to start finding value out of the core, where there’s a number of players right now, to just go for hunt on other value extraction, out of the CBD. 

So out of CBD, there are a lot interesting concept that you can do, right. Tenants in the CBD and tenants in Jalan Besar are different. Yeah. And I went to Syed Alwi, the tenants there are also very different. So it’s a different target market and ultimately I’ll ask myself what kind of story can I bring about in this street, this neighborhood. Can I open up demand to other people who are willing to come here, if I put in the effort? So yeah. So your question on, is it the same factors to consider an investment – it’s the same exact factors. Yeah. 

Reggie: Nice.

Jacqueline: But the target markets are different. Yeah. 

Troy: Actually I want to ask you, what was the most expensive learning lesson that you have, when you are investing in shophouses? 

Jacqueline: In the initial years, when you have not a lot of comparable value, because what you are…. 

Reggie: Because you are the first one. 

Troy: Pioneer. 

Reggie: You pioneer…

Jacqueline: Pioneer and not comparable because you’re trying to… what essentially, what you’re doing is to increase the target market, to bring in new players, right? These new players would not have looked at the shophouse. 

Troy: But why do you want to bring in new players? 

Jacqueline: Because you want to increase the pie share. So when I do an assumption, when I buy, I assume that I can do this, I can do that. But I need the new target market to buy in my vision. 

Reggie: I know what you mean. It’s the same idea as there’s a row of shophouse in the middle of Serangoon that nobody’s there. And then someone comes in and open one cafe. The next person opens another cafe and the whole street become a cafe street. 

Jacqueline: But no cafe initially wanted to come into this place. 

Reggie: You’re playing the risk on the very first front, right, trying to stage the area. 

Jacqueline: Yes. So that huge lesson is that when you really want to come out with a marketing plan or, you know, you want to transform it, you want to bring in new players, it’s tough. And you have to door knock, you have to approach different people, such that, that first cafe would tell you, okay, if you give me this price, I will come in. 

Reggie: I’ll join you.

Jacqueline: Yes. So one of the most challenging thing was that – numbers are numbers on the paper. But if I can’t deliver the numbers, I can’t fulfill that dream that I wanted to do. So the most difficult lesson I learned is that you must be prepared there’s a lot of “No.” Whatever that you think it makes sense, there’s still a lot of “No.” Yeah. 

Reggie: Good stuff. Good stuff. Thank you, thank you. 

Jacqueline: Thank you.

Troy: Hey, thanks for taking time to tune in. I hope you’ve learned a little bit more about property investing today. If you feel like you have benefited from this podcast, do share this with your loved ones. And also, do follow us on all our socials and join our community telegram group. And tell us what you’re interested to know about next. Everything is in the description below. Have a great day ahead guys, and always remember, when we are better prepared, the next opportunity is just around the corner. See you next week. 

I feel like the episodes are getting jucier. You hear a lot of wisdom in this real estate series that you wouldn’t ever hear elsewhere. But especially in the past three episodes where these investors have accumulatively spent decades honing their real estate investing skills. We’re talking about managing hundreds of millions, if not, maybe even billions of dollars worth of assets combined. 

Maybe you are at a stage whereby you want to invest in commercial properties or just invest in properties in general, and you want to learn more, what Jacqueline has shared with us today, will definitely help you out. 

Doing research is always tedious, but what can increase your chances of a profitable investment in any properties is knowing what to look out for. Demand-supply is a strong factor and will always be, no doubt. But underlying that demand-supply are other pillars to look out for as well.

If you need inspiration, listen to this episode again, because I’m sure when you listen between the lines, if you need inspiration on investing in properties and what to look out for, listen to this podcast again. When you start to listen between the lines, I’m sure some of what Jacqueline has shared about doing research on shophouses can be applied even to residential properties. 

So with that said, it was an eye-opening or ears-opening episode talking about properties in Singapore today. I hope you learned something new and I’ll see you next week.