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(Photo by Aik Seng Lim)

Record sale of 23 coffee shops at $200 million

It was reported in the media today (11 Feb) coffee shop chain Broadway has bought out all 23 coffee shops of another coffee shop chain S11 at an estimated cost of $200 million.

It is believed to be the largest purchase of its kind for a coffee-shop chain to date. At $200 million, the average price per coffee shop is calculated to be about $9 million each. Some of the shops acquired include those at Block 304, Woodlands Street 31; Block 34, Upper Cross Street and Block 640, Bukit Batok Central.

Broadway took out an advertisement in the Chinese media announcing the deal and said, "We will continue to provide the public with delicious, economical and quality food and drinks." The takeover of all the coffee shops is expected to be done within three months.

Mr Hong Poh Hin, chairman of the Foochow Coffee Restaurant and Bar Merchants Association, said that customers are unlikely to see any food price changes after the change in ownership - at least in the early stages. "I think, at the start, prices should be quite stable and stay as they are," said Mr Hong. But there is no guarantee.

"But later on, if the new management wants to upgrade or renovate the coffee shops, then it's another matter," he added. "If they put in more investment, their rental prices might go higher."

Broadway is one of the coffee-shop operators in Singapore, along with the likes of Chang Cheng Group and Kopitiam Group.

Single coffee shop sold at record price of $31 million

In 2015, a family member of Chang Cheng Group, Mr Paul Kok Kuan Pow, bid up the price of a coffee shop at Bukit Batok Street 11 to acquire it at a record $31 million - the biggest purchase of a single coffee shop.

The media reported that Paul Kok and a Malaysian named Cho Kim Wing bought the Bt Batok coffee shop under a company called EH 155. Paul Kok himself was a Malaysian before he came to Singapore in 2000.

The media also said that Mr Kok enjoys singing karaoke and is known to sing with his friends and business associates in the VIP rooms of Chinese restaurants such as Yunnan Garden Restaurant, off North Buona Vista Road.

While Mr Kok sings, it was also reported that because of the high bid price to acquire the Bt Batok coffee shop, stall rentals were subsequently increased, bringing much hardship to the hawkers.

Since the transfer, some hawkers have reportedly said the rent has doubled to $6,500 a month, said the media.

As a result, some stalls have no choice but to increase their food price, hitting the pockets of Bt Batok residents. Other hawkers resorted to extending their operating hours to stay afloat.

Khaw: "These are business decisions in which HDB does not intervene"

When asked about what the government would do with regard to the potential increase in stall rentals, in light of the escalating transacted prices for HDB coffee shops, then National Development Minister Khaw Boon Wan said:

"The rents of individual stalls are negotiated between the eating house operators and the stallholders. The operator has to set the stall rental price carefully to ensure good take-up rates whereas the stallholders have to ensure the rents are not too high as to render their businesses not viable. These are business decisions in which HDB does not intervene."

But Khaw did promise that they will closely monitor the commercial properties market. "If necessary, we will intervene to prevent speculation and excessive price increases in this market," he said.

At the time, then ST Editor Han Fook Kwang wrote an article commenting about the sky-high transacted prices for HDB coffee shops, "The buyer was prepared to pay the record price not because it made business sense in the running of a coffee shop, but because it was a good property buy which he could hope to profit from at some later date.”

In other words, people are now speculating on HDB coffee shops and HDB still thinks "these are business decisions in which HDB does not intervene".