SINGAPORE (Apr 2): Kishore Buxani gets excited when he is shown an old building. “It’s because there’s an opportunity to turn it around,” says the CEO and founder of real estate investment firm Buxani Group. He is considerably less enthusiastic when shown a shiny new building unless he can buy it at a price below market value.

That opportunity came about in early 2007: It was when Buxani and Seychelles-based private investment firm, Capital Management Group, purchased six strata floors of Grade-A office space at Samsung Hub at 3 Church Street. Capital Management, founded by Mukesh Valabhji, has been a partner with Buxani on several acquisitions.

The vendor of the six strata floors at Samsung Hub was OCBC Properties and the total strata area was 78,490 sq ft. The joint-venture partners, Buxani and Capital Management, paid $122.4 million for it, which translated to $1,560 psf.

It was a brand-new 999-year leasehold, 30-storey Grade-A office building with a six-storey podium in the CBD. Joint owners in the development were CapitaLand, OCBC Properties and the Singapore Chinese Chamber of Commerce.

In 2002, when the building was still under construction, it was discovered to be tilting by 0.1 degree, and the problem was rectified by main contractor, Samsung.

The building was completed and received its Temporary Occupation Permit (TOP) in 2006, and Samsung even became an anchor tenant. Thus, the building became known as Samsung Hub.

While other investors were initially cautious about the building’s history, Buxani saw it as a buying opportunity. He requested for a report on the soundness of the building from a structural engineer, even while he was negotiating to purchase the six floors from OCBC Properties. “The report wasn’t completed yet, but the structural engineer said, ‘Trust me, it’s probably the safest building in Singapore now,’” says Buxani. “Based on that trust, I went ahead.” The deal was struck in late 2006 and completed in early 2007.

When Samsung Hub finally obtained its Certificate of Structural Completion (CSC) in 2011, Buxani decided to put some of the floors up for sale, and they were sold at more than $3,000 psf. The only unit he kept is the office he currently occupies. “We had 90% financing, and so when we sold, we made seven times equity,” says Buxani.

He still considers Samsung Hub one of the best investment deals in his portfolio.

One could say Buxani, who is in his mid-40s, had an early start in buying property: When he was 12, he and his brother helped their mother purchase a condominium on Meyer Road. On weekends, he worked at a relative’s shop in Far East Plaza, peddling T-shirts and jeans. “I wanted to earn some pocket money,” he says.

His father, a civil servant, had passed away when he was 11. His mother then moved the family from Johor Bahru to Singapore. “We didn’t come from money,” says Buxani. It seems that real estate investing ran in his blood. His mother, Indra, is the sister of property magnates Raj and Asok Kumar of Royal Brothers Group. The brothers have since gone their separate ways with their respective sons: Raj and son, Kishin R K, who heads RB Capital; and Asok, with his son Bobby Hiranandani, co-chairman of Royal Group Holdings.

Buxani emphasises that his company is a separate entity from that of his uncles and cousins.

Prior to becoming a full-time real estate investor and developer, Buxani joined Goldman Sachs’ investment banking division when he was 24. His job was to start an asset management business by helping private families, family offices and corporate entities invest in global equities, fixed-income instruments and currencies. “I focused on undervalued stocks, which was very research-based, and tried to understand long-term [investment] themes,” he says. “It’s very much like investing in real estate. You have to understand the underlying fundamentals.”

Buxani bought his first property in 2000 while still an investment banker at Goldman Sachs. It went on to make him his first million. He was 28 then. “Perhaps it’s because I worked in one of the shops when I was a kid that the first property I bought was a strata shop unit at Far East Plaza,” he muses. “It was on the third level, facing the escalators, and 380 sq ft. I paid $880,000, about $2,700 psf.”

From that one unit, he bought more strata shops in Far East Plaza and Lucky Plaza, as well as strata office units in the CBD, including at Malacca Centre, adjacent to RB Capital Building (the former Royal Brothers Building). He also invested in conservation shophouses in Chinatown and Little India. “I’ve bought and sold some over the years,” he says.

He founded Buxani Group in 2003 to hold his assets, and decided to leave Goldman Sachs in 2005 when he realised he was enjoying his extra-curricular activities — property investing — more than his full-time job as an investment banker.

<strong>‘Accidental’ en bloc beneficiary</strong>

Buxani is a walking testament of how childhood experiences and impressions shape us as adults. “When I was young, I saw so many people lose their pants in real estate from 1985 to 1987 and, again, in the Asian financial crisis in 1997/98. And these were usually the same people who had claimed, ‘Sure to make money,’ when they bought their properties,” he recalls. “So, now, whenever I hear someone say something is guaranteed to make money, I cringe.”

As such, Buxani is not about to bet on the en bloc boom. “The perception is that the residential market is recovering,” he says. “I believe there’s pent-up demand, and it will continue for a while. But, for me, I will stick with commercial property in Singapore.”

Nevertheless, he benefited when Thong Sia Building was sold en bloc for $380 million. “Honestly, we didn’t think of going en bloc when we bought it, although I knew it had en bloc potential, given its location just off Orchard Road, and the fact that it’s freehold,” he says.

In August 2013, Buxani purchased Raffles Medical Management, an entity of Raffles Medical Group, which owned the commercial podium of Thong Sia Building, for $120 million. The seven-storey commercial podium contained eight retail and office units, with sizes ranging from 710 to 8,826 sq ft. Raffles Medical Group had purchased the commercial podium in February 2011 for $92.08 million to convert it into a specialist medical centre. When it failed to obtain the necessary government approvals for the conversion, it put the commercial podium up for sale by tender.

Following the purchase, Buxani had plans to reposition and rename the building. Thong Sia Co was the distributor of Seiko watches and the building was famous for its prominent Seiko watch boutique fronting Bideford Road. “We thought of changing the name to Times Square Building — it was a play on the acronym TSB of Thong Sia Building,” explains Buxani. “We even had an architect draw pictures of what the building would will look like with a big clock.”

When Buxani joined Thong Sia Building’s Management Council of Strata Title (MCST) board as its chairman, at the very first management meeting in January 2014, about half a dozen members suggested that the owners attempt a collective sale. A collective sale committee (CSC) was set up, and a request for proposals was called to appoint a property consultant and a lawyer.

Thong Sia Building, which was built in 1981, occupies a freehold site of 21,602 sq ft. In addition to the seven-storey commercial podium, it had a 19-storey residential block with 37 apartments. Prior to the collective sale, its owners had verified with URA that the gross floor area (GFA) of the building was 156,300 sq ft, which reflects a plot ratio of 7.23. “This was 10% higher than what most people had initially estimated,” says Buxani.

Although the commercial podium accounted for just 30% of the strata area at Thong Sia Building, it had a higher share value of 75.2%. This is because commercial units have a higher share value than residential units. “But we arrived at an apportionment that was agreeable to everyone,” says Buxani.

The original reserve price was $400 million. There were expressions of interest but no firm buyers even after two tenders were held. When the second private treaty was called, a buyer emerged, but with a lower offer of $380 million. The CSC proceeded to collect signatures all over again and managed to obtain 80% consensus to sell at the lower price. The collective sale was done in July 2015 and completed in April 2016.

The building is being redeveloped into Bideford Hills by Sin Capital Group, an Asian private investment group. It will be a mixed-use development with serviced apartments managed by Oakwood Asia Pacific, and branded Oakwood Studios.

The sale of the former Thong Sia Building was brokered by JLL, and marked the only collective sale in 2015. It was also considered the largest mixed-use collective sale in Singapore. The sale price of $380 million reflected a price of $2,430 psf based on the existing GFA of the building.

<strong>Opportunistic buys, long-term hold</strong>

Buxani has made several opportunistic deals over the past decade. In 2006, the former GMG Building at 108 Robinson Road was put up for sale by expression of interest. The asking price was $48 million, or $875 psf, yet there were no bidders.

Buxani smelt an opportunity, however, as the building was freehold and on Robinson Road in the CBD. It was an old building developed in the 1970s. As it was the result of two buildings merged together, there were two lobbies, and there were pillars within the offices. “It was a bit odd, but I could see its potential,” says Buxani.

After acquiring the building for $48 million, Buxani and his partner, Capital Management, spent another $6 million to refurbish it, then renamed it Finexis Building. In 2011, they sold a 50% stake in the 12-storey building to an offshore fund managed by Sin Capital for $110 million, or $2,043 psf. In 2014, the remaining 50% stake in the building was sold to another offshore fund managed by Sin Capital for $120 million, or $2,300 psf.

In April 2012, Buxani and Capital Management jointly purchased 51 strata office units at Parkway Centre in Marine Parade for $53.375 million. The strata area totalled 51,191 sq ft, which means the purchase price translated to $1,043 psf. The building had 68 years left on its 99-year lease.

Once again, Buxani got himself on the MCST committee and elected chairman. When he called for an extraordinary general meeting and suggested upgrading Parkway Centre, he was told that the sinking fund had only about $300,000. It would cost about $500,000 to upgrade the toilets and common corridors and to repaint the building. Buxani suggested going ahead with upgrading works, and his company would pay the difference.

In 2012, the strata commercial market was hot. Because of the imposition of the additional buyer’s stamp duty and seller’s stamp duty in the residential sector in 2011, many investors switched from buying residential to strata commercial units. “We started receiving offers from interested parties,” says Buxani.

From September 2012, he started selling strata units from $1,600 psf to as high as $1,820 psf. Buxani is still holding on to 20 units at Parkway Centre, which are fully leased. The area is being rejuvenated with the upcoming Thomson-East Coast Line, and Parkway Centre should benefit from its proximity to the future Marine Parade MRT station.

In late 2012, Buxani and Capital Management also jointly purchased the former Katong Junction, a four-storey freehold commercial building on Joo Chiat Road. They paid $55.28 million for the building, and proceeded with addition and alteration works. The building has been renamed Katong Point.

The three upper levels have been taken up by MOX, a collaborative work space for those in the creative industry, with a retail storefront on the first level. “I’m still holding on to the building because it’s a freehold commercial property,” says Buxani. “We would like to keep it for the long term unless we receive an offer we can’t refuse. In Singapore, once you sell something, it’s hard to find a replacement property.”

Given that the Singapore property market is on an uptrend, it is becoming “a challenge” for Buxani to hunt for undervalued or underappreciated assets in Singapore. As such, he has been looking abroad since 2013.

He believes the current boom in the tourism and travel industry will be a long-term trend, driven by millennials and the growth in Chinese tourists abroad. He therefore started Buxani Hotels to invest in hospitality assets. Particularly bullish about the UK and Europe, he recently purchased a hotel in Scotland and is doing due diligence for its possible conversion into a four-storey boutique hotel.

Buxani is also a shareholder in a luxury resort and residential development on the 268ha Felicite island in Seychelles, which is being developed by Capital Management. The Six Senses Zil Pasyon, a 30-villa resort that opened in October 2016, has been enjoying an occupancy rate in the 70%-to-80% range.

There are plans to develop 28 luxury villas on the island. So far, four of the residences have been completed. Two have been sold to buyers who had purchased the units off-plan, and another two will be used as show villas for a global launch slated for later this year.

To increase his chances of securing bigger hospitality assets in the UK and Europe, Buxani Capital was launched recently. “It’s a platform to create a vehicle for larger hospitality acquisition opportunities in Europe with like-minded co-investors,” he says, adding that the focus will be on the acquisition of hotel portfolios.

Kishore Buxani, investor extraordinaire

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