SINGAPORE - Straits Developments, a subsidiary of conglomerate The Straits Trading Company, on Sunday launched two new property investment products allowing eligible shareholders to own shares in two high-end Singapore residential properties in its real estate portfolio.
Through a process called asset fractionalisation, these investment products aim to offer investors exposure to a condominium unit in Duchess Residences at 108 Duchess Avenue in Bukit Timah, as well as a freehold good class bungalow (GCB) located at 8A Cable Road, Chatsworth Park, Straits Trading said in a statement.
The process involves dividing the properties into fractions, allowing investors to buy and own a portion of each property at a fraction of their value. Each investor will get a share, or a fraction, of the rental income from the underlying property, and enjoy any dividends generated by that property, it added.
After the first five years, investors may enjoy returns which reflect a share in any appreciation in value of the underlying property via a special payout. However, both the dividends and special payout are not guaranteed.
The minimum investment amount for the 999-year-leasehold Duchess Residences unit is $200,000, while that for the Chatworth Park GCB is $500,000. When asked, the management declined to disclose the valuations of the two properties.
Both investments are currently being offered to accredited investors who are also Straits Trading Shareholders’ Club registrants.
Accredited investors are assessed to have the financial means and know-how to trade in a wider suite of financial products and services compared with retail investors. Shareholders who hold at least 100 shares of Straits Trading can register with the club free of charge.
In 2022, two of such offerings involving a GCB, also in Cable Road in Chatsworth Park, and a residential property located at Woollerton Park in Gallop Green, were made available to accredited investors registered with the Shareholders’ Club under a pilot scheme.
Straits Trading is reviewing ways to make fractionalised property investments available to more investors as interest grows.
“Our strategy is to expand this to a bigger scale, eventually targeting more investors and across varied products, subject to the right space, platform and regulations. The Shareholders’ Club is one platform that we are tapping to do this,” Straits Development chief executive Eric Teng said.
He added that fractionalised investments offer advantages over other property-based asset classes because it allows investors to own portions of luxury properties that are typically hard to buy as a whole.
Investors will also avoid the hassle associated with property ownership, as Straits Trading will be responsible for the legal and administrative work and maintenance of the properties.
They can also choose the specific property they want to invest in, unlike real estate investment trusts, which offer a portfolio of selected properties, Mr Teng said.
However, he warned that similar to the traditional property investments, the underlying property can also decrease in value. This also means that investments in a specific property’s cashflows can also potentially decrease.
To that end, Mr Teng said the company has “deliberately only selected properties where long-term returns are generally more stable”.