When Village Park's shoplot goes to auction, what is really for sale?

The shoplot in Damansara Uptown, PJ, where the famous Village Park Nasi Lemak operates, is going to auction with a reserve price of RM5.3 million.

What's unusual is that there isn't just one or two listings.

From a quick look, maybe twenty or thirty different agents online are pushing the same property, and none of them use "Damansara Uptown 3½ storey shoplot" as the selling point.

What they're all selling is:

"Malaysia's most famous nasi lemak: the Village Park shop is going to auction."

Later even the media started reporting it.

Why would so many people suddenly advertise an auction for a shoplot of a bit over RM5 million?

So I started digging.

A line that pulls traffic

First, this isn't an agent casually setting up an auction. It's genuinely on the High Court e-Lelong, and the property carries a charge from Standard Chartered.

So the more reasonable explanation is still that the original owners may have had a loan, an estate or inheritance issue, or something between one generation and the next that wasn't handled properly, and in the end the bank went for foreclosure.

But another phenomenon is very interesting.

Normally, not that many people would hear about an auction of a shoplot worth around RM5 million.

This one is different.

Because it's no longer selling an ordinary Damansara Uptown shoplot.

It's selling one line:

"The Village Park shop, starting at RM5.3m."

That story pulls traffic on its own.

And the most interesting thing about auctions is that the more people know, the more potential bidders there are.

If nobody noticed, one bidder might take it at RM5.3m.

But with dozens of agents pushing it and the media reporting it, suddenly lots of people know, more and more of them may bid, and the price naturally climbs.

So in a sense, the agents don't need to "fake" anything at all. Simply amplifying the attention may already change the final auction price.

Market value and strategic value

Suppose the RM20,000 monthly rent I've heard about is true.

Buy at RM5.3m, and the gross yield is about 4.5%. At RM6m, about 4%. At RM8m, only 3%. At RM10m, just 2.4%.

So ordinary investors won't chase it forever.

At some price, they'll decide it isn't worth it.

But Village Park is different.

An ordinary investor calculates:

"How much rent can this property give me each year?"

Village Park may be calculating:

"If I lose this location, how much will I lose each year?"

That is the difference between market value and strategic value.

To everyone else, it's just a shoplot.

But Village Park has been operating at this location for more than twenty years.

Customers remember the address, tourists visiting KL go there, and Google, media, word of mouth, foot traffic, the kitchen and operations are all tied to this place.

In a way, this property has become part of the Village Park brand.

So in theory, what Village Park is willing to pay could well be higher than what an ordinary property investor would.

Sometimes an auction is really just another form of negotiation.

Before, it might have been only the landlord and Village Park sitting down to talk:

RM6m, do you want to buy it?

If that doesn't work out, it now becomes:

No problem, let the market decide.

The bank wants its money back. The auction agents want bidders. The media thinks the story is newsworthy. Investors see RM5.3m and think it looks cheap.

So everyone piles in.

In the end the whole market does price discovery for the owner, and puts pressure on Village Park at the same time.

Of course, so far there's no evidence that the owners and agents designed this deliberately, and even less evidence that anyone arranged fake bidders to push the price up.

I think the more reasonable explanation is:

This is a real foreclosure. It's just that a very famous tenant sits inside, so the whole auction ecosystem naturally amplified it.

Problems that were never part of the business

And there's another very important factor that decides whether Village Park should worry:

How long its tenancy has left.

If there are still five or ten years, Village Park may not need to worry at all.

You buy it for RM8m, and I keep sitting here paying you RM20k in rent.

But if the tenancy is about to expire, it's a completely different game.

Business really can be funny sometimes.

You were just selling good nasi lemak. Customers queue, business is great, the brand is famous, and you think your daily worries are food cost, staff, marketing and competition.

Then one day, you also have to worry about who actually owns the property you've rented for over twenty years, whether the owner paid back the bank, whether the next generation sorted out the inheritance, whether the property will be auctioned, and whether a crowd of people will suddenly rush in to compete with you for your own shop.

From Village Park's point of view, just focusing on running one business well is genuinely hard these days.

Besides customers and competition, you also have to deal with a pile of messy things that were never part of your business in the first place.