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S'pore second most active hotel market in Asia-Pac in Q3

It accounted for 26.7% of US$2.77b of hotel investment sales deals: Savills

SINGAPORE was the second most active market in Asia-Pacific for hotel transactions after Australia in the third quarter, according to a report by Savills.

The Republic recorded US$742 million of hotel deals helped by the sale of Grand Park Orchard, Gallery Hotel, The Sentosa Resort & Spa, and Hotel 1929.

Singapore had a 26.7 per cent share of the US$2.77 billion of hotel investment sales deals across Asia-Pacific in the July-September quarter of 2013. Australia, with US$1.07 billion, had the lion's share of 38.5 per cent. Japan and China were in third and fourth placing, at 17.9 per cent and 13.2 per cent share respectively.

The biggest Singapore hotel transaction in Q3 was that of the Grand Park Orchard, which was listed at about US$364.25 million. Savills said this approximate sale price referred to the transaction value for only the hotel component as calculated by US-based Real Capital Analytics (RCA); it excluded the retail podium Knightsbridge.

The combined asset comprising the 308-room Grand Park Orchard Hotel and Knightsbridge changed hands for S$1.16 billion, according to an earlier BT report. The buyer is Bright Ruby Resources, a Singapore-incorporated vehicle controlled by a Du family in China.

Noting that the average transaction price for the most recent Singapore hotel deals has exceeded S$1 million per room, Savills highlighted that this is against a mix of a weaker events-calendar, slower corporate demand and price competition from newly opened hotels which has reduced hotel trading performance this year.

Singapore Tourism Board statistics show that the average revenue per available room was down 3 per cent year-on-year in the first seven months of this year.

"Consequently, acquisition capitalisation rates have been compressed to as low as 3.5 to 4.0 per cent for some recent transactions, such as Grand Park Orchard, Gallery Hotel and Hotel 1929," the report said.

The US$2.77 billion in hotel investment sales deals in the Asia-Pacific in the third quarter was slightly ahead of the US$2.64 billion in the preceding quarter and more than double the US$1.1 billion in Q3 last year.

The largest transaction in Q3 this year was Abu Dhabi Investment Authority's A$800 million (S$939 million) purchase of Australia's largest hotel owner, Tourism Asset Holdings Limited (TAHL).

South Korea's Mirae Asset Global Investments also purchased Four Seasons Sydney for about A$342 million.

In Japan, the biggest transaction in Q3 was the 42 billion yen (S$540.60 million) purchase of Sheraton Grande Tokyo Bay by global investment management firm Fortress Investment Group. In all US$496 million worth of hotel investment deals were transacted in Japan in Q3 - 78.7 per cent higher than in the same period last year.

"We are now seeing more Japanese companies, whether in the manufacturing or real estate industries, acquiring overseas real estate, while international funds, mainly from Asia, have a strong appetite to invest in real estate in Japan," Savills said.

Singapore's total hotel investment sales volume for the first nine months was US$1.47 billion. This has surpassed the US$379.37 million for the whole of last year, according to RCA and Savills Hotels.

Looking ahead, Savills says the strongest growth in hotel investment sales for full-year 2013 is expected to be in Japan, South Korea and Singapore, while decreases are expected in Hong Kong, Thailand and China due mainly to a lack of prime products.

"There is a rising influx of new funds to Asia-Pacific, with sovereign wealth funds from the Middle East, international pension funds, opportunistic funds and other new players seeking opportunities in different Asian sectors.

"Overall prime yield levels should remain stable, while investor confidence improves for the secondary markets. We predict that prime yields may harden further in Singapore, Japan and Thailand, while we do not expect any major changes elsewhere until the end of 2013."