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Westin Singapore hotel sold for $468m

Daisho Group's Marina Bay hotel buy is at a hefty $1.5m per room

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Maiden Singapore investment: Daisho bought the 305-room, 99-year leasehold hotel in Asia Square Tower 2 from a fund managed under MGPA. - ST FILE PHOTO

[SINGAPORE] Just over a month after officially opening its doors to guests, The Westin Singapore hotel has been sold for $468 million to Japan-based property developer and investor Daisho Group.

Daisho's acquisition of the 305-room, 99-year leasehold hotel located in Asia Square Tower 2 at Marina Bay is its maiden investment in Singapore. The purchase price translates into a hefty $1.5 million per room, possibly a new record for a hotel here.

Earlier this year, Bright Ruby Resources, a company controlled by a family from China, was reported to have paid between $1.4 million-$1.5 million per room for the freehold Grand Park Orchard Hotel, smashing the previous $1.1 million per room record.

BT understands that The Westin Singapore transaction was sealed just before Christmas. The seller is a fund managed under MGPA, a private-equity property investment advisory firm. MGPA's original asking price was $2 million per room, or about $610 million in total.

MGPA is currently owned by asset manager BlackRock, which bought over the firm for an undisclosed sum in a deal that was completed in October.

Daisho Development Singapore director Mamoru Kohda said that Daisho decided to acquire the hotel because of its location and the group's view on room demand in the area.

"We think that there are not enough hotel rooms here. Also, the Marina Bay area is developing very quickly and has a very strong pool of office tenants, so we will be strongly supported by a corporate clientele," he said.

"We've also worked with Starwood in Malaysia and our working relationship with them was strong, so these are the reasons why we decided to buy The Westin Singapore. Daisho is a long-time asset holder, therefore we will work with Westin for a long time."

The Westin Singapore is the first hotel property to be managed under the Westin brand after the latter left the country more than 10 years ago, in 2001. It occupies levels 32 to 46 of Asia Square Tower 2, with offices taking up the bulk of the remaining floors. It is the first hotel in Singapore to be located within an office building, and has the highest hotel lobby here, on the 32nd floor.

Lance Ourednik, general manager of The Westin Singapore, said: "The sale and ownership change does not affect the daily operation and management of the hotel. The Westin Singapore continues to fly the Westin flag and be managed by Starwood Hotels & Resorts Worldwide, Inc."

Daisho's purchase at a record price on a per room basis comes as the Singapore hotel sector faces headwinds such as declining room rates and new completions coming onstream.

However, market experts that BT spoke to say that the amount paid represents its expectations for strong future earnings, and a premium for a brand new hotel.

Tan Tiong Cheng, executive chairman of Knight Frank, said: "The hotel is brand new and already fitted out, so that merits a premium. Fitting out a hotel can be very expensive."

Its location on the top floors of Asia Square Tower 2 also merits a premium, he added.

Another market expert, who declined to be named, noted that much of the new and upcoming supply of hotel rooms is largely in the mid-tier section and not the high-end market.

"In the Marina Bay area, there aren't enough hotels, there is in fact a slight under-supply. And as the area develops and more corporations are located there, demand for hotel rooms could rise and this could, in turn, raise room rates.

"So Daisho is buying into the future," said the veteran industry player, adding that he believes room rates would have to average between $400 and $500 per night for the deal to be lucrative for Daisho.

Published room rates at The Westin Singapore start at $650 per night for a standard room, but actual rates vary depending on demand and supply, so a standard room can be booked at between $300 and $400 a night currently.

The Westin Singapore declined to provide occupancy rates so far. Mr Ourednik would only say that it has been "enjoying good occupancy rates since we opened on 12 November and are optimistic about our business in 2014".

Apart from upscale The Westin Singapore, hotel properties which came onstream this year include Parkroyal@Pickering, Ramada Hotel Singapore and Carlton City Hotel. In 2014, the Sofitel So, The Patina and another hotel under the Holiday Inn Express brand are slated to open.

Preliminary statistics from the Singapore Tourism Board showed that hotel occupancies were at 87 per cent for January to October this year. Luxury hotels were the only category to post an increase in revenue per available room (RevPar), which was up 9 per cent.

RevPar declines were seen in upscale (-12 per cent), mid-tier (-3 per cent) and economy (-8 per cent) hotels.

Daisho currently owns a range of retail, office and hotel developments across Australia, Malaysia and Japan. The total value of its current property holdings exceeds US$1.5 billion.

Its portfolio includes a 510-room hotel in Kuala Lumpur, Malaysia, which is managed by the Hilton Group, the AO retail complex in central Tokyo and Park Hyatt Sydney.

It is also in the middle of constructing 180 Brisbane, an office tower development in Brisbane, Australia, that is due for completion in 2015.