OUE to sell serviced apartments to Hong Kong's Dorsett, AMTD for S$289m

PROPERTY developer OUE Limited has inked agreements to sell Oakwood Premier OUE Singapore, its luxury serviced residences and hotel business along Shenton Way, for S$289 million in total.

The buyers are joint venture firms formed by Hong Kong financial services firm AMTD Group and hotel operator Dorsett Hospitality International. Dorsett is wholly-owned by Hong Kong-listed property giant Far East Consortium International (FEC). 

In a bourse filing early on Thursday morning, OUE said that Alkas Realty, its wholly-owned subsidiary and property holding firm, has entered into property sale and purchase agreement (SPA) with DHI Holding (S) Pte Ltd for the sale and transfer of Alkas' leasehold interest in Oakwood Premier together with all plant, machinery and equipment owned by Alkas. The 99-year leasehold interest expires in July 2066.

The purchase consideration for the property is S$287.1 million, and was negotiated after taking into account its market value, among other things.

Oakwood Premier is the hotel and serviced residences component of the redeveloped OUE Downtown, a mixed-use complex in Singapore's central business district. Managed by Oakwood Worldwide (Asia), it has 268 rooms comprising studio, one- and two-bedroom apartments, as well as two dining facilities and other amenities, occupying levels 7 to 32 of OUE Downtown 1. Total gross floor area spans 25,054 square metres (sq m),with strata title area of 23,234 sq m.

Meanwhile, OUE Downtown Pte Ltd (OUEDTPL), a wholly-owned subsidiary of OUE and serviced apartment operator, has also entered into a business SPA to sell the Oakwood Premier business and assets to DHI Downtown.

The purchase consideration for OUEDTPL is S$1.9 million, and was negotiated after taking into account the book value of the business and assets, among other things.

The buyer, DHI Downtown, will apply to the Hotels Licensing Board to seek approval of the change of the name of the property to Oakwood Premier AMTD Singapore.

In its announcement on Wednesday, FEC said it is buying Oakwood Premier in order to build a stronger presence in Singapore - where it already operates the Dorsett Singapore hotel - and to further diversify its hotel portfolio.

The remaining short tenure of the existing third-party management contract also offers an opportunity for Dorsett to enhance its brand equity in Singapore, the Hong Kong conglomerate noted.

FEC's board added that it finds the total purchase consideration of S$289 million "attractive", given the location, quality and potential of the property. Earlier this year, Oakwood Premier was granted the licence to be operated as a hotel, offering short-stay accommodation which is typically a more profitable segment of the hospitality market, FEC said. In contrast, serviced apartments without a hotel licence typically have a minimum-stay requirement of seven days.

In the medium term, FEC believes that through some light asset enhancement, the property could be remodelled to offer additional hotel rooms and deliver higher revenues per square foot.

Both the property and business transactions are conditional upon and subject to each other's concurrent completion.

The property sale is also subject to the approval of Singapore's President, currently Halimah Yacob, as head lessor.

OUE said that both proposed transactions are not expected to have a material effect on the group's net tangible assets or earnings per share for the financial year ending Dec 31, 2019.

Before inking the SPAs, OUE had extended the offer to buy the serviced apartments to OUE Hospitality Trust (H-Trust) as H-Trust had the right of first refusal.

However, H-Trust declined the offer because its trustee and trustee-manager were of the view that buying Oakwood Premier based on the proposed terms would not be accretive to OUE Commercial Real Estate Investment Trust's (C-Reit) distribution per unit. H-Trust is now a sub-trust of C-Reit, following the completion of their merger earlier this month.

C-Reit will "continue to explore opportunities for the acquisition of yield-accretive assets which are in line with its investment criteria and strategy", its manager said in a bourse filing on Thursday.

OUE shares closed flat at S$1.46 on Wednesday, while C-Reit units were up one cent at S$0.535.

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