Hotel G, lyf Funan floated as possible asset sales

THE improving performance of the Singapore hotel sector aided by the reopening of Singapore’s borders since April is expected to spark investment interest in hospitality assets here. The owners of at least 2 such properties have roped in agents to suss out buying interest.

One is Hong Kong-based Gaw Capital Partners, for its Hotel G Singapore in the Middle Road/Bencoolen Street locale. The price expectation for the freehold property – in the bustling Bugis/Bras Basah area – is seen as being around S$320 million, which works out to about S$1 million per room. The majority of the hotel’s 308 rooms are just 12 square metres each, considered small by industry standards for a midscale hotel, where rooms are typically 17-20 sq m, according to industry players.

The 16-storey property’s gross floor area (GFA) is about 94,600 sq ft; the property’s development potential has been maximised. However, there is potential to add value to the asset by converting some of the car park space on level 4 into additional hotel rooms.

A low-key campaign has also been underway for some weeks to source for potential buyers for lyf Funan Singapore, a co-living serviced residence property along Hill Street in the civic district. The property is held by the Ascott Serviced Residence (Global) Fund, equally owned by CapitaLand Investment’s wholly-owned lodging business unit The Ascott Limited and the Qatar Investment Authority.

Ownership of lyf Funan is as a strata title in a mixed development that also includes a mall and 2 office blocks. (The retail and office components are held by CapitaLand Integrated Commercial Trust.) The project is on a site with 99-year leasehold tenure expiring in December 2078, leaving a balance term of about 56 years.

Word on the street is that the guide price for lyf Funan is “north of S$300 million”. A price of S$300 million translates to nearly S$912,000 per unit and a lower S$728,000 per key. The 9-storey property has 329 units with a total of 412 keys. Facilities include a communal kitchen, co-working/event space and a laundromat.

Chee Hok Yean, the Asia-Pacific president of hotel advisory firm HVS, expects both properties to draw strong buying interest. “Sentiment in the Singapore hospitality market is positive. With Singapore reopening its borders in April, hotels have been trading well; room rates for many hotels have already recovered to, if not surpassed, pre-Covid levels though occupancies are still below the pre-Covid period,” she said.

HVS is not involved with the ongoing marketing exercises for either Hotel G or lyf Funan.

Based on Singapore hotel market statistics from the Singapore Tourism Board, the average room rate for hotels in June 2022 was about S$238, up 63 per cent from June 2021 and surpassing the S$211 in June 2019. The average occupancy rate of 76.9 per cent for June this year, though, is still about 9 percentage points lower than the June 2019 figure of 86.1 per cent. The revenue per available room of S$183 in June 2022 is slightly ahead of the S$181 in June 2019. “Right now, the hotel business is coming mainly from leisure travellers. Corporate travel is mostly regional at the moment; we’ve not seen much long-haul business travel into Singapore just yet. Also missing are arrivals from China,” noted Chee.

“So there is potential for further recovery in the Singapore hospitality market when China reopens its borders and allows its citizens to travel out, and as international business travel also picks up,” she added.

Serviced residences in Singapore were not hit much even during the Covid pandemic, Chee recalls. “There were some expats who moved out (with their families) from their rental apartments as their leases expired and stayed in serviced apartments temporarily before relocating from Singapore.” Serviced apartments provide more flexibility for short term leases, with a minimum stay of 7 days, compared with 3 months for a private residential rental lease.

Besides the positive sentiment in the hospitality market, Chee says another reason Hotel G and lyf Funan can be expected to draw strong investor interest is that both assets are in attractive locations in the city area and near MRT stations – which would appeal to both leisure and business travellers looking at varying durations of stay in Singapore.

“Of course, Hotel G is likely to attract the usual daily-rated stay. For lyf, it would be short to medium term stay of a few months.”

lyf Funan offers various formats of accommodation, from single-occupancy studios of 7 sq m to 6-bedroom suites of 105 sq m. There are also shared communal facilities. “The arrangement works well for project teams comprising staff from different countries who need to come together for a short-term project, for instance. lyf also appeals to tourists who want to stay in the city area, as it has a hotel licence, with minimum stay of 1 day,” she added.

At lyf Funan, nearly 84 per cent or 276 of the 329 units are double-occupancy studios ranging from 11 sq m to 18 sq m. lyf Funan also has single-occupancy studio units and studio-with-kitchen units in addition to a total of 35 units of 2, 4 and 6-bedroom suites. The property was valued at S$190 million at the end of last year.

The initial closing for offers by potential bidders is expected to take place late next week.

The expression of interest for Hotel G is expected to close in September.

The hotel is said to be currently hitting close to 80 per cent occupancy and an average room rate of around S$160 per night.

Of the 308 rooms, 62 per cent or 192 rooms are 12 sq m each and another 24 rooms are even smaller, at 10 sq m each.

Hotels G is a stylish lifestyle hotel brand minted by Gaw Capital’s hospitality arm GCP Hospitality. Gaw Capital bought the Singapore hotel for S$203 million in 2015 when it was known as Big Hotel. GCP Hospitality then rebranded, refurbished and repositioned the property under its Hotels G brand.