Far East seen as likely buyer of Le Meridien in Sentosa

Singapore

FAR East Organization, owned by the Ng family, is likely to buy the Le Meridien Singapore, Sentosa.

The Business Times understands that the property and hospitality giant is in advanced talks to buy the 191-room hotel, which stands on a site with 57 years left on its lease, for about S$163 million.

The deal will be subject to approval by the Sentosa Development Corporation (SDC).

Located next to the Merlion Tower on Sentosa, the hotel was put up for sale by receivers PwC Singapore earlier this year. After the exercise closed in June, a few bidders are understood to have been shortlisted to sharpen their pencils and improve their offers.

Market watchers say it makes sense for Far East Organization to buy the hotel, given that the group, together with its sponsored trust, Far East Hospitality Trust, is developing three hotels nearby, with a total of 839 rooms.

The 606-room Village Hotel at Sentosa and The Outpost Hotel, a 193-room property targeting millennials and young couples, are estimated to open in April 2019; The Barracks Hotel, a heritage-focused property with 40 rooms, is slated to open in the third quarter of 2019.

These three hotels, which will share facilities such as the pools in front of Village and Outpost, will be managed by Far East Hospitality.

Marriott is now managing the nearby hotel under the Le Meridien brand. Hotel industry watchers say that, until all three of Far East Organization's hotels are up and running and their operations stabilised, they would not be surprised if Far East Organization - assuming it succeeds in buying Le Meridien - continues to engage Marriott, for this hotel in the short term.

If the deal is struck, Far East Organization would be able to reap economies of scale and achieve greater efficiency from controlling a cluster of hotels.

The Le Meridien Singapore, Sentosa was held by Treasure Resort, which was ordered to be wound up earlier this year, following a High Court order won by Sanchoon Builders, which is owed money over work it had done on the property, when it was the Movenpick Heritage Hotel Sentosa.

Sanchoon, which was awarded nearly S$15 million in September 2016, is not a secured creditor, said earlier media reports.

Treasure had allegedly defaulted on a loan with its main bank, Malaysian Banking Berhad, since September 2016, which led to the bank demanding repayment of about S$200 million.

The hotel's sale probably requires Maybank's nod.

The property comprises a three-storey heritage building and a six-storey new block. Its interior design was done by well-known Japanese firm Super Potato.

Hotel market watchers say that the buyer will have to pay a cut of its total revenue, amounting to between five and 10 per cent, as ground rent to SDC.

SDC's approval will also be required for all asset-enhancement works in the property.

Le Meridien Singapore, Sentosa has a land area of nearly 101,600 sq ft; its gross floor area is nearly 144,000 sq ft.

Under the Urban Redevelopment Authority's Master Plan 2014, the site is in a conservation area, and marked for hotel use.

When contacted, Far East Organization's executive director and chief financial officer Koh Kah Sek said: "We regularly explore and seek investment opportunities. However, we are not able to comment on the details of the transaction at this point in time as the bid process is still ongoing."