RB Capital mulls sale of Farrer Park hotel

Singapore

RB CAPITAL is considering sale of its Park Hotel Farrer Park, after receiving unsolicited offers since the hotel began operations just about a month ago.

Kishin RK, chief executive of RB Capital, said the 300-room hotel was recently valued at about S$390 million, or S$1.3 million per room, but added: "We are not quoting a specific price but will let the market determine the true price of this upscale hotel through a global expressions of interest (EOI) exercise".

JLL Hotels & Hospitality Group has been appointed the exclusive agent.

Buyers will have the choice of buying the hotel with vacant possession, or with a management contract with Park Hotel Group.

Mr Kishin said: "We have received unsolicited offers for this property from the region - from both high net worth individuals as well as hotel developers/owners."

He also lets on that another reason for launching an EOI exercise for the hotel is that "we are looking at a potential overseas acquisition".

The majority of rooms in the 20-storey hotel, which is directly connected to Farrer Park MRT Station, are about 22 sq m with some going up to 27 sq m.

The hotel is part of RB Capital's Farrer Square mixed development that received Temporary Occupation Permit in April.

It includes another tower, 12 storeys high, that houses 42 medical suites; the bulk of this space has been either sold or leased.

There is also about 3,584-sq-ft retail space on the ground floor of the project facing the Farrer Park MRT Station entrance, part of which has been leased to a restaurant and the rest is under negotiation.

The retail space may be offered for sale to the potential buyer of the hotel.

RB Capital developed the project on a 99-year-leasehold site that it clinched at a state tender in 2012, which means the balance lease on the site is 94 years.

Nihat Ercan, managing director, investment sales Asia at JLL Hotels & Hospitality Group, commented: "There is pent-up demand for Singapore real estate. But when you look at hotel transactions across the Asia-Pacific region, investment sales volume is down this year because of a lack of available products for sale in the market. Singapore is seen as a safe haven for long-term investment and capital appreciation.

"So against this backdrop, we expect to see strong interest for Park Hotel Farrer Park, especially in view of its availability for vacant possession, which is pretty rare."

He said the last substantial comparable hotel sale here would be that of Grand Park Orchard in 2013, which was also available with either vacant possession or a management agreement. Its S$1.16 billion sale price included a substantial retail component; indicatively, the 308 hotel rooms were priced at S$460 million (translating to S$1.5 million per key). The seller in that transaction, Park Hotel Group, continues to manage the hotel.

Market watchers, however, point out that Grand Park Orchard is freehold and in the prime Orchard Road shopping belt.

Some observers said another comparable one could look at would be The Westin Singapore in Asia Square in the financial district, which went for S$468 million or S$1.5 million per room in late 2013. The balance lease on the site at the time was about 93 years.

That said, a seasoned hotel consultant noted that these two benchmarks are for the "higher spectrum of five-star hotels due to their location, facilities and/or tenure, and one has to adjust for these various factors to estimate the price for this particular property".

Still, analysts note that the capital chasing hotel assets in Singapore has grown tremendously in the past few years.

Mr Ercan said the global marketing campaign for Park Hotel Farrer Park will commence in mid-July but a closing date for the EOI has yet to be determined.

RB Capital, set up in 2006, also owns the 442-room Holiday Inn Express Clarke Quay, which opened in 2014, and the upcoming 225-room InterContinental Singapore Robertson Quay, slated to begin trading in September.

The group also has a few hotels under development in Malaysia. RB Capital's portfolio also includes office assets such as the EFG Bank Building near City Hall MRT Station, RB Capital Building in Raffles Place and 33 Jalan Sultan Ismail in Kuala Lumpur. It also owns retail property assets.