Singapore Property News

THE Riady-owned Overseas Union Enterprise (OUE) has purchased the 320-room Crowne Plaza Changi Airport from listed LC Development and its partner LaSalle Asia Opportunity II SARL for $299.5 million.

 

Under a deal signed yesterday, OUE's wholly owned unit Imperial Development Pte Ltd will pay LC Airport Hotel Pte Ltd – which is equally and jointly owned by LC Development and LaSalle Asia – $293 million for the hotel and a further $6.5 million for net current assets on the books.

 

OUE said it would build an additional 200 rooms for $37 million at the hotel.

 

The acquisition increases OUE's Singapore hotel room count by 32 per cent to 2,146. The company already manages two five-star hotels here – the Marina Mandarin and the Mandarin Orchard – under its Meritus Hotels & Resorts franchise.

 

Speaking to BT yesterday, OUE's executive chairman Stephen Riady said the purchase was in line with his group's strategy of acquiring prime assets, then enhancing their value to ensure a stream of good-quality and sustainable recurrent income.

 

'If you look at our record over the years, we have acquired super prime assets and added value to them in order to boost yields,' Mr Riady said.

 

'In the case of the Crowne Plaza, this is a unique and iconic hotel set next to Terminal 3 at Changi airport. Because of the tourism boom in Singapore, there is absolutely no willing seller for any good four-star or five-star hotel here. So we are very pleased with this transaction, and believe it is of great value.'

 

Indeed, given the purchase price and the cost of the additional rooms, a 520-room hotel works out to some $635,000 per room, which is a significant discount to the going price of over $850,000 per room for similar class hotels elsewhere on the island.

 

Crowne Plaza Changi Airport enjoys an occupancy of 89 per cent. Mr Riady said he is confident that will be sustained or even rise as tourism arrivals in Singapore rise by over 50 per cent in the next five years to some 17 million.

 

Meanwhile, LC Development will rake in a net gain of $9O million (or almost 9 cents per share) from the sale. As at end-December 2010, it carried this asset in its book at $23.9 million.

 

In an announcement yesterday, LC Development said its 50 per cent stake of the sale proceeds, if completed at June 30, 2010, would represent 90.6 per cent of its market capitalisation.

 

It would also have boosted LC Development's NTA per share to 29.89 cents, from 21.13 cents, and lift the company's bottomline from a loss of 0.18 cents to a profit of 8.58 cents per share. The sale will also wipe out all debt from the company's books.

 

The Civil Aviation Authority of Singapore granted LC Airport Hotel the licence to develop the 64,831 sq ft parcel beside Changi Airport's Terminal 3 in March 2006. The lease on the land expires in August 2083.

 

LC Development was obliged to sell its 50 per cent interest in the airport hotel after LaSalle Asia insisted on exercising its 'drag-along rights', which the two partners signed in 2007. Under that deal, if one partner sells out, the other is obliged to do so as well.

 

The completion of sale in May is subject to the approval of Changi Airport Group, the corporatised entity which is the lessor of the land and operator of the airport.