China group buys Grand Park hotel at record price

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singaporeproperty
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China group buys Grand Park hotel at record price

Post by singaporeproperty » Sat Aug 10, 2013 1:57 am

Published August 02, 2013

China group buys Grand Park hotel at record price

Ruby Resources said to have paid over $1.1b for the hotel and shops

By Kalpana Rashiwala


[SINGAPORE] Grand Park Orchard hotel including its retail podium Knightsbridge are said to have been sold at slightly over $1.15 billion. The freehold property is being sold by Park Hotel Group to Bright Ruby Resources, a Singapore-incorporated vehicle controlled by the Du family of China.

The buyer's diversified businesses include shipping, resources and property. Bright Ruby has acquired several commercial properties in Australia, though this is believed to be its first major investment in the Singapore real estate sector.

The cash-flush group has been doing due diligence for the acquisition of Grand Park Orchard for several weeks.

Seller Park Hotel Group is expected to continue managing the 308-room hotel.

Jones Lang LaSalle group is understood to have brokered the transaction.

Market watchers say the sale is the biggest ever private-sector property transaction in Singapore - excluding asset sales undertaken as part of real estate investment trust floats, and Government Land Sales and other public sector-originated deals.

The deal also sets a benchmark price for Singapore hotel rooms.

Besides the 308-room hotel, the transaction includes about 74,000 sq ft net lettable area of retail space.

Assuming the retail space is valued at $9,500 per square foot, the hotel would be valued at almost $1.5 million per room. A higher price of $10,000 psf for the retail space would translate to a hotel pricing of close to $1.4 million per room.

Either way, this busts the previous highest Singapore hotel pricing of around $1.1 million per room.

The price being paid by Bright Ruby is understood to translate to a net yield of just over 4 per cent.

Current average room rates at Grand Park Orchard are said to be around $300 per night, with occupancy rates of more than 90 per cent.

Knightsbridge has been leased to retailers such as Abercrombie & Fitch, Topshop/Topman, Brooks Brothers, Tommy Hilfiger, Dickson Watch & Jewellery, and The Hour Glass at monthly rents said to be in the $25-35 psf band.

Grand Park Orchard is the second property that Park Hotel Group has sold in Singapore.

The first was the Park Hotel Clarke Quay, which it sold in late March for $300 million or $893,000 per room to Ascendas Hospitality Trust.

That deal entailed a contract to lease back the hotel to a unit of Park Hotel Group for 10 years with an option for a further five-year term.

The rental income will comprise an initial fixed rent component of $11.5 million for the first year subject to an escalation of 3 per cent per annum and variable rent components tied to the hotel's performance.

The 336-room Clarke Quay property is on a site with a balance lease term of about 93 years.

The group is now left with one other hotel in Singapore, Grand Park City Hall in Coleman Street. A few potential buyers are understood to have studied the asset but a deal has yet to materialise.

Set up in Hong Kong in 1961 by three sibilings of the Law family - Raymond, Lobo and Elizabeth - Park Hotel Group moved its headquarters to Singapore in 2005.

Last year, the group clinched contracts to manage two hotels in Singapore being developed by third parties - one being developed by Chip Eng Seng next to Ikea in Alexandra Road, and the other by RB Capital above Farrer Park MRT Station in Little India.

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