Fairmont Raffles Hotel Int’l sells its stake in Raffles Hotel to ex-Credit Suisse banker

THE Grand Dame of Singapore will be getting a new master — yet again.

Fairmont Raffles Hotel International — controlled by Saudi Arabian billionaire Prince Alwaleed bin Talal and United States-based private-equity company Colony Capital — is selling its stake in the 120-year-old Raffles Hotel.

The buyer is a group led by a former investment banker of Credit Suisse Group, Mr Mark Pawley, Fairmont said in a statement yesterday.

While it did not disclose the price or name the other buyers, The Business Times reported yesterday that the group would pay about $650 million for the acquisition.

The transaction is part of the company’s strategy to “monetise” its investments in hotels and real estate and will provide the company with “significant capital for future growth”, it said.

The 103-room Raffles Hotel will continue to be part of the Fairmont Raffles’ collection of hotels and the company will continue to run the property through a management contract, the statement said.

This is the second time in less than three years that the iconic hotel — which is gazetted as a national monument — has changed hands. In 2005, Colony bought the hotel and the adjacent shopping arcade as part of the entire hotel business of the then-listed Raffles Holdings for a total of $1.7 billion.

According to BT, Colony later merged these assets with Fairmont Hotels and Resorts after Fairmont was acquired by Colony and Prince Alwaleed’s Kingdom Hotels International to create a single hotel enterprise, Fairmont Raffles Hotel International.

Source : Today - 9 May 2008

THE Royal Peacock Hotel in Chinatown’s Keong Saik Road is likely to be sold soon - with a potential price tag of about $38 million.

The owners of the boutique hotel called for expressions of interest, which closed on Wednesday, after attracting at least five bidders.

The keen interest underlined rising interest in the hotel sector in Singapore, analysts said.

The 74-room hotel’s marketing agent, Cushman & Wakefield, said the property’s guide price is $38 million, or more than $500,000 a room.

While the wider property market is quiet, as many buyers and sellers are remaining on the sidelines, the hotel sector offers a different picture.

With rising tourist arrivals and room rates, investors are more than happy to pay ‘tomorrow’s price’ for a hotel located in the city centre, said Mr Donald Han, the managing director of Cushman & Wakefield in Singapore.

A five-star hotel typically sells for $700,000 to $800,000 a room, he said.

The bidders for the Royal Peacock, most of whom are foreigners, are not existing hotel players in Singapore, he said.

The hotel, which opened in 1995, is owned by Grace International, the local property offshoot of a family trading business based in Indonesia. The firm also owns The Scarlet, an 84-room boutique hotel in Erskine Road that opened in late 2004. This is set in 13 two-storey, restored shophouses built in 1868 and a four-storey shophouse.

The Royal Peacock occupies 10 restored shophouses in Keong Saik Road, which was once famous as a red-light district.

The rooms, ranging from 18 sq m to 30 sq m in area, boast period touches such as antique gilt-framed mirrors, plush purple carpets and red walls. They cost between $105 and $185 a night.

The eventual buyer will be looking to enjoy rising room rates, analysts say.

Room rates in Singapore have been rising steadily after staying low for a long period. Average rates are now hovering around $240 to $250, up from just $120 in 2004.

Mr Han said the outlook for the hotel industry remains upbeat, and Cushman & Wakefield is in the process of being appointed as the marketing agent for two other hotels over the next two months. These hotels, with fewer than 200 rooms, are also well-located.

Source : Straits Times - 9 May 2008

SINGAPORE-LISTED Hotel Properties Limited (HPL) has entered into a joint venture with a Libyan state-owned company to develop hotels and tourist resorts in Libya.

And the first project of its partnership with the Social Security Fund Investments Company (SSFI) is a US$30 million (S$41 million) project to refurbish a top hotel in the country.

The tie-up, on a 50-50 basis, was announced on Wednesday night by Mr Stephen Lau, HPL’s executive vice-president, before they signed a memorandum of understanding (MOU).

He said: ‘With its superb Mediterranean climate, 1,800km of pristine coastline and desert attractions, as well as its heritage sites,  Libya is poised to be an exciting new tourist destination.’

Mr Lau is part of a business delegation accompanying Senior Minister Goh Chok Tong on a four-day visit to Libya which ended yesterday.

The SSFI is owned by the Libyan Pension Fund and has been investing in hotels for more than 25 years, said its board chairman Issa Tuwegiar. It has interests in some 23 hotels and resorts around the country.

The Libyan Pension Fund, to which workers have to contribute 15 per cent of their pay, is worth three to four billion Libyan dinars (S$3.5 billion to S$4.6 billion), he added.

As for its first project, Mr Lau said the refurbishing of the 1970s-era Grand Hotel in Tripoli is expected to be completed in 18 months’ time.

Its 320 rooms will be merged into fewer but larger rooms to cater to more upmarket travellers and businessmen, he added.

Explaining the birth of the partnership, Dr Tarek Elgehmi, executive manager of SSFI, said it had been looking for a partner for some time to upgrade its hotels to five-star standards.

Its top executives met HPL’s officials when they visited Libya as part of a business delegation. Their subsequent visits to HPL properties in Singapore and Asia paved the way for the tie-up.

The signing of their MOU took place on the sidelines of a networking dinner jointly organised by the Singapore Business Federation and the Libyan Businessmen Council here.

Speaking at the dinner, SM Goh urged Libyan companies to ‘look east’ - towards opportunities in Asian countries such as Singapore, Malaysia, Indonesia, Thailand and China.

Explaining his call, he noted that a shift in the global distribution of wealth is gradually taking place, moving away from Europe towards Asia.

He also urged Libyan companies to go through Singapore as it has a good airport and sea port, and is well-placed to serve as interlocutor.

Source : Straits Times - 9 May 2008

Creation of JV with that country’s state pension fund manager is on cards

HOTEL Properties Ltd (HPL) has forged an agreement with Libya’s state pension fund manager to rebuild and refurbish hotels in the country, a deal achieved partly thanks to ‘middleman’ Philip Yeo.

Stephen Yeo, executive vice-president of HPL, said on Wednesday evening at a press conference here that many details have yet to be firmed up. But on the cards is the creation of a 50-50 joint venture company with Libya’s Social Security Fund Investments Company (SSFI), which manages three to four billion Libyan dinars (S$3.5 to 4.7 billion) in assets, to refurbish Tripoli’s Al Kadir hotel to five-star standard for US$30 million.

Other projects include the building of a 50-storey mixed-use tower in Tripoli for around 150 million euros (S$317.5 million), and the redevelopment of a hotel in Benghazi city, according to SSFI chairman Issa Tuwegiar. SSFI manages 23 hotels, resorts and tourism villages in Libya on behalf of Libya’s pension fund.

Hexagon Development Advisors - a consultancy headed by the former EDB and A*Star chief Philip Yeo - helped Ong Beng Seng’s HPL clinch the deal. Mr Yeo is now chairman of Spring Singapore.

The main shareholders of Hexagon - a company set up in February 2007 - are Reef Enterprises, believed to be an HPL outfit, and Ellington Investments, which focuses on energy and power industries. Through his own firm P*Yeo Investments, Mr Yeo has shares in Hexagon. The consulting firm’s senior people include other former EDB officers.

Mr Yeo and Mr Ong are understood to have visited Libya more than once in the past year and have built up a relationship with the Libyan Economic Development Board, a government body inspired in part by its Singapore counterpart.

A joint HPL-Hexagon delegation visited Libya last September to discuss business deals, according to David Ban, Mr Ong’s associate and a consultant at Hexagon who was present at the signing of a memorandum of understanding on Wednesday night.

SSFI’s Mr Tuwegiar said HPL’s expertise in tourism and hospitality is particularly welcome and the agreement was secured quickly, within a few months. HPL has interests in 23 hotels worldwide and has developed numerous luxury residential properties. It also owns shopping and commercial properties plus the Hard Rock cafe franchise in the Asia-Pacific region.

Yesterday morning, Senior Minister Goh Chok Tong met Libyan leader Colonel Muammar Gaddafi for what Mr Goh called an ‘illuminating discussion’ lasting almost an hour.

Mr Goh told reporters that he was interested in finding out the future direction of the Libyan economy. ‘Unless you are sure of the clarity of the direction of the Libya economy it will be a bit difficult for us to consider investing in the economy in the big way,’ he said.

Afterwards, Mr Goh met Libyan Prime Minister Al Bugdady Ali Al-Mahmoudi and witnessed the signing of a memorandum of understanding to further economic cooperation between the two countries. Singapore businessmen remain worried that shifting rules and regulations in Libya could hurt their investments and Mr Goh said he had transmitted these concerns to the Libyan leaders.

Libya has only recently come out of international isolation after United Nations and US sanctions were lifted.

The country has large reserves of oil and gas, as well as 1,800km of coastline and many heritage sites, including Leptis Magna, an impressive Roman ruin that is largely unexcavated.

This has led to a rapid influx of foreign businessmen and tourists, which the country’s infrastructure is struggling to cope with. Libyan government officials say they may need as many as 40,000 more hotel rooms to meet the surge in demand, as there are only about 12,000 rooms at present. Only one hotel is said to be of five-star standard and even then its facilities - for example, Internet access - are still patchy.

Source : Business Times - 9 May 2008

RAFFLES Hotel is being sold - as readers of BT were told yesterday. Under an in-principle agreement announced yesterday, Fairmont Raffles Hotels International (FRHI) will sell the iconic hotel to a consortium led by former Credit Suisse investment banker Mark Pawley.

‘Completion is expected to take place at the end of May 2008,’ FRHI added in its statement.

Raffles Hotels & Resorts, owned by FRHI, will continue to manage the hotel under a long-term management contract.

The pricing for the transaction and details of consortium members were not disclosed.

While he was head of Asian Real Estate, Gaming and Lodging business at Credit Suisse Investment Banking in Asia, Mr Pawley was involved with the $1.7 billion sale of the entire Raffles Holdings’ hotel portfolio - including Raffles Hotel in Singapore - to US-based private equity firm Colony Capital in 2005.

Colony later merged that portfolio with Fairmont Hotels & Resorts’ assets to create FRHI.

Colony is today understood to hold about 40 per cent in FRHI while Saudi Prince Alwaleed bin Talal’s Kingdom Hotels International owns the rest.

BT reported yesterday that a preliminary agreement had been inked on the sale of Raffles Hotel and the adjoining shopping arcade and that the price is believed to be in the ‘mid-$600 million range’. The report had also said that the buyer was believed to be a family trust, most likely linked to a European family.

Market watchers yesterday suggested the trust is likely to be a member of the consortium.

Raffles Hotel, Singapore, is just the latest asset FRHI/Colony have sold from the former Raffles Holdings portfolio acquired in 2005.

Last year, FRHI sold 100 per cent equity interest in its two Cambodian hotels, Raffles Hotel Le Royal in Phnom Penh and Raffles Grand Hotel d’Angkor in Siem Reap, to Kingdom Hotels Investments for US$36.4 million and at the same implied enterprise value. It also sold Swissotel Sydney last year.

In late 2006, FRHI sold Swissotel Merchant Court in Singapore to a fund managed by LaSalle Investment Management at a price reported to be in the $300-400 million range.

In its statement yesterday, FRHI said: ‘As part of FRHI’s ongoing business strategy to build a brand-focused global hotel company, FRHI continues to pursue opportunities to monetise its hotel real estate investments.

‘These asset sales are purely real estate transactions that provide an opportunity to realise the value of our very successful investments and provide us access to significant capital for future growth of our management companies.’

‘Similar to FRHI’s past real estate transactions, any hotels that are sold will continue to be part of the company’s hotel collection and will be managed under long-term management contracts.’

Source : Business Times - 9 May 2008

Consortium led by banker may buy hotel and adjoining arcade for $650m

MYSTERY buyers are set to acquire the historic Raffles Hotel for more than treble the $200 million it sold for just three years ago.

The 121-year-old hotel and the adjoining shopping arcade are changing hands again after a consortium led by a Singapore-based banker agreed to buy the property, the American and Middle Eastern owners announced yesterday.

The eye-popping price tag is about $650 million, The Business Times (BT) reported yesterday.

The dramatic jump in value of the heritage property is the result of Singapore’s booming hotel industry, market watchers say. Average room rates are now about $240, way up from $136 in 2005.

The identities of the buyers are not yet clear, though the consortium is being led by prominent former Credit Suisse banker Mark Pawley, who declined to comment yesterday.

The BT cited unnamed sources as saying the consortium might be linked to a European family.

As a Credit Suisse banker, Mr Pawley helped arrange the $1.7 billion sale of the hotels of Raffles Holdings to US-based Colony Capital in 2005. The hotel portfolio included Raffles Hotel and the adjacent shopping arcade - valued at $200 million then.

Mr Pawley is chief executive of Singapore-based Oxley Capital Group, a private investment house focusing on real estate and private equity. Oxley told Reuters yesterday that it was not the buyer.

After Colony bought Raffles Holdings, it combined the hotels, including Raffles Hotel, into Fairmont Hotels & Resorts, which it had also acquired.

Yesterday, Fairmont Raffles Hotels International (FRHI) announced that it had reached an in-principle agreement with the consortium led by Mr Pawley to sell its stake in Raffles Hotel.

The deal is expected to be completed by the end of the month, the firm - controlled by Saudi Arabian billionaire, Prince Alwaleed bin Talal - and Colony said in a statement.

FRHI said it continues to look for ways to ‘monetise its hotel real estate investments’.

These asset sales, it said, are ‘purely real estate transactions that provide an opportunity to realise the value of our very successful investments’.

Staff and guests at Raffles Hotel are unlikely to be directly affected by the change.

‘Similar to FRHI’s past estate transactions, any hotels that are sold will continue to be part of the company’s hotel collection and will be managed under long-term management contracts,’ it said.

The BT reported that the sale would come with a 40-year management contract for Raffles Hotels and Resorts, citing unnamed sources.

It also reported a sale price ‘in the mid-$600 million range’. The 999-year leasehold Raffles Hotel has 104 suites. The shopping arcade has a 99-year lease.

Mr Donald Han, Cushman & Wakefield’s managing director, said the hotel sale price would exceed $1 million per room, after taking out the retail component. Generally, a five-star hotel sells for about $700,000 to $800,000 a room.

Back in 2005, concerns were raised about securing the legacy of the hotel, which is a part of Singapore’s history and heritage. But the parties involved have said the hotel’s legacy remains intact.
 
Source : Straits Times - 9 May 2008

Fairmont Raffles Hotels International said on Thursday that it will sell its stake in Singapore’s landmark Raffles Hotel to a consortium led by ex-Credit Suisse banker Mark Pawley.

Fairmont, which is controlled by Saudi Prince Alwaleed bin Talal and US private equity firm Colony Capital, did not disclose the selling price, although Singapore media said the figure was around $650 million (US$471.7 million).

Fairmont did not name the members of the consortium. Mr Pawley is CEO of Singapore-based private equity firm Oxley Capital that specializes in real estate, though an executive at Oxley told Reuters the firm was not the buyer.

The Business Times cited unnamed sources as saying the overseas buyer was linked to a European family.

Colony bought the 121-year-old hotel for about $200 million in 2005 as part of a bigger $1.7 billion acquisition of the Raffles Holdings hotel chain, the Business Times said.

Raffles Hotel, a Singapore national monument, was founded in 1887 by four Armenian brothers. In its colonial heyday, its guests included luminaries such as authors Joseph Conrad, Rudyard Kipling and Somerset Maugham.

Fairmont, which operates 88 hotels globally under the Raffles, Fairmont and Swissotel brands, said in a statement it will continue to manage the Singapore hotel after the sale. — REUTERS

Source : Business Times - 8 May 2008

Hotel Properties Limited (HPL) said the company and the Social Security Fund Investments Company (SSFI) have signed a memorandum of understanding to explore the formation of a joint venture company for the development of hospitality and tourism projects in Libya.

HPL said that with its superb Mediterranean climate, 1,800 kilometres of pristine coastline and desert attractions, as well as its heritage sites, Libya is poised to be an exciting new tourist destination.

SSFI has been established in Libya by decree of the General Peoples Committee and owned by the Libyan Pension Fund. SSFI has been entrusted with the management and investments of assets and funds of the Pension Fund of Libya.

SSFI, which manages 23 hotels, resorts and tourism villages in Libya on behalf of the Libyan Pension Fund, intends to build an iconic mixed-use 50-storey tower in Tripoli and another 3 high-rise towers and a modern shopping mall in Benghazi.

Other sizable and significant investment projects are also in the pipeline. — BT newsroom

Source : Business Times - 8 May 2008

Preliminary deal for hotel, arcade said to be inked for about $650m

Raffles Hotel is believed to be changing hands again, along with its adjoining shopping arcade. The overseas buyer is understood to be a family trust, most likely linked to a European family.

BT understands that a preliminary deal has been inked for the sale and that the price is in the ‘mid-$600 million range’. However, the transaction has not been completed yet.

Raffles Hotel: The overseas buyer is said to be a family trust likely linked to a European family. The deal comes with a 40-year management contract for Raffles Hotels & Resorts, sources say

The deal comes with a 40-year management contract for Raffles Hotels & Resorts, which currently manages the hotel, sources say.

The asset is being sold by a unit of Fairmont Raffles Hotels International (FRHI), which is controlled by Saudi Prince Alwaleed bin Talal’s Kingdom Hotels International and US-based private equity group Colony Capital.

Colony bought the Raffles Hotel and adjacent shopping arcade as part of the entire hotel business of the then-listed Raffles Holdings in 2005 for a total $1.7 billion.

It later combined these assets with the portfolio of Fairmont Hotels & Resorts following the acquisition of Fairmont by Kingdom Hotels and Colony to create a single hotel enterprise, Fairmont Raffles Hotels International, with more than 85 hotels around the globe under the Raffles, Fairmont and Swissotel brands.

Prince Alwaleed holds the majority stake - believed to be about 60 per cent - in Fairmont Raffles Hotels International, with Colony owning the rest.

BT understands that the Raffles Hotel and shopping arcade were valued at about $200 million in the $1.7 billion portfolio acquired by Colony in 2005.

Raffles Hotel, with 104 suites, is on a 999-year leasehold site while Raffles Hotel Arcade next door is on a site with 99-year leasehold tenure starting Dec 15, 1988.

The hotel, which celebrated its 120th year anniversary in September last year, is gazetted a national monument.

It was built by the Sarkies Brothers in 1887 on the site of a 10-room bungalow.

The hotel expanded quickly and soon became the stuff of legend, mentioned in the works of Somerset Maugham and Joseph Conrad.

In the late 1980s, a massive restoration of the hotel, which has a site area of about 190,000 sq ft, was undertaken.

At the same time, a shopping arcade was built next door on a site with a land area of about 108,000 sq ft.

The three-storey arcade has a built-up area of about 306,750 sq ft. The hotel re- opened in September 1991.

Market watchers reckon that the $650 million or so price tag at which the asset is changing hands under the latest deal reflects not just rising hotel values on the back of increasing hotel room rates over the past two years, but also the highly successful food & beverage concepts Raffles Hotel boasts - such as Doc Cheng’s, Tiffin Room, Empire Cafe and Long Bar.

It also has a ballroom and a suite of meeting rooms, plus Jubilee Hall, a Victorian-style theatre playhouse.

Raffles Hotel is understood to have been sold through a privately-conducted competitive bidding process.

Source : Business Times - 8 May 2008

International hotelier Golden Tulip Hospitality Group has chosen Thailand as the centre of its one billion euro (S$2.11 billion) South-east Asian expansion plan under which it will open up to 50 properties over four years.

The Swiss-based company, which now operates 324 hotels in 54 countries including China and India, opened its Golden Tulip South-east Asia office in Bangkok last October.

Regional operations are based in the city due to its strategic location, and because more than 20 properties will be opened in Thailand.

‘We have over a billion euros committed to this expansion in the next four to five years,’ said Golden Tulip chief executive officer and president Hans Kennedie. ‘We plan to create around 5,000 jobs in the region in that time.’

The first properties will be in Thailand, Cambodia, Vietnam, Indonesia and Malaysia, before others are opened elsewhere in the region, he said.

The economy-business Tulip Inn brand will spearhead the growth plan by targeting Asian travellers in the region’s key urban centres, and will represent 60 per cent of the company’s South-east Asian portfolio.

Room rates will range between US$105 and US$130.

The company has taken this initiative because of ’saturation’ at the luxury end of the region’s hospitality market, said Golden Tulip’s South-east Asia managing director Mark van Ogtrop.

‘We want to enter the economy business segment because that is not saturated yet,’ he said. ‘There is not much competition, plus there are much healthier returns on investment with this model.

‘Our unique selling point will be a heavy emphasis on high technology. All rooms will feature Wi-fi, personalised music access, VOIP and more.’

The four-star Golden Tulip and the five-star Royal Tulip brands will also be launched, accounting for 35 and 5 per cent of the portfolio respectively.

The company will partner local developers in each territory to accelerate growth.

‘We are a marketing and management company,’ said Mr van Ogtrop. ‘We see that the fastest and best way to grow is to leave the development to local experts.’

The first Tulip Inn is scheduled to open in Bangkok this July, followed by other properties in the city, as well as in Phuket and Koh Samui, plus another in Phnom Penh, Cambodia.

The company plans to open hotels in Singapore, but high land prices and short-term leases are creating a temporary barrier to investment.

‘You can’t just walk into Singapore and do a deal,’ said Mr van Ogtrop. ‘Real estate is typically expensive there. You are also often dealing with very short government leases. If you want to invest in a hotel, you can’t use a short-term lease model.

‘The opportunity is in finding a property to acquire, then you don’t have those barriers,’ he said, adding that the group is in talks and hopes to make an announcement soon.

The company also plans to lure investors by launching a Golden Tulip South-East Asia Capital property investment fund later this year.

Source : Business Times - 1 May 2008