Friday, May 30, 2008

Wheels Come Off Raffles Hotel Deal

Source : The Business Times, May 30, 2008

Proposed sale to consortium fails to materialise

The proposed sale of Raffles Hotel is off.

A spokeswoman for the consortium led by former Credit Suisse banker Mark Pawley that was to have bought the Singapore icon confirmed yesterday: 'We regret to say that the sale will not be completed as planned. The consortium is very disappointed with the current outcome as we had hoped for a win-win solution involving all parties.

'This would have involved an assured distinct identity for Raffles Hotel as a flagship for Singapore in the international hospitality industry and a rejuvenation of the hotel. We will continue to actively explore other opportunities to contribute to Singapore.'

She declined to give reasons for the deal not being completed, citing confidentiality clauses. The deal was reported to have been in the range of about $650 million and would have included the adjoining shopping arcade. But when asked about talk that there might have been some issues with the source of the money for the purchase, she replied strongly: 'The source of the money has always been the same. This has never been an issue and there is no basis for these allegations.'

On suggestions that the consortium might have faced funding problems, the spokeswoman said: 'We have the money. To say otherwise is baseless.'

BT understands that the completion of the sale was expected yesterday. The in-principle agreement for the deal was announced on May 8.

Fairmont Raffles Hotels International (FRHI), the owner of the landmark hotel and adjacent shopping arcade, was to have secured a very long-term management contract, reportedly for 40 years, to manage the hotel under its hotel management arm, Raffles Hotels & Resorts.

Colony Capital holds about 40 per cent in FRHI while Saudi Prince Alwaleed bin Talal's Kingdom Hotels International owns the rest.

FRHI's May 8 statement had said that similar to its past real estate transactions, any hotels sold would continue to be part of the company's hotel collection and managed under long-term management contracts. Industry observers say that this is crucial to FRHI's plans to spin off and float a hotel management arm.

'Most existing hotel groups would be reluctant to purchase a hotel with a long-term management contract from the seller. And frankly, Fairmont Raffles would jealously guard their proprietary management systems from any potential hotel owner that is also in the business,' a market watcher said.

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