Thursday, June 26, 2008

UOL To Invest Up To $500m In Overseas Hotels

Source : The Business Times, June 26, 2008

It anticipates huge growth in the hospitality industry

SINGAPORE developer UOL Group said yesterday that it will spend up to $500 million over three years acquiring hotels in the United States, Australia and throughout Asia, in expectation of a boom in global travel.

'We see tremendous growth in the hospitality industry, especially from the Asia-Pacific where there is a growing group of new rich, and they all want to see the world,' said UOL's president and chief executive officer Gwee Lian Kheng at the Reuters Global Real Estate Summit in Singapore.

'Budget air travel is also growing, and we think that with all these factors, tourism in the world will continue to boom,' said Mr Gwee, whose firm owns the Pan Pacific global hotels brand and who also heads hospitality group Hotel Plaza.

The firm, which paid US$165 million in January for a Singapore residential land site, sees continued strength in the sector, even as first-quarter private home sales in Singapore dipped to a five-year low amid fears of a global recession.

'If you tell me that the market is dead, I disagree because we're still a fairly strong economy compared with other parts of the world,' said Mr Gwee, a 35-year property veteran.

UOL, whose largest shareholders are Singapore's number-two bank United Overseas Bank and its chairman Wee Cho Yaw, has a market value of about US$2 billion.

It is among the few developers to have continued to put up Singapore residential projects for sale this year, even as most large builders delayed sales to wait out a moribund market.

The firm's luxury Nassim Park project, launched in early June, is now 55 per cent sold and at average prices of about $3,000 per square foot, Mr Gwee said, but he acknowledged that sales have slowed significantly compared to a year ago.

UOL has moderated its asking prices due to weaker demand, but has been able to maintain its profit margins at well over 15 per cent, he said, adding that UOL will for the next three years focus on the low and mid-tier segments where demand is expected to be stronger.

'Prices in the luxury market could see a slowdown, but the mid and lower-tier will still go up, partly because of all the people who sold their homes en bloc last year,' Mr Gwee said.

Thousands of Singaporeans collectively sold their apartment blocks to developers in a ferocious land-grab over the past two years in en bloc sales, and some developers believe these sellers have yet to purchase replacement homes.

UOL now has about 80 per cent of its investments in Singapore and the remainder overseas, and is also looking abroad for growth but prefers to do so defensively, Mr Gwee said.

Its top pick now is China, particularly its second-tier cities. The firm is also looking to acquire distressed US assets such as offices or hotels at a good price, but will wait for uncertainties caused by the US sub-prime mortgage crisis to clear up before doing so.

'Right now it's still too early. The sub-prime issue is still not resolved and there's still a lot of currency risk when you buy overseas, so we'll let all these clear up first,' Mr Gwee said. -- Reuters

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