Swissotel Merchant Court Up For Sale

Source : The Business Times, August 29, 2008

Clarke Quay hotel on the market for $330m-$380m

After a holding period of barely two years, a fund managed by LaSalle Investment Management which bought Swissotel Merchant Court in the Clarke Quay area is putting the 476-room property up for sale.

The hotel, which stands on a site with a remaining lease of about 85 years, is being sold subject to a long-term management contract with Swissotel, part of Fairmont Raffles Hotels International.

The indicative price is understood to be in the $700,000 to $800,000 per room range, translating to an absolute quantum of around $330 million to $380 million.

The LaSalle Investment Management fund that currently owns the property bought it in late 2006 for about $250-300 million, it is understood.

The hotel, which stands on a site with a remaining lease of about 85 years, is being sold subject to a long-term management contract with Swissotel, part of Fairmont Raffles Hotels International.

Despite the softer visitor arrivals into Singapore lately, Jones Lang LaSalle Hotels, the sole marketing agent for the property, is confident that investors will find the property appealing given that Asia's hotel investment market is tightly held. 'Long-term investors don't take a weekly or monthly perspective, and the overall infrastructure being invested in Singapore gives them comfort on the long-term growth prospects here,' says Mike Batchelor, managing director, investment sales (Asia) at JLL Hotels.

The hotel will be marketed through an international tender that will close on Oct 3.

'Investor interest for the property is expected to be strong. We anticipate the property will attract interest from Europe and the Middle East as well as from the more traditional investment markets across North and South Asia,' Mr Batchelor said.

In May last year, CDL Hospitality Real Estate Investment Trust bought the nearby Novotel Clarke Quay in a deal that priced the 398-room hotel at $219.8 million or about $552,000 per room. Mr Batchelor argues that Swissotel Merchant Court's average room size of 30 square metres is larger than Novotel Clarke Quay's. Also, room rates are higher at Swissotel Merchant Court, which would allow for a higher pricing on the hotel. 'Historically, hotels in Singapore have been transacted at net yields ranging from about 4 per cent to 5.5 per cent,' he noted.

The LaSalle Investment Management fund reportedly bought Swissotel Merchant Court in 2006 from Fairmont Raffles Hotels International (owned by Kingdom Hotels International and Colony Capital), which had in turn acquired it as part of the entire hotel business of Raffles Holdings in 2005.

The hotel has three food-and-beverage outlets, conference facilities, an Amrita Spa complete with a fitness centre.

'The incoming purchaser will also have the opportunity to further enhance the asset through the redevelopment of the prime riverfront space overlooking Clarke Quay,' said JLL Hotels senior vice-president Tom Oakden.

'The hotel's ground floor space offers the ideal location for a new state-of-the-art indoor/out- door food-and-beverage facility, tying in well with plans to revitalise the riverfront precinct and new signature events such as The Singapore River Festival,' he added.