Published April 08, 2013

Park Hotel Grp seen seeking $1b for Orchard Rd hotel

Total price tag pegs hotel's value in the high-$1m range per room

By Kalpana Rashiwala

[SINGAPORE] Park Hotel Group, which announced a $300 million or $893,000 per room sale of its Park Hotel Clarke Quay to Ascendas Hospitality Trust over the weekend, is understood to have put some of its other hotels on the market as well.

Industry players say these include its two remaining Singapore hotels - Grand Park City Hall in Coleman Street and Grand Park Orchard (along with its retail podium Knightsbridge).

The group is said to be seeking more than $1 billion for the latter asset or a whopping sum in the high-$1 million range per room - which if achieved would reprice the Singapore hotel market, according to industry players.

The asset comprises the 308-room Grand Park Orchard and about 74,000 sq ft net lettable area of retail space - leased to retailers such as Abercrombie & Fitch, Topshop/Topman, Brooks Brothers, Tommy Hilfiger, Dickson Watch & Jewellery, and The Hour Glass.

Assuming the hotel rooms are priced at $2 million per room or totalling $616 million, the retail space would be valued at about $5,200 per square foot (psf) - based on a $1 billion price tag for the overall asset. Sources suggest Park Hotel Group could be thinking of pricing the retail space higher, at more than $6,000 psf, which would still reflect a record pricing in the high-$1 million range per hotel room.

However, Grand Park Orchard (with Knightsbridge) may not be the next asset the group may sell, suggests a hotel broker. Instead the Coleman Street hotel is more likely to be divested first. Word on the street is that a price of around $1 million per room is being sought for this property, which is on a site with a remaining lease of about 79 years.

"Why sell the jewel (Grand Park Orchard) first? Having achieved nearly $900,000 per room for the Clarke Quay transaction and if they can get $1 million per room or close to it for the Coleman Street hotel - both of which are leasehold properties - that would serve as another benchmark that will help push up the value of its freehold Orchard Road hotel," said the hotel broker.

Park Hotel Clarke Quay, with 336 rooms, stands on a site with a remaining lease of about 93 years.

Jones Lang LaSalle Hotels is said to have brokered its sale. Word on the street is that JLL Hotels has also been appointed to market Grand Park City Hall.

In Hong Kong, JLL Hotels is said to have conducted an expression of interest exercise recently for the group's hotel in Tsim Sha Tsui. A deal has yet to be announced.

Observers believe Park Hotel Group is open to selling its other hotels - in Wuxi, Kunming, Xian and Otaru (Japan).

The group, set up in Hong Kong in 1961 by three siblings of the Law family - Raymond, Lobo and Elizabeth - moved its headquarters to Singapore in 2005. It is thought that the planned sale of its hotels could be part of a restructuring of the family's business, with some of the senior-generation Laws looking to reap the fruits of their hotel investments from asset sales; leaving Allen Law, the group's Singapore-based CEO and son of Mr Lobo Law, to further develop the hotel management business he has minted in the past few years.

Last year, the group clinched contracts to manage two hotels in Singapore being developed by third parties. One, along Alexandra Road (next to Ikea), is being built by Chip Eng Seng; the other is a 300-room hotel above Farrer Park MRT Station in Little India being developed by RB Capital Hotels.

The sale of Park Hotel Clarke Quay to Ascendas Hospitality Trust comes with 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.