http://www.businesstimes.com.sg/sub/...83940,00.html?

Published April 16, 2011

We buy one prime asset every year: Riady


THE $300 million purchase of Crowne Plaza Changi Airport is in line with Overseas Union Enterprise's (OUE) strategy of acquiring at least one prime asset every year, according to the listed property and hospitality group's executive chairman Stephen Riady.

'Ever since we acquired OUE in 2006, we have acquired one prime or super-prime asset every year,' he said. 'Our strategy is to acquire such assets, then enhance them so that they can deliver a sustained flow of good-quality income for the group. This is a strategy which has boosted OUE's operating income by more than three-fold since 2009.'

OUE's operating profit jumped to $78.1 million last year, from $22.3 million in FY2009. Its net profit for 2010 was $772.5 million - reversing a net loss of $92.2 million for 2009 - as earnings were boosted by a $664.7 million fair-value gain on its investment properties.

Since Mr Riady's family-owned Lippo group bought the former Lien-family controlled property company for $1.8 billion - a purchase which delivered the iconic One Raffles Place which was the headquarters of the former Overseas Union Bank - OUE has gone on to buy a slew of assets, which include the Twin Peaks at Leonie Hill ($600 million) and DBS Towers at Shenton Way ($870 million), in recent years.

In keeping with its strategy of adding value to its acquired assets, Mr Riady said OUE was developing a 38-storey office tower next to One Raffles Place, and redeveloping the former Overseas Union House (home of the former Neptune Restaurant) at 50 Collyer Quay into 500,000 sq ft prime office and commercial space called OUE Bayfront.

About two-thirds of that property, which obtained its temporary occupation permit in January, has been leased out to tenants, including Bank of America Merrill Lynch.

OUE yesterday announced it had secured a loan facility for $460 million from OCBC Bank and HSBC Bank to refinance an existing facility for the redevelopment of OUE Bayfront, Change Alley Aerial Plaza Tower and Change Alley Link Bridge.

The company intends to start asset enhancement works on DBS Towers by 2013 to boost rental income.

Both OUE Bayfront and DBS Towers are expected to contribute to the group's earnings in 2011.

Almost two years ago, it completed the $200 million upgrading of the Mandarin Orchard gallery into a spanking new mall annex. OUE's Meritus Hotels & Resorts manages and operates Mandarin Orchard and its sister hotel, Marina Mandarin.

Although the company's portfolio consists of offices, hotels, some retail space and a small portion of residential property, Mr Riady said OUE's core priorities were office and hotels.

'Our focus is Singapore where we have 97 per cent of the assets. We are particularly bullish on the hospitality and office property market here,' Mr Riady said.

He said that over the next five years, OUE would continue to add more prime assets to its portfolio.

'We will continue implementing our asset acquisition strategy by adding at least one new asset every year to OUE's portfolio. But we won't just buy and keep. We will continue to add value and enhance the assets we acquire. The aim is to build strong recurrent income stream.'

Turning to his latest acquisition, Crowne Plaza Changi Airport, he said this was an iconic hotel with great potential.

'Right now Terminal 3 is under-utilised, but as the tourist numbers continue to climb, it will fill up just like Terminals 1 and 2. That is why we see the need for 200 additional rooms.'

He also pointed out that such hotels were a rarity on the market at the moment.

'Because of the tourism boom in Singapore, there is absolutely no willing seller for good-quality four-star or five-star hotels.' He added that the Crowne Plaza was a very unique and architectural icon at the airport.

'We are very pleased to sign this transaction.'