SO/ Singapore hotel opposite Lau Pa Sat being sold at S$1.8m per room, say sources

This pricing is seen by some as setting a benchmark for the Singapore hotel market. Buyer Viva Land group owns the Robinson Point office building next door.

Apr 29, 2022

A NEW benchmark in per-room pricing may have been set in the Singapore hotel market: The 134-room SO/ Singapore, which sits opposite Lau Pa Sat in the Central Business District (CBD), is being sold for about S$1.8 million per key, making for a total price of some S$240 million.

Located at the corner of Robinson Road and Boon Tat Street and known as Sofitel So Singapore before it was rebranded, the property is on a site with about 49 years left on its lease.

The hotel is being sold by Royal Group, which clinched the landmark 60-year leasehold conservation building formerly known as Ogilvy Centre at a state tender in 2011. The group developed it into the hotel, which opened its doors in 2014.

The buyer is understood to be Viva Land group, which is said to be linked to Chinese-Vietnamese billionairess Truong My Lan, the founder of Van Thinh Phat Group, according to reports online. Viva Land also bought Robinson Point, a 21-storey freehold office building next to SO/ Singapore hotel, for S$500 million in a deal completed in 2021.

Market watchers say Viva Land’s acquisition of the SO/ Singapore may bear positively on the redevelopment potential of Robinson Point under the government’s CBD Incentive Scheme, which aims to spur owners of older, predominantly office buildings in some parts of the CBD to redevelop their properties into mixed-use projects. The idea is to inject a live-in population and liven up the area in the evenings and on weekends.

Before the latest SO/ Singapore transaction, the highest price for a Singapore hotel was the S$1.534 million paid per key for the 2013 sale of The Westin Singapore within the Asia Square development in Marina Bay. The Westin is on a site that had about 93 years left on its lease at the time.

Although the 999-year leasehold Ascott Raffles Place, a serviced apartment asset with a hotel licence, fetched slightly over S$2.4 million per key in 2019, some market watchers note that its units - starting at 48 sq m - are much larger than the usual hotel room sizes.

The head honcho of a major hospitality group in Singapore said: “Moreover, there was latent potential to convert the asset back into offices, so the price could have reflected this commercial-use value. So the S$1.8 million per key for SO/ Singapore can be considered a record for a Singapore hotel transaction, especially given such a short land lease tenure.”

Another hotel owner, who also spoke on condition of anonymity, recognised the prospects of the SO/ Singapore deal leading to an upward revision of hotel prices in Singapore on the back of a recovery in the hotel business and limited supply. However, a property consultant noted that the relatively high pricing could also be partly attributed to the asset being a heritage conservation property.

Said the head of the major hospitality group: “The Singapore hotel market is in recovery mode with the relaxation of border controls as well as the easing of Covid measures on the island. Most hotels here are no longer participating in the government quarantine programme, and their revenue per available room (RevPAR) for April is roughly 60 per cent of pre-Covid levels.

“Hotels are seeing some strong leisure traffic, mostly from the region. Corporate travellers are also starting to come back. For some hotels, average room rates are not far away from pre-Covid levels, but occupancy rates vary; some are at 50-60 per cent and others, around 70 per cent. Prior to the Covid outbreak, occupancy rates used to be in the mid-80s, though in some cases, they could reach the low-90s.”

Hotels are now playing host to short-haul travellers. "As the year progresses and Singapore’s neighbours also continue to relax their Covid rules, business from long-haul leisure travellers is expected to pick up as Singapore is part of a multi-country destination for European leisure travellers, for instance," he added.

Calvin Li, the head of transaction advisory services for the Asia-Pacific at JLL Hotels & Hospitality Group, said: “As demand has not yet fully recovered and hotels are facing a labour crunch, occupancies are expected to take longer to recover.

Eased border restrictions and local measures provide opportunities for revenue growth. However, operators have remained cautiously optimistic on profits, due to inflation, rising utilities expenses and manpower shortage.”

Some market watchers are upbeat about investment demand for Singapore hotels.

Said JLL's Li: "As a key gateway city in Asia, Singapore has always remained high on investors’ radar.... With low debt levels and government initiatives enabling hotel owners to maintain positive gross operating profit in 2021, we expect that trend to continue and anticipate limited distressed sales in 2022. Disposals are likely to be more strategic in nature.”

A row of 7 conservation shophouses at 20 Trengganu Street in Chinatown, with a balance leasehold tenure of slightly under 50 years, is also on the market.

The property belongs to Royal Group, which is controlled by Asok Kumar Hiranandani and his son, Bobby.

https://www.businesstimes.com.sg/rea...om-say-sources