Greenland Teases Potential S-REIT Investors with Promise of LA Hotel

What if you built a $3.24 billion portfolio of hotels in China and no one wanted it? Shanghai-based Greenland Group seems to be struggling with this question as the developer, which ranks as the mainland’s second-largest by sales, continues to troll for interest in a proposed Singapore-based hospitality REIT.

The state-owned developer’s apparent answer to its quandary, following remarks from representatives of its business partner, seems to be to throw in properties in Sydney and Los Angeles, after the original 19 hotel package of all-mainland, mostly second-tier-city assets failed to attract investor interest.

Greenland, together with its partner Amare Investment Management Group originally proposed the REIT in early March, but the deal has yet to receive approval from the Singapore government.

Spicing Up Some Unappetising Mainland Hotels

Amare CEO Alvin Cheng told the Singapore media last week that, “We are adding two more hotels making 21.” The two new hotels include one in Greenland’s Chinese five-star branded Primus Hotel on Pitt Street in Sydney, and a second in the company’s Metropolis project, which is currently under construction in downtown Los Angeles. Greenland had already added the Sydney property to the proposed REIT pipeline in late March, making this the second time that the developer has sweetened its offering in an attempt to spark investor interest.

While the 21 hotels, which include properties managed by Marriott, Intercontinental Hotels Group, and Starwood, are said to make up a pipeline of assets to be injected into the potential S-REIT, the investment vehicle would initially include just six properties – all of them in mainland China.

Serving Up a Sub-2% Investment

Cheng is said to have indicated that all six hotels are profitable and maintain average occupancy of 70 percent. However, potential investors who had reviewed the hotel portfolio’s financial details told Mingtiandi on condition of anonymity that the investment yield on the portfolio was less than two percent. During China’s building boom state-owned Greenland has built a set of Greenland Center large-scale mixed-use projects in second tier cities on the mainland, with hotel components of these developments now incorporated into the proposed REIT.

The Amare executive is said to have indicated that his company, along with Greenland, continues to discuss the potential for the hospitality REIT with regulators and bankers.