Hong Kong-based real estate investment firm Far East Consortium International has appointed Derek Cheung as chief executive officer of a hotel trust that the group plans to list in the coming months.
Cheung, who started his new role as head of the manager of FEC Hospitality REIT today, told Mingtiandi that Far East, which owns hotels and serviced apartments in 27 cities under the Dorsett brand, plans to spin off a set of hotel assets from the Hong Kong-listed residential and hotel developer’s holdings for listing on a separate stock exchange which has yet to be specified.
“Our goal is to make it the largest hospitality REIT in the world,” Cheung said. Far East already owns 10 Dorsett properties in Europe, in addition to assets in Australia, Greater China, Southeast Asia and Japan.
Now based in Singapore after relocating from Hong Kong, the hotel investment veteran said that FEC Hospitality REIT will leverage opportunities to grow through mergers and acquisitions, while adding that rising valuations for real estate assets globally would create opportunities for the trust to build an attractive portfolio.
“The REIT’s global mandate will make it easier to acquire yield accretive assets and substantially diversify any geographical risk,” Cheung noted.
Listing Expected to Raise up to S$500M
Although the exact composition of the REIT has not yet been disclosed, FEC confirmed just over two months ago that the company was considering the “listing of certain hospitality properties” in Australia, Singapore, Malaysia and the UK.
The listing is expected to raise up to S$500 million ($360 million), according to sources cited by Bloomberg, with the potential sale of trust units backed mainly by hotels under FEC’s Dorsett Hospitality brand occurring as soon as the first half of 2020.
FEC, which has a market cap of HK$8.8 billion ($1.1 billion), operated 28 hotels with about 7,500 rooms as of March last year, with another 15 hotels under development.
New Century REIT Boss Moves to SG
Cheung is taking up his new appointment after seven years as chief executive officer of Hong Kong-listed New Century Real Estate Investment Trust, a position he officially vacated just yesterday.
Sponsored by Hong Kong-listed New Century Group and US alternative asset manager Carlyle Group, New Century REIT was the world’s first China-focused hotel REIT to achieve a stock market listing, as well as becoming the first Hong Kong-listed REIT to invest in a western real estate market, when it acquired the Holiday Inn Eindhoven in the Netherlands during 2016.
Under Cheung’s stewardship, New Century REIT just five months ago disposed of that Netherlands asset to Dutch private equity firm Somerset Capital for €39.8 ($43.2 million), earning the REIT a mark-up of more than 50 percent over what it paid to acquire the asset.
New Century REIT, which now consists of a portfolio of six upscale hotels in mainland China, had acquired the Netherlands property for €25.75 million, with market sources indicating that the REIT achieved an internal rate of return of around 40 percent on the disposal.