CapitaLand’s Ascott in Due Diligence to Buy Gaw Singapore Hotel

A lodging unit of CapitaLand Group is in due diligence to buy a hotel in Singapore’s Bugis area from Hong Kong-based Gaw Capital Partners at a price potentially 28 percent less than the company’s target in a marketing exercise a year ago, Mingtiandi has learned.

Industry sources confirmed that a lodging unit of CapitaLand is in the process of acquiring the 308-key Hotel G Singapore at around S$230 to S$240 million ($170 to $177 million), compared to Gaw’s initial asking price of S$320 million in 2022, as trades of Singapore assets have slowed in the face of rising interest rates.

Both Gaw Capital and CapitaLand declined to comment on the reported transaction, however, a representative from Ascott Ltd told Mingtiandi on Thursday that the company “constantly evaluate opportunities to optimise returns [and will] make an announcement should there be a material transaction.”

The discussions for the budget hotel at the intersection of Middle Road and Bencoolen Road in the rapidly gentrifying Bugis area come as CapitaLand Investment, which operates lodging under its The Ascott Ltd unit and controls the manager of CapitaLand Ascott Trust, on Thursday reported that its revenue from lodging management rose 31 percent in the first nine months of 2023, compared to the same period last year.

Co-Living Future Foreseen

Should CapitaLand acquire Hotel G for the S$230 million lower-end of the price range, it would be paying  S$746,753 per key for the hospitality asset. That price would be 25 percent less than than the S$1 million price per room which Gaw Capital was targeting when it engaged CBRE last year to market the property, according to market sources familiar with the process.

While the deal has yet to close, industry analysts speculate that Hotel G, which features rooms averaging a spartan 118 square feet (11 square metres) in size, will likely be rebranded under Ascott’s co-living brand lyf.

Gaw acquired the asset formerly known as Big Hotel in November 2015 for S$203 million (then $146 million) and has since repositioned the property, which is operated by its GCP Hospitality unit.

The hotel spans 94,560 square feet (8,785 square metres) across 16 floors near the shopping hotspots of Bugis and Orchard Road.

Turning to Tokyo

Gaw’s divestment comes shortly after the private equity firm teamed with Manhattan-based KKR to buy the 746-room Hyatt Regency Shinjuku in Tokyo for about $500 million in the largest single-asset hotel deal in Asia Pacific this year.

The firm’s GCP Hospitality arm manages over 39 hotels and serviced apartment properties with 7,500 keys globally, including the five-star Regent Hong Kong hotel which Gaw acquired in 2015 for $938 million when it was still branded as the Intercontinental Hong Kong.

While trades of hotels in Japan and some other Asian markets have rebounded this year, deals for hospitality assets in Singapore have gone quiet, despite the sector’s year-to-date revenue per available room already surpassing 2019 levels by 13 percent, according to a recent report by JLL.

The property agency expects trades of hotel assets in Singapore to drop by 45 percent to $500 million this year from over $900 million last year as “well-capitalised owners continue to tightly hold assets for long-term ownership.”

Ascott Expands

The potential purchase of Hotel G comes as CapitaLand Investment, the group’s listed investment unit, said in an earnings report on Thursday that it aims to double its lodging management earnings to S$500 million by 2028.

“Lodging has great tailwinds, it has exceeded our expectations and exceeded its targets last year,” CLI group chief financial officer Paul Tham said in an interview with Mingtiandi that same day. He added that, while the lodging business is cyclical, the company expects its returns from the sector to continue to grow.

As of end-September, CLI had 97,000 operational lodging units in its portfolio with 66,000 additional units in its development pipeline.

For its co-living brand, Ascott is planning to grow its lyf portfolio to 150 properties with over 30,000 keys by 2030. Since August, Ascott has introduced its hotel and serviced residence brand, The Crest Collection in Asia by opening three new locations in Singapore, Indonesia and Malaysia, including opening The Robertson House at Robertson Quay last month.