Former Love Hotel Developer Set to Go Private in Singapore Buyout

The founder of a Singapore real estate developer that got its start operating hotels in the city’s red-light district is set to take the company private after reaching a key milestone in a buyout effort today.

A voluntary conditional cash offer announced by Fragrance Group chairman and chief executive Koh Wee Meng last Friday of 13.8 Singapore cents per share in the property firm went unconditional today after securing an agreement with parties representing more than 90 percent of the company’s issued shareholding, according to an announcement to the Singapore Exchange.

The offer by the Singapore entrepreneur represents a 16.9 percent premium to Thursday’s closing price of 11.8 Singapore cents, valuing the company at roughly S$927 million ($685.6 million). The impending privatisation of the company comes after Fragrance Group’s earnings before tax and interest fell by 73 percent last year, with the company finishing 2020 with EBIT of just over $32 million.

According to the company’s 2020 annual report, Fragrance had assets of S$3.3 billion as of 31 December, but it has also faced setbacks with projects in the UK and Australia, as well as in Singapore.

Listless Listing

Through holding firm JK Global Treasures, in which he is the sole shareholder, Koh holds 74.71 percent of Fragrance shares. The tycoon’s wife, Lim Wan Looi, holds 10.94 percent, and the couple together with Fragrance deputy CEO Periakaruppan Aravindan and 12 other parties acting in concert own a combined 91.5 percent.

Under the terms of the offer, JK Global Treasures will send an offer document setting out the terms and conditions of the offer and the appropriate forms of acceptance to holders of Fragrance shares not earlier than 14 days and not later than 21 days from the offer announcement date, according to a Monday filing with the Singapore Exchange by financial advisor DBS Bank on behalf of JK Global Treasures.

DBS said the offer would give shareholders a chance to realise investment gains free of brokerage costs. Shares of Fragrance, a lightly traded and largely static listing on the SGX’s secondary Catalist board, rose nearly 17 percent in Monday’s session to 14 Singapore cents.

Red-Light King

Fragrance boss Koh was once known as the “King of Geylang” for building a string of budget hotels in the red-light district. But the 58-year-old has long since diversified into more respectable segments of the property industry, both in Singapore and overseas.

In addition to its portfolio of local hotels, Fragrance lists among its investment properties the 26-storey Fragrance Empire Building on Alexandra Road, as well as five more commercial, industrial or mixed-use assets in the city. The company’s assets in its home city were valued at S$2.26 billion at the end of 2020, which represented 72 percent of its portfolio by value.

Fragrance Group also has invested in hotels in the UK and Australia, as well as holding commercial and residential properties in the two countries.

Inhospitable Conditions

As Fragrance moved up in society, the group picked up a set of five hotels in the UK and now has another in progress. Earlier this year, Bespoke Hotels, a UK hospitality firm that managed four of Fragrance’s properties in Great Britain, closed down the hostelries in Blackpool, Plymouth and Manchester, saying they had become unviable during the pandemic.

Fragrance reopened the four properties shortly thereafter under new management.

In Australia, where the company has two established hospitality assets and another seven hotel projects in progress, Fragrance has been forced to scale back plans for a project in Hobart, Tasmania in the face of opposition from heritage groups, while its other properties face challenges from the country’s ongoing closed-border policy.

Last July, Fragrance had put up for sale a 29-storey office tower on the edge of Singapore’s downtown core at an indicative price of S$715 million but ultimately failed to make a sale.

The company is now redeveloping the property at 15 Hoe Chiang Road across from the Tanjong Pagar container terminal as a combined hotel and commercial project, according to Fragrance Group’s 2020 annual report.