Fragrance Group Chairman Said Interested Parties Will Have to Buy All properties for S$1.4 Billion
If a kid had gazed on construction sites instead of stars in the sky, then it is likely that he becomes like Real Estate tycoon, James Koh Wee Meng, who turned a Forbes’ Billionaire and Singapore’s top 50 richest person through his real estate and hotel business.
If passion drives men to take risks and climb great heights, then it is evident from the timeline of James Koh’s professional growth.
Be it forsaking the family’s Jewellery business for real estate ventures or selling his house to develop a bungalow or the novel Parc Rosewood Condominium concept or the recent half a dozen acquisitions in the UK, it has been a series of risks driven by passion.
Current in the series has been his Fragrance Group’s Global Premium Hotels with a chain of 23 hotels enlisted for sale since 2018-H2 at S$1.4 Billion.
Though there are ready takers for piecemeal, he has decided to offer the entire portfolio to a single buyer. Choosing to keep the international valuer anonymous, his asking price works out to about S$720,000 per key.
Ruling out any intention to entertain a bargain over the price, he however is open to negotiate terms that could help the future owner to continue their operations with the existing management.
Incidentally, Klapstar is a Boutique Hotel that is being managed by the Group without owning the asset.
It is noteworthy that a wholly owned subsidiary called the Fragrance Corporate has been incorporated on the first week of 2019 with interests in management services.
He also ruled out all speculations related to financial health of the Group and his projects overseas.
He affirmed their seasoned expertise to maintain their hotels through regular asset enhancement initiatives not requiring to part with the asset on that account.
He further does not foresee any cause of concern over his two Australian mixed developments – the beyonce inspired Premier Tower in Melbourne and the twin towers of NV Apartments in Perth with their TOP in 2020.
Catering to budget conscious business and leisure travelers landing on Geylang, Balestier, Selegie, Pasir Panjang and Bugis areas, James Koh’s GPH has 21 hotels under Fragrance Brand and two under Parc Sovereign Brand.
Having established the brand two decades back, most of these buildings are housed on attractive freehold properties.
In the recent years, plans to delist GPH from SGX worked good through his investment arm, JK Global Capital, which purchased the entire shares at the rate of 36.5 cents.
Since 2012, the Company had no records of efforts to raise equity capital nor had significant trading liquidity, favoring his offer to privatize the firm. The last annual report of GPH prior to privatization dated December 31, 2016 recorded the value of its assets at S$1.21 Billion.
Fragrance Group’s unaudited consolidated earnings for the third quarter and nine months ended September 30, 2018 recorded S$ 17.5 million net profits, an impressive 31% increase.
With generous rental yields from assets including UK’s Imperial Hotel and Australia’s ibis Styles Hobart, revenues have increased to S$ 167.2 million, a stirring 24% upward.
With Agents bringing interests from investors again and again over his hotels in the years, James Koh was made to consider and consolidate his decision to offer the entire entity to a single buyer.
With the current market trend favoring hotel acquisitions, he has put the GPH portfolio for sale after the July cooling measures that affected residential investments.
His passion for hotel development over hotel management has encouraged him to offer GPH at the point of time when Hotel Operators are keenly looking to invest in the booming hospitality industry.
Moreover, he has recorded his strong notion that he would rather retain his GPH portfolio than give away at a lower price.
The overall interest shown by local and global companies in hotel asset investments in the recent months has been phenomenal, recording S$1.36 Billion transactions in 2018, which is a four-year high, as per Cushman & Wakefield’s research analysis.
Their study also projects delivery of 892 additional rooms to the hospitality market every year from 2019 to 2022.
Hotel room performances in revenues have increased by 7.5% in 2018 with 87% average occupancy rates and 4% increase in RevPAR. JLL’s Sr Vice President – Investment Sales, Adam Bury pictures the impact these figures have on the capital values.
While Hotel owners reap their return on investment, he believes that in the coming years, there could be significant shift in allotment of capital from residential properties to hotel investments.
The next is winning an exclusive GLS hotel site tender offering S$562 million, the highest price along Club Street, CBD, in the inaugurating month of 2019. Operating under six brands, these add to their existing 38 hotels spread across the Island.
Novotel Singapore with 254 rooms and Mercure Singapore with 518 rooms on Stevens Road together has fetched S$950 million or S$1.23 million per key for Oxley Holdings on their first ever hospitality venture acquired in 2013.
With 83% occupancy rates and S$53 million annual income, it has appealed none other than the Indonesian magnate Tahir on the maiden month of 2019 with his letter of intent.
The heritage structure Ascott Raffles Place Singapore made a historic transaction at S$353.3 million or S$ 2.4 million per key fetching S$134 million net gain for Ascott REIT, the wholly owned subsidiary of CapitaLand Singapore.
Marking their stamp on the International Plaza and Hyatt Regency projects, the famous investor Cheong Sim Lam family got attracted enough to shell out 60% more than the valuation of this property, which houses serviced apartments.
All investment moves in the market point to the flourishing tourism industry, which the URA recognizes and acknowledges.
In the Circular dated August 13, 2018, the URA has conveyed its revised approach to new development applications for hotels and backpackers’ hostel uses.
Accordingly, URA entertains proposals from developers for sites that are not zoned or permitted for Hotel use.
After scrutiny of each such proposal separately with respect to its neighbourhood, URA wishes to sanction favorably if the site or the action plan does not pose a conflict to the good interest of that particular area.
URA has indicated the increasing number of International guests in the last few years and the anticipation of the growth of this trend with demand for more hotel rooms, as reasons for the revision of its approach to new developments.
Incidentally, James Koh has proposed his freehold mixed development, Tower 15 on Hoe Chiang Road to change of use to hotel in end 2018. Indeed, an expected move from a passion driven hotel developer at the appropriate time.