A-HTrust – DBSV

Park Hotel Clarke Quay "poised for imminent sale"

• Park Hotel Clarke Quay is reported to be available for sale at a price tag of close to S$300m
• Price implies up to a price per key of S$900k seems high but reflects optimisim in Singapore as a leading tourist location

The media reported that the 336-room Park Hotel Clarke Quay is "poised for imminent sale" at about S$300m. The buyer is reportedly a REIT, and Ascendas Hospitality Trust is a prime candidate. Park Hotel Clarke Quay is new upscale hotel that was completed in 2009. The hotel is strategically located near the Central Business District and is close to several tourist attractions like Chinatown, Arab Street, and the National Museum, and is within walking distance to Clarke Quay MRT Station and lively drinking hole, Clarke Quay. The hotel has received good reviews by travelers at online travel website Tripadvisor.com. There are other hotels in the vicinity which means there will be competition for guests.There are no further details or related announcements by any REITs.

The price tag and our thoughts

The reported S$300m price tag implies S$900k/key, which seems high but is within expectations given the tight holdings of hotel assets in Singapore and the lack of available hotel assets in good locations in Singapore. Previous transactions in the vicinity included Hotel Grand Pacific, an older hotel that was sold at S$850k-S$900k/key)

Given the positive outlook for Singapore's tourism sector in the medium term – Singapore Tourism Board is targeting to increase visitor arrivals to 17m in 2015 -, Singapore remains one of the most desired hotel investment markets in the region.

Assuming S$260/night RevPAR reported by Upscale hotels (Singapore Tourism Board) and 50% EBITDA margin, the price tag implies EBITDA yields of 5.25%- 5.5%.

It is interesting that Ascendas Hospitality Trust was also mentioned because if successful, this deal would represent its maiden foray into Singapore. But given its exposure in Australia, Japan and China, its portfolio yield (est. 6.6% on book, 6.1% on implied basis) is naturally higher than Singapore’s, and would likely mean dilution for shareholders or the trust would have to take on a larger debt-funded structure in order to make the deal accretive.