Big Hotel back on market - now with leaseback deal

Big Hotel along Middle Road is back on the market - this time on a sale-and-leaseback arrangement.

It is being offered through an expressions of interest (EOI) exercise. Submissions are due on Oct 28.

The expected asking price for the 308-room freehold hotel, which opened in May last year, is understood to be between S$270 million and S$280 million, translating into between S$877,000 and S$909,000 per room.

This is more than the S$260 million or S$844,000-per-room price tag for the property in July last year, when it was offered through an EOI exercise.

This time around, however, the seller - a special-purpose vehicle, the biggest shareholder of which is ERC Holdings, which is in turn majority-owned by its chief executive Andy Ong - has packaged the proposed transaction as a sale-and-leaseback deal.

Big Hotel is being sold with the existing operator in place to manage the asset under the Big Hotel brand for at least three years. The hotel is being sold on a leaseback structure with a fixed guaranteed income being paid to the new owner. The existing operator is Gryphon Hospitality Services, also linked to Mr Ong.

The leaseback period is flexible and can be extended beyond the minimum three years, depending on the buyer's requirements.

The returns will be superior to recent office transactions in Singapore, which have been at around 3 per cent net yield.

Big Hotel has been achieving 90 per cent occupancy in the past year; recent average room rates have been S$140 a night.

The rooms vary from 13 square metres to 47 sq m (140 square feet to 506 sq ft); the average room size is around 15 sq m (161 sq ft).

Big Hotel offers a chance for buyers to not only secure a freehold asset with a guaranteed return, but also a foothold in the highly competitive Singapore hotel market.

Facilities in the 16-storey hotel include a multi-storey car park with 52 lots, three retail or food-and-beverage outlets and a gym.

This is a rare opportunity to acquire a freehold asset in the CBD at a guaranteed yield. We expect the offering to be extremely well-received by both hotel investors and buyers outside of this asset class.

The full potential of the property's central location will be realised once the Rochor and Bencoolen MRT stations are up and running in 2016 and 2017 respectively.

Source: Business Times – 18 September 2014