OUE to sell serviced residence and hotel business for $289m

Property developer OUE is selling Oakwood Premier OUE Singapore, its luxury serviced residence and hotel business in Shenton Way for $289 million.

The buyers are joint venture firms formed by Hong Kong financial services firm AMTD Group and hotel operator Dorsett Hospitality International.

Dorsett is wholly owned by Hong Kong-listed property giant Far East Consortium International.

Oakwood Premier is the hotel and serviced residence component of the redeveloped OUE Downtown, a mixed-use complex in the central business district.

It has 268 rooms comprising studio, one-and two-bedroom apartments, as well as two dining facilities and other amenities, occupying levels 7 to 32 of OUE Downtown 1. The total gross floor area spans 25,054 sq m.

One aspect of the deal involves a wholly owned subsidiary of OUE, OUE Downtown, selling the Oakwood Premier business and assets to DHI Downtown for $1.9 million.

Far East Consortium said it is buying Oakwood Premier to build a stronger presence in Singapore, where it already operates the Dorsett Singapore hotel, and to diversify its portfolio.

It added that it finds the purchase price of $289 million "attractive", given the location, quality and potential of the property.

Far East Consortium added that it finds the purchase price of $289 million "attractive", given the location, quality and potential of the property.

Earlier this year, Oakwood Premier was granted a licence to be operated as a hotel, offering short-stay accommodation, a typically more profitable segment of the hospitality market, Far East Consortium said.

Serviced apartments without a hotel licence typically have a minimum-stay rule of seven days.

The firm believes that some light renovations could allow the property to offer additional hotel rooms and deliver higher revenues per square foot.

OUE said the proposed transactions are not expected to have a material effect on its net tangible assets or earnings per share for the financial year ending Dec 31, 2019.

The firm had extended the offer to buy the serviced apartments to OUE Hospitality Trust (H-Trust), which had the right of first refusal, but it declined the offer.

It felt buying Oakwood Premier on the proposed terms would not be accretive to OUE Commercial Real Estate Investment Trust's (C-Reit) distribution per unit. H-Trust is now a sub-trust of C-Reit.

OUE shares closed up 3.4 per cent to $1.51 yesterday.

A version of this article appeared in the print edition of The Straits Times on September 20, 2019, with the headline 'OUE to sell serviced residence and hotel business for $289m'. Print Edition | Subscribe