1.) Inorganic Acquisition of the Oasia Hotel Downtown
FEHT made an acquisition from its sponsor on the Oasia Hotel Downtown which was only completed last year for a fee of $220.1m.
The premise is a 314 room upscale hotel located in the Tanjong Pagar area near my office.
The acquisition is funded via debt which means this will automatically be yield accretive, raising NPI pro-forma by 4% higher. Upon completion of the acquisition, gearing has increased to 37.5%.
Revpar for the hotel is currently at SGD170, and the premise will be under Master lease structure for the next 20 years.
2.) Supply of new hotels decreasing
Hotel supply in the past 5 years have increased at a CAGR of 4.9% and has increased faster than the rate of tourism arrival.
By theory of economics, we knew supply > demand means the ADR and Revpar would go down.
In 2018, this increase in supply is expected to slow down to 750 additional rooms, which translates into only 1.1% increase.
There will obviously continue to be pressure, but should demand surge higher than that, we should see a rebound in the hotel and service apartment segment.
3.) Village Hotel, The Outpost Hotel and The Barracks Hotel at Sentosa
This is a joint venture with its sponsor which FEHT owns 30% stake at the moment worth $133m.
This 839 room mega project will be completed in 2019, and will cater to the middle market of people who is looking to stay at the Sentosa area. I find this quite interesting project.
It’s still early days but at 4% NPI this should bring in about $6m worth to distributional income every year.