Capri and Citadines properties are in advanced sales talks as investors return to the hospitality radar

The 285 room Dorsett Singapore is being quietly advertised for sale. It’s connected to Outram Park MRT station. The hotel sits on land with a balance lease of about 85 years.

Far East Consortium International, the owner of this hotel, is believed to be asking for S$1.1m per room. This could translate into a net return of around 4%.

Price for the 154 unit Citadines Mount Sophia is expected to be approximately S$150million. BlackRock and Weave Living have been said to be conducting due diligence on a possible acquisition.

Citadines Mount Sophia is owned by CapitaLand Ascott Trust. It has a leasehold balance of 81 years. Clas website states that the property’s value was S$124m as of Dec 31, 2022.

The 12-storey Wilkie Edge Complex is located at the corner Wilkie and Selegie Roads. Recently, the office and retail space at Wilkie Edge were also sold.

Prospective buyers performing exclusive due diligence on Citadines Mount Sophia, Capri by Fraser and Changi City amongst other assets

The Singapore property market is booming with the return of travelers and the hospitality industry.

Capri by Fraser and Citadines Mount Sophia, are some of the assets that potential buyers will be conducting exclusive due diligence on.

A buyer for the 299 apartments at Citadines Raffles Place has not yet been identified, but an expression of interest was closed in the 4th quarter of 2023.

Capri by Fraser in Changi City, a short walk from Expo MRT and Singapore Expo, is expected to cost around S$170m. The 313 room hotel is owned by Frasers Property and was built as part of an integrated development on a site with a lease term of approximately 45 years. The strata area is approximately 299,300 sq ft; this figure includes some void spaces.

According to reports, a joint venture (JV), which includes entities connected to two Hong Kong parties – FEC Atelier Capital Partners – is in exclusive due diligence to a possible purchase of Capri for Fraser Changi City. The JV may include US-based global investor TPG Angelo Gordon.

The rooms at Capri by Fraser Changi City are between 32 and 70 sq. m.

Potential upside

You can increase the value of your hotel by, for instance, subdividing rooms and turning underused areas, such as the lobby, into revenue-generating space.

Capri by Fraser Changi City forms part of a larger integrated project which also includes the One@Changi City business park and Changi City Point shopping mall. The project was built on a JTC Corporation site that was awarded in late 2008. The 60-year lease tenure for the site began April 30, 2009. Site is located in Changi Business Park. Cushman & Wakefield, it is believed, will be marketing Capri By Fraser Changi City.

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A sale is underway in the CBD at the Citadines Raffles Place within the CapitaSpring Building at Market Street. The site has a lease term remaining of approximately 57 years.

Colliers conducted an expression-of-interest (EOI), which closed in the Q4 of 2014, for the asset of serviced apartments. However, a buyer is yet to be identified. According to market chatter Olayan Group participated in the EOI. Market watchers anticipate the owner to ask for at least S$1m per room.

Hotels can increase their room rates in order to offset increased operating costs or to take advantage of large concerts and Mice events (meetings and incentives, conferences, and exhibitions). For a typical two- to three-year office lease, the rental rates are locked in for the entire duration of the contract. A landlord cannot adjust the rent during this period.

She added that the net yields of hotels in Singapore will be determined by factors like the tenure and age of the property as well as its location, quality and revenue-generating capacity.

An experienced property investment sales agent stated that, given the current high borrowing rates, most buyers will want a minimum of 4% for a hotel purchase, unless they are buying a well-designed, freehold asset in a high-quality location.

In this case, the buyer might be willing to pay 2 to 3 percent (of) the net yield in exchange for the chance to own the asset. The art and science of pricing a hotel are both involved.

Citadines is a joint venture between CapitaLand Integrated Commercial Trust (ICT), CapitaLand Development (CD) and Mitsubishi Estate Co.

CapitaSpring occupies a site that has a 99-year leasehold tenure, effective February 1, 1982.

Watchers of the property investment industry said that the return of travelers to Singapore following the Covid scandal and the busy event calendar have helped to boost interest in Singapore’s hospitality sector.

Singapore is a great place to purchase a hotel. Singapore is a popular destination for travellers who are willing to pay a premium to experience its cleanliness and safety. Singapore’s property values may fluctuate, but they have steadily increased over the years.

Assets linked to inflation

In the current climate, hotels and serviced apartments are also seen as inflation-linked investments.

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