Capri and Citadines property in advanced sale discussions as hospitality returns on investors’ radar
Citadines Mount Sophia, a 154-unit serviced residence, is expected cost around S$150million. BlackRock is said to have engaged Weave Living in due diligence regarding a potential purchase.
Citadines Mount Sophia, owned by CapitaLand Ascott Trust(Clas), has an 81-year leasehold estate. Clas’ site states that at the end of December 2022, the property had a value of S$124,000,000.
Prospective buyers conduct exclusive due diligence for Citadines Mount Sophia & Capri by Fraser, Changi City and other assets
Singapore’s investment property market seems to be dominated by the theme of hospitality, with the return and popularity of travel.
Capri by Fraser is one of several assets where potential buyers have undertaken exclusive due diligence.
In the fourth quarter 2023, an expression of interests was also closed for the 299 apartment Citadines Raffles Place. However, a buyer is still to be identified.
The 285-room Dorsett Singapore located next to the Outram Park MRT interchange is also quietly being marketed for sales. The hotel occupies a land parcel with an estimated 85-year balance lease.
Far East Consortium International is said to be looking for about S$1.1million per room. That could translate to an average net yield of almost 4%.
Capri by Fraser Changi City, a part of the integrated project also includes One@Changi City and Changi City Point. The project is being developed on land that JTC Corporation awarded to the developer in late 2008. A 60-year lease was granted for the property starting April 30, 2009 The site is in Changi Business Park. Cushman & Wakefield will market Capri by Fraser in Changi City.
On Market Street in the CBD, a sale of the Citadines Raffles Place is currently underway. This building, which is part of the CapitaSpring complex, has a remaining lease term that’s about 57-years.
The Wilkie Edge complex, which has 12 floors, is located on the corner of Wilkie Road and Selegie road. Recent transactions also took place in Wilkie edge for the sale of office and retail spaces.
Capri by Fraser Changi City – a stones throw away from Expo MRT station, and the Singapore Expo – is expected at around S$170 million. The Frasers Property-owned 313-room property is part of a project which was developed in a site where the balance lease term is about 45 years. The hotel’s strata is nearly 299 300 square feet, including some void space.
Joint ventures (JVs) consisting of entities tied to two Hong Kong-based parties – FEC and Atelier Captial Partners – are said to be conducting exclusive due diligence on a potential Capri purchase by Fraser, Changi City. TPG Angelo Gordon, a global investment manager based in the US, may be included in the JV.
Room sizes at Capri Fraser, Changi City vary from 32 to 70 square meters.
Potential upside
The hotel value can be increased by dividing up rooms or converting areas that are under-used, like the lobby.
According to a seasoned real estate investment sales agent, buyers are looking for at least a 4% yield on a hotel, except if it’s a freehold property of excellent quality in a good location.
In this situation, a buyer could be willing pay a price that reflects 2 to 3% of the net yield for the chance to purchase the asset. Hotel pricing is both an art and a science.
Colliers has conducted an Expression of Interest (EOI) for the serviced apartment assets that ended in Q4 last year, but no buyer has been identified. Market chatter suggests that Olayan Group took part in this EOI. Market watchers believe the asking price for each room will be at least S$1,000,000.
Citadines, Raffles Place was acquired by a joint-venture consisting of CapitaLand Integrated Commercial Trust and CapitaLand Development.
CapitaSpring was built on a land with a 99 year leasehold tenure that began Feb 1, 1982.
The hospitality industry is booming in Singapore, according to property investors. A busy events calendar and the strong recovery of travel after the Covid disaster are both contributing to the interest.
Singapore has many advantages for anyone looking to purchase a new hotel. Singapore’s cleanliness and security are enough to make most travellers willing to pay more to visit. Singapore has seen a steady increase in the property values of its hotels.
Inflation-linked Asset Status
The current inflation rate is another reason why hotels and serviced apartment properties are attractive.
Hotels can raise room rates to offset rising operating costs. They can also take advantage big events like concerts, meetings, incentives, conferences, exhibitions (Mice). Rental rates for an office lease that lasts two to three year would be fixed for the entire lease. The landlord could not adjust rental prices during the term of the lease.
She said that when determining the net yields for hotels in Singapore, they will consider factors such as land tenure, age and quality of property, location and revenue generation capacity.
