OUE Sells Luxury Serviced Apartments to Dorsett and AMTD for S$289 Million

Property developer OUE Limited has announced the sale of its luxury serviced residences and hotel business, Oakwood Premier OUE Singapore, located on Shenton Way, for a total of S$289 million. The acquisition is being made by joint venture firms established by Hong Kong-based financial services firm AMTD Group and hotel operator Dorsett Hospitality International, a subsidiary of Far East Consortium International (FEC).

Key Takeaways

• OUE Limited is selling Oakwood Premier OUE Singapore for S$289 million.
• The buyers are joint venture firms of AMTD Group and Dorsett Hospitality International.
• The sale includes the property and the serviced apartment business.
• The transaction is expected to close concurrently and is subject to regulatory approval.

Transaction Details

OUE's wholly-owned subsidiary, Alkas Realty, has entered into a property sale and purchase agreement with DHI Holding (S) Pte Ltd for the leasehold interest in Oakwood Premier. This portion of the deal is valued at S$287.1 million. The leasehold interest extends until July 2066.

Oakwood Premier OUE Singapore is a significant component of the OUE Downtown mixed-use complex in Singapore's central business district. It comprises 268 rooms, including studio, one- and two-bedroom apartments, along with dining facilities and other amenities, spread across levels 7 to 32 of OUE Downtown 1. The total gross floor area is 25,054 square meters.

Additionally, OUE Downtown Pte Ltd (OUEDTPL), another OUE subsidiary, will sell the Oakwood Premier business and assets to DHI Downtown for S$1.9 million. The buyer intends to rename the property Oakwood Premier AMTD Singapore, pending approval from the Hotels Licensing Board.

Strategic Rationale for Buyers

Far East Consortium International (FEC), the parent company of Dorsett Hospitality International, views this acquisition as a strategic move to strengthen its presence in Singapore, where it already operates the Dorsett Singapore hotel. The purchase also aims to further diversify its hotel portfolio. FEC highlighted that the total purchase price of S$289 million is considered attractive given the property's prime location, quality, and potential. The property recently obtained a hotel license, allowing for short-stay accommodations, which is generally a more profitable segment of the hospitality market compared to serviced apartments with minimum stay requirements.

FEC anticipates that with minor asset enhancements, the property can be reconfigured to offer additional hotel rooms and potentially increase revenue per square foot.

Transaction Conditions and Impact

Both the property and business transactions are conditional on each other's concurrent completion. The property sale also requires the approval of Singapore's President, as the head lessor. OUE has stated that these transactions are not expected to materially impact the group's net tangible assets or earnings per share for the financial year ending December 31, 2019.

Prior to finalizing the agreements, OUE had offered the serviced apartments to OUE Hospitality Trust (H-Trust), which held the right of first refusal. However, H-Trust declined the offer, deeming it not accretive to OUE Commercial Real Estate Investment Trust's (C-Reit) distribution per unit. H-Trust is now a sub-trust of C-Reit following their recent merger.

Sources

• OUE to sell serviced apartments to Hong Kong's Dorsett, AMTD for $289m, The Straits Times.
• OUE to sell serviced apartments to Hong Kong's Dorsett, AMTD for S$289m, The Business Times.