OUE Sells Luxury Serviced Apartments to Hong Kong Consortium for $289 Million

Property developer OUE Limited has announced the sale of its luxury serviced residences and hotel business, Oakwood Premier OUE Singapore, for a total of $289 million. The transaction involves joint venture firms formed by Hong Kong's AMTD Group and Dorsett Hospitality International, a subsidiary of Far East Consortium International.

Key Takeaways

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

Transaction Details

OUE's wholly-owned subsidiary, Alkas Realty, has entered into a property sale and purchase agreement (SPA) with DHI Holding (S) Pte Ltd for the sale of its leasehold interest in Oakwood Premier. The purchase consideration for the property amounts to $287.1 million. This 99-year leasehold interest expires in July 2066.

Additionally, OUE Downtown Pte Ltd (OUEDTPL), another OUE subsidiary, has agreed to sell the Oakwood Premier business and assets to DHI Downtown for $1.9 million. The buyer intends to rename the property Oakwood Premier AMTD Singapore.

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 FEC's hotel portfolio. FEC highlighted that the remaining short tenure of the existing management contract presents an opportunity to enhance Dorsett's brand equity in the Singaporean market.

FEC's board considers the total purchase price of $289 million attractive, given the property's prime location, quality, and potential. The property recently obtained a hotel license, allowing for short-stay accommodation, which is generally more profitable than traditional serviced apartments with minimum stay requirements.

Future Potential and Conditions

FEC anticipates that with minor asset enhancements, the property could be reconfigured to offer additional hotel rooms and potentially increase revenue per square foot. Both the property and business transactions are contingent on each other's concurrent completion. The property sale also requires the approval of Singapore's President, as the head lessor.

Impact on OUE and OUE Hospitality Trust

OUE 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 the SPAs, 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. C-Reit, which now includes H-Trust as a sub-trust, continues to seek yield-accretive assets aligned with its investment strategy.

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.