OUE to sell Oakwood serviced residences for S$289m

Property developer OUE has inked agreements to sell Oakwood Premier OUE Singapore, its luxury serviced residences and hotel business in Shenton Way, for S$289 million.

The buyers are joint venture firms formed by Hong Kong financial services firm AMTD Group and hotel operator Dorsett Hospitality International. Dorsett is wholly owned by Hong Kong-listed property giant Far East Consortium International (FEC).

Oakwood Premier is the hotel and serviced residences component of the redeveloped OUE Downtown complex in Singapore’s central business district. It has 268 rooms, two dining facilities and other amenities, occupying levels 7 to 32 of OUE Downtown 1. Total gross floor area spans 25,054 square metres (sq m), while strata title area totals 23,234 sq m. It is managed by Oakwood Worldwide (Asia).

OUE’s wholly-owned subsidiary and property holding firm Alkas Realty has entered into a property sale and purchase agreement with DHI Holding (S) for the sale and transfer of Alkas’ leasehold interest in Oakwood Premier and all plant, machinery and equipment owned by Alkas. The 99-year leasehold interest expires in July 2066.

The consideration for the property is S$287.1 million and was negotiated after taking into account its market value.

Meanwhile, serviced apartment operator OUE Downtown Pte Ltd (OUEDTPL), wholly-owned by OUE, also entered into an business agreement to sell the Oakwood Premier business and assets to DHI Downtown.

The consideration for OUEDTPL is S$1.9 million, and was negotiated after taking into account the book value of the business and assets.

DHI Downtown will seek approval from the Hotels Licensing Board to change the property’s name to Oakwood Premier AMTD Singapore.

In a separate filing, FEC said that buying Oakwood Premier will help it build a stronger presence in Singapore – where it already operates the Dorsett Singapore hotel – and further diversify its hotel portfolio.

The Hong Kong conglomerate’s board also finds the total consideration of S$289 million “attractive”, given the property’s location, quality and potential. This year, Oakwood Premier was granted the licence to operate as a hotel, offering short-stay accommodation which is typically a more profitable segment of the hospitality market, FEC said. In contrast, serviced apartments without a hotel licence tend to have a minimum-stay requirement of seven days.

In the medium term, FEC believes the property could be remodelled through some light asset enhancement to offer additional hotel rooms and deliver higher revenues per square foot.

Both the property and business transactions are conditional upon each other’s concurrent completion. The property sale is also subject to the approval of Singapore’s President as head lessor.

The proposed transactions are not expected to have a material effect on OUE’s net tangible assets of earnings per share for fiscal 2019.

Prior to entering into these deals, OUE had extended the offer to buy the serviced apartments to OUE Hospitality Trust (H-Trust) as the latter had the right of first refusal.

However, the trust declined the offer because its trustee and trustee-manager believed that buying Oakwood Premier based on the proposed terms would not be accretive to OUE Commercial Real Estate Investment Trust’s (C-Reit) distribution per unit, said C-Reit’s manager on Thursday. H-Trust is now a sub-trust of C-Reit, following the completion of their merger earlier this month.

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