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Real estate investors are closely following market news to determine the market prices of hotels put up for sale in the city-state, reported the Singapore Business Review.
For instance, the Wanderlust Hotel in Dickson Road was recently acquired by 8M Real Estate from KMC Holdings for $37 million, or about $1.3 million per key based on its 29 rooms, said DBS Equity Research.
Located on a 4,634 sq ft. land parcel close to the Jalan Besar MRT Station, the freehold four-storey heritage building was originally bought by KMC Holdings from Singapore Buddhist Welfare Services in 2008 for $10.3 million.
8M Real Estate is a local privately-held property investment firm, while the seller is linked to Loh Lik Peng, the founder of restaurant and hotel group Unlisted Collection.
According to DBS Equity Research analyst Mervin Song, the sale of Wanderlust Hotel follows news that the construction cost of the 340- to 350-room Park Hotel Farrer Park on the former Singtel site at Hill Street is about $1.1 million per room, with buyers believed to be willing to fork out $1.3 million per key for RB Capital’s property.
“In our view, this news again highlights the disparity in valuations that physical market and equity market investors ascribe to hotels in Singapore,” he noted, adding that the implied value of Singapore hotels for hospitality REITs is between $625k to $1 million per key.
“With hospitality S-REITs trading effectively below replacement cost and the hospitality market expected to be on a multi-year recovery given limited new supply over the next three years, we retain our ‘overweight’ stance on the sector,” added Song.
Senior Content Producer, Christopher Chitty, edited this story.
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