Singapore Billionaire Family Bets on Hotels, Plans REIT Listing

Singapore Billionaire Family Bets on Hotels, Plans REIT Listing
Visitors look at the central business district skyline from the SkyPark atop Marina Bay Sands in Singapore. Photographer: Sam Kang Li/Bloomberg

RB Capital, which is bidding for 42 Marriott hotels in the U.K., is seeking to acquire other assets in Europe and expand in Southeast Asia as it prepares to list a hospitality trust in Singapore.

“We are accumulating assets, we are bulking up,” Kishin RK, chief executive officer of Singapore-based property company, said in an interview. “We are waiting for the right time to go out to the markets; we have a sizeable amount of development pipeline under construction.”

The 29-year-old developer is betting on gains in tourism as Singapore has attracted about a million visitors a month since 2010, when its two casinos opened, and as more budget airlines fly to the city-state. Shares of Far East Hospitality Trust and Ascendas Hospitality Trust have gained since their initial stock sales in the country this year.

“Hospitality REITs have done phenomenally well here,” Kishin said. “The market is looking for more products.”

RB Capital plans to list its hospitality trust in the next two years, once the hotels that it’s developing generate a stable cash flow, Kishin said.

Kishin, who is building about 1,300 hotel rooms in Singapore and Kuala Lumpur, is betting on growing demand for international chains by budget-conscious travelers. He will open next year a 460-room hotel in Singapore and another 210-room property in Kuala Lumpur under the Holiday Inn Express brand.

Budget Travel

“Budget travel in the last 24 months has increased substantially,” he said. “In three to five years, you’re going to see a peak in Southeast Asia.”

Singapore Airlines Ltd. responded to the rising demand for discount carriers by starting budget long-haul operator Scoot this year. Jetstar, the budget arm of Qantas Airways Ltd., is building up a network of low-cost carriers across Asia.

Kishin set up RB Capital’s hospitality business in 2010 after he struggled to find an international hotel in Singapore that charged between S$150 ($122) and S$190 a night.

“We saw a vacuum that was not filled,” he said. “The next category down are local brands which foreigners may not be able to relate to in terms of brand recognition.”

Singapore had the highest average daily hotel room rate in Asia in the first half of this year after Hong Kong, according to a CBRE Group Inc. report in August. The average daily rate in Singapore was at $230, bolstered by visitor arrivals into the city-state, CBRE said.

The hotels that RB Capital is developing will appeal to budget-conscious travelers from Asia, said Nicholas Mak, executive director at SLP International Property Consultants, a real estate consulting company. “The outlook for this segment is bright,” he said.

Little India

The developer, which acquired a hotel site above a train station in Singapore’s Little India district after making a record bid in April, plans to announce at least one more hotel project in the “near future,” Kishin said. RB Capital offered S$1,078.80 a square foot based on how much space it could build on the site, beating nine other bidders, including Far East Organization, Singapore’s biggest closely held developer.

Kishin plans to grow RB Capital’s assets to S$5 billion in three years, from about S$3 billion, he said, without specifying how much debt the company has. The company, which plans to expand in Indonesia and Thailand, currently has about S$1 billion in hotel assets, he said.

“For us to go out to market and for a REIT structure to make sense, we would need at least S$1 billion in assets today,” he said. “Moving forward as the REIT market in Singapore develops, size would play an important role; we continue with our acquisition plans moving ahead.”

Marriott Hotels

RB Capital has been in the running for the Marriott properties being offered by Royal Bank of Scotland Group Plc in the last nine months, one of a few deals the developer is pursuing in Europe, Kishin said.

RBS, Britain’s largest publicly held lender following its 2008 bailout, has been seeking a buyer for the U.K. hotels managed by Marriott International Inc. to recover 700 million pounds ($1.1 billion) after the borrowers defaulted a year ago. Erfan Hussain, a spokesman for RBS, declined to comment in an e-mail about RB Capital’s bid.

“If you’re focused on Singapore, it’s a highly competitive market because every developer is looking to buy ready-made assets here,” Kishin said. “That’s the reason why we’ve started to look at Europe.”

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