Offshore: Niche accommodation in Tiong Bahru

The Tiong Bahru estate in Singapore is morphing into an attractive boutique hotel enclave with the entry of a new kid on the block, the upscale 50-room Hotel Nostalgia located at the corner of Tiong Bahru Road and Seng Poh Road. It is scheduled to open at end-July.

Meanwhile, Wangz Hotel, still under construction at the other end of Tiong Bahru Road at the junction of Outram Road, will bring the total number of boutique hotels along Tiong Bahru Road to three. The other is the 288-room Link Hotel, which opened in 2007.

One of the oldest housing estates in Singapore, Tiong Bahru has a charm of its own, with architecture that’s an eclectic blend of art deco and the old Straits Settlement shophouse design. The estate was modelled after the old English towns at that time, hence blocks are low-rise and far from each other. In those days, it was the choice neighbourhood for the upper class, and hence, was considered “Singapore’s Hollywood”, says John White, managing director of private equity group Lion Properties, which owns the 50-room Hotel Nostalgia.

Lion Properties had purchased two shophouses at the corner of Tiong Bahru and Seng Poh Roads, and an empty lot behind the two, in August 2007. It paid S$11.4 million for the site, according to the URA Realis database of caveats lodged, and received approval for the amalgamation of the sites and for conversion to hotel use. While the two shophouses are being conserved and refurbished, a new annex is being built on the empty lot. According to White, the total investment, including acquisition of the freehold land, amounts to some S$20 million.
The 5-room Hotel Nostagia, seen in progress above and as an artist inpression on the July, offeringin hisrical
Tiong Bahru also had a reputation as the place where rich and powerful men kept their mistresses, hence the moniker “Mei Ren Wo” or “den of beauties”. Hotel Nostalgia will be bringing back some of Tiong Bahru’s colourful and rich history, with rooms featuring two themes, says White: the “lush theme”, which reflects the romantic history of the area, and the “colonial theme”, which is a flashback of the old English designs. “So it’s quite unique in that aspect, and hence the name, Nostalgia.”

Affordable prices, good service

“New boutique hotels like Nostalgia will make the Tiong Bahru area a more prominent hub outside the traditional luxury hotel clusters like the Marina Centre area and the Orchard Road belt,” says property consulting firm Cushman & Wakefield’s regional managing director, Donald Han. While tourists and even corporate travellers may be reining in their spending and looking at more affordable alternatives to luxury five-star hotels in the face of the global economic slump, many do not want to compromise on the level of service. “Hence, such boutique hotels provide an alternative to the luxury hotel chains,” adds Han.

Link Hotel, owned by Macau-based Hang Huo Enterprise, is a refurbishment and conversion into hotel use of two of the oldest blocks of flats built by the Singapore Improvement Trust, a government body administered by the British colonial authority and the predecessor to the Housing Development Board, back in the early 1930s.

While Link Hotel’s target audience is mainly tour groups from China, Hotel Nostalgia’s luxury boutique offering is likely to appeal to the higher-end independent travellers from Europe, North America and Australasia — “people who’re looking for a Singapore experience”, says White.

Hotel Nostalgia is positioned as an “affordable luxury boutique hotel but characterised by a high level of personal service”. Room rates will range from S$180 to S$220 per night. The rooms will also be boutique-size, ranging from 180 to 190 sq ft, with some going up to 280 sq ft, says White.

As Singapore matures as a global destination, “it is starting to provide greater choices of accommodation for travellers”, he adds. Examples of the new, upscale boutique hotels currently in operation, and considered the first movers in this segment, include The Scarlett Hotel on Erskine Road, The Majestic in Bukit Pasoh and Naumi on Seah Street.

White argues that there’s room for more players and also greater diversification. As such, Lion Properties Group chose Tiong Bahru, a site that’s not on Orchard Road or in the CBD, but close to both. “It’s basically heartland Singapore,” says White, “and it gives people the opportunity to experience the way Singaporeans live in an estate such as Tiong Bahru.”

Strong property players
The group is currently recruiting staff and preparing for the opening of the hotel. “We’re quite comfortable operating it ourselves,” says White, citing the group’s experience in accommodation management as some of the investors are said to have managed boutique hotels in Auckland and a chain of serviced apartments across New Zealand.White: Hotel Nostalgia's luxury boutique offering is likely to appeal to the higher-end independent travellers frpm Europe, North America and Australasia - people who're looking for a Singapore experience

Lion Properties Group, formed in mid-2007, is made up of 10 individual investors — six from Singapore and four from New Zealand, says White. Some of the prominent individual investors from Singapore include Lee Kim Bock, former managing director of Omni Plastics, and Koh Boon Hwee, chairman of DBS Group Holdings and DBS Bank. New Zealander private investors include Kevin Podmore and Aeneas “Mike” O’Sullivan, major shareholders of property-based funds management group St Laurence Ltd.

White, who also hails from New Zealand, is not just the managing director, but also an investor in Lion Properties. Formerly founder and CEO of global health and safety software company INTAZ Ltd, White formed EdPlus NZ, which specialised in student accommodation. He relocated to Singapore in 2006, and his first venture was with a company called EdPac Asia, which specialised in “providing accommodation for students and other investment property for long-term hold”.

Lion Properties is a private equity fund that also operates like a boutique property developer, focusing on buying properties, adding value through asset enhancements and new development, and then selling them. “We’re only looking at Singapore property at this stage,” says White. “We believe Singapore has a very strong future as it moves towards being a global city.”
Apart from Hotel Nostalgia, Lion Properties also owns a freehold, 11,400 sq ft industrial land parcel in Arumugam Road, which it acquired in August 2007 for S$6.6 million. “We were going to develop it, [but] it’s on hold and is being land banked at the moment because the market is such that it’s not time to do an [industrial] development,” says White. “The industrial market tends to lag behind the general commercial sector, so we just need to get our timing right.”

Conservation clamour
Riding the property upturn in late 2006 to 2007, the group of individual investors in Lion Properties, “who are a group of friends”, had also bought and sold several conservation properties, which included shophouses along Beach Road as well as Murray Terrace, says White.

According to the caveats lodged with URA Realis, Murray Terrace changed hands three times in under a year. The Lion Properties investors bought it for S$17.5 million in November 2006. They then received “an offer we couldn’t refuse”, according to White, and sold it seven months later to another investment group for S$31 million. They in turn flipped it three months later to Boston-headquartered US real estate fund AEW for S$50.1 million. Cushman & Wakefield is said to have handled all three transactions. AEW has since refurbished the conservation property into a 4-storey office building and leased the space.

Conservation properties are difficult to find, admits White. “You have to be always on the lookout, and do your analysis carefully to make sure you’re in the right location, that you can add value and increase your yield and tenant mix.”

In the last two months, White has received strong interest from several parties for Hotel Nostalgia, with some looking at purchasing the property as an investment while others are looking to operate it themselves. “We have a couple of interested parties who’ve approached us,” he admits. “They tend to be individuals or families who’re interested in investing in Singapore.”
With Lion Properties having invested effort in the design, building and quality of the hotel-room finishings, the hotel valuation “should be north of S$25 million”, estimates Cushman & Wakefield’s Han. “Generally, there are plenty of buyers for properties that are less than S$50 million in quantum size.”

Interest in future prospectsHan says there has been a lot of interest in hotel properties from potential buyers, particularly 'family money' from Indonesia,Hong Kong,China and Malaysia
According to him, there has been a lot of interest in hotel properties from potential buyers, particularly “family money” from Indonesia, Hong Kong, China and Malaysia. Han also sees interest from groups such as KOP Capital, the Singapore-based luxury developer that acquired a 50% stake in Spain-based small luxury hotel operator Stein Group for US$250 million (RM882.6 million) last August. At the time of the announcement, the partners said they were looking for opportunities in Asia, specifically in Singapore, China, Indonesia and Thailand.

“While the hotel and tourism sector may be a little murky in the short-term, these investors are capitalising on the medium- and long-term prospects, particularly the spin-offs that are likely to happen with the opening of the two integrated resorts,” says Han.

International hotel groups are also said to be interested in entering the boutique hotel segment, observes Han. “Some of these international hotel groups are also looking at rolling out more of their hotel brands in the budget range, given the change in the market.” For instance, Starwood Hotels & Resorts is considering bringing its Aloft brand to Singapore; Accor Group, which will have two Ibis hotels in Singapore, could potentially bring in its other budget hotel line, Formula 1; and there’s also InterContinental Hotel Group, which may bring in its Holiday Inn Express brand, he adds.

For now, Lion Properties is focused on getting the hotel up and running. “We have appointed a manager and we’re now recruiting staff for the operation,” says White. “We will start with the level of staff based on the opening occupancy, and take on additional staff as the occupancy grows. It’s pretty important these days to manage costs and overhead.”

White believes the integrated resorts will lead to an increase in the number of nights’ stay by visitors to Singapore, and “that’s obviously going to be good for us, with the number of hotel rooms coming on”. A savvy property investor, he’s philosophical about the market. “It’s very tough out there at the moment. But you have to believe that property and the hotel market goes in cycles, and while there is a major global recession at the moment, we’re starting to see the light at the end of the tunnel.”

Cecilia Chow is City and Country editor at The Edge Singapore

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 760, June 22 - 28, 2009.

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