• Transaction highlights still strong pricing for hotels in Singapore
• Implied valuations of Singapore hotels in hospitality S-REITs trading below physical market transactions
• Top pick – CDREIT (TP of S$2.00)
Sale of Wanderlust Hotel for S$1.3m per key
• According to the Business Times, 29-room Wanderlust Hotel which sits on a freehold title was sold by a company linked to Loh Lik Peng (founder of hotel and restaurant group Unlisted Collection) for S$37m. This translates into c.S$1.3m per key.
• The buyer is reported to be 8M Real Estate, a Singapore-based privately held property investment company.
• Wanderlust Hotel is located along Dickson Road, in the Little Conservation Area and is near the Jalan Besar MRT Station.
CDL Hospitality - Technical Analysis
• This transaction follows news that the cost of developing a 340- to 350-room hotel on the ex-Singtel site at Hill Street will be approximately S$1.1m and market speculation was that buyers were willing to pay S$1.3m per key for the Park Hotel Farrer Park.
• In our view, this news again highlights the disparity in valuations that physical market and equity market investors ascribe to hotels in Singapore. Currently, the implied value of the Singapore hotels for hospitality REITs ranges from S$625k-S$1m per key.
• Thus, 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, with CDREIT as our top pick (BUY, TP of S$2.00).
Source : DBS Group Research