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Such a trust could be S’pore’s third after those set up by Ascott and CDL

SINGAPORE could get its third real estate investment trust (Reit) with a hospitality theme after Far East Organization (FEO) expressed interest in floating its service apartments and possibly its hotels in a Reit.

FEO is Singapore’s largest owner-operator of service residences. Its chief operating officer of property sales, Mr Chia Boon Kuah, disclosed its proposal yesterday, though he said FEO has yet to finalise any such plan.

If it goes ahead, the Reit could be Singapore’s third hospitality Reit after Ascott Residence Trust and CDL Hospitality Trusts.

City Developments’ (CDL’s) hotel trust is expected to list next month, while Ascott Reit hit the local market in March.

Reits earn income from the rents of tenants at properties they own, while investors get regular payments similar to dividends.

FEO’s Reit could include its service apartments such as its top-grade 225-unit Orchard Parksuites behind Wisma Atria mall, 90-unit Regency House in Penang Road, 141-unit Far East Plaza and 78-unit Central Place in Hougang.

It could also include its hotels such as the landmark Fullerton Hotel, Orchard Parade Hotel, Albert Court Hotel and Golden Landmark Hotel.

With a portfolio of 900 service residence units in nine properties, FEO has a 25 per cent share of the growing market here.

Explaining the Reit possibility, Mr Chia said the service apartment and hotel markets are doing well. There is a ‘global vibrancy” here, given the upcoming integrated casino resorts, rising tourist arrivals and the rejuvenation of Orchard Road, he said.

‘The market is not only asking for more of the same product, but also those of higher standards,” said Mr Chia. ‘It’s whether operators will be doing more of their own or using Reit as an acquisition vehicle to grow the business.’

He said FEO’s latest service apartment project - the 205-unit Orchard Scotts Residences - will set new standards for the industry.

Targeted at ‘top-end expatriates”, it will welcome guests from July next year, he said.

As it is part of the Orchard Scotts residential development, it has access to all the facilities on the sprawling 263,000 sq ft grounds.

The service apartment block has two opulent dining rooms and fully fitted kitchens, where guests can hold private dinner parties, with food prepared by their personal chefs. The 205 units there range from 538 sq ft to 4,000 sq ft.

Singapore’s attractive investment policies, strong political climate, stable social environment and cosmopolitan feel contribute to making it a good place to invest, do business and live in, which augers well for the service residence sector, said Mr Chia.

In the past 18 months, there has been interest from global funds to buy its service apartment properties such as the entire Orchard Parksuites, he added. ‘But we see growth in the market.”

He said FEO is also eyeing Malaysia, Vietnam, Thailand and Indonesia. It already has a 150-unit service residence, Sri Tiara, in Kuala Lumpur. But its Reit’s initial portfolio would have local assets, which would not present currency risks, he said.

‘If FEO does the Reit in the near future, it will have to offer higher returns because the current market sentiment is poor,” said an industry source.

Some of FEO’s hotels are not as attractive as those in the CDL trust, which also means it may have to offer a yield above CDL’s 6.2 per cent to 6.4 per cent if it injects these into the Reit, he noted.

joyceteo@sph.com.sg

Property portfolio FAR East’s Reit could include its service apartments such as its 225-unit Orchard Parksuites behind Wisma Atria mall, 90-unit Regency House in Penang Road, 141-unit Far East Plaza and 78-unit Central Place in Hougang.

It could also include its hotels such as the landmark Fullerton Hotel, Orchard Parade Hotel, Albert Court Hotel and Golden Landmark Hotel.

With a portfolio of 900 service residence units in nine properties, FEO has a 25 per cent share of the growing market here.

Source : Straits Times - 22 Jun 2006