Tan Boy Tee may have a funny name by U.S. standards, but he's no joke in the hotel investment game.
The Singaporean tycoon is known for his interests in oil and gas, but has lately diversified into hotels through the privately held Bestford Capital, which he runs with his two sons. The group has reportedly picked up half a dozen properties including the Park Hyatt in Washington D.C., which sold for $100 million last year. In February, Bestford bought Boston's Battery Wharf Hotel for $50 million. Their portfolio also includes hotels in Japan and the UK, and, oddly enough, none so far in Singapore.
While most of their hotel acquisitions have been in the upper-upscale and luxury segments, the group is now invested down market, a sign that cross-border investment isn't only seeking out trophy properties in top MSAs. It's also scoping out and buying up positions in U.S. hotel companies.
The latest is Red Roof Inn. According to The Straits Times, Bestford Capital earlier this year bought a majority stake in the Red Roof Inn portfolio, which, in recent months, has been expanding beyond North America.
In the case of Red Roof, Bestford partnered with Westmont Hospitality to submit a winning bid of about US$600 million.
According to Savills Research, Singapore investors have spent a total of US$1.9 billion on 116 assets in the overseas hospitality market year-to-date. Singapore is also reportedly the fifth highest cross-border capital origin country for hotel assets this year so far, after the U.S., Qatar, China and the United Arab Emirates.
"Most of the buyers in the current market are private equity players or high-net-worth individuals focusing only on hotels," Raymond Clement, managing director of Savills Hotels, Asia-Pacific, told The Strait Times.
While hotel assets are considered a riskier investment than other commercial spaces, they often have higher returns for investors.
"Hotels would be considered as a more risky investment than retail, commercial or residential in most of the gateway cities in Asia-Pacific, as it implies more factors including environmental, tourism, transport, brands and hotel operators," Clement continued.
Hotel yields in the Asia-Pacific region are usually 100 to 200 basis points more than commercial buildings in cities such as Seoul, Tokyo, Beijing, Shanghai, Taipei, Hong Kong, Singapore, Sydney and Melbourne, Clement added.
In the U.S., Singaporean investors accounted for 8.9 percent of all hotel transactions YTD, the majority of which linked to the Red Roof buy-in. Excluding this portfolio transaction, Australia was the country with the most Singaporean investment, accounting for 30.1 percent of all hotel transactions in Australia this year. Singapore money bought a total of eight properties with a total value of A$671.7 million (S$675 million), according to Real Capital Analytics.
Emerging destinations for Singapore investors include South-east Asian countries such as Malaysia, Thailand and Indonesia. "Many Singaporean investors would like to invest in Japan but often cannot compete with the robust bidding of local Japanese investors," Clement said. "Furthermore, construction costs have increased, making developments and refurbishments untenable for Singapore-listed companies."