Far East Hospitality Trust has reportedly offered to acquire Singapore's Oasia Hotel Downtown in a $210-million bid.
OCBC Investment Research claims the proposal is set to boost the company’s growth and earnings, driving the buyer’s revenue on the deal up 4.6 percent.
However, the trust is awaiting approval from stapled security holders on the acquisition. Much of the funding for the purchase will come from debt, bumping the trust’s leverage up 37.5 percent.
The trust’s Singapore-based developer Far East SOHO will lease the property for 20 years with the opportunity to extend it for an additional 20 years. The fixed rent will be at $6.5 million per year while variable rent will make up 33 percent of the property’s GOPPAR. Oasia Hotel Downtown’s GOPPAR would make up 8.9 percent of Far East’s total revenue, if the hotel group includes it in the performance report for the first nine months of 2017.
OCBC’s report also said the hotel has more potential to increase RevPAR. Its RevPAR in last year’s first nine months came in at $170—lower than the hotel industry average at $201.20. Since the property is upscale, the Oasia could have reached the upscale hotel RevPAR average at $224.20 in the first 10 months of 2017.
"We note the upside potential for the asset’s operational performance, given 1) its strategic location within the CBD 2) solid reputation with a flurry of awards and positive reviews online 3) room for further growth with occupancy levels still in the low-80s,” Deborah Ong, OCBC analyst told Singapore Business Review.