Master Contract Services, which earlier this year entered into a deal to acquire the boutique office block 700 Beach with plans to redevelop it into a hotel, is said to be open to selling the asset on a completion basis.
That is, Master Contract is thought to be willing to deliver the completed hotel, which is expected to have about 300 rooms, along with assignment of a management contract entered into with the United Kingdom’s Whitbread group to operate the hotel under the Premier Inn brand.
Located between Golden Mile Complex and Golden Mile Tower, 700 Beach is near Nicoll Highway MRT Station.
Master Contract Services has diversified from its original construction business into property development projects.
Word on the street is that Master Contract could be eyeing $1 million per room for the proposed hotel, which would translate to a lumpsum of $300 million. The hotel’s total development cost is thought to be around $180-190 million.
This takes into account the $120 million at which 700 Beach was valued under a deal that saw Master Contract entering a 70:30 joint venture with private-equity firm Fine Grain to acquire the property.
The transaction effectively saw Fine Grain returning to take a minority stake in the property after divesting its majority stake – amounting to around 82 per cent of 700 Beach’s existing strata area – together with Hirsch Bedner Associates, which sold its 18-per cent strata area at the same time.
Some market watchers reckon that a pricing of $1 million per room may be too rich considering Premier Inn’s positioning as a budget hotel chain in its UK home market.
However, Master Contract Services is said to be prepared to wait until the redevelopment is completed. The hotel is slated to open in the first quarter of 2016.
Approval for demolition of the existing eight-storey office block was granted recently by the authorities and this is expected to take place soon, assuming a construction period of about 18 months to build the hotel.
The proposed hotel development scheme, being designed by DP Architects, is expected to have a gross floor area of five times its site area of 18,400 sq ft.
This is higher than the 4.15 plot ratio tapped by the existing office development, which means a differential premium probably has to be paid to the state for increasing the plot ratio.
The site is on a balance lease term of 89 years.
Source: Business Times – 20 March 2014
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