The stability of the DoubleTree by Hilton is what prompted the group to make the purchase.
RANKED 20th among Singapore’s top-50 richest, with a net worth of US$1.4bil (RM5bil) by Forbes last year, founder and chairman of Royal Group Holdings Asok Kumar Hiranandani knows it too well when he has gotten a good deal.
The question now is whether he wants to expand that good deal to include the retail portion of the mixed integrated Intermark development.
The Royal Group’s RM388mil investment on DoubleTree by Hilton in Jalan Ampang Kuala Lumpur early this month is the latest addition to the group’s diversified real estate portfolio.
According to Bloomberg’s data, Asok Kumar is instrumental in developing and building the group’s market share in Singapore that includes some of the iconic buildings that form part of the Singapore landscape.
He has immense expertise and a wealth of experience in the commercial property, financial and capital markets. His recent purchases include commercial buildigns 1 and 3 Phillips Street in the Raffles Business District.
With the latest acquisition, the privately held Royal Group – which dates back 1947 and is known for its real estate – will soon be managing a range of properties across Singapore, Malaysia and Australia, comprising residential, industrial, shopping malls, hotels and office towers. One of Asok’s recent Singapore purchase was also among his largest – the renovation of a 215-room resort hotel on Sentosa Island, scheduled to open this year which is managed by his son Bobby.
The group is reported to be working on other opportunities in Singapore, Malaysia, Australia, Maldives and Europe.
Royal Group of Companies chairman Asok Kumar says: “We’re delighted to acquire one of the most interconnected hotels in the heart of Kuala Lumpur within its unique location.
“It marks a milestone in Royal Group’s heritage, as we seek to offer unique experiences within our hospitality portfolio. DoubleTree by Hilton Kuala Lumpur is a strong and successful name within the industry.
“Adding this property to our portfolio of preferred brands not only broadens our hospitality and lifestyle footprint in Malaysia, but also enables us to accelerate the growth of hotels across Asia,” Ashok says in a press release. This will be the first property in the group’s portfolio to be managed by Hilton.
In a separate telephone interview, Royal Group of Companies managing director Peter Wilding opines that Asok Kumar is a visionary.
“He can look into markets more than any investor and businessman,” Wilding says.
Wilding, 49, an Australian who has been with the group for over a year says the stability of the DoubleTree by Hilton is what prompted the group to make the purchase and admits that the current market condition and weak ringgit are opportunities to close such deals.
Although certain quarters are of the view that there are too many hotels in the country and in the city, Wilding says this is one asset that will work well in the Royal Group’s portfolio.
Its location, size and quality are solid investment for the group and will contribute “a significant number” to the group’s bottom-line as the company is at the forefront of an advanced hospitality transformation.
He says the group is investing in one of the largest leading hospitality properties in KL and this will broaden its portfolio and accelerate its growth in Asia-Pacific at this “pivotal time”.
The purchase will also strengthen its position as a market leader within the industry, and help it capitalise on the bullish growth for hospitality in key Asia markets, he says.
DoubleTree by Hilton Kuala Lumpur general manager Ian Barrow say as Kuala Lumpur continues to define and remake itself as a multi-faceted tourist destination steeped in a “city within a city” concept, the hotel is seeing an enhanced demand for full-service hotels equipped with stellar accommodation and outstanding amenities.
RM720,000 a room
The RM388mil deal is said to be equivalent to about RM720,000 for a room at Doubletree by Hilton.
Wilding, who oversees the group’s retail, commercial and hospitality business, says negotiation with Intermark’s owner New York-based fund manager BlackRock commenced in May, last year.
While some parties have commented that it took a long time to complete the deal, Wilding says the group did not encounter any significant challenges while negotiating with BlackRock.
“However, it’s a fairly huge property with 540 rooms and a huge transaction is involved.
“There is demand in the hospitality industry. The hotel has just been redeveloped and the refurbishment is of a high quality. That makes it a good part of the acquisition, apart from its central location and convenient transportation access,” says Wilding, adding that the group hopes to complete the transaction by early September.
He says being a dominant property player, the group has came up with a strategy in the last four years to expand across the region by venturing into hospitality. It also has retail and commercial properties.
With Hilton’s brand name and reputation, he says the group has no intention to change the hotel’s management.
“The Hilton has an agreement in place to manage the hotel and we are happy with it. It will be business as usual and the name DoubleTree by Hilton Kuala Lumpur will remain. So will its employees,” says Wilding.
The group will not be involved in the hotel operations, but will want to market it more to increase patronage.
On whether the Royal Group has plans to set up a company here, he says it does not intend to, as the group has plans to maintain its headquarters in Singapore.
The group previously owned Menara Park in Jalan Yap Kwan Seng, but had divested it years ago.
With the hotel’s average occupancy rate of about 80% last year, Wilding says the group is confident that Hilton can better that number.
It had taken into account the hotel’s growth in occupancy rates and its strong conferencing and event spaces before making the deal.
Meanwhile, property consultant VPC Alliance (KL) Sdn Bhd managing director James Wong opines that the RM388mil deal is of the best fair value.
“It can fetch a higher price from RM750,000 to RM800,000 per room. It’s a good deal for both Royal Group and BlackRock.
“BlackRock had purchased it for investment, and wanted to exit. So, it is timely for both parties to close the deal,” says Wong.
Additionally, he says since many hotels have been coming onstream for the last couple of years, the achievable room rates (ARR) over the past few years have either been stagnant or increased slightly for four to five-star hotel properties, resulting in the difficulty to hike room rates.
Interest in retail portion
Said to be an integral part of the development, the 200,000sq ft Intermark Mall provides life and colour to the entire development. A quarter of it deals in food and beverage (F&B).
The news of the Retirement Fund Inc’s or Kumpulan Wang Amanah Pekerja (KWAP) acquisition of Integra Tower for RM1.065bil had certain quarters wondering if the Royal Group would invest in the retail podium, as it would add value to the overall acquisition.
“Even if it is owned by another party, it is not unusual to have different owners when there are agreements in place,” says Wilding, adding that it is the components that give the development its unique features.
Going forward, he says the group intends to look for more opportunities to expand its business in Kuala Lumpur.
“We are currently looking at several options here. However, it is still too early to disclose anything at this point in time, as we are in the midst of discussions with the parties,” adds Wilding.
The Intermark comprises four parcels, office blocks Integra Tower and the Vista Tower, DoubleTree Hotel and the Intermark Mall. All four parcels were put up for sale about a year or more ago.
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