Singapore, July 19 (BDNEWS)- Singapore's famous Raffles Hotel has been sold to a U.S. real estate investment fund, Colony Capital LLC, by its parent, Raffles Holdings, along with another 40 hotels and resorts around the world, including the Swissotel chain.
Singapore Legend has it that Somerset Maugham would work all morning under a frangipani tree in the Palm Court of the famed Raffles Hotel here, turning the bits of gossip and scandal overheard at dinner parties into famous stories. Ernest Hemingway is said to have patronized the hotel's Long Bar and its celebrated Singapore Sling, while a young Rudyard Kipling once had this simple advice: "Feed at Raffles."
With its elegant colonial architecture, grand staircase and breezy arcades, the 118-year old Raffles Hotel - named after the founding father of colonial Singapore, Sir Stamford Raffles - has long epitomized a bygone era of elegance and old world opulence, an iconic cornerstone of Singapore's hospitality industry.
The deal, valued at about 1.72 billion Singapore dollars, or $1.02 billion, including debt, will further expand the hotel portfolio of Colony Capital, which has invested more than $15 billion in over 8,000 assets since 1991.
These include the Costa Smeralda resort in Sardinia; Hotel Guanahani in St. Barts in the Caribbean, the Amanresorts hotel chain, London's Savoy Group, the Stanhope Hotel in New York, the Atlantic City Hilton and the Las Vegas Hilton.
Colony Capital has more than 19,000 rooms in its portfolio in addition to the 12,000 rooms in the Raffles chain.
Jennie Chua, president and chief executive of Raffles, said in an interview that her company lacked the resources to "play with the big boys" on a global stage. "To return money to shareholders you need scale and that would have required a couple of billion dollars in investment, not something easily achieved by our own resources," she said.
While Raffles Holdings, which is 60 percent owned by CapitaLand, the Singapore property developer, is ranked 18th in the world in terms of hotel rooms, its numbers pale in comparison with market leaders like Hilton Hotel Group with 358,408 rooms and Best Western with 310,000 rooms.
The market capitalization of Raffles Holdings is $500 million, said Chua, who will remain chairman of Raffles Hotel in Singapore. The industry's top players combined have a market capitalization of about $25 billion, she said.
Chua said the timing of the sale was good because after losing money for years, the Raffles Holdings' hotel business had finally started making money in 2003.
Colony Capital will take over management contracts for all of the hotels that Raffles Holdings owned or operated and its chairman and chief executive, Thomas Barrack, has committed to expanding both the Raffles and Swissotel brands.
"We are honored to become the custodian of one of the finest hotel chains in the world and a true national treasure of the people of Singapore," he said. "We deeply respect the historical significance of the Raffles Hotel, Singapore and we consider it our responsibility to protect that legacy."
As part of the deal, Raffles Holdings has an option to buy back the lease of the Raffles Hotel Arcade in Singapore after 82 years following completion of the sale. Raffles Holdings will also continue to own a range of assets, including antiques and memorabilia, but has agreed to lend them to Colony for display at the hotel.
BDNEWS/1323 hrs.
