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Hind Hotels

Hind director looks afresh at NZ

Singapore Government-controlled DBS Realty has been struggling for a month to mop up just over 1% of the shares in Hind Hotels so it can complete a takeover begun early last year.
Meanwhile one of Hind’s former controlling shareholders, Niwas Jhunjhnuwala (right), is looking again at New Zealand property. He has taken control of the investment portfolio he and his brothers began acquiring in the early 90s, which he estimates is worth about $S100 million ($NZ122 million) although takeover documents show its value dipped well below that during Asia’s economic upheaval.
The New Zealand assets had been keeping the tired Singapore hotel company afloat, although the last company documents before the directors bought the portfolio show their value to the group fell from $S90 million to $S79 million in the year to December 1998.
Those assets are headed by Central Office Park, at the Ellerslie-Penrose interchange on Auckland’s Southern Motorway, which fell from a value of $S43 million in 1997 to $S36.6 million.
Hind bought the office park in 1992 for $NZ38 million from a bank syndicate which took it over from the statutory managers of Aurora Group. Hind later bought the Wiri woolstore and Masport industrial estate in Mt Wellington and, two years ago, paid $NZ8.5 million for the Meadowland shopping centre in Howick.
Niwas Jhunjhnuwala said, during an interview in Singapore in January, he wants to spread his investments and fields hundreds of proposals. An example: the brothers took off for Romania two years ago to check one of these. “We went to buy a port, but it didn’t stack up,” he said.
Those other opportunities now have to match the feel he has for New Zealand. “Now I have a good feel of the market, hopefully I will further expand and may go public.”
Mr Jhunjhnuwala says a float of the New Zealand portfolio is probably “some time away.” It might also depend on a new generation having that feel, because Niwas and brother Lal, who was Hind chairman, are in their 70s.
Their start in New Zealand was entirely debt-funded, ironically so because they bought from banks selling up New Zealand companies, which by then were being charged very heavy penalty interest rates. (Central Park developer Aurora was controlled by Equiticorp and fell in that group’s collapse.)
“In 1992 the equity ratio was nil, 30% was a bank letter of credit from Singapore. I’m building an equity base, roughly 40% equity,” Mr Jhunjhnuwala says.
He says Hind bought “at the right time” but may now sell some of its assets to buy better. That “something better” has some basic requirements to meet: “We go for good long-term tenants. It should not hurt my pocket. My expenditure should come out of rent.”
The asset category does not seem important. Whatever scheme is shown to be viable, “we are ready,” he says.
“I can ready inside [a proposal] now, good or not good. The main thing is feeling you can retain that growth. That’s why we go for blue-chip, long-term tenants, who are getting more and more rare. It’s not a landlord’s market, it’s a tenant’s market now.”
The Jhunjhnuwalas own their industrial premises in Hong Kong and Niwas has an office in Bombay, but the brothers steered clear of Indonesia, the Phillipines, Malaysia and Thailand during their growth surge. “I don’t take currency risk and I borrow long-term. I pay extra but I can sleep peacefully.”
The Jhunjhnuwala brothers have moved cautiously, despite the size of the New Zealand portfolio, ensuring rent more than pays the mortgage. Between them they have numerous business interests around the world – among them, watchmaking in Hong Kong and an experimental farm in Burma which exports black beans and green peas to India. Another branch of the family has been in construction in India for 50 years and now manages 46 hotels there.

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Hind sale

Big hits on sellout
Hind bought the Imperial Hotel in Singapore in 1977, when it was ranked second in the city, and listed their company five years later. Niwas Jhunjhnuwala says it was still five-star accommodation when it closed late last year, but the decision to close made the last year costly for the company.
Major tour operators, airlines and travel agents stopped using it when their contracts expired, $S38 million was written off on closure, and underprovision for tax on investments remitted to Singapore in the September 1999 quarter took the company down further. It turned from a $S6.4 million net profit (after accounting for $S8.9 million profit on sale of the New Zealand assets) in the six months to June, to a $S42 million loss three months later.
Hind had already taken a $S68 million hit on the valuation of its 10,740sqm Imperial property in 1997. The Jhunjhnuwalas sold their remaining 54% of Hind to DBS last April at $S2.80 a share for a cool $S100 million, but smaller shareholders were offered only $S2.50, a fraction over asset backing, when the offer to them finally came through in October.
The price was finally set at $S2.55 and DBS fell 1.1% short of the 90% needed for compulsory acquisition when its offer closed on January 14. DBS has since been mopping up small holdings, lifting its stake to 89.05%.
Those small holders may believe things couldn’t have got much worse, after the dividend was halved last year. They may face a three-year wait, but DBS plans to build 91 luxury condominiums on the site of the 600-room hotel, spending an estimated $S110 million on development, on top of the $S177 million Hind acquisition for a project with an estimated gross value (last October) of $S328 million. That makes every unit in the two proposed 14-storey blocks worth an average $S3.6 million.
Some hotel construction continues in Singapore – the CDL Group, which owns New Zealand’s biggest chain, has started work on a site near the top of Orchard Rd on what is intended to be a six-star hotel. But for Hind, the valuations done on the Imperial site showed a very clear margin in favour of redeveloping.
As a hotel site it was valued last October at $120 million ($S11,217/sqm), which would have resulted in a $S40 million revaluation deficit on book value. As a redevelopment site it was worth $S169 million ($S15,736/sqm).

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