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).
Big hits on sellout