Property fund manager buys dormitory for $127m

Completed in mid-2001, Homestay Lodge in Kaki Bukit Avenue 3 comprises 10 blocks - seven residential blocks, two blocks with dining and minimart facilities and an administration block.

Property fund manager Pamfleet Group has inked a deal to buy Homestay Lodge for slightly above S$127 million. The dormitory of about 6,000 beds in Kaki Bukit Avenue 3 sits on two plots of land totalling about 200,000 sq ft. There are about 14 years left on the lease. The plots were sold by the Housing & Development Board in 1999; the deal that Pamfleet has entered into is subject to HDB's approval, The Business Times understands.

Homestay Lodge is being sold by a privately owned vehicle of Hotel Properties managing director Ong Beng Seng and his brother-in-law David Fu. JLL brokered the transaction. It conducted an expression-of-interest exercise that closed in late January. Following that exercise, Pamfleet was selected to do due diligence on a purchase, at around S$125 million. Following negotiations, the final price settled on was slightly higher, just a little above S$127 milllion.

When contacted, Karamjit Singh, international director at JLL who is understood to have handled the deal, declined to comment. Completed in mid-2001, Homestay Lodge comprises 10 blocks - seven residential blocks of either six or seven storeys, two blocks containing dining and minimart facilities, and an administration block. Market watchers note that dormitories can be a viable investment, even with short lease term left on the land - 14 years in this case - as yields tend to be high, in the mid-teens, thus enabling investors to make a decent profit before the lease expires. There has been a significant rise in dormitory bed rates in the past decade, the result of an acute shortage of such space.

In the case of Homestay Lodge, there may also be some asset enhancement potential; there is a modest unutilised plot ratio that a potential investor could tap, for instance, by adding more recreational facilities, thus paving the way for higher bed rates.

Pamfleet has offices in Hong Kong and Singapore. In 2013, a special-purpose vehicle managed by Pamfleet Asset Management (Singapore) acquired Bright Chambers at the junction of Middle Road and Victoria Street. It paid S$45 million or S$1,076 per square foot of existing gross floor area for the nine-storey commercial building, which is next to Bugis + mall. At the time of the sale, it was reported that the balance lease term of the Bright Chambers site was about 60 years. The building is now undergoing a massive refurbishment for a strata office-and-retail project, The Prospex.

Published on 19 Mar 2015

By Kalpana Rashiwala

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