The Straits Trading Company Limited (STC) and Far East Orchard Limited (FEOrchard), two of Singapore’s leading hospitality operators have signed an eagerly-awaited Joint Venture Implementation Agreement (JVIA) to establish a 30/70 joint venture (JVCo) to pursue and conduct hospitality management and hospitality‐related businesses and investments in real estate used primarily for hospitality purposes.
Under the terms of the JVIA, STC – holding a 30% stake – will contribute its three hotel properties, namely Rendezvous Grand Hotel Melbourne, Rendezvous Hotel Perth and Rendezvous Studio Hotel Perth Central, and 13 hotel management contracts under RHI and leases to the JVCo and receive net cash of SGD$56.2 million.
FEOrchard will contribute 25 hotel and service residence management agreements and contribute cash of SGD$97 million to the JVCo.
The joint venture will enable STC and FEOrchard to transform their existing hospitality businesses into one of the largest hotel operations in Asia Pacific with a scalable and sustainable platform for future growth and expansion.
The joint venture will initially manage more than 6000 rooms.
“This new joint venture combines the strengths of two leading hospitality operators,” said STC Chairman, Chew Gek Khim. “It also enables Straits Trading to continue its strategy of transforming its portfolio of businesses into more effective growth engines, each a leading player with economies of scale.
“The combination of FEOrchard’s operational expertise and STC’s strong hotel presence in Australia and New Zealand through its Rendezvous hotels will create a formidable hospitality joint venture which we plan to expand in their respective and new markets.”
In Singapore, STC announced that it has signed agreements with Far East Hospitality Trust (FEHT) and Serene Land Pte Ltd (a member of the Far East Organization group of companies) which will monetize Rendezvous Grand Hotel Singapore and Rendezvous Gallery for an aggregate consideration of SGD$285 million, comprising SGD$217 million in cash and SGD$68 million in FEHT stapled securities.
“Over the past years, through refurbishments, asset enhancements and rebranding, STC has enhanced the value of Rendezvous Grand Hotel Singapore and Rendezvous Gallery which has increased by SGD$117 million since 2009,” said Chew Gek Khim.
“We are now transforming these properties into cash and a stake in FEHT from which we will enjoy a steady income stream.
“This will enable STC to continue its strategy of transforming its portfolio of businesses into more effective growth engines, each a leading player with economies of scale.”