Lucrum Capital offers Mama Shelter Singapore Orchard for sale at $195 mil

/ EdgeProp Singapore |

April 25, 2024 9:52 AM SGT

Artist's impression of the upcoming 115-room Mama Shelter Singapore Orchard (Picture: Lucrum Capital)

Construction is underway at the upcoming Mama Shelter Singapore Orchard at 110 Killiney Road. The 115-room hotel is scheduled to open sometime in 1Q2025. It will be anchored by a 6,000 sq ft restaurant on the first level and an 8,000 sq ft rooftop bar with a swimming pool. Designed by Ong & Ong Architects, the upcoming hotel aims to achieve the highest green mark rating — the BCA Green Mark Platinum. The hotel is the redevelopment of the former Tai Wah Building, which Singapore-based private equity investment firm Lucrum Capital purchased en bloc for close to $84.9 million in November 2017.

David Batchelor, director and partner of Lucrum Capital, believes Mama Shelter is the best fit for the hotel, given its location in the Somerset area of Orchard Road. “Besides comfortable accommodation, F&B and entertainment is also a big part of Mama Shelter’s overall offering,” he says.

Artist's impression of the restaurant on the ground floor of Mama Shelter (Picture: Lucrum Capital)

First Mama Shelter in Asia

Mama Shelter was founded in 2008 in Paris by Serge Trigano, his sons Jérémie and Benjamin, and French designer Philippe Starck. Trigano has a rich hospitality pedigree: his father co-founded Club Med in 1950. Trigano himself worked at Club Med, where he rose through the ranks to become CEO of the US in 1980 and president of the group after his father stepped down in 1993. The Mama Shelter brand combines urban design, glamour and affordability. It has 18 hotels with 2,606 rooms today and is operated by Ennismore, a lifestyle hospitality company now part of Accor.

The upcoming hotel is the first Mama Shelter in Asia Pacific, says Stella Blythe, director of CBRE Hotels & Hospitality, Capital Markets. “Mama Shelter is a highly profitable brand under the Accor-Ennismore umbrella. It’s very F&B-driven and lifestyle-oriented.”

David Batchelor of Lucrum Capital, with the construction of the upcoming Mama Shelter Orchard Singapore on the site of the former Tai Wah Building (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Mama Shelter Singapore Orchard is owned by a fund under Lucrum Capital. The fund has held the asset for more than five years — beyond its fund life — owing to the Covid pandemic. Lucrum Capital intends to divest the asset. “Now that the hospitality market is recovering, we see it as an opportunity for our investors to exit,” says Batchelor.

CBRE has been appointed the exclusive marketing agent for the hotel, which has an indicative price of $195 million, or $1.7 million per key. The site is zoned for hotel use, with a gross plot ratio of 2.8. The sale will be conducted via expression of interest, which will close on May 30.

The $3 billion redevelopment of Singtel Comcentre by a joint venture between Singtel and Lendlease will feature two 20-storey, Grade-A office buildings with a total gross floor area of 1.18 million sq ft; and another 30,000 sq ft of F&B, lifestyle and retail space (Picture: Singtel)

Renewal in the Orchard-Somerset area

Renewal is taking place in the Orchard-Somerset area with the redevelopment of the former Grange Road Carpark by Lendlease Global Commercial REIT into a multi-functional event space, Live!@313. It is targeted to open in 4Q2024 and will feature unique food concepts and an indoor live-performance venue.

Adjacent to the upcoming Mama Shelter Singapore Orchard is the $3 billion redevelopment of Singtel Comcentre by a joint venture between Singtel and Lendlease. The new development will feature two 20-storey, Grade-A office buildings with a total gross floor area of 1.18 million sq ft; and another 30,000 sq ft of F&B, lifestyle and retail space, including a Singtel flagship store. There will be a 300-person auditorium, a rooftop park, a running and walking track, and an integrated wellness hub.

The renewal will bring “vibrancy and dynamism” to Orchard Road, says Michael Tay, CBRE head of capital markets, Singapore. Upon completion in 2028, the Singtel Comcentre redevelopment will activate the neighbourhood with new commercial and retail offerings and enhance connectivity with a new underground link to Somerset MRT Station, he adds.

The enhancement in connectivity and vibrancy will benefit hotel guests at Mama Shelter and the patrons of the restaurant and rooftop bar, notes Lucrum Capital’s Batchelor.

The rooftop bar with swimming pool spans across 8,000 sq ft (Picture: Lucrum Capital)

Limited hotel supply pipeline

“Singapore has seen one of the most limited hotel supply pipelines within Asia Pacific over the past three years, due to construction costs increasing here at a faster rate than any other major market in the region since the beginning of 2020,” says CBRE’s Blythe. As a result, only 2,208 rooms came to the market in 2023, just 2.8% of the total rooms available.

With the opening of Mercure Icon Club Street in the first quarter, comprising 989 rooms, CBRE now forecasts hotel supply to grow at a compound annual growth rate of just 0.6% over the next four years. “Overall hotel performance will remain buoyant due to lack of new completions and subsequent new competition in the market,” says Blythe.

Based on Singapore Tourism Board statistics for the first two months of 2024, the upscale segment had the highest occupancy rate of 86%, up from 78.6% a year ago. “It reinforces the trend that guests are choosing to stay at upscale locations even with the increased room rates compared to historic levels,” notes Blythe.

Singapore’s hotel market is poised for continued growth, adds Blythe, given the aggressive demand growth forecast and significant infrastructure developments such as Changi Airport Terminal 5, enhanced leisure attractions, and a thriving corporate and Mice market.

Artist's impression of one of the 115 rooms at Mama Shelter Singapore Orchard (Picture: Lucrum Capital)

Rarity of freehold hotels in Orchard Road area “Freehold hotels in the Orchard Road submarket are also rarely available for sale,” according to CBRE’s Tay. The last freehold hospitality-based asset in the Orchard Road area that changed hands was the former Thong Sia Building site at 28 and 30 Bideford Road. Boustead Projects purchased the 18-storey building for $515 million in June 2022, and the property has been rebranded the 156-room Como Metropolitan Singapore. It marks the first hotel in the city-state by Como Hotels & Resorts, founded by Singaporean entrepreneur Christina Ong. She is the wife of Ong Beng Seng, managing director of Hotel Properties.

Citadines Mount Sophia was sold to a joint venture between BlackRock and Hong Kong-based Weave Living for $148 million in February. The 99-year leasehold, 12-storey property has a mix of studios, one- and two-bedroom suites. It is part of the Wilkie Edge mixed-use development comprising a retail podium, office block and basement carpark.

Based on the projected hotel room rates at Mama Shelter Singapore Orchard, which are likely to be pegged upwards of $300 a night, and the indicative price tag, the yield is expected to be in the 4% range. “What’s more important is the future capital appreciation,” says Batchelor.

Given the dearth of available freehold hotels in the Orchard Road submarket, CBRE’s Tay expects the property to attract investors such as family offices, boutique real estate funds, local companies and high-net-worth individuals. “The majority of hotels in Orchard are quite sizeable with more than 200 keys,” he says. “Boutique offerings like Mama Shelter Singapore Orchard are scarce.”

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