Oakwood Asia Pacific signs up with boutique developer Newfort Realty

By Michael Lim

/ The Edge Property |

October 22, 2015 10:00 AM SGT

Oakwood Asia Pacific will finally make its presence felt in Singapore when it opens the doors to its first Oakwood- branded serviced apartment, Oakwood Studios, in November next year. The company signed its first management agreement with Newfort Realty, a local boutique developer, to manage its property for the next 10 years, which is renewable for another 10 years.

It is the first property in Singapore that the company is managing after setting up its Asia-Pacific headquarters in the city-state in 1995. It has 28 branded properties with 4,230 serviced apartments in 16 cities across the region including Guangzhou, China. It plans to open 16 properties over the next three years. According to Oakwood, its 20-year absence from Singapore was not due to lack of trying, but the challenge in securing the right property in the right location.

“We have always had the desire to operate a property here, as it is our home office,” explains Dean Schreiber, managing director of Oakwood Asia Pacific. “It wasn’t until recently that owners of serviced apartments have been open to allowing third-party operators to come in and take over the management of their properties.” Most of the incumbent serviced apartment operators in Singapore are also property owners and developers, including CapitaLand’s Ascott Ltd, Frasers Centrepoint’s Frasers Hospitality and Far East Hospitality. UOL Group has also been expanding the Pan Pacific Serviced Suites brand in Singapore and around the region.

The second reason was the lack of a suitable location. “We wanted a property that is centralised,” says Schreiber. “We wanted the right product that would be able to enhance our brand position.” The property that it has signed up with Newfort Realty appears to be “the right property”, he adds. “All the stars were aligned. It was in the right location close to Orchard Road, and it had the right product size and quality that we wanted as well.”

Maiden foray The maiden Oakwood-branded serviced apartment will be located on 18 Mount Elizabeth, just off Orchard Road. It was the former Chateau Eliza that Newfort Realty purchased en bloc in 2012 for $92.2 million. The firm paid $3.8 million in development charges, as it had intended to redevelop the property into a 68- unit high-end condominium. When the residential market softened in the wake of the additional property cooling measures, Newfort Realty decided to halt the redevelopment of Chateau Eliza. The decision meant Newfort Realty had to pay $10 million in additional buyer’s stamp duty.

“We had the necessary approvals, the showflat was ready and we were ready to launch, but the cooling measures had taken its toll and hit the high-end market badly,” says Calvin Tan, director of Newfort Realty. That was when the firm decided to bite the bullet and revisit the drawing board for alternative options. One of them was to convert the property into a serviced apartment block, he adds.

Newfort Realty will spend close to $30 million to convert the 37-unit Chateau Eliza into a 98-unit serviced apartment to be branded as Oakwood Studios. Once completed, the company would have spent close to $136 million, or about $1.4 million an apartment. The company has given its undertaking that it will operate the freehold site as a serviced apartment for the next 50 years.

“The day we received the approval to convert Chateau Eliza into a serviced apartment, I received calls from all the local big boys,” says Tan. “This is because it is difficult to get approval for serviced apartments in a prime location. The authorities’ key concern was traffic.”

Although the proposals from the local big boys were interesting, Newfort Realty wanted something different — a concept and brand that are new to Singapore. Oakwood Asia Pacific provided that difference, says Tan. As CEO of US fast food restaurateur Carl’s Jr in Singapore, Tan was also inclined to work with another US company. Lending greater confidence was the fact that Singapore’s Mapletree Investments had taken a 49% stake in Oakwood Asia Pacific in April 2014. The new joint venture between Mapletree and Oakwood Asia Pacific intends to open more than 100 new properties around the world over the next five years. The target is to acquire and develop some US$4 billion ($5.6 billion) worth of corporate and serviced apartment assets within Asia, Europe and North America. The Los Angeles-headquartered Oakwood was founded 50 years ago and was a pioneer in the US corporate housing industry. Oakwood Worldwide has expanded across North America, London and Asia-Pacific.

Oakwood Studios Singapore

Source: Oakwood Asia Pacific

Latecomer? According to JLL’s Hotels & Hospitality Group, there are currently close to 40 serviced apartment developments, supplying an estimated 4,955 units in Singapore. In November 2016, Oakwood Studios will have added another 98 units to the market. This does not include the former Somerset Grand Cairnhill Singapore serviced apartment, which Capita-Land Residential and Ascott are redeveloping into an integrated development comprising 40% serviced apartments with hotel licence and 60% high-end residential. Upon completion of the redevelopment, CapitaLand plans to divest and deliver New Cairnhill SR to Ascott REIT for $405 million in 2017.

Oakwood believes there is room for more players in the local market. “The demand for serviced apartments is still strong,” says Schreiber. He attributes this to the growing trend of companies sending professionals to Singapore on shorter-term assignments or contracts for two to six months. For such workers on short-term assignments, the preference is to be in a serviced apartment, which is more spacious than a hotel room and provides the flexibility of doing one’s own laundry or cooking, he adds.

Alternatively, Newfort Realty’s Tan says he has another property that could be turned into a serviced apartment. In July last year, Low Keng Huat’s 99%-owned subsidiary, Newfort Alliance (Moulmein), purchased the remaining 36 apartment units at Balestier Towers for slightly over $63.9 million, following its purchase of 15 commercial units and an apartment in the property in August 2013. Tan owns the remaining 1%.

“We are in the midst of trying to convert Balestier Towers into a serviced apartment property,” says Tan. “Should we be successful, Low Kheng Huat may want to run it themselves as they have in-house expertise. After all, they own Duxton Hotels International, and operate hotels in Australia and Vietnam under the brand name.” Tan could also propose Oakwood as an operator if “the numbers make sense”, he adds.

Meanwhile, Oakwood is also expanding aggressively across the region, and capitalising on its joint venture with Mapletree. It is likely to operate a property in Australia on behalf of Mapletree Investments, which earlier this year acquired Adina Apartments, a 162-unit serviced apartment property located at the edge of Brisbane’s CBD. In the pipeline is another property in Tokyo and Ho Chi Minh City, within SC Vivocity, which is part of Mapletree’s mixed-use development called Saigon South Place.

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This article appeared in the City & Country of Issue 696 (Sep 28, 2015) of The Edge Singapore.

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