BlackRock to sell hotel at The Intermark?

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

By: VASANTHA GANESAN @ page15

The building that houses DoubleTree by Hilton Kuala Lumpur is up for sale and has drawn investor attention, sources say.

The Edge understands that New York-based BlackRock Inc may sell the 540-room hotel, which is part of its integrated development The Intermark in Jalan Tun Razak, for an estimated RM350 million.

It was reported that Crown Princess Hotel Kuala Lumpur, which had originally occupied the building, was acquired by Australia’s Macquarie Global Property Advisors (MGPA) for RM240 million in 2007.

Two months ago, BlackRock took over MGPA, a private equity real estate investment advisory company that focuses on real estate markets in Europe and Asia, creating a global real estate investment company worth US$23.5 billion.

“A deal is being worked out,” a source tells The Edge when asked about the sale of the hotel.  It is learnt that a Singapore-based company may become the new owner of the property.

BlackRock, when contacted, declined to comment on the possible sale of the building, which is within a stone’s throw of the iconic Petronas Twin Towers.

While it may not be surprising that the building is on the market – most funds exit their investment after a three to five-year period – industry observers point out that The Intermark has only one title.  Hence, disposing of its components separately would pose a challenge.  “(Nevertheless), it is still possible to sell it ……… but they (buyer & seller) may hit some roadblocks,” a real estate consultant contacted by The Edge says.

Apart from DoubleTree by Hilton, The Intermark also houses Intermark Mall, Vista Tower and Integra Tower.

It Intermark occupies what was previously the site of City Square Centre, which comprised the six-storey City Square shopping centre, the 62-storey Empire Tower office block and the 35-storey, 571-room Crown Princess Hotel.  These three buildings were upgraded and renamed Intermark Mall, Vista Tower and DoubleTree by Hilton respectively.

Next to the City Square Centre was Plaza Ampang, which was demolished and replaced with Integra Tower as part of The Intermark.

MGPA had purchased City Square Centre for RM680 million from Asia Pacific Land Bhd (AP Land) and Plaza Ampang from a related company of Ap Land for an estimated RM80 million.

It acquired the assets under its US$1.3 billion MGPA Fund II and redeveloped the sites as The Intermark, all four components of which are said to have gross development value of RM2.2 billion.

While City Square Centre was purchased in 2007, Crown Princess only closed its doors in January 2009.  The hotel had started operating in 1991 and was managed by Federal Hotels Internationals (FHI).

AP Land and FHI have common shareholders.

When DoubleTree, a Hilton Worldwide group hotel, opened three years ago, it became the first DoubleTree brand in Southeast Asia.  Should the hotel sale materialise, it will be one of a few in recent years.  Sunway Real Estate Investment Trust, for example, bought The Legend Hotel Kuala Lumpur, now renamed Sunway Putra Hotel, in an auction in 2011.

The capital’s most expensive hotel deal was in 2009, when The Westin, located in Jalan Bukit Bintang, was sold by Ireka Corp Bhd for RM455 million to Thailand’s Newood Assets Ltd.  The sale fetched slightly more than RM1 million per room.  The sale of DoubleTree at RM350 million would translate roughly into RM648,000 per room.

Malaysia is targeting to have 96,804 rooms in four and five-star hotels by 2020 to accommodate an estimated 36 million tourist arrivals, making owning a hotel attractive.

It was reported earlier in the year, about the time BlackRock announced plans to buy MGPA, that Integra Tower may be up for sale.  Launched in mid-2003, the 40-storey office building has US’ LEED-specified accreditation for green buildings.

With 777,000 sf of total floor area, integra Tower has managed to draw such tenants as J.P. Morgan, Michael Page and Petronas Lubricants.  There has been no news of a sale since.     E