SINGAPORE, March 26, 2020
SINGAPORE, March 26, 2020 /PRNewswire/ -- OUE Limited ("OUE") and OUE Commercial REIT Management Pte. Ltd., in its capacity as manager (the "Manager") of OUE Commercial Real Estate Investment Trust ("OUE C-REIT") have collaborated to rebrand the landmark Mandarin Orchard Singapore to Hilton Singapore Orchard ("Re-branding Exercise"), following a comprehensive and strategic review.
OUE, which is the master lessee of Mandarin Orchard Singapore, has entered into a Branding and Management Agreement (the "BAMA") with Conrad International Management Services (Singapore) Pte. Ltd. ("Hilton") to rebrand Mandarin Orchard Singapore into Hilton's flagship in Singapore.
Under the BAMA, Mandarin Orchard Singapore will relaunch as Hilton Singapore Orchard—Hilton's flagship in Singapore and the largest Hilton hotel in Asia-Pacific—with product and service offerings aligned with Hilton's brand standards. Hilton will have the exclusive authority to operate the property upon the opening of Hilton Singapore Orchard.
Asset enhancement works to add new meeting facilities as well as refreshed food and beverage offerings to cater to the growing demand for regional and global meetings, incentives, conference and exhibition ("MICE") events have also been planned. The planned refurbishment will be conducted in phases and will commence in 2Q 2020 to capitalise on the current challenges facing the hospitality industry due to COVID-19. The refurbishment is scheduled to be completed by end-2021. During the refurbishment period, Mandarin Orchard Singapore will continue to operate under the management of Meritus Hotels & Resorts, the hotel management company under the Hospitality Division of OUE.
Upon its relaunch in 2022, the hotel will feature 1,080 well-appointed rooms and five restaurants and bars including an all-day dining restaurant. The hotel will also boast meeting and function spaces spanning a total of 3,765 square metres, including three ballrooms.
"We are presented here with exciting opportunities to tap on the strong brand recognition, global distribution network, and industry-leading innovations that Hilton brings, as we reposition the property more strategically for the longer term within Singapore's landscape of robust tourism growth and at the same time increased competition in the hospitality industry," says Mr Brian Riady, Deputy Chief Executive Officer of OUE.
Mr Riady added, "The rebranding of Mandarin Orchard Singapore is a fitting culmination to its 50-year legacy as the benchmark of gracious Asian hospitality in Singapore, following a comprehensive and strategic review by OUE in collaboration with OUE C-REIT. For the customer, this new chapter translates to exceptional service experiences synonymous with the Hilton brand. For our employees, being part of an international hotel chain offers tremendous opportunities for career growth and development."
Ms Tan Shu Lin, Chief Executive Officer of the Manager said, "We firmly believe in the long-term value of our landmark asset. This strategic partnership presents an attractive opportunity to strengthen the property's position as one of the premier hotels in the prime Orchard Road segment."
"The rejuvenation into an upper upscale hotel combined with the addition of more income-generating spaces within the property allows the Manager to create value and drive sustainable returns in line with our proactive asset management approach. The current challenges faced by the Singapore hospitality sector also present a timely opportunity for us to carry out the extensive renovations, with the rebranded hotel expected to be ready in time to take advantage of the sector's anticipated recovery," added Ms Tan.
Rationale for the Rebranding Exercise
Prominently located in the heart of Singapore's premier Orchard Road shopping and entertainment belt, Mandarin Orchard Singapore, which began operations in 1971, is part of OUE C-REIT's portfolio, under OUE Hospitality Sub-Trust. OUE and the Manager believe the Rebranding Exercise will significantly enhance the property and drive growth in long term sustainable returns and value to the Unitholders of OUE C-REIT.
The benefits of the Rebranding Exercise are as follows:
(a) Hilton's strong brand recognition and marketing enhance the property's competitive positioning
The rebranding of "Mandarin Orchard Singapore" to "Hilton Singapore Orchard" enables the property to tap on Hilton's strong brand recognition and marketing, enhancing its competitive positioning alongside other upper upscale hotels along Orchard Road. The Hilton brand is the flagship brand of the Hilton portfolio and has more than 570 properties across six continents. Based on the Brand Finance Hotels 50 2019 Report, the Hilton Hotels & Resorts brand is the world's most valuable individual hotel brand.
(b) Hilton's strong global distribution network and established partnerships complement the property's existing distribution and marketing strategies
The property stands to benefit from Hilton's strong global distribution network, allowing it to tap into the higher yielding luxury market for both leisure and corporate segments with the brand's pipeline of global key accounts and established partnerships with global travel companies. This complements the property's current strength in serving regional guests, particularly in the leisure segment, as well as diversifies its business mix and enhancing revenue, distribution and marketing strategies.
(c) Opportunity to drive more direct booking business on the back of established guest loyalty programme
The property, which will be the largest Hilton hotel in Asia-Pacific when it relaunches with 1,080 rooms, will also be able to expand its reach to more than 100 million members worldwide through the highly successful Hilton Honors guest loyalty programme, as it drives more direct booking business.
(d) Positions the property to better capitalise on long term growth drivers in the Singapore hospitality sector
With the addition of new meeting spaces as part of the Rebranding Exercise, the property will be well positioned to cater to growing demand for MICE events, as Singapore continues to grow and enhance its profile as the top Asian MICE destination for regional and global events. Although the Singapore hospitality sector will be negatively impacted in the near term by the COVID-19 situation, the Rebranding Exercise positions the property to capitalise on the expected recovery in the sector once the situation is under control and travel confidence resumes.
Furthermore, with increased vibrancy from the planned revitalisation of the Orchard Road shopping precinct, supported by sustained efforts by the authorities to amplify the appeal of Singapore as a top global destination to business, leisure, and MICE audiences worldwide, the longer term outlook for the Singapore hospitality sector is favourable.
Master Lease Agreement ("MLA")
OUE is the master lessee of the property under a master lease agreement entered into between OUE, the trustee of OUE Hospitality Sub-Trust and the Manager (the "MLA"). Under the terms of the MLA, the master lease shall be for an initial term of 15 years from 25 July 2013, with an option to renew for a further term of 15 years.
In conjunction with the entry into the BAMA, OUE Hospitality Sub-Trust (as the owner of the property) has provided an undertaking to Hilton that in the event the MLA expires or is otherwise terminated, OUE Hospitality Sub-Trust shall nominate an affiliate (failing which, OUE Hospitality Sub-Trust will assume) the obligations of OUE under the BAMA. The Manager will, when appropriate and in due course, decide and propose the appropriate course of action in such event.
Key commercial terms of the MLA remain unchanged. Under the terms of the MLA, there is downside protection from the master lease for OUE Hospitality Sub-Trust as the MLA has a fixed minimum rent component of S$45.0 million per annum, which will provide income assurance to Unitholders of OUE C-REIT throughout the period of phased renovation and ramping-up of operations.
Financial Impact on OUE C-REIT
OUE C-REIT expects to incur capital expenditure of approximately S$90.0 million in the Rebranding Exercise, with a projected return on investment of approximately 10% on a stabilised basis. The Manager intends to draw down on existing loan facilities to fully fund the Rebranding Contribution progressively over the renovation period. As the capital expenditure will be expended in phases, the exercise is not expected to have any material impact on the aggregate leverage or earnings of OUE C-REIT for the financial year ending 31 December 2020.
For further information and enquiries, please contact:
Senior Vice President,
Hospitality Asset Management
Tel: +65 9618 5081
OUE Commercial REIT
Senior Vice President, Investor Relations
Tel: +65 6809 8704
For more information on OUE Limited, visit www.oue.com.sg
For OUE Commercial REIT, visit www.ouect.com
SOURCE OUE Limited