Frasers opens US$135m Beijing service residence

Source : Business Times - 15 Aug 2008

FRASERS Hospitality, a unit of Frasers Centrepoint, the property arm of listed conglomerate F&N, yesterday officially opened a 23-storey service residence in Beijing, the sixth of up to 20 it hopes to open in China. The company owns or operates service residences in more than 14 cities in Asia and Europe and is targeting 8,500 apartments by 2010.

The latest US$135 million project has 357 apartments and has already housed celebrities such as S.H.E and Wang Lee Hom. It was completed earlier this year ahead of the Olympic Games and is the first in China to be wholly-owned by the company.

But a long-mooted real estate investment trust holding the company’s hospitality assets is likely to be delayed for at least a year or two, said its chief executive officer Choe Peng Sum.

‘Everyone knows right now is not the time to do a Reit,’ said Mr Choe. ‘We are quite ready but it’s a weak market. People are saying at least another year, if anything, after 2009.’

He said that the company preferred to manage properties on behalf of owners as it seeks to expand rapidly while remaining asset-light. ‘But we would like to own properties if they are in super-prime locations,’ said Mr Choe. Its newest residence is in the heart of Beijing’s central business district and is already seeing 80 per cent occupancy. Mr Choe called the Beijing project’s timing ‘just right’, as it came ahead of recent attempts by the country’s central government to tighten bank lending and property development. For instance, it was able to secure a 50 per cent loan in US dollars from foreign banks, just before the government stipulated that loans should be denominated in yuan.

‘The difference in spread could be as much as 5 percentage points,’ Mr Choe said. As well, the price of land has been booming and would have risen to about 50 per cent of total cost if the project was done today, he added, which would make ownership unfeasible.

‘China is the world’s biggest growth engine and Beijing is at the heart of this … China would be the biggest market for us,’ he said, though the company is also expanding into India, the Middle East and Vietnam.

President SR Nathan, in the city attending the Beijing Olympic games, was the guest of honour at the opening ceremony.