Select to invest at least $1.65m in hotel venture

Source : Business Times - 14 Apr 2009

FOOD caterer Select Group said yesterday that it intends to rent a building for at least $1.65 million and convert it into a boutique hotel.

It plans to rent the annex to the office block Tower Fifteen at 15 Hoe Chiang Road for three years from controlling shareholder Jit Sun Investments through its subsidiary Wisteria Hotel Management.

Besides paying a basic rent of $50,000 a month - made up of $40,000 base rent and a $10,000 ‘information technology support services fee’ - Select must pay half of its yearly gross operating profit to Jit Sun.

The transaction value of at least $1.65 million for the 36-month rental agreement amounts to 33 months of rent, as Jit Sun has agreed not to charge the company rent for three months from the start of the tenancy.

The company said the rental amount was based on factors such as the size of the hotel, the facilities available and projected revenue and cash flows.

The sales projections were not revealed in Select’s regulatory filing. Select said the venture is part of a plan to boost revenue.

The proposed tenancy agreement follows a memorandum of understanding signed in June 2007 and negotiations with Jit Sun over the terms.

‘This maiden contract will provide the group with a platform to be a player in this higher-end business segment,’ Select said.

Select will also manage a restaurant and bar in the hotel - to be named Klapsons The Boutique Hotel - which it believes will complement its core business.

As Jit Sun - an investment holding company with businesses in oil-and- gas, real estate, hospitality and F&B - owns 22.8 per cent of Select, the company will hold an extraordinary general meeting for shareholders to approve the hotel proposal.

Under Singapore Exchange (SGX) rules, any interested-person transaction equal to or more than 5 per cent of the consolidated net tangible assets of the group in the latest financial year must be given the go-ahead by shareholders.

The transaction value of at least $1.65 million represents about 24 per cent of the group’s net tangible assets on Dec 31, 2008.

Under the agreement, the three-year tenancy must start by Aug 31 this year and can be renewed for another three years.