International -- Asian Business: SINGAPORE
THE SUN MAY BE SETTING ON ONG BENG SENG'S EMPIRE (int'l edition)
The mogul's flashy assets in Asia and beyond are on the block
Ong Beng Seng has long stood out among Singapore's typically staid business executives. Over the past decade, the entrepreneur has built a regional group of companies devoted to flash, glitz, and conspicuous consumption. From Hard Rock Cafe and Planet Hollywood to Giorgio Armani and Calvin Klein, Ong formed partnerships with famous Western brands, opening stores and franchise restaurants across Asia. He even produced a sequel to an Arnold Schwarzenegger documentary, called Pumping Iron II-The Women.
Now Ong, 52, is falling to earth, another victim of the Asian downturn. Tourists aren't flocking to the tycoon's Asian hotels, restaurants, and boutiques as they once did. At the same time, rising interest rates are forcing the heavily leveraged Ong to pay higher debt-servicing costs. The market value of his publicly listed vehicle, Hotel Properties Ltd., has plunged by 58% since last summer, compared to a 19% dip in the Singapore market. HPL's profits slid by 27% in 1997, to $13 million, and the company says this year will be "difficult." Ong's private holdings appear to be troubled as well. To raise cash, he has shed $130 million in assets in the past few months--everything from a stake in New York's Hotel Pennsylvania to a private jet. More sales are likely.
In so doing, Ong finds himself in good company. High-flying Southeast Asian businessmen, like Vincent Tan of Malaysia's Berjaya Group and Dhanin Chearavanont of Thailand's Charoen Pokphand Group, are trimming their holdings as well. In Singapore, where property values have dropped 40% since their peak two years ago, such big developers as City Development Ltd. and Wing Tai Holdings are in a price war and are offering rebates to buyers.
Ong's penchant for secrecy is catching up with him as well, now that he needs investors' support. Analysts complain about a lack of transparency at HPL, where Ong is managing director, and poor treatment of minority shareholders. HPL often gets into deals with Ong's private companies. The company "has never been investor friendly," says one Singapore analyst. Ong and other HPL executives declined comment but have told the local press they are selling assets to raise funds for acquisitions.HEAVY BURDEN. HPL has amassed a high level of debt by building resorts, hotels, and shopping malls that cater to well-heeled consumers. The company has an 80% debt-to-equity ratio, compared with a 50% average for Singapore companies. With interest rates up 150 basis points since last fall, servicing that debt is more expensive. "He has to raise cash," says analyst Andrew Tan of ABN-Amro in Singapore. "They expanded too fast."
So last month, Ong's HPL sold its stake in a Planet Hollywood hotel project in New York for $70 million, mostly in assumed debt. It unloaded 20% of an unfinished resort in Bali to Singapore's state-owned Temasak for $8.4 million. Ong sold his 70% stake in Donna Karan stores in Japan for $19 million. A Melbourne hotel fetched $24 million, and his private jet brought $9.3 million.
Other items that may go on the block are the group's bankrupt Australian retail company, some Singapore office towers, and the Metropolitan and Halkin hotels in Britain. Wall Street is also speculating that Ong will unload his 23.6% stake in the struggling Planet Hollywood restaurant chain. Planet Hollywood CEO Robert Earl insists that Ong has no plans to sell. "Has he lost faith in us? Absolutely not," says Earl. If Ong does sell, his shares would fetch under $100 million, a third of what they were worth last July. Ong also owns 50% stakes in the chain's Asian franchises.
Whether Ong is in severe distress or is merely reshuffling his portfolio is unclear. While holdings such as Planet Hollywood and some hotels are far off their peak prices, in many cases he still has booked hefty gains on his initial investment. But given Asia's austere new era, it does appear that Ong's expensive fling in the world of glamour is winding down.By Bruce Einhorn in Hong Kong, with Gail DeGeorge in MiamiReturn to top