Global Economics

Singapore and Host Create Hotel Venture


GIC Real Estate and U.S.-based hospitality company Host Hotels & Resorts join to invest up to $2 billion in hotels in the Asia-Pacific region

Investment management company GIC Singapore has joined hands with Host Hotels & Resorts for a second joint foray into hospitality, this time to explore investment opportunities in Asia and Australia.

The Government of Singapore Investment Corporation (GIC) and US-based hotel operator Host Hotels & Resorts will set up a Singapore company to invest in Asia and Australia. GIC's real estate investment arm, GIC Real Estate, will own 75% and Host will own 25% of the joint venture company. The JV will initially have equity commitments from the partners of up to $600 million. Including leverage, the total investment which the joint venture can make will be between $1.5 and $2 billion.

A Host affiliate will manage the properties for an agreed fee. In case the JV exceeds defined target return-on-equity parameters, Host will potentially earn a further share of profits.

"Combining Host's core skills in hospitality investment and asset management and GIC's regional presence and network, we believe that the joint venture is well positioned to build up a substantial portfolio of hospitality-related assets in Asia," says Seek Ngee Huat, president of GIC Real Estate, in a written statement.

Host Hotels & Resorts is a lodging real estate investment trust and an owner of luxury and upmarket hotels listed on the NYSE. It currently owns 119 properties with approximately 64,000 rooms. It partners with premium brands such as Marriott, Ritz-Carlton, Westin, Sheraton, W, St. Regis and others to operate properties in 50 major markets worldwide.

GIC Real Estate manages a multi-billion dollar portfolio of direct and indirect property investments with over 200 investments in more than 30 countries.

GIC Real Estate and Host already have a history of working together. In March 2006 Host formed a joint venture in the Netherlands with Dutch pension fund Stichting Pensioenfonds and a subsidiary of GIC. The JV was created to acquire from Starwood five European hotels and from Host the Sheraton Warsaw Hotel & Towers for a total consideration of $621 million. GIC owns 48% of the JV.

The European JV also intended to acquire hotels in Europe with a focus on the United Kingdom, France, Germany, Italy and Spain with a Host affiliate managing the properties for an asset management fee. The European JV currently owns 10 hotels in five countries in Europe with approximately 3,200 rooms.

Host Hotels lost around 1.6% in early trading on the NYSE on Wednesday to $16.97 and continued to lose through the day to close at $16.64.

Anand is a writer at FinanceAsia.com .

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