Far East Orchard crosses S$3 billion AUM target with stake buys in business trust managers
It is acquiring a 42% stake in Far East Hospitality Trust managers for S$28.3 million
[SINGAPORE] Far East Orchard is acquiring an additional 42 per cent stake in the managers of Far East Hospitality Trust (FEHT) , a transaction that will propel its core assets under management (AUM) past its S$3 billion goal to S$3.9 billion, four years earlier than targeted.
Far East Orchard announced on Monday (Oct 5) morning that the S$28.3 million deal will raise its ownership in the managers from its current 33 per cent to 75 per cent. The remaining 25 per cent will continue to be held by the seller, FEO Asset Management, a wholly owned subsidiary of Far East Organization Centre.
The acquisition involves shares in both FEO Hospitality Asset Management, the manager of Far East Hospitality Real Estate Investment Trust (FEH-Reit), and FEO Hospitality Trust Management, the trustee-manager of Far East Hospitality Business Trust (FEH-BT).
FEHT is a hospitality stapled group with a market capitalisation of S$1.25 billion. It comprises FEH-Reit and FEH-BT and holds a portfolio of 13 properties, comprising 12 properties in Singapore and one hotel in Japan.
Far East Orchard said in its statement that the deal with its associates is a strategic move to accelerate Far East Orchard’s “FEOR30” business road map.
By gaining effective control of the FEHT managers, Far East Orchard’s core AUM will scale by about 86 per cent, jumping from S$2.1 billion to S$3.9 billion.
This exceeds the company’s previously announced core AUM target of S$3 billion, and supports a new core AUM target of “at least S$5 billion” by FY2030, Far East Orchard said.
Alan Tang, group CEO of Far East Orchard, noted that the accretive acquisition is a significant step towards scaling a fully integrated lodging platform.
“By strengthening our alignment with FEHT, we are expanding our recurring income base and broadening the channels through which we can grow in a capital-efficient manner, including capital recycling and capital-light AUM growth alongside our existing private fund platform.”
He added: “This gives us greater flexibility to grow faster, build more resilient earnings, and capture value and maximise returns across the full asset life cycle.”
The S$28.3 million consideration will be paid entirely in cash, funded by Far East Orchard’s internal resources.
As part of the transaction’s conditions, FEO Hospitality Asset Management will distribute a dividend in specie of roughly 165.2 million FEHT stapled securities to its shareholders.
Shares of Far East Orchard ended S$0.01 or 1 per cent higher at S$1.06 on Friday.
