He took the plunge to build brand of serviced apartments
Frasers Hospitality boss to double its units to 30,000 in next 5 years
Published on Apr 21, 2014 1:06 AM
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Frasers Hospitality chief executive Choe Peng Sum says the firm has plans to expand globally, with Europe, Jakarta, Australia and the Middle East being of particular interest. -- ST PHOTO: DESMOND FOO
By Cheryl Ong
MR CHOE Peng Sum had no idea when he joined conglomerate Fraser & Neave (F&N) 18 years ago that he would end up running one of the world's leading brands of serviced apartments.
Mr Choe, 53, had just left a cushy job with Shangri-La Hotel, where he was a scholarship holder on a fast track up the corporate ladder.
He had been headhunted to help diversify drinks company F&N's business after it acquired Centrepoint Properties in 1990. That business became Frasers Hospitality two years later.
Mr Choe remembers every detail of his first day on March 31, 1996: "I looked around, I had a makeshift office, I didn't even have a secretary, and there (was no such thing as) serviced apartments then.
"I was really frightened because in the Shangri-La, I had everything, the whole mechanism was there... Moving up the ladder was so good," he recounted.
He recalls raising the idea of a serviced residence and having to convince the F&N board not to turn its property at Robertson Walk into a residential project.
Under Mr Choe's leadership as chief executive, the brand has come a long way since 1998, from 400 units in two properties in Singapore, to 15,500 units in 92 properties in 49 cities today.
Frasers Hospitality, which marked its 16th anniversary on March 31, is set to double the number of units under its ownership and management to 30,000 units in the next five years.
"What took us 16 years to reach, we're going to take five years," he said.
Speaking to The Straits Times in an interview at Fraser Suites River Valley, Mr Choe mapped out his game plan.
Plans to go bigger
FRASERS Hospitality, which has its own properties and operates serviced apartments on behalf of other owners, will focus on growing its presence mainly through clinching management contracts, Mr Choe said.
"Most of the American big boys... they don't grow by owning properties, they grow through management contracts. But to grow that way, there needs to be a trust in the brand and a good track record."
Now, 30 per cent of the firm's properties are owned, while the rest are under their management.
The firm has five brands: Fraser Place, Fraser Suites, Fraser Residence, Capri by Fraser and Modena. Capri units are hybrid hotel and serviced apartments catering to guests on shorter stays, while the Modena brand is currently focused on China.
Owning properties in prime locations is a plus, said Mr Choe, but "it needs to be invested in the right property cycle".
He pointed to Europe, where property values are just on their way up from the bottom.
He is bullish on the continent, especially Germany, where the firm is building a Capri property in Frankfurt that will open next year. The firm is also expecting to expand its presence in Berlin, Barcelona, Madrid and Milan.
"We've been trying to pursue Europe for a long time... It's just that in the last two years, prices really dropped quite a bit, and it's a good time (now)," he said.
In Asia-Pacific, Mr Choe is bullish on Jakarta, where there is a strong presence of expats from the oil and gas industry. The firm will open Fraser Place Setiabudi Jakarta next year. He also has his eye on Australia, where one more Capri property will open in Brisbane next year.
Elsewhere, Frasers is expecting to add a property each in Bahrain and Dubai this year.
But back home where the lion's share of the market is held by Far East Organization, the firm plans to expand through its Capri-brand residences to capture the growing number of corporate guests who come here for shorter stays. Frasers' flagship Capri property is in Changi Business Park, but Mr Choe noted the one-north area in Buona Vista is "definitely" the next place where "we're looking for more".
No walk in the park
MR CHOE acknowledges that "it will be a challenge" to reach the targets he has set, but "with a brand, it helps a lot".
Back at the beginning of his journey at Frasers Hospitality, he had no track record on his side. Persuading others to join his team was also tough then.
When the firm was ready to welcome its first guest, along came the Asian financial crisis in 1998, and his management was doubtful over the property's opening prospects.
In a stroke of luck, firms were pulling out of Jakarta which was rife with riots at the time, and they came to Singapore seeking a safe haven. This brought an influx of expats which raised occupancy at Frasers' properties to 80 per cent, and the firm has not looked back since.
Mr Choe also remembers preparing to roll up his sleeves to clean rooms and make beds during the Sars crisis in 2003, when he told the housekeepers that they would still be employed even if they chose to stay at home to avoid catching the virus.
"I cried because they all looked at me and said, 'We're going in on our own accord. Don't worry about us, we'll take the risk,'" he said.
Strong support
IN A way, the firm is a "child" that he has nurtured, but Mr Choe is confident that "we're definitely in a place to run it well" in the next five years, before it comes of age at 21.
After Thai billionaire Charoen Sirivadhanabhakdi's recent takeover of F&N, the board has given "strong support for investment properties", he said.
The firm also unveiled plans recently to inject some of its properties into a real estate investment trust. Mr Choe said the trust could comprise properties owned by Mr Charoen's TCC Group in addition to Frasers Hospitality's assets.
Although these plans are likely to keep him busy in the coming years, Mr Choe is still very much a family man. The father of two daughters - Ruth, 23, and Rachel, 22 - says he never took up golf seriously because he relishes weekends spent with them and his wife, Evelyn.
His daughters, who study at the National University of Singapore, are both athletes representing their faculties on campus, and the family spend weekends at the gym and enjoy sporty holidays.
"I'm looking forward to trekking or skiing with them amid the sights and sounds of the mountains some day," he quipped.
ocheryl@sph.com.sg
(19-04-2014, 03:20 PM)greengiraffe Wrote: FCL gave more hints on the initial hospitality assets that could be anchoring its upcoming hospitality trusts.
In its maiden annual report pages 197 - 200, one can deduce by differentiating between completed investment properties and completed properties held for sale.
Under completed properties held for sale, I can only manage to trace down the following hospitality assets:
i) 80.5% held Fraser Suites Sydney with a (100%) book value of A$99m
ii) 87.5% held Fraser Suites Perth with a (100%) book value of A$125M
iii) 50% held Capri By Fraser, Changi City with a (100%) book value of S$101m. Viva REIT acquired the 251-room hotel in UE Bizhub East for a per key valuation of S$550k. Using similar benchmark, the 303-room Capri By Fraser, Changi City should be worth around $166.65m.
As the previously rumoured listing market cap of US$473m or S$600m for the hospitality reit, the classification of the above 3 assets sounds about right and TCC Assets may just need to contribute another 1 to 2 more assets for the initial listing assuming little gearing at the inception of the hospitality reit.
Vested
GG
(07-04-2014, 02:48 PM)greengiraffe Wrote: http://infopub.sgx.com/FileOpen/Frasers%...leID=20041
I did further research on FCL on the pending listing of Fraser Hospitality Trust. On page 59 of the maiden annual report, the net book value of hospitality assets are worth in excess of S$1.6bn. The entire division chalked up EBIT of $70m possibly implying an unleveraged yield of around 4.3%.
Based on previous media speculation of the float size, it appears that the intended hospitality trust could have a very healthy pipeline of assets (currently FCL already has more than 3 times the speculated float value) in the years ahead once the relatively immatured assets are being nurtured to maturity. The pipeline may be enhanced with the indicated participation of unlisted parent TCC Assets.
Other catalysts for FCL going forward includes:
i) further asset light strategies on its retail mall assets - speculated next up to be 50% owned Changi City Point
ii) interim dividends payable based on its track record of unlisted entity. FCL paid an adjusted 6.9 cents DPS last years - a 50% payout ratio
iii) streamlining of F&N and FCL holdings between TCC and Inter Bev (Thai Bev)
iv) eventual improvement in free float of FCL that will enhance institutional participation and potential inclusion in major stock indices.
Vested
GG
(31-03-2014, 10:26 PM)greengiraffe Wrote: Recap:
http://infopub.sgx.com/Apps?A=COW_CorpAn...7700387B4B
6 Feb 14 - "Thai tycoon Charoens FCL eyes $473 mln hospitality REIT in Q2 sources".
http://infopub.sgx.com/FileOpen/FCL-Tham...eID=286023
12 Mar 14 - RECEIPT OF ELIGIBILITY-TO-LIST FOR PROPOSED REIT LISTING
http://infopub.sgx.com/FileOpen/Frasers_...eID=288920
31 Mar 14 - Marking Sweet 16 with 92
Facts: PBIT for Hospitality S$69.7m or 12% of total group PBIT for year ending 30 Sept 2013.
With financial engineering for the floating of REIT and with the potential participation of TCC Group, it appears that another platform for value creation will soon be established.
Vested
GG
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