Colony sells colonial icon

The legendary Raffles Hotel in Singapore, purchased in 2005 by Colony Capital, has been sold for a reported 3x profit. By Dave Keating

In its heyday it was one of the prominent symbols of the British empire, and still today, no visit to Singapore is complete without a visit to the Raffles Hotel. Built in 1887, it was once the central hub for upper-class British colonials making their fortune in the Far East, and it hosted famous guests such as the authors Joseph Conrad, Rudyard Kipling and Somerset Maugham.

Perhaps it is fitting then that a sizable profit has just been made from the famous colonial building by Colony Capital.

The Los Angeles-based private equity firm acquired the property in 2005 as part of its acquisition of the Raffles Hotel Chain, which owns 56 properties worldwide under the Raffles and Swissotel brands. Raffles Holdings sold the business to Colony for an entire enterprise value of S$1.7 billion ($1.2 billion; €794 million), about S$200 million of which was for the crown jewel property in Singapore.

Last month, Fairmont Raffles Hotel International – the management company created and owned by Colony Capital and Saudi Prince Alwaleed bin Talal – sold its stake in the hotel to a consortium led by ex-Credit Suisse banker Mark Pawley. The sale price was not disclosed, but Singapore media reported that the hotel – which was declared a national monument in 1987 – was sold for around S$650 million ($471 million; €304 million).

Fairmont also did not reveal the members of the consortium making the purchase. Pawley is chief executive officer of Singapore-based private equity firm Oxley Capital, however the firm told Reuters it was not the buyer.

Fairmont Raffles Hotel International was formed when Colony merged Raffles and Fairmont, which it acquired in a separate transaction around the same time. That combined company operates 88 hotels under the Raffles, Fairmont and Swissotel brands.

In a statement, Fairmont said the sale would provide the company with “significant capital for future growth of our management companies”. The Raffles Hotel will continue to be part of Fairmont's “hotel collection” and continue to be managed by the firm following the sale.

The reported sale price is likely so high because the hotel serves not only as a luxury lodging option but also as a popular tourist attraction. It is particularly known for its Long Bar, which serves the Singapore Sling, a cocktail created by the bar around 1910 and which quickly spread throughout the world. The bar is also famous for the peanut shells which are thrown onto the floor by its patrons, a tradition which harkens back to the institution's colonial days. The hotel also holds some patriotic appeal for Britons. During World War II, as the Japanese bombed the Malay Peninsula and made their way south, British families retreated toward Singapore and congregated at the Raffles Hotel. When Singapore eventually surrendered to Japan, British colonials gathered at the Long Bar to sing “There Will Always Be An England.”

Though the hotel went through an extensive renovation in 1989, there has not been a major renovation since that time and Colony didn't make extensive changes to the property while it held it. Colony is well known for its strategy of buying incomeproducing real estate assets such as hotels, casinos and pubs. In the 17 years since its inception, Colony has invested more than $36 billion in more than 8,500 assets and now has 14 offices in ten countries. Aside from the Raffles, Colony's other highprofile acquisitions have included French football chain Paris St Germain and the Atlantis hotel and casino, the largest gaming resort in the Caribbean.