An innovative deal to develop a hotel from a cruise liner in Myanmar led by one of Asia’s more prominent private equity real estate firms has been cancelled.
PERE can reveal that, SC Capital Partners, the Singapore-based firm led by entrepreneur Suchad Chiaranussati, has cancelled plans to develop the hotel in the former capital city after costs associated with dredging around the pier where the liner was to be moored became prohibitively expensive.
SC Capital acquired the Saga Ruby from Folkstone-based holiday operator Saga Group early last year and had planned to dock it in Myanmar in what would have been one of the first examples of major international institutional investment in the country since its government was handed over to civilian leadership by its long-ruling military junta in 2011. As PERE previously reported, the entire investment was expected to be about $35 million.
The boat has undergone meaningful redevelopment near Bangkok, where it is currently berthed. But after the costs exceeded SC Capital’s initial underwriting, the firm is understood to have polled investors within its Real Estate Capital Asia Partners (RECAP) III fund, through which it acquired the vessel, to see whether they wanted to progress with the deal on the adjusted basis. It did not have to take that approach given its capital was committed on discretionary basis, but is understood to have nonetheless chosen to offer its investors a chance to determine what happens.
Those talks, which concluded last month, resulted in a decision for SC Capital to withdraw from the deal.
Having already acquired and renovated the ship, the firm will now evaluate alternative options for it, including mooring it in another Asian market or possibly even selling it. A decision on that is expected in the next two to three months.
When approached, SC Capital confirmed the agreement to moor the boat in Rangoon had been terminated and that it was exploring alternative options. The firm declined to divulge details but did say that it had reversed from the transaction as a result of increased ‘execution risk’.
While the floating hotel has not worked out according to the original plan, SC Capital retains exposure to Myanmar’s fledgling hotel sector having invested about $35 million in two other, more conventional hotel developments.
RECAP III attracted $530 million in 2012, effectively putting Chiaranussati on the map as one of Asia’s prominent private equity real estate fund managers.
That fund has performed strongly and that has encouraged investors to flock to his subsequent fund offering, RECAP IV, which was closed on $850 million, $100 million more than its original $750 million target, at the end of last year.
Issues in Myanmar seemingly have done nothing to dampen the firm’s boundary-pushing given last month it invested $33 million in a rare resort investment in the Maldives, although that property is already income generating and requires no development.