SC Capital Partners has purchased a large UK cruise liner with a view to transforming it into a luxury hotel in Myanmar in one of the most radical investments ever made by an Asia private equity real estate firm.
PERE can reveal the Singapore-based firm led by entrepreneur Suchad Chiaranussati has committed $35 million in equity to the project from its third pan-Asia opportunity fund, Real Estate Capital Asia Partners (RECAP) III, for which it raised $530 million in 2012.
The unusual deal ultimately sees SC Capital acquire the decommissioned Saga Ruby from Folkstone-based holiday operator Saga Group and sail the cruise liner from the UK to Phuket in Chiaranussati’s native Thailand where it will be renovated into a hotel able to offer to customers 360 rooms.
Once done, it will be sailed to Yangon, the former capital city of Myanmar, where it will be moored ahead of its opening, scheduled currently for September. Rooms are expected to fare between $180 and $200 per night, understood to be well shy of current room rates charged by high-end hotels in the country.
The deal brings SC Capital’s investment in Myanmar to $70 million, effectively meaning that RECAP III is 13.2 percent allocated to a country that has seen next to no institutional investment from western capital sources until now.
RECAP III has been backed by investors including US pensions Phoenix Employees’ Retirement System and the Fort Worth Employees’ Retirement Fund as well as City Developments, the Singaporean development company of the Kwek family, according to PERE’s Research & Analytics division.
While SC Capital is now meaningfully invested in Myanmar, it has received support amongst its investor pool for its frontier investing approach. One unnamed investor said: “Ultimately we’re backing an entrepreneur and this is classically what we should expect from an opportunity fund in Asia. If it goes well, there could be a massive payout.”
Myanmar has seen little investment since its government was handed over to civilian leadership by its long-ruling military junta in 2011 making return expectations hard to gauge. Nonetheless, it is understood that SC Capital is expecting a coup a premium return over conventional opportunistic return expectations in Asia.
The other two deals by SC Capital in Myanmar comprise another, 250-room hotel, for which the firm has secured a 50-year lease from the government and is expected to take two years to develop, and a 110-unit residential development. Both of these investments also are in Yangon.
The investments bring RECAP III to 75 percent invested and it is understood that SC Capital could approach investors again for capital for a fourth fund as early as this summer.
The firm declined to comment.