Istithmar, the private equity arm of government-owned Dubai World, has invested $20 million for a 40 percent stake in a joint venture to develop 30 budget hotels across Southeast Asia, primarily in Malaysia and Thailand.
The three-way joint-venture will see Hong Kong-listed City s-Solutions (CES), which operates the hospitality-related business of Singapore’s Hong Leong Group, take up the other 40 percent interest. The remaining stake will be held by Tune Hotels, created by founders of Air Asia, a regional budget carrier based in Kuala Lumpur. The budget carrier flies to a number of Southeast Asia destinations and a few cities in China.
In April, the first Tune Hotel opened for business in the centre of the Malaysian capital, also the home base of Air Asia. Six additional no-frill hotels are under development across the country, while the $50 million venture will fund the development for an additional thirty hotels across Southeast Asia, particularly Thailand.
The investors in the joint venture expect to make an exit from this budget hotel project in four to six years’ time, Dennis Melka, a co-founder of Tune Hotels told a press conference. The investors have not determined a precise exit route.
Richard Johnson, managing director of Istithmar Real Estate told PERE Istithmar has invested about $8 billion in real estate globally, out of which $250 million – prior to the latest investment – has been in Asia.
Asia has a “growth story that is compelling,” and Istithmar expects to raise its allocation to the region to as much as 20 percent in two to three years’ time, he said.
He added that Istithmar is opening an office in Singapore within the next quarter, and is also looking “perhaps” to open an office in Shanghai.
The group’s first investments in Asia has thus far been in hotel and residential development but the portfolio will expand to include retail, industrial and office assets, Johnson said.
Istithmar’s investments in Asia include Singapore’s CDL Hospitality Real Estate Investment Trust, a resort in Thailand’s Ko Samui and Raimon Land, a Thai developer of high-end residences and resorts.