RB Capital plans REIT-led overseas acquisitions

In 2012, one of Singapore’s youngest billionaires, Kishin RK, nearly beat the odds in his quest to acquire the 42 hotels, managed by Marriot International Inc. Losing out to the sovereign wealth fund – Abu Dhabi Investment Authority – in that  billion dollar deal has not out a damper on his plans.

Kishin RK, CEO of RB Capital – the property and hotel group he founded in 2006- says, he is on the lookout for an acquisition of a similar size. This would help him plan a hotel REIT (real estate investment trust) listed in Singapore to fund his global expansion in the hospitality space.

His preferred markets for this acquisition, aimed at giving his group scale and a larger footprint, include Europe and Australia. “Within the hospitality space, we will look for acquisitions in two markets that have caught our interest – Australia and Europe. A lot of global capital has gone into Europe, and it was relatively cheap earlier, but today, it has become very competitive.  Still, it has many opportunities with decent pricing, in the hospitality space,” he said in an interaction with DEALSTREETASIA.

A global acquisition is not the only thing on his mind. Simultaneously he is also studying the prospects for the group’s expansion into the serviced apartments’ space in Singapore and planning a foray into real estate segment in India.

Amidst all these, Kishin, 31, is also working on integrating RB Capital with his father’s real estate firm Royal Holdings to create a $10 billion company by 2020.

His father Raj Kumar is among Singapore’s leading billionaires according to the list compiled by Forbes

He called the integration of the two companies ‘timely’ both in terms of creating scale as well as having a joint management platform with a single vision and focus

The overwhelming logic behind this move though was ‘succession planning’. “Royal Holdings is owned by father and I started RB Capital in 2006 and having been building it since. Being the only child, the integration is part of succession planning. At the end of the end of the day, I would be inheriting Royal Holdings platform, so it is important to combine it now,” Kishin added.

Explaining the reasons behind venturing out on his own and setting up RB Capital in 2006, when he was just 23, Kishin said he had been part of the family business for a while and had wanted to build something more entrepreneurial.

In his own words, he has since built RB Capital into a ‘diversified real estate development and investment company’ with 90% of its asset base in Singapore, and offices in Malaysia and Hong Kong. The group, which has over $4 billion in assets, is in the retail office space, hotels and healthcare segment, and currently has over 1000 hotel rooms under development in Singapore.

Last year, RB Capital launched it’s healthcare arm that is developing healthcare real estate, and Kishin said expansion into this segment would add both scale and help diversify risk.

“Healthcare is a growing segment in Singapore, which is the hub for medical tourism. We are doing a project called ‘Farrer Square’  which has an integrated hotel, a healthcare facility and a healthcare retail at the top of Farrer Park MRT Station here. One of the main drivers for that project is the Indian market as the area is known as the district of Little India in Singapore.  Farrer Park area in Singapore has developed as a medical hub, riding on our development and our neighbouring development,” he added.

Kishin is also bullish on Singapore’s competitiveness as a healthcare destination.  “Singapore’s dominance in this space is primarily in the quality health care. We support the region and you have tourism coming in from Malaysia, Indonesia, Thailand, and they look at Singapore as a hub,” he said.

RB Capital had acquired the site at Farrer Park for a little over $151 million in 2012 and is building a S$450 million 300-room upscale hotel, along with 42 purpose-built strata medical suites and retail platform on the ground floor.

Edited excerpts from the interview.

Talk us through about your plans for launching a hotel REIT.

Hospitality REIT was a plan that we first talked about in 2012 and was in line with the 42 hotels that we were bidding for in the UK. We were among the final set of bidders, and our plan was to combine our local assets in Singapore with the 42 assets that we had planned to acquire, and list it in the REIT market here. We lost out on the bidding process. We will revisit the REIT plan when we find another opportunity. For launching a REIT, scale is very important – the 42 Marriot Hotels gave us the scale, and we are looking for another similar portfolio. 

How do you compete with online portals such as Airbnb and local players, who don’t have assets – you have a lot of costs, which these players don’t have. Singapore mirrors developed markets in terms of internet penetration and awareness that gets people listing their properties online, or even looking for deals online.

Firstly, for a lot of tourism that comes into Singapore, the driver is the MICE (Meetings, Incentives, Conferences, and Exhibitions) business. I know of Airbnb and several other platforms – but, in terms of Asian culture, allowing someone into your house and letting them live there, I don’t know whether it will really fly here. It won’t get the type of scale as in the US, and I don’t see an impact on our business at all.

At the end of the day, it is about consistency, brand recognition. If there is a lady travelling alone, would she go to someone’s home to stay? If I were married, I would not allow my wife to go and stay with someone else – it is a matter of safety and consistency. These platforms are filling another space – you use the hotels for more than just rooms – for its restaurants, for the meeting rooms, for public facilities, and the time you spend in your room is minimal.

We are in a hotel now and using these facilities  – and I would not be able to talk to you sitting in someone else’s house. There is more to a hotel than a bed and a shower. These portals are disrupting the serviced apartment space. Staying in a service residence to staying in someone else’s home – that would be competitive.

Will you enter the serviced apartments’ space?

Eventually we have to look at the serviced apartment space if we have to extend the hospitality business. In places like Singapore, the hospitality business is getting very expensive. On a per room basis, when I started out, we are looking to buy at $500-$700k per key for a good four to five star hotel. Today at the same hotel, over  a short period of four years, the cost on a per key basis has doubled.

So in terms of achieving scale in a place like Singapore, we would need to look alternative hospitality platforms like the serviced apartments space. There are a few service apartments’ players in the market who are well established and I think that if I were to ever launch a service apartment platform, it would need to fill a gap – I don’t know what that gap is today. I am studying it.

There is place for another player in the serviced apartments’ space. We will look at it very seriously, eventually, as we continue to look for scale within this sector.

We will look at this space outside Singapore too, but I think that Singapore is a great launch pad. If I were to launch a serviced apartment product, it has be one with a difference  – a lot of my competitors already have the scale – for me it is important that we are different and offer something that competitors don’t have.

Singapore is a market that we know best, a demography that we know best, and if I get into this space, it will be from here, and it will be within the region first, before we go to global.

At RB Capital, you are a developer and an investor – how do you balance the two?

Our investment strategy depends on the market – for example, in a place like Singapore, where we are operators on our own, we invest in our projects. But in a place with a slightly higher entry barrier, like India, we would need a local partner.

With the change of leadership and with the pro-business mind set of the new Prime Minister Narendra Modi, I think groups like us will sit up and look at India from an investment point of view. Eventually, India is a market that we will get into – we have been looking for a long time.

In terms of liquidity, with its REIT market opening up, India will be more interesting from an investment point of view for a foreigner. At the same time, India under Modi is welcoming a lot of foreign investments and he (Modi) is looking at foreign investment as something that is very important for India.

So will you be foraying into India soon?

India is a huge market, and it need not be just Mumbai and Delhi, It can be Tier-II cities. With over a billion people, there is a huge need for homes to be built, organised malls and offices that need to be built – we hope to join the party soon.

There are two segments in India that excite groups like us. India has had a challenging hospitality environment. In the last few years, with a lot of hotels coming up, keeping up the rate and occupancy levels has become a challenge. Tourism needs to fill that volume. So, I see an opportunity for us to be in the hospitality space.

Not just RB Capital – a lot of global brands are looking to enter India.  Even in the Indian retail space, there has been some loosening from the government in the recent past in allowing foreign brands in the retail space, I see an opportunity for us. There is some management expertise within the organised retail market in India that we can offer.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.