UTAS sells hotels?

 

UTAS may have sold the Mid City Hotel to the Singaporean owned Fragrance Group and the Fountainside Hotel to the State government for housing if the grapevine is correct. The sale prices aren’t known at this stage.

If true it will be a deft way for the government to inject funds into UTAS without poor old UTAS having to come begging to the government to allow it to borrow more.
Not that lenders are queuing at the door given UTAS can’t service existing borrowings from its core operations.

UTAS paid $25.8 million for the MidCity Hotel in 2018 for student accommodation, and then spent a further $7 million refurbishing  122 rooms to convert them back to hotel rooms after Covid stopped the flow of international student causing UTAS’ entire business model to fall over shortly after leaving the starting stalls. The rooms have a likely cost base of around $300k per room. It will be hard to get investors to pay that price for rooms of that quality.

The Fountainside was bought at roughly the same time for $18.76 million and has also undergone refurbishments giving its 50 rooms a likely cost base of $500k each which is roughly the capex cost per room for an upmarket hotel. It is understood the premises are used as accommodation for health workers. It wouldn’t surprise if this continued.

The government will have to borrow every cent if the purchase from UTAS completes. At least it won’t have to pay stamp duty.

UTAS has pencilled $45 million in its latest financials as estimated sales proceeds from the two hotels. This should at least cover some of the operating deficit for the current 2024 year, if it’s anything like the disastrous 2023 year. At this stage there no inkling that UTAS has managed to turn the ship around.

But this will mean UTAS first foray into property speculation will yield losses. Which doesn’t augur well for the bunch of novices embarking on the largest property development in the State’s history.

Perhaps it’s time for the stewards to call off the race before disaster strikes.