The acquired hotel, including its office and retail components, will be fully funded by debt financing and is accretive with a net property income yield of 5.6 per cent for FY 2016.
CDHLT is a stapled group comprising CDL Hospitality Real Estate Investment Trust (H-REIT), a real estate investment trust, and CDL Hospitality Business Trust (HBT). The group’s assets are valued at S$2.5 billion.
Acquiring the high quality asset at Bavaria, CDHLT considers the deal a rare opportunity as it strengthens its portfolio and earnings base through diversification.
Vincent Yeo, CEO of CDLHT’s managers, said Munich is a compelling destination for the company’s first acquisition in continental Europe, allowing CDLHT to benefit from a potential economic recovery in the region through exposure to the largest economy in Europe.
CDLHT also disclosed of raising S$255.4 million by launching a fully underwritten and renounceable rights issue as it realigns its capital structure through partially repaying its existing borrowings. This is expected to enhance the Singapore-listed firm’s financial flexibility through reduced gearing and increased debt headroom.
The company noted partial repayment of existing higher interest-bearing borrowings will also lower its weighted average cost of debt and further improve its interest coverage ratio.
“The acquisition of Pullman Hotel Munich facilitates CDLHT with a strategic entry into Germany and allows us to penetrate a highly sought-after hospitality market while enjoying a spread between the attractive property yield and ultra-low borrowing rates,” Yeo said.
He expects the equity fund raising exercise will strengthen CDLHT’s balance sheet and enhance financial flexibility, allowing it to pursue future growth opportunities, through acquisitions and asset enhancement initiatives.
“Once our acquisition in Munich and equity fund raising are completed, CDLHT’s portfolio will see the addition of two new European properties in 2017 and our total valuation of the portfolio will increase from S$2.4 billion at end 2016 to S$2.7 billion,” Yeo added.
CDLHT currently owns 19 properties with a total of 5,077 hotel rooms, comprising six hotels and a retail mall in Singapore, five hotels in Australia, one hotel in New Zealand, two hotels in Japan, two hotels in United Kingdom and two resorts in Maldives.
CDLHT is managed by M&C REIT Management Limited and M&C Business Trust Management Limited, subsidiaries of Millennium & Copthorne Hotels Plc, an internationally recognised hospitality group, which owns and operates hotels globally and is listed on the London Stock Exchange.