CDL Hospitality Trusts announced recently its plan to buy W Singapore hotel located at Sentosa Cove for a price of S$324 million.
The group also announced their plans to sell Novotel Singapore Clarke Quay (part of Liang Court) for S$375.9 million in an effort to redevelop the site.
It also will be making an estimated S$475 million investment in integrated development plan for a new hotel project.
Novotel Hotel @ Clarke Quay comprising of 403 rooms will be purchased by real estate bigwigs CapitaLand, Ascott Residence Trust and City Developments Limited (CDL). The hotel has a GFA of 34,909 sq m and is situated at River Valley Road.
It has lease holding till May, 2077.
CDLHT is expected to pocket S$369.3 million in profits after the sale is completed and is likely to use this sum in repaying current debts, funding future acquisitions like the W Hotel purchase and also to distribute percentages to shareholders.
This sale is seeing an 87% rise from the previous sale of the property which had happened in 2007 for S$201 m.
Independent assessors Colliers International Consultancy and Valuation had estimated a 1.9% higher value or S$7.2m for the sale.
However, in another valuation conducted by their hired assessors Knight Frank, CDLHT have got only 1.4% or S$5.4m more than what was projected.
CDLHT said that it will be making a forward purchase of 110% or S$475m (whichever is lower) for the hotel’s redevelopment cost.
CDL Hospitality Trusts will be getting paid in cash which will come in four portions and will be funded alongside debt financing.
The final funding method will be established once the completion of the project draws closer and payment will be due.
Both assessors Knight Frank and Colliers have put a value for the new hotel at S$481m and S$478m.
It is expected that the Novotel sale will be completed by April 2020.
There will be a new 99-year-old lease and the new hotel will be branded as Moxy, a Marriott International boutique hotel. The new hotel is expected to target new generation travellers.
Meanwhile CDLHT will be able to complete the purchase of the new hotel W Singapore @ Sentosa Cove by 2025. This new hotel is likely to have 460 to 475 rooms covering a gross floor area of 15,541 square meter.
With a gross floor area of 25,374 square meters, the W Singapore hotel located at Sentosa Cove (also a Marriott hotel) currently has 240 rooms and a 99-year-old lease that began on 31st October 2006.
CDLHT will also be investing in buying all the internal resources of W Singapore and it is being speculated that they will pump in the money that they will get from Novotel’s debt financing and sale. This purchase is likely to be completed by the early months of 2020.
It must be mentioned here that all the deals will be subject to CDLHT’s Security Holders approval as well as other approvals from important authorities.
It is being speculated that CDLHT will call an extraordinary general meeting within January 2020 to get approvals from their security holders.
Among the rising international demand for lifestyle-oriented hotels that have a story-telling potential and strong identities, the deal will cement CDLHT’s penetration into the lifestyle hotel segment in different tiers and price points of Singapore, said the managers of CDLHT.
The CDLHT managers also added that given Singapore’s global attraction and the fact that it is the 5th most visited city globally attracting business and leisure travellers alike, the new hotel as well as the W Hotel will help the company to gain more exposure in Singapore.
Even after selling its Novotel’s stakes, CDLHT will be preserving most of its hotel portfolio in Singapore because of the W Hotel deal.
CDLHT’s current pro forma is reportedly low at 35.5% even after acquiring W Hotel and divesting Novotel.
Even then it will leave an adequate debt headroom totalling to about S$512.7 million, if it is assumed that there is going to be a 45% limit for the company.
There are currently six hotels of 2718 rooms that are owned by CDLHT in Singapore. After these proposed deals are finalised, the company will have 7 hotels under its banner with more than 3000 rooms.