FRASERS Centrepoint Limited (FCL) unveiled on Monday its proposed A$464 million (S$488 million) sale-and-leaseback arrangement of Sofitel Sydney Wentworth, the iconic heritage-listed hotel in Sydney, Australia.
Frasers Sydney Wentworth Trust will grant a 75-year leasehold interest in the 436-room hotel to FHT Sydney Trust 3, an Australian sub-trust wholly owned by Frasers Hospitality Real Estate Investment Trust (FH-Reit) for A$224 million, which will be funded by a combination of equity and debt financing.
Upon the expiry of FH-Reit's leasehold interest, the title to the hotel will revert back to the FCL Group.
The initial term of the master lease is for 20 years. It comes with an option to renew for a further 20 years. A fixed rent of A$6.0 million per annum is payable, plus a variable component.
"The proceeds will allow the FCL Group to reduce its borrowings and gearing. Based on the proforma financial effects of the proposed sale and leaseback arrangement, assuming this has taken place on 30 September 2014, the gearing of the FCL Group is estimated to decrease from 95 per cent to 91 per cent," FCL said.
It added that the arrangement would strengthen the FCL Group's balance sheet and provide additional debt capacity for future growth.
FCL also said the arrangement is in line with its strategy to optimise capital productivity through its Reit platforms.
"FCL believes that FHT serves as an efficient platform for holding hospitality properties which FCL may divest, subject to mutual agreement and necessary approvals. Such disposals have the potential to realise the capital appreciation in such properties."