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CapitaLand invests US$26m for 70% stake in Indonesia hotel operator

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Capitaland Limited has invested US$25.9 million for a 70 per cent share in Indonesian company Green Oak Hotel Management (GOHM), the real estate developer announced on Monday.

CAPITALAND Limited has invested US$25.9 million for a 70 per cent share in Indonesian company Green Oak Hotel Management (GOHM), the real estate developer announced on Monday.

The investment in GOHM, which is the holding company of TAUZIA, one of Indonesia's top five hotel operators, is part of CapitaLand's strategy to grow its hospitality business through The Ascott Limited, its wholly owned serviced residence business unit.

With the addition of TAUZIA, Ascott's portfolio will increase by close to 20,000 units in 122 hotels across Indonesia, Malaysia and Vietnam, and comprise 94,000 units globally, exceeding its 2020 target of 80,000 units.

CapitaLand paid US$12.95 million for the acquisition on Monday, with the remainder to be paid annually over five years starting from Jan 1, 2018, up to an aggregate amount of US$12.95 million. The annual payments will be computed with a formula relating to the number of hotel rooms opened in certain hotels managed by GOHM in the relevant year, subject to certain adjustments.

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Most of TAUZIA's hotels are located in Indonesia, with close to 60 per cent in key cities such as Jakarta, Bali, Bandung, Surabaya and Yogyakarta. About 70 per cent of its hotels cater to business and convention travellers, while the rest are targeted at leisure travellers.

"While Ascott's serviced residences continue to see strong demand from expatriates and corporate travellers, we can capitalise on significant opportunities in the middle-class business hotel segment, which is expanding at an unprecedented rate," said Kevin Goh, Ascott's chief executive officer.

"With our investment in TAUZIA, we look forward to accessing this market, which is one of the fastest-growing segments of the hotel industry.”

The acquisition is not expected to have any material impact on the net tangible assets or earnings per share of the CapitaLand group for the financial year ending Dec 31, 2018, CapitaLand said.