CDL hotel arm reviewing portfolio, assessing at least three offers for assets

CITY Developments Limited (CDL) hotel arm Millennium & Copthorne Hotels (M&C) is reviewing its portfolio and may dispose of some assets under a drive to recover from the effects of the Covid-19 pandemic by as early as 2021, it said in a statement on Wednesday evening.

It said: "Having received expressions of interest for various assets globally, M&C is assessing at least three offers." It noted that some offers are subject to re-zoning and regulatory approval for a change of use from hospitality.

"Based on current offers, M&C expects to conclude at least one such sale in 2021."

M&C now owns, manages and operates more than 145 hotels worldwide. While the capital values of many properties have risen despite the pandemic, the return on equity - from hospitality revenue and profits - is unlikely to recover to pre-Covid-19 levels in the near term, said M&C.

M&C thus intends to focus on "key gateway cities globally, including Singapore, London and New York", and the four-star category under three brand collections - M Collection, Millennium Collection and Copthorne Collection; it will also maintain several assets in the five-star and luxury categories under Leng's Collection.

"M&C has been and will continue reviewing and fine-tuning the upgrade of its portfolio to better suit future market conditions," it added, noting the closure of Copthorne Penang this July and the deferred renovation of Millennium Hilton Downtown in New York, announced before Covid-19.

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As for the offers that M&C is assessing, it noted that the sale of any of these assets, if concluded, "is likely to result in significant gain on disposal".

As a case in point, it noted that the S$49 million (£27.6 million) sale of Millennium Cincinnati on Feb 14, 2020, resulted in a gain on disposal equivalent to S$26.4 million.

Hotels which can return to sustained levels of profitability may be seeded for acquisition by CDL Hospitality Trusts, of which CDL is the sponsor and in which it holds an effective 37.8 per cent stake.

M&C's other efforts include lowering its global structure through clustering functions for multiple properties, doubling roles and redeploying staff, and reducing headcount as a last resort. As at the end of September, total global headcount had been cut 36 per cent from end-2019 levels.

It will also scale up digital marketing to reach domestic consumers and target potential drive-in consumers residing within 300 km of its hotels in certain cities in the United States, United Kingdom, and Europe.

M&C's global occupancy rate in September has recovered to 40 per cent, from a low of 30 per cent in June. It expects to end 2020 with an occupancy rate of "at least half the 73 per cent rate" achieved in 2019. Global gross operating profit has been positive since July.

CDL shares closed up S$0.14 or 1.88 per cent at S$7.58, and CDL Hospitality Trust units closed unchanged at S$1.22 on Wednesday before the news.