CDL to sell Penang hotel for RM75m

CITY Developments Limited (CDL) on Monday said it plans to divest the Copthorne Orchid Hotel & Resort Penang in Malaysia for some RM75 million (S$25 million).

The sale and purchase agreement was entered into by CDL's wholly-owned subsidiary Millennium & Copthorne Hotels Limited (M&C).

The buyer is Malaysia-listed Ivory Properties Group Berhad. It will acquire the freehold land that the 318-room hotel resides on, along with the hotel and all fixtures, fittings, equipment and tangible personal property in respect of the hotel, CDL said.

In a press statement, CDL noted that the divestment is in line with the group's strategy to "extract value from its non-core hotel assets, streamline its portfolio and recycle capital following the onset of the Covid-19 pandemic".

The sale of the Penang hotel is expected to lead to a pre-tax gain of S$9.2 million next year, CDL said. This is the group's third non-core hotel asset disposal since the start of the year, with a combined sales value of S$104.8 million. Total pre-tax divestment gains for CDL amount to S$50.3 million, of which S$23.9 million will be recognised in 2021.

Last year, CDL took the London-listed M&C private, following a cash offer at 685 pence per share that valued the hotel company at £2.23 billion (S$3.96 billion). M&C operates 66 hotels, while 79 are under franchise and management contracts.

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Since the privatisation and the outbreak of Covid-19, M&C has restructured costs and redirected marketing resources towards domestic tourism, it said. These have resulted in "green shoots of recovery" of the hospitality business in recent months, CDL added.

In the third quarter of 2020, M&C exercised a put option to sell Copthorne Hotel Birmingham in the UK for £17.2 million. This sale will be completed in Q3 2021, resulting in a pre-tax gain on disposal of S$14.7 million.

In February this year, CDL also sold Millennium Cincinnati in the US for US$36 million. This resulted in a pre-tax gain of S$26.4 million, which was recognised in H1 2020.

According to the group, M&C has assessed that the land values of many of its properties are now "significantly higher than their acquisition cost".

Following the three divestments and considering current offers, M&C expects to complete one to two more disposals from now till the end of 2022. It has operations in 29 countries and an inventory of more than 40,000 rooms.

CDL shares were trading at S$8.01 as at 2.19pm on Monday, up S$0.21 or 2.7 per cent.