CDL unit to sell 5-star hotel Millennium Hilton Seoul, adjoining land for S$1.26b

CITY Developments Limited (CDL) C09 announced on Monday (Dec 13) plans to sell Millennium Hilton Seoul, a 5-star 22-storey hotel situated near Seoul's downtown business district, and its adjoining land plot for 1.1 trillion won (S$1.26 billion).

The proposed sale of the assets in South Korea marks the property group's fourth hotel divestment of the Millennium & Copthorne Hotels Limited (M&C) portfolio since its privatisation and the largest hotel divestment to date.

In a bourse filing on Monday, CDL said the proposed divestment, which is expected to be completed by Feb 28, 2022, is "in line with the acceleration of the CDL Group's capital recycling strategy to unlock latent value from its long-held assets".

CDL added that the performance of the hotel, which is located at the foot of Mount Namsan, "has been trending negatively over the years" and was further hit by Covid-19 which saw a sharp decline in accommodation and event bookings.

Upon its completion, CDL is expected to recognise an estimated gain in the income statement of S$529.73 million, net of taxes and related transaction costs, it stated.

"This is expected to positively impact the net asset value per share and earnings per share of the group," it said.

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The sale price represents an excess of 835.17 billion won (S$960.4 million) over CDL's net book value of the property as of Nov 30, 2021, it pointed out.

The deal - between CDL's indirect wholly-owned subsidiary CDL Hotel (Korea) and YD427 PFV, an entity managed by IGIS Asset Management, one of South Korea's largest real estate managers - was arrived at on a "willing-buyer and willing-seller basis".

However, it was "the highest offer" compared with several unsolicited and competing offers, CDL added.

Millennium Hilton Seoul is operated by Hilton Hotels & Resorts under a management contract, and comprises 680 guest rooms and 29 suites.

Opened in 1983, the hotel was previously owned by Daewoo Group before it was acquired by the CDL Group in November 1999 for US$213.5 million following the Asian Financial Crisis. In 2013, CDL Hotels (Korea) Limited acquired the adjoining 1,563.7 square metre freehold land plot from Woo Yang Industrial Development for 29.5 billion won.

On Monday, CDL said it started reviewing M&C's entire global hotel footprint to restructure hotel assets and streamline cost structures with a view to unlock value "at the right time" following M&C's privatisation in November 2019.

Commenting on the sale, Kwek Leng Beng, the executive chairman of CDL and M&C, said the group had "always believed that (Millennium Hilton Seoul) would be an asset that could provide tremendous value to shareholders at the right time and at the right price."

Stressing that CDL had "negotiated hard to maximise value", he reiterated that the "sizeable divestment at a significant premium to book value" was the impetus to sell without hesitation and realise a substantial profit.

"We remain confident of the global hospitality recovery with pent-up demand. We will continue to review and fine-tune our portfolio to accelerate the Group's growth and transformation while enhancing shareholder value," he added.

The previous two non-core M&C hotel divestments completed were Millennium Hotel Cincinnati and Copthorne Hotel Birmingham, with Millennium Harvest House Boulder in the US expected to complete in 2022.

These three non-core divestments have a combined sales value of around S$178.96 million.

As of June 30, 2021, M&C owns, manages and operates over 145 hotels across some 80 locations worldwide throughout Asia, Europe, the Middle East, New Zealand and the US.

CDL shares closed down 0.6 per cent or S$0.04 at S$6.99 on Friday before the announcement.

READ MORE: Hotel investment outlook brightens in Asia-Pacific