CDLHT hotel deals 'not prejudicial' to securityholders' interests: IFA

Singapore

CDL Hospitality Trusts' (CDLHT) proposed redevelopment of Novotel Singapore Clarke Quay and its potential acquisition of W Singapore in Sentosa Cove are both on normal commercial terms, according to independent financial adviser (IFA) Deloitte & Touche Corporate Finance.

Both deals are "not prejudicial" to the interests of CDL Hospitality Real Estate Investment Trust (H-Reit), CDL Hospitality Business Trust (HBT) or minority securityholders, the adviser said in a circular despatched on Friday. CDLHT is a stapled group comprising H-Reit and HBT.

After considering the adviser's opinion, the audit and risk committees and independent directors of CDLHT's managers are recommending securityholders vote in favour of both transactions at the upcoming extraordinary general meetings (EGMs). The EGMs will be held at 10am on Jan 23 at Orchard Hotel Singapore.

The managers believe that both proposed deals will allow the trust to increase its foothold in the lifestyle hotel market, preserve its majority portfolio weightage in Singapore and recycle capital efficiently. The transactions are also expected to be accretive on the distribution per stapled security of CDLHT, on a pro-forma basis.

In November, CDLHT said it is looking to sell its entire stake in the 403-key Novotel Singapore Clarke Quay along River Valley Road for S$375.9 million to CapitaLand and City Developments Limited (CDL), as part of the consortium's redevelopment of the Liang Court site.

The sale price is 87 per cent higher than the original purchase price of S$201 million in 2007. It is also 1.9 per cent and 1.4 per cent higher than the independent valuations done by Colliers International and Knight Frank respectively. Net proceeds will be some S$369.3 million.

A portion of these proceeds may be used to make distributions to stapled securityholders, at the discretion of CDLHT's managers.

A new hotel with 460-475 rooms will be built in Novotel's place, and CDLHT will buy it under a forward-purchase agreement with CDL at the lower of either S$475 million or 110 per cent of actual development costs incurred. This will be funded through debt financing.

Separately, CDLHT in November also proposed to buy the 240-room W Singapore luxury hotel for S$324 million from Cityview Place Holdings, a wholly-owned unit of CDL. This will be funded by internal resources, including proceeds from the Novotel sale and/or debt financing. Stapled securities of CDLHT closed flat at S$1.63 on Friday.