CDLHT in £24.1m deal for 4-star hotel in Manchester, UK

CDL Hospitality Trusts (CDLHT) J85 : J85 0% has indirectly acquired a 4-star hotel in Manchester, the United Kingdom. The total acquisition cost is about £24.1 million (S$43.8 million).

The purchase consideration, which is subject to post-completion adjustments, amounts to £4.3 million - of which £3 million has been paid to the seller of the property. The remaining £1.3 million has been retained until certain conditions are met.

The move allows the stapled group – which owns lifestyle hotels like W Singapore - Sentosa Cove and Studio M Hotel in Singapore – to further penetrate the lifestyle hotel market, the managers said in a bourse filing. 

The managers expect the acquisition to be accretive based on pro forma estimates. Had the acquisition been completed on Jan 1, 2021, and CDLHT held the property through Dec 31, 2021, the distribution per stapled security (DPS) for CDLHT would have been S$0.0432 instead of S$0.0427. This translates to a DPS accretion of 1.1 per cent.

As part of the transaction, a wholly-owned subsidiary of CDL Hospitality Real Estate Investment Trust (CDL H-Reit) on Tuesday (Feb 22) entered into a share and purchase agreement with RAHoldingsUK to acquire Roundapple Hotel Partners III - which holds Hotel Brooklyn.

Roundapple Hotel Partners III holds a leasehold interest in Hotel Brooklyn with a remaining lease term of 196 years. It leases out the entire property to HLD (Manchester) - which is part of a group under Marshall Holdings, whose principal activities are in commercial development and construction.

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The occupational lease is a "full repairing and insuring lease" that will provide a fixed income stream for CDLHT, the managers said. It is subject to upward-only rent review provisions broadly based on inflation.

Post-acquisition, CDLHT's hotel portfolio fixed rent will rise by 7.8 per cent, assuming the stapled group owned the property from Jan 1, 2022. 

The hotel has an independent property valuation of £25.3 million as at Dec 31, 2021. This is 10.9 per cent higher than its agreed property value of £22.8 million.

The net asset value of Hotel Brooklyn is £4.4 million, taking into account its agreed property value, as well as an £18 million in bank and shareholder loan amounts to be repaid by Roundapple Hotel Partners III at completion.

The managers plan to finance the total acquisition cost through debt. Assuming it was completed on Dec 31, 2021, CDLHT’s gearing ratio would be 40 per cent, according to pro forma estimates.

Hotel Brooklyn - located at 57 and 59 Portland Street - has been fully operational since May 2021, although it commenced operations in February before closing for business intermittently between then and April 2021. The 189-room hotel has 2 food and beverage outlets, 3 meeting rooms that can be combined to form over 220 square metres of space, as well as a casino with a restaurant and bar.

It is within walking distance to the central business district, as well as tourist attractions like the Manchester Art Gallery, retail areas such as Market Street and entertainment hubs like the Manchester Arena. Hotel Brooklyn is also an 8-minute walk to Manchester Piccadilly – the city's main train station and is a 20-minute drive from Manchester Airport. 

CDL Hospitality Trusts is a stapled group comprising CDL H-Reit and CDL Hospitality Business Trust.

Stapled securities of CDLHT were trading 0.8 per cent or S$0.01 lower at S$1.21 as at 3.42 pm on Tuesday.