Datapulse to take 15% stake in Seoul hotel for 8.6b won

Singapore

DATAPULSE Technology is acquiring a 15 per cent stake in Seoul's Holiday Inn Express Euljiro hotel for 8.6 billion won (S$10.2 million), as part of a larger deal involving Bizcentre Capital.

Bizcentre Capital is a subsidiary of Plenitude Berhad, a Malaysia-listed investment holding company engaged in property development, property investment and hotel operations.

Datapulse's indirect subsidiary KPH Top and Bizcentre Capital will take a 15 per cent and 85 per cent stake, respectively in Korea Investment Private Placement Business Hotel Real Estate Investment Trust (REF Trust), which owns the hotel, for a total of 59 billion won.

The vendor is the Military Mutual Aid Association, a retirement savings fund in South Korea holding the outstanding beneficiary certificates of the trust. REF Trust is a real estate fund and also a collective investment vehicle, with Korean Investment Management Co as quality asset manager and KB Kookmin Bank Co as the trustee.

Datapulse's estimated 8.6 billion won in total acquisition costs comprises 4.1 billion won for its share of the purchase, 4.4 billion won for a proportionate corporate guarantee in connection with refinancing an existing loan and 100 million won for its share of transaction costs. The deal will be fully funded by internal resources and is expected to complete by June 21, 2019.

The purchase is in line with its expansion strategy and allow it to increase its interests in the South Korea hospitality market. The 224-room mid-scale hotel is a relatively new asset with a freehold land title and is also strategically located in Euljiro, in between popular retail and shopping districts Myeongdong and Dongdaemen. It is also walking distance to commercial properties in the Euljiro business districts.

As the hotel is currently operated by a local hotel operator under the Holiday Inn Express brand through a franchise agreement, Datapulse said this may provide the group with upside potential when the franchise agreement is converted into a full hotel management arrangement.

To ensure the risk and rewards of the proposed investment are pro rated, KPH Top and Bizcentre Capital have struck a joint venture (JV) agreement. Capital contributions in relation to the deal will hence be in the agreed proportion of 15:85 respectively.

Datapulse will incorporate a new company called KPH 2 with a paid-up share capital of S$1,000. A wholly-owned subsidiary of KPH Top, it will house the conditional beneficiary certificate sale and purchase agreement (BCA), and the conditional JV agreement.

KPH 2 and Bizcentre Capital will incorporate a new company called Pinetree Hotel, with a paid-up share capital of 100 million won, contributed according to the agreed proportion. This will house the conditional business transfer agreement, covering the hotel's assets, licences, contracts and employees.

Deal completion is subject to and conditional, "including but not limited" to the approval of shareholder of both companies, and their ultimate holding companies, where applicable, on top of meeting certain conditions precedent.

Datapulse also disclosed the interests of its chairman Aw Cheok Huat, who is a director and controlling shareholder of ICP Group, which provides hotel management services to certain hotels owned by Plenitude.

Datapulse shares closed one cent lower at S$0.25 on Wednesday.