HOTEL Royal Limited announced on Tuesday that it will be acquiring Royale Chulan Bukit Bintang Hotel from Boustead Hotels & Resorts for 197 million ringgit (S$65 million).
The 4-star hotel is situated along Jalan Bukit Bintang, Kuala Lumpur, Malaysia, with 400 suites and rooms that sit on freehold land of about 3,189 square metres.
As at the date of this announcement, the audited net book value as at Dec 31, 2017 and latest indicative open market value of the hotel is 91.7 million ringgit and 197 million ringgit respectively.
As such, the excess of the consideration over the audited net book value of the hotel is 105.3 million ringgit.
Hotel Royal said that Boustead Hotels & Resorts accounted for the hotel at cost less accumulated depreciation and impairment losses, and as such, the audited net book value of 91.7 million ringgit "may not reflect its latest indicative open market value".
The company said that the sale is an opportunity for the group to expand its hotel operations in Kuala Lumpur and that the cost per guest room is "reasonable".
As the group also owns Hotel Royal Kuala Lumpur, a 285-room 4-star hotel in the Bukit Bintang area, the purchase will "add synergy to the group's hotel operations in Kuala Lumpur in terms of sales referrals, joint marketing and management time", said Hotel Royal.
In addition, the directors are of the view that the hotel being located in one of the prime tourist and hotel belts of Kuala Lumpur city centre offers potential capital appreciation in the future.
The proposed acquisition will be financed by internal resources and bank borrowings.
A sum of 3.94 million ringgit, representing 2 per cent of the consideration, has been paid by Hotel Royal as an earnest deposit, while another 8 per cent, or 15.76 million ringgit, is payable upon the signing of the agreement. The balance will be paid upon the date of the deal's completion.