CDL Hospitality Trusts (CDLHT) has acquired Munich's Pullman Hotel and its office and retail components for €98.9 million (S$154 million). The four-star hotel, which is near the major business district, is the trust's first entry into continental Europe.
"The acquisition... allows us to penetrate a highly sought-after hospitality market while enjoying a spread between the attractive property yield and ultra-low borrowing rates," said chief executive Vincent Yeo. It said yesterday that the deal is accretive with a net property income yield of 5.6 per cent for the financial year ending in December 2016.
The trust has also launched a fully underwritten and renounceable rights issue to raise $255.4 million.
"This exercise will strengthen our balance sheet and enhance financial flexibility, allowing (the trust) to pursue future growth opportunities through acquisitions and asset enhancement initiatives," added Mr Yeo. The company said it is expected to enhance financial flexibility through reduced gearing.
The partial repayment of existing borrowings will also lower its weighted average cost of debt and further improve its interest coverage ratio, the firm said.
After the Munich deal is completed, and taking into account May's acquisition of The Lowry Hotel, the trust's gearing is expected to increase from about 36.8 per cent to 42.6 per cent, not including the rights issue.