SINGAPORE - City Developments Limited (CDL) said on Monday (Dec 14) that its wholly-owned hotel arm, Millennium & Copthorne Hotels (M&C), has entered into a sale and purchase agreement to divest the Copthorne Orchid Hotel & Resort Penang in Malaysia for RM75 million (S$25 million).
The divestment is in line with the group's strategy to extract value from its non-core hotel assets, streamline its portfolio and recycle capital following the onset of the Covid-19 pandemic, CDL said.
M&C expects to complete one to two more disposals between now and the end of 2022, said CDL. The hotel group is currently evaluating other unsolicited offers for its non-core assets, it added. These offers may be subject to rezoning and regulatory approval for change of use from hospitality.
The sale of the 318-room Penang hotel to Malaysia-listed Ivory Properties Group is expected to result in a pre-tax gain of $9.2 million in 2021.
It will bring to three the number of non-core hotel asset disposals since the start of 2020, with a combined sales value of $104.8 million and pretax divestment gains for CDL of $50.3 million, of which $23.9 million will be recognised in 2021.
M&C exercised a put option this year to sell Copthorne Hotel Birmingham in the UK for £17.2 million (S$30.8 million). The sale will be completed in the third quarter of 2021 and will result in a pre-tax gain of $14.7 million. It follows the sale of Millennium Cincinnati in the US for US$36 million (S$49 million), completed in February for a pre-tax gain of $26.4 million.
CDL privatised London-based M&C in November 2019 after delisting it from the London Stock Exchange at a valuation of £2.23 billion. M&C operates 66 hotels under the Millennium Hotels and Resorts global brands: 12 in Asia, 21 in Europe/UK, 18 in the US and 15 in New Zealand. It runs another 79 hotels under franchise and management contracts.
Since privatisation and the outbreak of the pandemic, M&C has restructured costs and redirected marketing resources to domestic tourism, said CDL. These efforts have resulted in green shoots of recovery of the hospitality business from the pandemic in recent months, it said.
But as return on equity of such assets, from hospitality revenue and profits, is not likely to recover to pre-Covid-19 levels in the nearterm, M&C is continually reviewing and fine-tuning its portfolio, CDL said. M&C has assessed that the land values of many of its properties are now significantly higher than their acquisition costs, it added.
CDL shares rose 15 cents or 1.9 per cent to $7.95 as of 1.47pm on Monday after the announcement, while CDL Hospitality Trust units were up 0.1 cent or 0.8 per cent at $1.32.