CDL Hospitality Trusts , a stapled group comprising CDL Hospitality Real Estate Investment Trust , a real estate investment trust, and CDL Hospitality Business Trust , a business trust, has today announced the acquisition of Pullman Hotel Munich (the “Hotel”) and its office and retail components (the “Commercial Components”, and together with the Hotel, the “Property”) for €98.9 million (approximately S$153.8 million1 ) , which will be fully funded by debt financing and is accretive with a net property income yield of 5.6% for FY 20163 .
Mr Vincent Yeo, Chief Executive Officer of CDLHT’s managers, said, “Munich is a compelling destination for our first acquisition in continental Europe, allowing CDLHT to benefit from a potential economic recovery in the region through exposure to the largest economy in Europe. Besides being an important business hub and trade fair destination within Germany, Munich is also home to famous cultural and sporting attractions.”
To realign CDLHT’s capital structure, through partially repaying its existing borrowings, CDLHT has today also launched a fully underwritten and renounceable rights issue to raise S$255.4 million. This is expected to enhance CDLHT’s financial flexibility through reduced gearing and increased debt headroom. The partial repayment of existing higher interest-bearing borrowings4 will also lower its weighted average cost of debt and further improve its interest coverage ratio.
Mr Yeo added, “The acquisition of Pullman Hotel Munich facilitates CDLHT with a strategic entry into Germany and allows us to penetrate a highly sought-after hospitality market while enjoying a spread between the attractive property yield and ultra-low borrowing rates. This equity fund raising exercise will strengthen our balance sheet and enhance financial flexibility, allowing CDLHT to pursue future growth opportunities, through acquisitions and asset enhancement initiatives.”
After the completion of the acquisition of the Property and taking into account the acquisition of The Lowry Hotel, which was announced and completed on 4 May 2017, CDLHT’s gearing is expected to increase from 36.8% (as at 31 March 2017) to 42.6%, not including the rights issue. Including the rights issue, CDLHT’s gearing will be approximately 33.6%, with an enlarged regulatory debt headroom of S$577.2 million. On a standalone basis, assuming CDLHT owned the Property from 1 January 2016 on 100% debt financing, the pro forma FY 2016 DPS accretion is approximately 3.8%
Assuming CDLHT owned the Property and The Lowry Hotel from 1 January 2016, both on 100% debt financing, and proceeded with a rights issue on 1 January 2016 with proceeds raised to partially repay sufficient existing borrowings to maintain the gearing of CDLHT at 36.8%, the acquisitions are expected to be accretive.