CDL to divest Millennium Hilton Seoul and adjoining land for $1.26 bil at 'significant premium to book value'

By Felicia Tan

/ The Edge Singapore |

December 13, 2021 12:59 PM SGT

The amount represents an excess of 835.17 billion won over CDL’s net book value of the property as at Nov 30. (Picture: CDL)

SINGAPORE (EDGEPROP) - City Developments Limited (CDL) has divested Millennium Hilton Seoul, as well as the adjoining land plot in Korea, for a total sum of 1.1 trillion won ($1.26 billion).

Read also: CDL sells Copthorne Orchid Hotel & Resort Penang for RM75 mil

The sale and purchase agreement was signed by CDL’s indirect wholly-owned subsidiary, CDL Hotels (Korea) and YD427 PFV Co on Dec 10.

YD427 PFV Co is an entity managed by IGIS Asset Management Co, which is one of the largest real estate managers in Korea with US$34 billion ($46.33 billion) in assets under management (AUM) as at 2020.

The amount represents an excess of 835.17 billion won over CDL’s net book value of the property as at Nov 30.

The sale price was arrived at on a willing-buyer, willing-seller basis. The highest offer was accepted by CDL after the group received several “unsolicited and competing” offers.

The hotel is located at the foot of South Korea’s Mount Namsan and within walking distance to Seoul’s downtown business district.

It opened its doors in 1983 under its previous owner, Daewoo Group, before it was acquired by CDL in November 1999 for US$213.5 million following the Asian Financial Crisis.

In 2013, CDL Hotels (Korea) acquired the adjoining 1,563.7 sqm freehold land lot from Woo Yang Industrial Development for 29.5 billion won.

According to CDL, the move is in line with the group’s capital recycling strategy to unlock latent value from its long-held assets.

The group adds that the performance of the hotel has been “trending negatively” over the years, and made worse by the Covid-19 pandemic since 2020. The pandemic led to a sharp decline in accommodation and event bookings on the back of international travel restrictions and temporary lockdown regimes.

The proposed divestment is expected to be completed by Feb 28, 2022.

Upon the completion of the proposed divestment, CDL is expected to recognise an estimated gain in the income statement of $529.73 million, net of taxes and related transaction costs.

The move is expected to positively impact the group’s net asset value (NAV) per share and earnings per share (EPS).

The proposed sale of the Seoul assets marks CDL’s fourth hotel divestment of the M&C portfolio since its privatisation. It is also the largest hotel divestment by CDL to date.

“Ever since I led our foray into the hotel industry in the 1970s, we have amassed a portfolio of valuable assets through strategic acquisitions and geographical expansion. Many of these assets have been held at book value for decades,” says Kwek Leng Beng, executive chairman of CDL and Millennium & Copthorne Hotels (M&C).

“Since acquiring Millennium Hilton Seoul in the late 1990s, we have steadfastly invested in the hotel, driven optimal performance and extracted good value from the property. We have always believed that this would be an asset that could provide tremendous value to shareholders at the right time and at the right price,” he adds.

“We received several unsolicited offers and negotiated hard to maximise value. This sizeable divestment at a significant premium to book value was the impetus to sell without hesitation and realise a substantial profit. The proposed divestment is in line with our capital recycling commitment to realise the deep, latent value from our assets,” he continues.

Kwek also expressed his confidence in the recovery of the global hospitality sector with pent-up demand.

“We will continue to review and fine-tune our portfolio to accelerate the group’s growth and transformation while enhancing shareholder value,” he says.

Shares in CDL closed 4 cents lower or 0.57% down at $6.99 on Dec 10.

This article first appeared on The Edge Singapore.

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