M&L Hospitality Trust

M&L Hospitality Trust: has filed a preliminary prospectus with the MAS.
The trust will be 45% owned by Grandline Int’l, which is owned by the Kum family.
The $1.2b initial portfolio comprises of 2,509 rooms at 6 hotels in Singapore (36% portfolio value), Australia (56%) and Japan (8%).
MLHT has an initial leverage of 29.3% debt-to-assets.
The $463m offering is tipped to price at 80-87 cts, with the REIT scheduled to start trading on 3 May.
This implies a yield of~ 8.05% this year and 7.7-8.3% next year.
DBS, JPM and UBS are the joint book runners.

The assets initial NPI yield is ~6.5% and the assets look to be acquired at ~$475k per key.
The forecasted average occupancy rate is 87.7% in FY12E with an average daily rate of $212/day (+2.4% y/y) or a RevPar of $186/day (+1.6% y/y).
The assets are: Ibis on Bencoolen and Ibis Novena in Singapore; Four Points by Sheraton and Swissotel Sydeny in Sydney, Australia; Travelodge Docklands in Melbourne, Australia; and Hilton Nagoya in Japan.
The assets target a range of clientele from the economy to the upper-scale segments.
All 6 assets are on master lease agreements expiring in 2020 to 2031 – the sponsor is the master lessee for 4 of the assets (85% portfolio value) with third parties acting as the master lessee for the balance 2 assets (15% portfolio value).

The hotels are operated by various managers including Accor, Starwood, Swissotel, Toga Group and Hilton Int’l.
Land titles are a mix of freehold and 99-year leaseholds.
The revenue structure for the assets comprises a fixed rent (for the 2 Sydney assets only) and a variable rent component calculated as a % of gross operating revenue and profit.

The trust plans to reconfigure and upgrade Four Points by Sheraton, adding 66 hotel rooms. That asset also has adjoining land available equivalent to 238 hotel rooms, 2150 sm of convention space, and 4500sm of commercial office space. In total, this would represent a 48% increase in available rooms at the asset (+12% on a portfolio level).

MLHT also enjoys a right of first refusal from the sponsor, which currently owns 5 hotels with 893 rooms in Australia, New Zealand and Japan. The sponsor also has entered into a sale & purchase agreement to acquire a 165-room hotel in Auckland, New Zealand and is in talks to acquire 2 hotels with 262 rooms in Hokkaido, Japan.
If all 8 hotels are acquired, MLHT would see a 53% increase in available rooms.
Along with the Four Points refurb and extension, this implies a potential 65% growth in available rooms.