CDL HT: CDLHT is marking its maiden entry into the European hospitality sector with the acquisition of the 198-room Cambridge City Hotel in UK for £62.5m ($133.2m).
Cambridge City Hotel is a newly-refurbished upscale hotel offering a comprehensive suite of facilities, and boasts a prime location in Cambridge city centre. It is also within the vicinity of popular tourist destinations such as King’s College, Fitzwilliam Museum, and the Grand Arcade Shopping Centre.
The property comes with a 125-year lease and option for an additional 50-year lease extension. For 1H15, the hotel's RevPAR grew 28.6% y/y to £101. The pro forma annualized NPI yield of the property works out to 5.6%, which translates to a DPS accretion of 1.9%.
The acquisition will be fully funded initially by GBP-denominated debt. Upon completion of the acquisition, CDLHT’s leverage will increase from 32.0% to 35.8%.
Management believes the UK hospitality outlook continues to be buoyant with international tourist arrivals expected to hit a record 35.1m in 2015. The recent streamlining of visa process for Chinese visitors entering UK is also likely to encourage more inbound travel from the world’s largest tourism source market.
The latest acquisition is a step in the right direction, aimed at diversifying the group’s reliance on S’pore’s hospitality industry, which is beset by sluggish tourist arrivals and a stronger SGD versus regional currencies.
At the current price, CDLHT trades at 7.8% yield and 0.8x P/B.
Overall, the street has 9 Buy, 6 Hold and 3 Sell ratings with a consensus TP of $1.66 on the hospitality trust.
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