CDLH Trust: to buy Studio M Hotel for a total cost of $156.2m from its Sponsor. The Hotel, which opened in 1H10, is located at Nanson Road (near Robertson Quay), and will add 360 rooms to CDLH’s existing portfolio of 3942 rooms. Driven by strong tourism demand, the Hotel ramped up utilization rapidly, and enjoyed a high avg occupancy rate (AOR) of 88.9% for the first 7 mths of full operations from 1 Jun to 31 Dec ’10. This compares with industry AOR of 86% for FY10…
The purchase will be initially funded entirely by debt; post-acq debt/assets ratio will rise to ~26.5%. The Hotel will contribute ~8% of total gross rental and NPI. Proforma property yield of the Hotel for FY10 is 6.1%, and compares favorably to CDLH’s existing implied property yield of 5.3%. This is expected to increase proforma DPU by 5% to 11.74cts. While the acq has been anticipated for some time, mkt may still view the deal positively given DPU accretion …
The majority of the Street has Buy ratings, with TP ranging btwn $2.05-2.53.
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