CDL Hospitality Trusts (CDLHT) has entered into a sale of agreement for the sale of Novotel Brisbane to ADFA Brisbane for A$67.9 million ($66.4 million).
According to CDLHT, the divestment is “in line with” its strategy of evaluating divestment opportunities to recycle capital for better returns and greater financial flexibility.
See also: CDL Hospitality Trusts reports 63.7% plunge in 1H20 DPS of 1.51 cents
Under the agreement, ADFA Brisbane will pay a deposit of A$3.5 million on Oct 21.
The sale price is 6.9% or A$4.4 million higher than the original purchase price of A$63.5 million and represents a slight premium to the independent valuation of A$67.5 million as at Aug 31.
The managers of CDLHT says it intends to use the proceeds mainly to repay existing borrowings, which will further strengthen CDLHT’s balance sheet and enhance its financial flexibility through increased debt headroom or fund acquisitions should suitable opportunities arise.
The divestment is expected to be completed on Oct 30.
“As part of our proactive asset management strategy, the divestment of Novotel Brisbane allows us to recycle capital to maximise longterm value for stapled securityholders. With the essentially fixed rent structure of the property, we have achieved a recurring rental yield of at least 7.8% per annum during our holding period,” says Vincent Yeo, CEO of the managers.
“Upon expiry of the master lease in April 2021, CDLHT is likely to be exposed to the underlying trading conditions. Hence, the divestment is an opportunity for us to exit the market as Brisbane is facing near-term challenges stemming from the Covid-19 pandemic and more hotel supply coming on-stream in the coming years. Given the current environment, the divestment represents a good result in the context of strengthening our balance sheet while managing to divest an asset in the uncertain global tourism environment at a sale price that is at a slight premium to the independent valuation,” Yeo adds.
Units in CDLHT closed 1 cent lower or 0.9% down at $1.07 on Oct 20.
