City Developments Limited (CDL) announced on Dec 14 that it has entered into a sale and purchase agreement to divest the Copthorne Orchid Hotel & Resort Penang for a consideration of RM75 million ($25 million).
The agreement was signed by CDL’s wholly-owned hotel subsidiary Millennium & Copthorne Hotels.
The buy of the 318-room Penang hotel is Bursa Malaysia-listed Ivory Properties Group Berhad. Ivory Properties will acquire the freehold land that the hotel resides on, the hotel, and all fixtures, fittings, equipment and tangible personal property, in respect of the hotel.
The divestment, according to the group, is in line with its strategy to extract value from its non-core hotel assets. The group’s strategy also includes streamlining its portfolio and recycling its capital following the onset of the Covid-19 pandemic.
This is CDL’s third non-core hotel asset disposal since the beginning of 2020.
SEE: Impacted by Covid-19, City Developments Limited focused on long-term: analysts
The three divestments have brought the group a combined sales value of $104.8 million and pre-tax divestment gains for CDL of $50.3 million, of which $23.9 million will be recognised in 2021.
Since CDL’s privatisation of Millennium & Copthorne in November 2019 and after the outbreak of the Covid-19 pandemic, the latter has restructured costs and redirected marketing resources towards domestic tourism.
In 3Q2020, Millennium & Copthorne exercised a put option to sell Copthorne Hotel Birmingham in the UK for £17.2 million ($30.8 million). The sale will be completed in 3Q2021 and will result in a pre-tax gain on disposal of $14.7 million.
The sale of the Penang hotel is expected to result in a pre-tax gain of $9.2 million for CDL.
Millennium & Copthorne, on Feb 14, 2020, completed the sale of Millennium Cincinnati in the US for US$36 million ($49 million), which resulted in a pre-tax gain of $26.4 million for CDL. This was recognised in 1HFY2020.
Following the three divestments cited above and considering current offers, M&C expects to complete one to two more disposals between now and the end of 2022. It currently has an inventory of over 40,000 rooms and operations in 29 countries.
As at 12.57pm, shares in CDL are trading 14 cents higher or 1.8% up at $7.94.
