26th May 2006 14:00
Millennium & Copthorne Hotels PLC26 May 2006 26 May 2006 Millennium & Copthorne Hotels plc ("M&C" or "the Company") ESTABLISHMENT OF A HOTEL REAL ESTATE INVESTMENT TRUST GROUP 1. Introduction The Board of Directors of M&C is pleased to announce that the Singapore ExchangeSecurities Trading Limited ("SGX-ST") has on 26 May 2006 granted a conditionaleligibility-to-list letter for the admission of all of the Stapled Securities(as defined hereunder) in CDL Hospitality REIT Group to the Official List of theMain Board of the SGX-ST. The eligibility-to-list letter is not an indication ofthe investment merits of CDL Hospitality REIT Group and the Stapled Securitiesbeing offered for investment. CDL Hospitality REIT Group will be a stapled group (the "Stapled Group"),comprising CDL Hospitality Real Estate Investment Trust ("H-REIT"), a realestate investment trust, and CDL Hospitality Business Trust ("HBT"), a businesstrust. The Stapled Group's business activities will focus on real estateprimarily used for hospitality and/or hospitality-related purposes, whetherwholly or partially, and real estate related assets in relation to theforegoing. A preliminary prospectus of the Stapled Group ("Prospectus") in connection withthe proposed initial public offering ("IPO"), containing details on the StapledGroup including the Properties (as defined hereunder, comprising the initialasset portfolio of H-REIT), the risk factors and distribution policy will belodged with the Monetary Authority of Singapore ("MAS") in due course. Thisproposed IPO is subject to, among other things, regulatory approval from theSGX-ST and the MAS. Accordingly, shareholders and other investors should notethat the proposed IPO is dependent on a number of factors and subject to anumber of conditions, which may or may not be satisfied. The Board has not madea final decision on whether or not to proceed, and if so when to proceed, withthe proposed IPO. Thus, there can be no assurance that the proposed IPO willproceed. 2. The Stapled Group The Stapled Group will comprise H-REIT and HBT. The units in H-REIT and units inHBT will be stapled together (the "Stapled Securities") under the terms of astapling deed to be entered into between M&C REIT Management Limited (awholly-owned subsidiary of the Company and acting as the manager of H-REIT) ("H-REIT Manager") and M&C Business Trust Management Limited (a wholly-ownedsubsidiary of the Company and acting as the trustee-manager of HBT) ("HBTTrustee-Manager"). As the units in H-REIT and the units in HBT will comprise theStapled Securities, these units cannot be traded separately. H-REIT will be established with the principal strategy of investing, directly orindirectly, in a diversified portfolio of income-producing real estate which isprimarily used for hospitality and/or hospitality-related purposes, whetherwholly or partially, and real estate related assets in relation to theforegoing. HBT will be dormant at the proposed listing date and may become active goingforward under certain circumstances which will be set out more fully in theProspectus. 3. H-REIT's Initial Asset Portfolio H-REIT's initial asset portfolio will comprise four Singapore hotels, namelyOrchard Hotel Singapore ("Orchard Hotel"), Grand Copthorne Waterfront HotelSingapore ("Grand Copthorne Waterfront Hotel"), M Hotel Singapore ("M Hotel")and Copthorne King's Hotel Singapore ("Copthorne King's Hotel") (collectivelyknown as the "Hotels"), and Orchard Hotel Shopping Arcade, a shopping arcadeannexed to Orchard Hotel (the Hotels and Orchard Hotel Shopping Arcadecollectively known as the "Properties"). City Developments Limited ("CDL"), the Company's intermediate holding company,and certain wholly-owned subsidiaries of the Company, namely, Republic Hotels &Resorts Limited ("RHRL"), Harbour View Hotel Pte. Ltd. ("HVHPL") and City HotelsPte. Ltd. ("CHPL"), (collectively known as the "Vendors") will enter intovarious sale and purchase agreements ("Sale and Purchase Agreements") with DBSTrustee Limited (an independent professional trust company registered under theTrust Companies Act, Chapter 336 of Singapore) ("H-REIT Trustee"), acting onbehalf of H-REIT, pursuant to which H-REIT will respectively acquire a 75-yearleasehold interest in Grand Copthorne Waterfront Hotel from CDL and thefollowing from the respective wholly-owned subsidiaries of the Company:- (a) 75-year leasehold interest in Orchard Hotel from CHPL; (b) 75-year leasehold interest in M Hotel from HVHPL; (c) the remaining approximately 61 year term of a 99-year leasehold interest in Copthorne King's Hotel from RHRL; and (d) 75-year leasehold interest in Orchard Hotel Shopping Arcade from CHPL. Further details of the Properties will be set out in the Prospectus. Except for the Orchard Hotel Shopping Arcade, H-REIT will enter into a 20-yearfixed term lease with each of RHRL, HVHPL and CHPL acting as lessees for therespective hotel assets, with an option to renew for another term of 20 years ateach lessee's option. The Grand Copthorne Waterfront Hotel will be leased byH-REIT to RHRL whilst the other 3 hotels will be leased to their respectivevendors. The lessees will each pay H-REIT rental comprising the sum of a fixedrent, a fixed service charge and a variable rent that is computed based on apercentage of the respective hotels' revenue and a percentage of the respectivehotels' gross operating profits for the prevailing financial year, which willallow H-REIT to earn passive rental income. As for Orchard Hotel Shopping Arcade, H-REIT will take over the existing leasestherein and continue to lease the retail units out to various tenants directlyand derive rental income therefrom. The appraised values of the Properties as at 28 February 2006 was approximatelyS$846.3 million (approximately £286.6 million), based on a valuation of theProperties undertaken by CB Richard Ellis (Pte) Ltd ("CBRE"), the independentvaluer appointed by the H-REIT Manager. This was not significantly differentfrom the appraised values of the Properties as at the same date carried out byKnight Frank Pte Ltd ("Knight Frank"), the independent valuer appointed by theH-REIT Trustee. The individual appraised values of the Properties are asfollows: Property Appraised Value by CBRE (as at 28 Appraised Value by Knight Frank (as February 2006) at 28 February 2006)Orchard Hotel S$330.1 million S$330.0 millionGrand Copthorne Waterfront S$234.1 million S$233.9 million HotelM Hotel S$161.5 million S$161.7 millionCopthorne King's Hotel S$86.1 million S$85.5 millionOrchard Hotel Shopping Arcade S$34.5 million S$35.2 millionTotal S$846.3 million S$846.3 million The revenue and profit before tax generated by the Properties and attributableto the Company for the financial year ended 31 December 2005 ("FY2005") were asfollows: Property FY 2005 Revenue FY2005 Profit Before TaxOrchard Hotel S$55.1 million S$19.1 millionGrand Copthorne Waterfront S$1.7 million S$1.7 million Hotel 1M Hotel S$30.9 million S$10.7 millionCopthorne King's Hotel S$19.3 million S$2.8 millionOrchard Hotel Shopping Arcade S$3.4 million S$2.0 millionTotal 2 S$110.4 million S$36.3 million Notes:1. As this property is owned by CDL, the revenue and profit before tax of GrandCopthorne Waterfront Hotel attributable to the Company only relates to hotelmanagement fees. 2. The profit before tax attributable to the Properties owned by the Company'ssubsidiaries (Orchard Hotel, M Hotel, Copthorne King's Hotel and Orchard HotelShopping Arcade) is an aggregate amount of S$34.6 million. The terms and conditions, including the sale price of the Properties will bedetermined upon entering into the Sale and Purchase Agreements with therespective Vendors which will be agreed in due course and which will be set outmore fully in the Prospectus. 4. Proposed Initial Public Offering ("IPO") The terms and the structure of the proposed IPO will be fully set out in theProspectus. DBS Bank Ltd ("DBS") and The Hongkong and Shanghai BankingCorporation Ltd ("HSBC") have been appointed Joint Financial Advisers, JointGlobal Coordinators and Joint Bookrunners for the proposed IPO, subject to adefinitive underwriting agreement to be executed in due course. 5. The Company's Interest To demonstrate its commitment to the Stapled Group, the Company, through awholly-owned subsidiary, is expected to subscribe for approximately 39% interestin the Stapled Group, funded through the proceeds of the disposal. 6. Rationale for the Sale of Properties The flotation of the Stapled Group will: a) unlock shareholders' value in the Singapore hotel assets owned by theCompany; and b) enable the Company to pursue the twin strategies of revenue growththrough increased fee-based income and increased investment exposure tohospitality and/or hospitality related real estate. The H-REIT Manager and HBT Trustee-Manager are wholly-owned subsidiaries of theCompany and will receive management fees for providing certain managementservices to H-REIT and HBT, respectively. Further, the H-REIT Manager and HBTTrustee-Manager will also earn acquisition fees and divestment fees forsuccessful acquisitions and disposal of properties, respectively, on behalf ofH-REIT and HBT, respectively. With the flotation of the Stapled Group, the Company will have a specialisedvehicle publicly listed on an internationally recognized stock exchange for thepurpose of acquiring and funding future hotel acquisitions through inter-alia, alisted real estate investment trust structure. H-REIT will be an asset-owningvehicle focused on delivering stable and growing distributions and makingyield-accretive acquisitions of properties used for hospitality and/orhospitality-related purposes initially in Singapore, and eventually globally. Asa real estate investment trust, H-REIT should also be a more capital-efficientasset-owning vehicle. The use of proceeds from the disposal of the Orchard Hotel, M Hotel, CopthorneKing's Hotel and Orchard Hotel Shopping Arcade by the Company's subsidiarieswill partly fund the acquisition of approximately 39% of the Stapled Group, withthe balance to be used for working capital purposes. Enquiries:Millennium & Copthorne Hotels plcTony Potter, Group Chief Executive Officer +44 (0) 20 7872 2444Robin Lee, Senior Vice President Finance +44 (0) 20 7872 2444 Financial DynamicsBen Foster/Charlie Watenphul +44 (0) 20 7831 3113 IMPORTANT NOTICE The information contained in this Announcement does not constitute an offer orinvitation to sell or the solicitation of an offer or invitation to purchase orsubscribe for stapled securities ("Stapled Securities") in CDL Hospitality REITGroup (the "Stapled Group") in Singapore or any other jurisdiction nor should itor any part of it form the basis of, or be relied upon in any connection with,any contract or commitment whatsoever. The information in this Announcement isqualified in its entirety by, and is subject to, the more detailed informationto be set out in the final prospectus ("Prospectus") to be registered by theMonetary Authority of Singapore (the "Authority"). The information presented inthis Announcement is subject to change. After registration of the prospectus bythe Authority, copies of the Prospectus relating to the proposed initial publicoffering may be obtained, subject to availability, from DBS Bank Ltd and TheHongkong and Shanghai Banking Corporation Ltd (collectively known as the "Underwriters") and, where applicable, from members of the Association of Banksin Singapore, members of the Singapore Exchange Securities Trading Limited ("SGX-ST") and merchant banks in Singapore. Anyone wishing to purchase the StapledSecurities should read the Prospectus before deciding whether to purchase theStapled Securities and will need to make an application in the manner set out inthe Prospectus. Any decision to purchase the Stapled Securities should be madesolely on the basis of information contained in the Prospectus and no relianceshould be placed on any information other than that contained in the Prospectus. The value of the Stapled Securities and the income derived from them may fall aswell as rise. Stapled Securities are not obligations or, deposits in, orguaranteed by, M&C REIT Management Limited ("H-REIT Manager"), DBS TrusteeLimited ("H-REIT Trustee"), M&C Business Trust Management Limited ("HBTTrustee-Manager"), the Underwriters, Millennium & Copthorne Hotels plc (the "Company") or any of their respective affiliates. An investment in the StapledSecurities will be subject to investment risks, including without limitation,risks relating to the properties constituting the initial asset portfolio of theStapled Group, risks relating to the Stapled Group's operations and risksrelating to investing in real estate and including the possible loss of theprincipal amount invested. Investors will have no right to request that theH-REIT Manager and HBT Trustee-Manager redeem or purchase the Stapled Securitieswhile the Stapled Securities are listed. It is intended that holders of StapledSecurities may only deal in their Stapled Securities through trading on theSGX-ST. Listing of the Stapled Securities on the SGX-ST does not guarantee aliquid market for the Stapled Securities. This Announcement should not be distributed to persons with addresses in theUnited States of America or in any other country where such distribution maylead to a breach of any applicable law and/or regulation. The StapledSecurities will not be registered under the U.S. Securities Act of 1933, asamended (the "Securities Act") or under the relevant securities laws of anystate or other jurisdiction of the United States. Accordingly, the StapledSecurities may not (unless an exemption under the Securities Act or otherrelevant securities laws is available) be offered, sold, taken up, or delivered,directly or indirectly, in, into or from the United States or any otherjurisdiction where this would constitute a violation of the relevant laws of, orrequire registration thereof in, such a jurisdiction or to, or for the accountor benefit of, any U.S. persons (as defined in Regulation S under the SecuritiesAct). This Announcement may contain forward-looking statements that involve risks anduncertainties. Any actual future performance, outcomes and results may differmaterially from those expressed in forward-looking statements as a result of anumber of risks, uncertainties and assumptions. Under no circumstances shouldthe inclusion of such information herein be regarded as a representation,warranty or prediction with respect to the accuracy of the underlyingassumptions by the H-REIT Manager, the H-REIT Trustee, the HBT Trustee-Manager,the Underwriters, the Company or any of their respective affiliates or any otherperson or that these results will be achieved or are likely to be achieved.Potential investors are cautioned not to place undue reliance on theseforward-looking statements, which are based on the Company's current view offuture events. This document, and any part of it, is not to be distributed, circulated orpublished in any country where such distribution may lead to a breach of anyapplicable law and/or regulation including, without limitation, in the UnitedStates or to any United States edition of any publication. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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