13th Jun 2006 10:16
Millennium & Copthorne Hotels PLC13 June 2006 13 June 2006 Millennium & Copthorne Hotels plc ("M&C" or "the Company") LODGEMENT OF PRELIMINARY PROSPECTUS RELATING TO CDL HOSPITALITY TRUSTS 1. Introduction Further to the announcement on 26 May 2006 that the Singapore ExchangeSecurities Trading Limited ("SGX-ST") granted a conditional eligibility-to-listletter for the admission of all of the Stapled Securities (as defined hereunder)in CDL Hospitality Trusts (previously known as CDL Hospitality REIT Group) tothe Official List of the Main Board of the SGX-ST, the Board of Directors of M&Cis pleased to announce that CDL Hospitality Trusts has successfully lodged thepreliminary prospectus ("Preliminary Prospectus") relating to its proposedinitial public offering ("IPO") on 13 June 2006. The Preliminary Prospectus isnow available on the Monetary Authority of Singapore ("MAS") website (see http://masnet.mas.gov.sg/opera/sdrprosp.nsf). CDL Hospitality Trusts will be a stapled group (the "Stapled Group"), comprisingCDL Hospitality Real Estate Investment Trust ("H-REIT"), a real estateinvestment trust, and CDL Hospitality Business Trust ("HBT"), a business trust.The Stapled Group's business activities will focus on real estate primarily usedfor hospitality and/or hospitality-related purposes, whether wholly orpartially, and real estate related assets in relation to the foregoing. This proposed IPO is subject to, among other things, regulatory approval fromthe SGX-ST and the MAS. Accordingly, shareholders and other investors shouldnote that 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 of Directorsof M&C has not made a final decision on whether or not to proceed, and if sowhen to proceed, with the proposed IPO. Thus, there can be no assurance thatthe proposed IPO will proceed. 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 entered into on 12 June 2006 between M&C REIT Management Limited(an indirect wholly owned subsidiary of the Company and acting as the manager ofH-REIT) ("H-REIT Manager"), DBS Trustee Limited (an independent professionaltrust company registered under the Trust Companies Act, Chapter 336 of Singaporeand acting as trustee of H-REIT) ("H-REIT Trustee") and M&C Business TrustManagement Limited (an indirect wholly owned subsidiary of the Company andacting as the trustee-manager of HBT) ("HBT Trustee-Manager"). As the units inH-REIT and the units in HBT will comprise the Stapled Securities, these unitscannot 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. These real estate assets may exist as part of larger mixed-usedevelopments where such developments may also include entertainment, leisure and/or gaming related facilities. HBT will be dormant at the proposed listing date and may become active goingforward under certain circumstances which are set out more fully in thePreliminary Prospectus. 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 each a "Hotel"), and Orchard Hotel Shopping Arcade, ashopping arcade annexed to Orchard Hotel (the Hotels and Orchard Hotel ShoppingArcade collectively 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") have on 12 June 2006entered into various conditional property sale and purchase agreements("Property Sale and Purchase Agreements") with H-REIT Trustee, acting on behalfof 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 and Orchard Hotel ShoppingArcade from CHPL; (b) 75-year leasehold interest in M Hotel from HVHPL; and (c) the remaining approximately 61 year term of a 99-year leasehold interest inCopthorne King's Hotel from RHRL. Completion under the Property Sale and Purchase Agreements is conditional uponthe permission of the SGX-ST to the listing and trading of the StapledSecurities on the SGX-ST being obtained by a date falling on or before theexpiry of 90 days from the date of such agreements. Further details of theProperties are set out in the Preliminary 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 theHotels, with an option to renew for another term of 20 years at each lessee'soption. The Grand Copthorne Waterfront Hotel will be leased by H-REIT to RHRLwhilst the other 3 Hotels will be leased to their respective vendors. Thelessees will each pay H-REIT rental comprising the sum of a fixed revenue(consisting of a fixed rent and a fixed service charge element) and a variablerent, which will allow H-REIT to earn passive rental income. The fixed revenuecomponent acts as a rental floor, and is based on the level of proforma rentalfrom the Hotels derived from their revenue and gross operating profit in thefinancial year ended 31 December 2003, which was the worst year for the travelindustry in Singapore with the SARS epidemic, bird flu and the Iraq War alloccurring in that year. The computation of the fixed revenue is based on the sumof 20% of the Hotels' revenue and 20% of the Hotels' gross operating profit forthe financial year ended 31 December 2003, which is approximately S$26.4million. The variable rent component is computed based on the sum of 20% of theHotels' revenue and 20% of the Hotels' gross operating profit for the prevailingfinancial year, less the fixed revenue. 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 £288.2 million(1)), 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 February 2006) (as at 28 February 2006)Orchard Hotel S$330.1 million S$330.0 millionGrand Copthorne Waterfront Hotel S$234.1 million S$233.9 millionM 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 Hotel S$1.7 million S$1.7 million(2)M 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(3) S$110.4 million S$36.3 million Notes: (1) Exchange rate used: S$1 = £0.3405, as of 9 June 2006 (2) As this property is owned by CDL, the revenue and profit before tax ofGrand Copthorne Waterfront Hotel attributable to the Company only relates tohotel management fees. (3) 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 net carrying value of the Properties owned by the Company's subsidiaries asat 31 December 2005 were as follows:- Property Net carrying valueOrchard Hotel and Orchard Hotel Shopping Arcade £116.7 million (S$334.4 million)M Hotel £50.3 million (S$144.1 million)Copthorne King's Hotel £25.3 million (S$72.5 million) Note: S$ equivalent is translated using exchange rate : S$1 = £0.3490, as of 31December 2005 The aggregate sale price for the Properties is approximately S$846.3 million ("Sale Price"), following the CBRE valuation. The key terms and conditions ofthe Property Sale and Purchase Agreements are set out more fully in thePreliminary Prospectus. The Sale Price will be satisfied entirely in cashthrough 1) the proposed IPO proceeds of the Stapled Group; 2) the Company's cashsubscription of approximately 39.1% of the Stapled Group through an indirectwholly owned subsidiary; and 3) through borrowings by H-REIT. 4. Proposed IPO DBS Bank Ltd ("DBS") and The Hongkong and Shanghai Banking Corporation Ltd ("HSBC") have been appointed Joint Financial Advisers, Joint Global Coordinators("JGCs") and Joint Bookrunners for the proposed IPO, subject to a definitiveunderwriting agreement to be executed in due course. The Stapled Group intends to undertake a proposed IPO of approximately 425million Stapled Securities. Based on an indicative IPO price range of S$0.83 toS$0.90 per Stapled Security (the "Proposed Offering Price Range"), the StapledGroup is expected to raise gross proceeds of approximately S$352.8 million toS$382.5 million. The actual issue price of the IPO will be determined followinga bookbuilding process to be carried out by the JGCs. The Proposed OfferingPrice Range translates into an indicative yield of approximately 6.16% to 6.37%for the annualised 6 months ending 31 December 2006 ("Forecast Period 2006")(1)and 6.45% to 6.69% for the 12 months ending 31 December 2007 ("Projection Year2007")(2). The offer structure and size of the Stapled Group as well as theindicative Proposed Offering Price Range, as described above, are indicativeonly at this juncture and will be finalised at a later date closer to the launchof the Stapled Group. The indicative terms and the structure of the proposed IPOare set out more fully in the Preliminary Prospectus. Upon the admission of the Stapled Group to the Official List of SGX-ST (the "Listing"), all the Stapled Securities will be traded through the book-entry(scripless) settlement system of the SGX-ST. The Stapled Securities are expectedto commence trading no later than July 2006. 5. The Company's Interest To demonstrate its commitment to the Stapled Group, the Company, through anindirect wholly owned subsidiary, namely Hospitality Holdings Pte. Ltd., has on12 June 2006 entered into a conditional agreement for the subscription of 273million Stapled Securities (which represents approximately 39.1% interest in theStapled Group) at IPO. The subscription monies for the 273 million StapledSecurities will be funded via bank borrowings procured by the Company. M&C, in respect of its effective interest, and Hospitality Holdings Pte. Ltd. inrespect of its direct interest, in and to the 39.1% interest in the StapledGroup to be acquired at the IPO have entered into a lock-up agreement with theJGCs pursuant to which each of them has undertaken that it will not, inter alia,directly or indirectly, offer, sell or contract to sell or otherwise dispose ofany of any such Stapled Securities for a period of 180 days from the date of thelisting of the Stapled Securities. The proceeds from the disposal of the Orchard Hotel, M Hotel, Copthorne King'sHotel and Orchard Hotel Shopping Arcade by the Company's subsidiaries will beused for working capital purposes, including the repayment of bank borrowingswithin the M&C group. Notes: (1). Based on the forecast for the Forecast Period 2006, together with theaccompanying assumptions, in the preliminary prospectus dated 13 June 2006. (2). Based on the projection for the Projection Year 2007, together with theaccompanying assumptions, in the preliminary prospectus dated 13 June 2006. 6. Financial Effect of the Proposed IPO The sale of the Properties is subject to amongst other things, the listing ofand commencement of trading of the Stapled Securities. The net attributable gain on disposal by the Company to H-REIT of Orchard Hotel,M Hotel, Copthorne King's Hotel and Orchard Hotel Shopping Arcade (beingproperties owned by certain of the Company's wholly owned subsidiaries) willonly be crystallised upon the completion of the IPO. The Company expects torecord the financial effects of the proposed IPO in its financial results forthe third quarter ending 30 September 2006. As set out in the Preliminary Prospectus, assuming that the proposed IPO wascompleted on 30 June 2006, the Company will earn approximately £0.79 (1) millionin management fees from H-REIT for the 6 months ending 31 December 2006 throughH-REIT Manager of which 80% will be paid in Stapled Securities and the remaining20% in cash. From the Company's 39.1% interest in the Stapled Group, based onthe indicative Proposed Offering Price Range of S$0.83 to S$0.90 per StapledSecurity, the Company will be entitled to distribution income of approximately£2.47 (1) million and £2.58 (1) million respectively for the 6 months ending 31December 2006. Note:(1). Exchange rate used: S$1 = £0.3405, as of 9 June 2006 7. 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 through its indirect wholly owned subsidiaries; 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 recognised 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. 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 HospitalityTrusts (the "Stapled Group") in Singapore or any other jurisdiction nor shouldit or any part of it form the basis of, or be relied upon in any connectionwith, any contract or commitment whatsoever. The information in thisAnnouncement is qualified in its entirety by, and is subject to, the moredetailed information to be set out in the final prospectus ("Prospectus") to beregistered by the Monetary Authority of Singapore (the "Authority"). Theinformation presented in this Announcement is subject to change. Afterregistration of the prospectus by the Authority, copies of the Prospectusrelating to the proposed initial public offering may be obtained, subject toavailability, from DBS Bank Ltd and The Hongkong and Shanghai BankingCorporation Ltd (collectively known as the "Underwriters") and, whereapplicable, from members of the Association of Banks in Singapore, members ofthe Singapore Exchange Securities Trading Limited ("SGX-ST") and merchant banksin Singapore. Anyone wishing to purchase the Stapled Securities should read theProspectus before deciding whether to purchase the Stapled Securities and willneed to make an application in the manner set out in the Prospectus. Anydecision to purchase the Stapled Securities should be made solely on the basisof information contained in the Prospectus and no reliance should be placed onany 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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