CITY Developments Limited (CDL) on Monday said it plans to divest the Copthorne Orchid Hotel & Resort Penang in Malaysia for some RM75 million (S$25 million).

 

The sale and purchase agreement was entered into by CDL' s wholly-owned subsidiary Millennium & Copthorne Hotels Limited (M& C).

 

The buyer is Malaysia-listed Ivory Properties Group Berhad. It will acquire the freehold land that the 318-room hotel resides on, along with the hotel and all fixtures, fittings, equipment and tangible personal property in respect of the hotel, CDL said.

 

In a press statement, CDL noted that the divestment is in line with the group' s strategy to " extract value from its non-core hotel assets, streamline its portfolio and recycle capital following the onset of the Covid-19 pandemic" .

 

The sale of the Penang hotel is expected to lead to a pre-tax gain of S$9.2 million next year, CDL said. This is the group' s third non-core hotel asset disposal since the start of the year, with a combined sales value of S$104.8 million. Total pre-tax divestment gains for CDL amount to S$50.3 million, of which S$23.9 million will be recognised in 2021.

 

Last year, CDL took the London-listed M& C private, following a cash offer at 685 pence per share that valued the hotel company at £ 2.23 billion (S$3.96 billion). M& C operates 66 hotels, while 79 are under franchise and management contracts.

 

Since the privatisation and the outbreak of Covid-19, M& C has restructured costs and redirected marketing resources towards domestic tourism, it said. These have resulted in " green shoots of recovery" of the hospitality business in recent months, CDL added.

 

In the third quarter of 2020, M& C exercised a put option to sell Copthorne Hotel Birmingham in the UK for £ 17.2 million. This sale will be completed in Q3 2021, resulting in a pre-tax gain on disposal of S$14.7 million.

 

In February this year, CDL also sold Millennium Cincinnati in the US for US$36 million. This resulted in a pre-tax gain of S$26.4 million, which was recognised in H1 2020.

 

According to the group, M& C has assessed that the land values of many of its properties are now " significantly higher than their acquisition cost" .

 

Following the three divestments and considering current offers, M& C expects to complete one to two more disposals from now till the end of 2022. It has operations in 29 countries and an inventory of more than 40,000 rooms.