Great Eagle plans to spin off three hotels in Hong Kong worth a total of HK$17.75 billion as a hotel investment trust.
The trust, Langham Hospitality Investments, yesterday revealed the details of the three hotels under its management.
The three hotels provide a total of 1,629 guest rooms. Based on the company's valuation, each room is worth about HK$10.89 million.
Great Eagle would control and own at least 51 per cent of the managers of the trust and lessees. The company has agreed to a lock-up period of six months after the hotel trust goes public.
The funds raised from the offering would be used for paying operating expenses.
The trust plans to spend HK$440 million in asset enhancement in the coming five years.
The scheme would include replacing the furniture, fixtures, carpets, fabric and wallpaper of about 230 rooms and suites at the Langham in Tsim Sha Tsui and replacing the carpets, wallpaper and fabric of all rooms at Langham Place Hotel in Mong Kok, and about 270 rooms at the Eaton in Yau Ma Tei. They would also improve food and beverage facilities in the hotels and add a spa.
The trust will set aside a reserve of HK$500 million for the asset enhancement plans and to fund general working capital purposes.
According to the trust, the occupancy rates of the Langham, Langham Place Hotel and Eaton were 86.1 per cent, 89.2 per cent and 94.9 per cent, respectively, last year.
The company forecast the occupancy rates of the hotels this year would be between 87 and 96 per cent, the same or higher than the occupancy rates recorded last year.
If the occupancy rate of each of the hotels is zero at the end of this year, the manager of the trust will distribute HK$24.8 million to the holders of share stapled units. The distribution will increase to HK$371.7 million if it is fully occupied. The average room rates of the hotels last year ranged between HK$1,198 and HK$2,239. The growth in room rates slowed down last year. The average room rate of the three hotels increased 6.02 per cent, compared with growth of 19.93 per cent in 2011.
The trust forecasts growth in room rates of 6 to 7.95 per cent this year, while the average room rates will be between HK$1,272 and HK$2,417.
An analyst, who declined to be named, said: "The growth rate of five-star hotels began to slow down last year due to the weakening global economy, while the businesses of three-star hotels was less affected. It is uncertain whether the five-star hotels could achieve a growth in room rates this year,"
The trust said net profit for this year was expected to be at least HK$230 million.
At the end of last year, the trust had a net liability of HK$628.7 million and cash of HK$31.56 million.