CDL to pay $690m for KL Regent

CDL Hotels International has agreed to buy the five-star Regent of Kuala Lumpur for $690 million in the latest stage of an aggressive global expansion plan.

The 469-room, 21-storey hotel, in the centre of Malaysia's capital, was opened in November 1989 and includes three floors of fully let commercial office space.

Hongkong-listed CDL is to buy the hotel from Hazama Bena Dua, the construction and property development group that built it, for $679 million in cash and 3.8 million CDL shares at $3 each.

CDL said the deal accorded with its objective of expanding its hotel portfolio and ''acquiring flagship hotels in key cities around the world''.

''We think it's a pretty good deal when you look at prices paid for top-end hotels in Kuala Lumpur last year,'' said Mr Lawrence Yip, CDL's general manager for finance and administration.

CDL plans a joint venture with at least one still-to-be-named Malaysian company to comply with Malaysia's foreign investment restrictions.

Mr Yip said: ''We're in negotiation now with a few promising potential partners.'' The deal is conditional upon the approval of the Foreign Investment Committee of Malaysia and the Ministry of International Trade and Industry of Malaysia.

The Hongkong stock exchange must also agree to the issue of new CDL shares to Hazama Bena Dua.

The deal is at a price per room of $1.47 million without attributing any value to the commercial space.

CDL expects the Regent to have an average occupancy rate of 70 per cent this year at an average room rate of $835.

And it believes the Regent will yield a net operating income, before interest and tax, of approximately nine per cent per year.

CDL said the deal would be funded through internal resources and bank borrowings and - subject to listing approval - the issue of the new shares.

CDL had a five-for-eight rights issue in March last year that raised $686 million and increased its cash in hand to about $1 billion.

Regent International Hotels Ltd will continue to manage the facility as part of a 20-year contract that started in 1989 and also gives Regent International the right to extend the term for a further two periods of 10 years each.

CDL, incorporated in the Cayman Islands, is listed in Hongkong but is 53 per cent owned and controlled by Singapore's City Developments Investments, which is part of the Hong Leong group.

It was set up in December 1989 after a restructuring of Hong Leong's hotel interests, which include operations in Singapore, China, Indochina, the Philippines, Taiwan and the United States.

Together with Asean Resources Holdings, CDL acquired 75 per cent of the Hotel Nikko in Hongkong for $870 million from cash-strapped Fortune Group of Taiwan.

CDL and Asean Resources assumed their share of Hotel Nikko's $747 million debt and paid the remainder in cash.

Lehman Brothers estimated the deal valued the Nikko at $1.16 billion or $2.52 million a room and the hotel's operating profit at $85 million for a cash-on-cash yield of 7.3 per cent.

CDL had said before the Nikko deal that it would be interested in buying into the troubled Ritz Carlton in Central if the price was substantially below the $1.5 billion suggested by the owner, GGS Hotel Holdings.

At the end of October, CDL bought the four-star Gloucester Hotel in central London for $810 million. Monitor, Page 8