Chow Tai Fook guarantees HK$707m hotel dividend

New World Development and its controlling shareholder, Chow Tai Fook Enterprises, have agreed to guarantee a minimum HK$707 million first-year payout from the proposed spin-off of the group's hotel subsidiary.

The guaranteed dividend distribution to unit-holders of the proposed NW Hotel Investments Group is for the period between the listing of the investment trust and June 30 next year, New World said in an announcement to the Hong Kong stock exchange.

If the actual distributable income of the trust is less than the guaranteed amount, New World and Chow Tai Fook, both controlled by Cheng Yu-tung and his family, will pay the difference to the unit-holders.

"The purpose of the distribution guarantee is to assist in smoothing out any possible volatility in the distributions made by the trustee-manager [on behalf of NW Hotel Investments] … thereby providing [unit-holders] with certainty as to the expected income and yield from their holdings," New World said.

New World submitted a listing application last month to the stock exchange to spin off its three hotels in Hong Kong - Grand Hyatt Hong Kong and Renaissance Harbour View Hotel in Wan Chai, and Hyatt Regency Hong Kong in Tsim Sha Tsui. The three have a total of 1,787 rooms. In addition, NW Hotel plans to invest in internationally branded hotels in Hong Kong.

New World's announcement said it would offer to transfer to NW Hotel its contractual entitlement to the operating results of Hyatt Regency Hong Kong in Sha Tin, if the Chinese University of Hong Kong gave its consent.