CDL Hospitality Trusts eyes Japan acquisitions

July 31, 2008
CDL Hospitality Trusts eyes Japan acquisitions
It's considering sprucing up Orchard arcade or turning it into hotel
rooms
By KALPANA RASHIWALA

CDL Hospitality Trusts (CDLHT), the biggest hotel owner in Singapore,
is looking at the Japan market with 'great interest' for potential
acquisitions as it now offers 'pricing levels not seen for many
years'.

CDLHT, a stapled group comprising CDL Hospitality Real Estate
Investment Trust (H-Reit) and CDL Hospitality Business Trust (HBT),
is also mulling whether to spruce up Orchard Hotel Shopping Arcade or
convert it into hotel rooms.

If converted, the 53,000 sq ft facility could yield about 78 hotel
rooms, which would add to Orchard Hotel's existing 653 rooms.

'We're are still doing studies and to some extent waiting for
construction costs to reach more reasonable levels,' Vincent Yeo, CEO
of M&C Reit Management, said yesterday in an interview with BT. M&C
Reit Management is the manager of H-Reit.

CDLHT yesterday posted a 68.7 per cent jump in second-quarter
distributable income to $25 million. For the first half ended June
30, 2008, distributable income jumped 79 per cent to $48.6 million,
on the back of organic growth across the portfolio as well as a full
period's contribution from Novotel Clarke Quay, which was acquired on
June 7, 2007.

'I like the acquisition environment today much better than what we
have experienced in the last couple of years. Because of the tight
credit conditions today, there are more motivated sellers and there
are more deals that we're seeing now, and consequently this means
that we can be a lot more selective in terms of location and
strategic assets,' Mr Yeo added.

'Japan has also gone through a very adverse credit situation and
there are a lot of deals. Assets as recently as last year used to
trade at 4 per cent yield. We're now seeing them gravitate above 6
per cent,' he said.

CDLHT's gearing level as at June 30, 2008, stood at 20.3 per cent.

Despite softness in Singapore visitor arrivals in June, CDLHT's
Singapore hotels posted average occupancy rate of 87.1 per cent in Q2
ended June 30, 2008, up 1.1 percentage points from 86 per cent for
proforma Q2 2007 (assuming Novotel Clarke Quay had been acquired on
April 1, 2007).

Revenue per available room increased 30.6 per cent year-on-year to
$222 in Q2 2008. Mr Yeo noted that the dip in Singapore's visitor
arrivals in June was mitigated by the increase in the average length
of stay per visitor.

CDLHT's hotel portfolio comprises Orchard Hotel, Grand Copthorne
Waterfront, M Hotel, Copthorne King's Hotel and Novotel Clarke Quay
in Singapore, and the Rendezvous Hotel Auckland in New Zealand.

CDLHT posted a 42.4 per cent year-on-year jump in Q2 gross revenue to
$29.5 million. For the first-half, gross revenue increased 48.3 per
cent to $57.4 million.

Unitholders will receive a total distribution per unit of 5.89 cents
for the first half comprising 5.37 cents of taxable income and 0.52
cent of tax-exempt. The total payout works out to an annualised
figure of 11.84 cents, reflecting an 8.2 per cent annualised
distribution yield based on CDLHT's closing price of $1.45 yesterday.
The counter ended one cent lower from the Tuesday close.

CDLHT's net asset value per stapled security stood at $1.61 as at
June 30, unchanged from the Dec 31, 2007 figure.

'While we are cautious over the outlook for the remainder of 2008 due
to the weakness demonstrated in visitor arrivals in the month of
June, we still expect to register growth for the next reporting
period.

'We believe that the general outlook for the hotel industry continues
to be positive over the medium and long term,' CDLHT said.