HL scores in Seoul

Attractive profit from sale of Millennium Seoul Hilton

SINGAPORE’S Hong Leong Group is selling the Millennium Seoul Hilton to Korean property developer Kangho AMC for nearly $700 million, reaping an attractive profit of about $465 million in the process.

:The 685-room hotel is in one of Seoul’s choicest districts. Hong Leong’s hotel arm, Millennium and Copthorne (M&C), bought it for the equivalent of £144.6 million ($387.8 million) in 1999.: The two parties now value the hotel at £287.9 million, but after taking into account some liabilities, agreed to a sale price of £232.6 million.

The price works out at US$830,000 ($1.14 million) per room, which is one of the highest sums paid for a hotel in Seoul, according to Hong Leong spokesman Gerry de Silva.

In fact, it comes close to the US$836,000 a room paid for the 807-room Plaza Hotel in New York by Israel’s Elad Group in 2004.

The Seoul sale comes only after former Daewoo Group chairman Kim Woo Choong was booted out from its 903-square-metre penthouse, which had been leased to him for 25 years for just US$0.31 a day. Daewoo had previously owned the hotel.

Hong Leong Group Chairman Kwek Leng Beng said: “The sale value attributed to the hotel demonstrates once again the underlying management skill of our group in maximising shareholder value. The M&C group’s strategy of being an owner of hotel assets remains unchanged. However, the opportunity for sale, whilst unsolicited, further strengthens the M&C group’s ability to take advantage of market and cyclical opportunities.”

M&C intends to use proceeds from the sale to increase its cash reserves in order to fund acquisition opportunities, earn interest income and reduce debt.

City Developments Limited (CDL) has already announced plans to invest between US$150 million and US$300 million in a commercial and residential project in Incheon.

M&C chief executive Richard Hartman said: “Seoul is a key gateway city and this will present us a more difficult decision on divestment. While the city has a challenging hotel operating environment particularly in Millennium Seoul Hilton, we have managed to achieve a profitable exit from the investment. We will be watching for suitable opportunities as they may arise in Korea.”

Source : Today – 25 Jun 2008

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