RM650m bid for Renaissance

By THE EDGE

Hot on the heels of paying a record price for the five-star Four Seasons Resort Langkawi, Saudi Prince Alwaleed Talal Abdulaziz Alsaud is back, this time sizing up the Renaissance Kuala Lumpur Hotel, a 50:50 joint venture between IGB Corporation Bhd and Hong Kong’s New World Group.

Sources said Prince Alwaleed is making a RM650 million bid for the 921-room 5-star hotel, a merger of what used to be known as the Renaissance KL Hotel and the adjacent wing housing the New World Hotel.

The offer, sources said, is however RM100 million short of the RM750 million tag owners of the hotel have bandied. At RM650 million, each room is pegged at about RM700,000.

When contacted, IGB executive director and chief executive officer of the hotel division Tan Boon Lee said a number of agents had been appointed and that several offers had been received but none of these so far managed to “excite” IGB.

“Some of the offers were ridiculous,” he told The Edge Financial Daily, declining to elaborate. “They are nowhere near what we want,” added Tan, without disclosing the price tag nor the parties that have shown interest.

According to sources, Prince Alwaleed’s offer was made following a visit to the hotel earlier this month by three senior managers from the Kingdom Hotel Investments (KHI), a conglomerate founded, chaired and majority-owned by the prince.

Renaissance KL has been on the market for some five years now but its owners are obviously in no hurry to cash out, especially now with tourism picking up and hotels in the country appearing on the radar of investors, both local and internationally since 2004.

Renaissance KL stands out for what the market calls its “superior location”. It sits at the intersection of the Jalan Sultan Ismail and Jalan Ampang thoroughfare and is a stone’s throw away from the Kuala Lumpur City Centre.

Occupancy is believed to have climbed to around 70% but a refurbishment exercise of quality can cost up to RM30 million or so, a market observer estimates, adding that the hotel has “good bones”.

For IGB, cashing out of the 5-star hotel makes sense. Locally, the group is making an aggressive inroad into the 3-star hotel business, spearheaded by its investments in the Cititel Hotel and the Boulevard Hotel, both in the Mid Valley City in Kuala Lumpur.

Furthermore, Renaissance KL is owned jointly by another party, unlike its other five-star hotel investments.

For the year ended Dec 31, 2006, IGB reported a group pre-tax profit of RM202 million on the back of RM719 million in turnover. The property development division contributed RM383 million in revenue, followed by property investment with RM209.7 million and hotel RM120.7 million.

Meanwhile, Prince Alwaleed’s purchase of Malaysian Airline System Bhd’s Four Seasons Resort Langkawi in March this year was a record deal for multiple reasons.

The deal for the 91-villa resort that overlooks the Andaman Sea entails 35.2ha of freehold and leasehold land, of which 14ha is undeveloped. The value of a 10ha tract was pegged at RM35 million, while RM400 million went to the resort and a 4ha parcel.

Based on the sale price, the price worked out to RM4.39 million per villa, the highest ever recorded in Malaysia for a hotel. Occupancy then was around 70% and the average room rate was RM2,000.

According to an industry source, the 4ha parcel could house another 10 to 50 villas, pushing up the yield to between 7% and 8%.

Other Malaysian hotels that have made news recently include the award-winning 5-star Westin in the heart of KL. Last August, Ireka Corp Bhd sold the 452-room hotel to Newood Assets Ltd for RM455 million or over RM1 million per room with yields estimated at between 5% and 6% then.

Newood is a special-purpose vehicle set up under the MM Group Ltd, an investment arm directly owned by the shareholders of TCC Land International (Thailand) Co Ltd.

Last September, the 502-room Sheraton Subang Hotel and Tower in Subang Jaya was sold for RM140 million to Hong Kong-based Far East Consortium International Ltd.

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