CDL has announced at the end of January that it is purchasing SKD in central London from Blackstone for GBP395 million ($649 million). SKD is a mixed-use estate fronting the River Thames. It comprises Grade A offices, food and beverage outlets, retail and residential units, as well as a marina with berths for up to 185 yachts.
The freehold property is centrally-located with good connectivity. Based on RHB’s estimates, the acquisition translates to an initial net property income yield of slightly above 7%, which Natarajan believes sufficiently buffers the weak near-term economic outlook in the UK.
“With this acquisition, the group now has a sizeable UK commercial portfolio of about GBP1 billion — management noted it could possibly be spun off into a private fund or REIT at the right time and drive in its fund management strategy,” he adds.
Meanwhile, CDL’s acquisition plans to acquire 5-star hotel Sofitel Brisbane Central from Brookfield Asset Management marks its maiden entry into the city’s hospitality sector. The purchase will be made via a 50:50 joint venture with its New Zealand-listed subsidiary Millennium & Copthorne Hotels New Zealand at the price of A$177.7 million.
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The acquisition is subject to government approval and is expected to be completed in 2HFY2023. Natarajan highlights that CDL had earlier guided that it would like to play a more active sponsor role for its listed hospitality trust — CDL Hospitality Trusts — by providing a good asset pipeline for potential acquisitions.
The net gearing, including fair value on investment properties post the two transactions is expected to be at the 60% level, which RHB deems as reasonable.
RHB has revised its FY2023 and FY2024 earnings estimates for CDL by 1% and -3% respectively by factoring in the latest acquisition and fine-tuning financing costs and margins.
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“Operationally, core earnings are expected to rebound this year from healthy residential sales and the hospitality sector recovery,” says Natarajan.
As at 2.28pm, shares in CDL are trading 5 cents lower or 0.67% down at $7.32.
