What you need to know about the UK luxury hotel CDL Hospitality Trusts is eyeing to acquire

It will be funded by 100% offshore GBP-denominated debt financing.

According to OCBC Investment Research, CDL Hospitality Trusts (CDLHT) has acquired The Lowry Hotel, one of only two 5-star luxury hotels in Manchester, UK for GBP 52.5m (approx. S$94.1m) with a net property income yield of 7.3% for FY16.

“The acquisition costs will be initially funded by 100% offshore GBP-denominated debt financing. Because of this, CDLHT is set to increase its gearing from 36.8% to around 39.1%,” added OCBC.

Here’s more from OCBC:

For 2016, the asset recorded a RevPAR growth of 6.9% YoY due to the strong demand from the corporate and leisure segments.

Going forward, we continue to expect positive RevPAR growth in 2017 given the refurbishment of guest rooms in 2H16.

The management is positive on the medium-term prospects of Manchester given its economic strengths, which they consider less vulnerable to the effects of Brexit, as well its positioning as a football and leisure hub.

Football-related business is a key part of demand for the asset, as Manchester is home to both Manchester United Football Club and Manchester City Football Club.

Over the weekends when premier league matches are being played, The Lowry Hotel is able to command significantly higher ADR – in our estimate, up to more than double the typical weekday corporate or leisure rate.

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