CDL Hospitality Trusts said on Friday that it acquired a 95 percent stake in Hotel Cerretani Florence, MGallery by Sofitel, located in Florence, Italy, for 40.6 million euros, or around S$63.6 million, marking its first foray into the Italian market.
“The acquisition of Hotel Cerretani Florence, MGallery by Sofitel, represents a rare opportunity for CDLHT to penetrate a greatly sought after hospitality market with high barriers to entry,” Vincent Yeo, CEO of CDL Hospitality Trusts’ managers, said in the statement.
“We have also furthered our strategy of capitalising on the window of opportunity afforded by the low funding environment in Europe while broadening the earnings base of our portfolio,” he added.
The low interest-rate funding environment on the continent will allow the trust to “enjoy an attractive spread between the property yield and
borrowing rates,” it said.
The purchase price was at an annualized net property income yield of 4.6 percent for the nine months ended 30 September, and it is accretive on a pro forma basis for 2017, it said in a filing to SGX after the market close on Friday.
The purchase will be funded either through internal resources, offshore debt or a combination of both, CDL Hospitality Trusts said.
Once the deal is completed, the hotel will be leased and operated by the existing lessee, with a new management lease agreement for 20 years, it said. The lessee is affiliated with the existing minority shareholder, which is part of the EVENT Hotels group, and will retain a 5 percent indirect stake in the property, CDL Hospitality Trusts said.
The lease structure offers “downside protection and upside participation,” with rent received is around 93 percent of the net operating profit, subject to a base rent of 1.3 million euros, or around S$2.0 million, the trust said.
Independent valuer HVS Global Hospitality Services valued the property on a 100 percent basis at 43.8 million euros, it said.
The property, which is an 86-room four-star hotel under the MGallery by Sofitel brand, underwent an extensive, 5.3 million euro refurbishment in 2016, it said. The location is within walking distance of several tourist attractions, including the Uffizi Gallery, it said.
The trust noted that future hotel room supply in the city will be limited as new urban planning regulations prohibit new hotel developments in the city center.