City Developments: To distribute nearly 12 percent CDL Hospitality stake shareholders

An artist's concept of CDL Hospitality Trusts' planned build-to-rent property, to be called The Castings, in Manchester, U.K. Credit: CDL Hospitality TrustsAn artist's concept of CDL Hospitality Trusts' planned build-to-rent property, to be called The Castings, in Manchester, U.K. Credit: CDL Hospitality Trusts

City Developments plans to distribute 144.3 million units of CDL Hospitality Trusts (CDLHT) — an around 11.72 percent stake — to its shareholders as a distribution in specie, the property group said in a filing to SGX Friday. 

“The hospitality industry is among the sectors hardest hit by Covid-19. Today, with increasing vaccination rates globally, the resumption of international travel, a gradual reopening of borders and the easing of restrictions, the sector is on the cusp of a strong recovery and well-positioned for growth,” City Developments said in a filing to SGX.

“The board therefore considers now to be an opportune time to rebalance the group’s asset and investment portfolio, and at the same time, with the proposed distribution, unlock value for shareholders by providing them with the opportunity to participate in the post-pandemic recovery and growth of the hospitality industry,” the company said. 

The distribution will be on the basis of 0.159 CDLHT unit for every City Developments share held, the filing said.

The unit distribution will result in an accounting deconsolidation of CDLHT from the group, with City Developments’ remaining 27 percent stake to be recognised as an associate, the filing said. 

On a pro forma basis, that would result in an estimated gain of S$467.5 million, with end-2021 pro forma net asset value per City Developments share rising to S$9.66 from S$9.28, the filing said. In addition, the company could book gains on any future asset sales by the group to the REIT, the filing said.

The distribution is subject to approval by City Developments’ shareholders, the filing said.

The proposed distribution of CDL Hospitality Trusts units would be in addition to the 8 Singapore cents final dividend and the 1 Singapore cent special dividend proposed Friday, City Developments said. 

CDLHT has assets under management of around S$2.9 billion as of end-2021; it invests in property mainly used for hospitality, hospitality-related and other accommodation and lodging facilities, including serviced apartments, resorts, co-living, senior housing, student housing and rental properties.