CDL Hospitality Trusts - CGS-CIMB Research 2021-08-31: Maiden Foray Into New Lodging Spaces

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CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Maiden Foray Into New Lodging Spaces

• CDL Hospitality Trusts ventured into residential build-to-rent (BTR) market in UK for a max sum of £73.3m.
• Limited supply and strong demand will support the demand for its BTR.
• This will enhance its income stability. DPU accretion 2.2%. Reiterate Add.

CDL Hospitality Trusts ventured into built-to-rent market in Manchester, UK

• CDL Hospitality Trusts (SGX:J85) entered into a land purchase agreement and a development funding agreement to invest in a residential build-to-rent (BTR) forward funding scheme in Manchester, UK, for £73.3m (S$136m).
• CDL Hospitality Trusts acquired land and buildings (£9.5m) located on the south east side of Longacre Street, Ancoats, Manchester, UK from Packaged Living, which will redevelop the land into a residential BTR (to be known as The Castings) for £63.8m; £58.2m will be paid out periodically over the development period, and the remaining cost will be paid upon completion. Including fit-out and transaction expenses, the total transaction cost works out to be £78.9m (S$146.5m), funded by GBP debt.
• The property will be developed into a freehold 352-unit BTR block, comprising lodging units, common amenity spaces (gym, cinema, lounge), rooftop terrace and ground floor retail spaces. The project should be completed by May 2024F.

A DPU-accretive deal at attractive pricing

• The total purchase consideration of £73.3m is lower than the funding assets.
• DPU accretion is expected to be 2.2%, based on FY20 distribution on a pro forma basis.

A new venture that will enhance income stability

• The transaction represents CDL Hospitality Trusts’s maiden foray into new gearing of CDL Hospitality Trusts if The Castings’ cap rate is compressed in the future.

Reiterate ADD on CDL Hospitality Trusts at an unchanged target price of S$1.32

• While the progressive payment of construction cost will dilute DPU (2.5% to 5% impact p.a.) before completion, this can be offset by capital distribution.
• See
  • CDL Hospitality Trusts's Share Price,
  • CDL Hospitality Trusts's Target Price,
  • CDL Hospitality Trusts's Analyst Reports,
  • CDL Hospitality Trusts's Dividend History,
  • CDL Hospitality Trusts's Announcements,
  • CDL Hospitality Trusts's Latest News.
• Re-rating catalyst/downside risk: Faster/slower recovery of travel demand.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-31

SGX Stock Analyst Report ADD MAINTAIN ADD 1.320 SAME 1.320