CDL Hospitality Trust acquires Pullman Munich for $112M

The Pullman Munich Hotel, Germany

Singapore's CDL Hospitality Trusts has acquired the Pullman Hotel in Munich, its office and retail components for a reported €98 million, around $112.2 million. According to The Straits Times, the purchase is being fully funded with debt financing. The accretive deal has a net property income yield of 5.6 percent for the 2016 financial year. 

The Munich hotel is CDLHT's first acquisition in continental Europe. "Munich is a compelling destination for our first acquisition in continental Europe, allowing CDLHT to benefit from a potential economic recovery in the region through exposure to the largest economy in Europe," said Vincent Yeo, the CDL's CEO.

The property is next to the Parkstadt Schwabing commercial district and near motorways connecting Munich to Berlin and Frankfurt, Munich International Airport and popular tourist destinations, including the English Garden, the BMW headquarters and Allianz Arena. 

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The hotel opened in 1986 and was fully renovated and rebranded in 2012 under the Pullman brand. Close to $20 million was invested in the property for renovations and refurbishments, including full renovations of its 337 guestrooms, food and beverage facilities, spa and lobby areas, from 2012-2016.  

The hotel will continue operating under AccorHotrels' Pullman brand once the transaction is finalized. The hotel will be leased under a 20-year management lease agreement to Event Hotels—an H-REIT partner—which begins on the date of completion. The lease structure provides downside protection and upside participation where rent is about 90 percent of the net operating profit of the hotel. This is subject to a guaranteed fixed rent of $4.08 million, which is subject to inflationary adjustments beginning at $4.08 million. 

CDLHT also launched a fully unwritten and renounceable rights issue to raise $184.2 million. The company said in a statement that this is expected to enhance financial flexibility through reduced gearing and increased debt headroom. The partial repayment of existing higher interest-bearing borrowings will also decrease its weighted average cost of debt and further boost its interest coverage ratio.  

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