PETALING JAYA: YTL Hospitality Real Estate Investment Trust or REIT (YTL-REIT) has entered into a sale and purchase agreement (SPA) with Hotel 25 Sdn Bhd, a wholly owned subsidiary of its parent YTL Corp Bhd
, to acquire the Hotel Stripes Kuala Lumpur, Autograph Collection on Jalan Kamunting in Kuala Lumpur for RM138mil.
The proposed related-party transaction would then see YTL-REIT leasing the property to Hotel 25 for 15 years, with the option to extend the lease by another 15 years.
The five-star hotel, which had a 69.3% occupancy rate as at June 30 this year, is seen as a step in YTL-REIT’s strategy to acquire and invest in high-quality hospitality properties in Malaysia and internationally, with a view to provide long-term and sustainable income distribution to unitholders and to achieve long-term growth in net asset value per unit.
The purchase is to be satisfied entirely in cash, with YTL-REIT revealing the proposal is expected to be funded with borrowings and internally generated funds.
According to the lease agreement – which would come into effect once the terms of the SPA have been put into motion – Hotel 25 would remit annual rental payments of RM9.7mil from the first year to the fifth, after which it would increase by 5% to RM10.1mil annually from the sixth to tenth years, and by a further 5% to RM10.7mil for the final five years.
In a filing with Bursa Malaysia yesterday, YTL-REIT said both parties under the lease agreement would use “reasonable endeavours” to mutually agree on the monthly rentals for the renewed term once the first 15-year lease has run its course.
“Upon completion of the proposed acquisition, the lease agreement will provide YTL-REIT with fixed rental payments from the lessee with a step-up provision of 5% for every five years.
“As such, the proposed lease is expected to contribute positively to future distributable income and distribution per unit of YTL-REIT after taking into consideration, among others, the additional income received from the lease arrangement and estimated borrowing costs,” said the investment manager.
The purchase is driven by YTL-REIT’s generally optimistic outlook for the Malaysian tourism industry, which it said over the last year has demonstrated its ability to recover and thrive amidst challenging circumstances.
It said, “The anticipated trajectory of Malaysia’s tourism sector in 2023, fuelled by the reopening of China’s borders, reflects an optimistic outlook. With the reopening of key international markets, Malaysia is well-positioned to strengthen its position as a preferred tourism destination.”
