- Sale-and-leaseback of Angsana Velavaru resort deal is a first for the group
- Win-win deal for both parties
- HOLD, TP raised to S$0.79; awaiting further catalyst
Sale & leaseback of Angsana Velavaru resort.
Banyan Tree Holdings (BTH) announced the sale and leaseback of Angsana Velavaru to CDL Hospitality Trust (CDREIT) for a consideration of US$71m. The property will be leased back to BTH to manage for an initial period of 10 years. Banyan Tree will pay a base rental and is entitled to a percentage of gross operating profit based on an agreed formula.
Win-win deal for both parties.
We see the deal as mutually beneficial to both parties as :
(i) it is in line with management’s asset light strategy of reducing real estate exposure on its balance sheet and refocusing on maximising returns to shareholders through the hotel management business which enjoys higher margins and thus returns;
(ii) the 10-year lease-back is superior to previous asset sale transactions as it offers operational visibility for the property and BTH will continue to retain its exposure in the robust hospitality market in the Maldives (the group has 4 properties in the Maldives); and
(iii) rental payment structure motivates BTH to achieve the highest possible returns for the property.
Maintain HOLD; TP raised to S$0.79 based on SOTP.
Based on our estimates, the deal is accretive and BTH will reap a gain of S$14m and c+4% accretion to its NAV. Our TP is revised upwards as we roll forward to FY13F given improved earnings visibility. Re-rating catalysts that we are looking out for include (i) redeployment of proceeds into higher yielding assets, and (ii) more of such sale-leaseback transactions which will further lighten the group’s balance sheet.