City Developments: News Analysis: More redeployment of divestment proceeds
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- City Developments acquire 408-room Nine Tree Premier Hotel Myeongdong II for KRW 140b (S$143.9m) / KRW343m (S$353k) per key.
- Retains its presence and riding on the tourism recovery in Seoul; Nine Tree Premier Hotel is strategically located in the prime Myeongdong-Euljiro commercial district and within walking distance to Euljiro 3-ga subway station.
- City Dev has redeployed almost half of its divestment proceeds since 2022 into various asset classes. Prudent acquisition while being opportune during declining asset valuation environment could bode well for City Dev in the medium term.
- Maintain BUY; TP of S$10.50
What has happened? City Developments (City Dev) announced the acquisition of Nine Tree Premier Hotel Myeongdong II (Nine Tree Premier Hotel) in Seoul, 408-room freehold upscale hotel, for KRW 140b (S$143.9m) / KRW343m (S$353k) per key. The hotel opened in 2017 and is located in the prime Myeongdong-Euljiro commercial district, within walking distance to famous shopping areas including the Myeongdong Walking Street, Lotte and Shinsegae department stores, restaurants, street food, business and entertainment venues. It is accessible via the Euljiro 3-ga subway station, which is within a 4-minute walk.
Our view
City Dev retains its presence in the hospitality market in Seoul with asset redeployment into the newer Nine Tree Premier Hotel from one of its biggest divestment of Millennium Hilton Seoul. Although both hotels may not be comparable, Nine Tree Premier Hotel is indeed strategically located at the heart of the tourist attraction, riding on the recovery of tourism post the pandemic. Compared to some transactions in 2022 which ranges at KRW370k to KRW480k per key, the acquisition price appears to be at the lower end of the range despite Nine Tree Premier Hotel is a bigger and possibly newer hotel. City Dev has been redeploying its divestment proceeds since 2022. This is the second hotel acquisition in 2023 and possibly the 6th major asset acquisition to redeploy its proceeds from the asset realisation in 2021 / 2022 of a total of c.S$3bn of proceeds, mainly from the divestment of Millennium Hilton Seoul of S$1.3b. Thus far, City Dev has redeployed c.S$1.6b (including the Nine Tree Premier Hotel acquisition), please refer to the table below. We believe prudent acquisition, taking opportunity of declining asset valuation environment could bode well for City Dev in the medium term. Maintain BUY; TP of S$10.50
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