Pavilion proposed acquisitions of Banyan Tree Kuala Lumpur and Pavilion Hotel Kuala Lumpur.
KUALA LUMPUR: Pavilion Real Estate Investment Trust (Pavilion REIT) has announced the proposed acquisitions of two hospitality assets in Kuala Lumpur, Banyan Tree Kuala Lumpur (BTKL) and Pavilion Hotel Kuala Lumpur (PHKL), in a landmark deal worth RM480mil.
Acting on behalf of Pavilion REIT, MTrustee Bhd entered into conditional sale and purchase agreements with Lumayan Indah Sdn Bhd for the acquisition of BTKL at a purchase consideration of RM140mil and with Harmoni Perkasa Sdn Bhd for the acquisition of PHKL at a purchase consideration of RM340mil.
“The acquisitions align with Pavilion REIT’s strategy which contributes positively to the overall portfolio and future growth, while also generating stable and sustainable income for unit holders. Acquiring these iconic hospitality assets reinforces our commitment to delivering premium offerings while capitalising on synergistic opportunities with Pavilion Kuala Lumpur Mall,” said Pavilion REIT Management chief executive officer Datuk Philip Ho.
The acquisitions will be funded via a combination of debt and/or equity, with Pavilion REIT proposing a private placement of new units to raise gross proceeds between RM264mil and RM552mil. Alternatively, it may issue up to RM246.5mil worth of units to settle part of the purchase consideration.
The transaction is expected to enhance portfolio diversification by reducing Pavilion Kuala Lumpur Mall’s contribution to Pavilion REIT’s total asset value from 61.4% to 58% via exposure to the hospitality sector.
BTKL and PHKL are connected to Pavilion Kuala Lumpur Mall, and the integration enables synergistic marketing and operational strategies anticipated to drive higher revenue per available room for the hotels and further elevate the overall value proposition of the mall.
The hotels have been operated and managed by Banyan Tree Hotels & Resorts Pte Ltd since their opening in 2018. Banyan Tree Hotels & Resorts Pte Ltd is part of Singapore-listed Banyan Tree Holdings Limited, a global hospitality group renowned for its luxury offerings and award-winning services.
BTKL, an award-winning five-star hotel within a 59-storey integrated building features 55 premium suites, a rooftop bar and the renowned Banyan Tree Spa. PHKL, located above Pavilion Kuala Lumpur Mall, offers 325 well-appointed rooms and extensive event and dining facilities. BTKL and PHKL have consistently achieved average occupancy rates of 83% and 82.2% respectively up to 30 September 2024. As part of the deal, the hotels will be leased back to the current operator for an initial 10-year term, with the option to renew for up to 20 additional years.
The fixed annual rental income will commence at RM33.5mil for the first five years, generating an approximate annual gross yield of 7%. This rental income will be subject to incremental adjustments every five years. This structure provides Pavilion REIT with a yield-accretive, stable and predictable income stream while offering potential upside through variable rental arrangements tied to the hotels’ performance.
These acquisitions come at a time when Malaysia’s tourism and hospitality industry is rebounding strongly. International tourist arrivals in 2024 are projected to reach 27.3 million, a significant increase from 20.1 million in 2023.
The proposals are subject to approval by Pavilion REIT’s unitholders and Bursa Malaysia Securities Bhd. Upon completion, the hotels will represent 5.5% of Pavilion REIT’s enlarged total assets under management, further solidifying its position as a dominant player in Malaysia’s real estate investment trust industry.
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