IGB Corp in talks to sell Renaissance KL

ESTABLISHED property company and hotelier, IGB Corp Bhd, is believed to be in talks to dispose of its 20-year-old, 910-room Renaissance Kuala Lumpur hotel to a little-known Singapore company for just below RM800 million. Should the deal materialise, it would create history as the country’s most expensive hotel transaction.

Sources tell The Edge that IGB is negotiating with a company called Canali Logistics Pte Ltd to sell Renaissance KL for between RM750 million and RM770 million. This hotel asset, the largest in Kuala Lumpur in terms of room inventory, is located in a prime location in the capital at the corner of Jalan Sultan Ismail and Jalan Ampang.

The Edge was unable to reach IGB Corp executive director Tan Boon Lee for comment.

Not much is known about the prospective purchaser, Canali Logistics. But the name does appear in a circular to shareholders issued in September 2014 by the Singapore Exchange-listed Hotel Grand Central Ltd. The document was pertaining to Canali Logistics’ planned purchase of Hotel Grand Chancellor in Belilios Road, Singapore, for S$248 million from Hotel Grand Central. The document describes the buyer as a company incorporated in the republic on Aug 27, 2009, with its principal businesses being shipping and logistics and general wholesale trade.

Interestingly, news of the negotiations to sell Renaissance KL comes shortly after another hotel sale by IGB. The Edge has learnt that IGB just last week concluded the sale of Cititel Express, in Jalan Tuanku Abdul Rahman, Kuala Lumpur, for RM37 million. Sources say the purchaser is The Royal Group from Singapore. The Royal Group last year purchased the DoubleTree by Hilton at The Intermark, Kuala Lumpur.

IGB’s businesses are property development, hotel operations, office building and retail management. The group also derives income from education and via its stake in IGB Real Estate Investment Trust which operates Mid Valley Megamall and The Gardens Mall.

It is worth noting that IGB’s 2015 annual report lists Renaissance KL, which sits on a freehold parcel, as the group’s top property by value. The net book value of the hotel as at Dec 31, 2015, was RM646.12 million. The market value will, however, be higher.

A source points out that this deal is likely to be sealed at RM765 million, or roughly RM840,000 per room — a price industry experts say is good for both the seller and the buyer. Moreover, just a year ago, the much newer DoubleTree by Hilton in Jalan Ampang was sold for about RM720,000 per room.

Renaissance KL has been one of those properties that have “always been on the market”, industry observers say. But they are questioning why IGB has chosen to sell the hotel now, and not, say, a year ago when property market sentiment was better. In fact, real estate agents say IGB was previously offered a higher price for the hotel. “They have waited so many years, so, why not wait for a few more to get a better price?” one asks.

Sources suggest that IGB’s decision to sell may have been prompted by the need for the management company to maintain the hotel as a Renaissance brand. The hotel is, in fact, now undergoing a RM50 million renovation, but more may be required. Another reason IGB may be divesting the hotel could be that the competition is getting keener as newer hotels and brands enter the market. Moreover, there has been a surge in serviced apartments in the city centre, which are being rented out for short-term accommodation.

The sale also appears timely as The Edge understands that the management contract with Marriott International Inc, which owns and operates the Renaissance brand, will come to an end this December. It has been rumoured that the new owner may consider a new hotel management firm, and one name that has emerged in the market is Hilton Hotels & Resorts.

IGB, in its annual report for the financial year ended Dec 31, 2015, says its hotel business performed below expectations and occupancy of its local hotels was impacted by the Goods and Services Tax, the prolonged haze and the cautious economic outlook. The group posted a net profit of RM216.9 million on the back of RM1.17 billion in revenue. Turnover contribution from the hotel division was RM365.6 million.

The group opened four hotels in 2015 — The Tank Stream Sydney, Australia; Cititel Express Penang; The Wembley Penang; and Cititel Express Ipoh.

IGB’s other hotels in Malaysia are Cititel Express, Kota Kinabalu; Cititel Mid Valley, Kuala Lumpur; Micasa All Suites Hotel; The Boulevard Kuala Lumpur; and St Giles, The Gardens in Kuala Lumpur.

The group also operates seven hotels abroad, including Micasa Hotel Apartments in Yangon, Myanmar; St Giles Heathrow and St Giles in London, the UK; St Giles Makati in Manila, the Philippines; The Court and The Tuscany in New York, the US; and The Tank Stream in Sydney.

The Renaissance hotel is owned by Great Union Properties Sdn Bhd, which in turn is owned by IGB Corp (70.48%) and Pacific Land Bhd (29.52%). Pacific Land, meanwhile, is wholly owned by IGB Corp.

Prior to 2012, IGB only owned 50% of the hotel. The remaining stake was held by Stapleton Developments Ltd and Chong Kin Weng. Stapleton is a unit of the Hong Kong-listed New World Development Co Ltd while Chong was a partner in a legal firm in Malaysia. IGB bought their 50% for RM277.5 million. At that time (late 2011), IGB said the valuation of the hotel was RM710 million, net of bank borrowings and shareholders loan.

Prior to the entire hotel being named Renaissance, it was divided into two: the four-star New World block and the five-star Renaissance block. In 2004, in line with its global strategy to streamline hotel names, the New World name was dropped and the popular Renaissance name was adopted.

This article first appeared in The Edge Malaysia on May 23, 2016. Subscribe here for your personal copy.

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