Wednesday, September 12, 2012

M&L Hospitality Trust

M&L Hospitality Trust is a real estate investment trust that was originally intended to list on SGX in 2012 but deferred its IPO listing as investor demand was less than expected.  Given the recent listing of Far East Hospitality Trust and Acscendas Hospitality Trust, will M&L Hospitality Trust list in the recent future? Only time will tell.  In the mean time, let's look at some background material on this trust.

It was founded by the Kum family which is one of the wealthiest family in Singapore. Michael Kum planned to list the trust on the main board of Singapore exchange which would in return raise its profits by $360 million. This forecast is based on the expected earnings. The trust has several hotel assets in Japan, Singapore and Australia. The Trust goal is to invest on income-producing Real estate in hospitality or else in general real estate related assets which are in the Asia Pacific region. The current issue managers, book runners, joint global coordinators and underwriters of the Trust are JP Morgan, DBS Group and UBS.

Current Scenario: M&L Hospitality trust has six major properties. They are two Ibis hotels in Singapore, a Travelodge in Melbourne, a Four Points by Sheraton, a Swissotel in Sydney, and a Hilton in Nagoya. Grandline International which is owned by the Kum family is the sponsor of the Trust. The trust contributes a lot to the economy of Singapore with about 68% of its 2,509 available rooms in the upper-end of the market and mid-market segments. The management now believes that reduction in room rates or occupancies would not affect their business as they have rooms enough to subside this issue.  For the listing plans in early 2012, the trust was expected to have a leverage ratio of 29.3%, which leaves a remaining borrow capacity of S$70 million for future acquisitions.

Conclusion: The fact is that there are not many hotel real estate trusts available in Asia due to which the investors would be a bit skeptical to put their money in. However, they should try to understand the dynamics of this industry. Also there is another fact which could be a danger to this trust is that  M&L hospitality trust has cross-border assets which would not be of good interests to many investors who might be afraid of foreign currency risks.

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