TA to purchase A$160 million hotel

KUALA LUMPUR: TA Enterprise Bhd (TAE), in a bid to boost its interests in the hospitality industry overseas, entered into an agreement to purchase a A$160 million hotel in Melbourne, Australia.

In an announcement to Bursa Malaysia yesterday, TA Enterprise said The Westin Melbourne is a five-star hotel located in the central business district and will cost the universal broker RM389.12 million (at the current exchange rate of RM2.432 to A$1).

It added that it would be purchasing the property from RPHT Pty Ltd and the business from RPHT Operations Pty Ltd through its newly established wholly owned subsidiaries TA Covernant Ltd and Ascents Hotel Pty Ltd.

The value of the property was set at A$137.41 million according to valuer Jones Lang LaSalle, while the business brought in A$13.36 million for the 12-month period ended July 31, 2008.

RPHT is held by three shareholders namely Westin Asia Pacific Management Pte Ltd, HLTTA Pty Ltd and United Super Pty Ltd, while RPHT Operations which owns the business is held by five institutional funds.

According to the filing, TA Covenant would be the property owner while Ascents Hotel would own the business. A trust, Ascents Trust, has also been registered with the Australian government in conjunction with this transaction.

The Westin Melbourne has shown consistent earnings growth since 2004, as well as in its occupancy rates, according to the announcement. The original cost of investment in the hotel was A$108 million and development commenced in 1997.

TAE has already committed A$16 million in deposits towards the purchase. It added that although shareholder approval was not required for the purchase, the transaction was still contingent on regulatory approval from Bank Negara Malaysia, as well as other interests.

TAE said it planned to fund the acquisition through “internally generated funds and borrowings”. The filing further shows that TAE would be taking out A$60 million (RM145.92 million) based on an exchange of RM2.432 per A$1) loan to fund the purchase.

The external loan would effectively increase its borrowings to RM283 million from RM137.1 million. TAE’s gearing ratio also rises from 0.06 to 0.13 times.

TAE is no stranger to the hospitality business in Australia as it currently owns the Radisson Hotel in Sydney, Australia. TAE expects the purchase to be completed by early 2010.

By The EDGE Malaysia (by Fong Min Hun)