Mandarin Oriental International Ltd REDEVELOPMENT OF THE EXCELSIOR, HONG KONG (3410D)
October 09 2018 - 1:00AM
UK Regulatory
TIDMMDO
RNS Number : 3410D
Mandarin Oriental International Ltd
09 October 2018
To: Business Editor For immediate release
This announcement contains Inside Information.
REDEVELOPMENT OF THE EXCELSIOR, HONG KONG
9th October 2018 - Mandarin Oriental International Limited today
announces that The Excelsior, Hong Kong will close on 31st March
2019 in order for Mandarin Oriental Hotel Group (the 'Group') to
redevelop the site. The hotel is situated on a prime commercial
waterfront site in the Causeway Bay district of Hong Kong where the
Group has approval for the development of a mixed-use commercial
building with a Gross Floor Area of some 63,500 sqm.
The decision to close the hotel, which opened in 1973, comes
after having completed a detailed review of the long-term strategic
options for the site, announced by the Group in June 2017. The
decision reflects strong commercial property values in Hong Kong
and the expected higher yield associated with a commercial building
at a time when the hotel requires significant investment.
The wholly-owned Excelsior hotel is a material contributor to
Group earnings and cash flows and houses the Group's corporate
office. Adjusting the Group's reported results for 2016 and 2017,
and the first half of 2018 to exclude the contribution of The
Excelsior, and include an estimated incremental head office rent
cost, generates the following pro forma results([1]) :
2016 2016 2017 2017 H1 2018 H1 2018
Reported Pro Forma Reported Pro Forma Reported Pro Forma
US$m (Audited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Unaudited)
Revenue* 1,323.7 1,245.2 1,380.4 1,298.2 700.2 660.0
----------- ------------- ----------- ------------- ------------- -------------
Underlying
EBITDA 158.2 126.2 157.9 122.9 79.6 63.6
----------- ------------- ----------- ------------- ------------- -------------
Underlying
Profit 57.3 34.4 54.9 29.8 22.3 11.4
----------- ------------- ----------- ------------- ------------- -------------
Net impact
to cash (19.3) (21.6) (15.1)
----------- ------------- ----------- ------------- ------------- -------------
* Total revenue from owned & managed hotels
Upon closure of the hotel, the Group will be required to
recognise a one-time accounting valuation gain associated with
reclassifying the asset as a commercial investment property on its
balance sheet. Based on current assumptions and market information,
the Group estimates that this reclassification of the asset to
reflect its market value as a site for commercial redevelopment
would lead to an accounting gain of some US$2.9 billion (net of
closure costs).
The redevelopment is expected to take up to six years to
complete and cost some US$650 million. The redevelopment will be
funded through an appropriate mix of external debt and cash
reserves. A decision on financing will be made in due course, with
the majority of costs not expected to be incurred until 2023. The
Excelsior site is mortgage free. Approximately US$15 million of
costs related to the redevelopment are estimated to be incurred in
2019, which the Group will fund from cash reserves. At 30th June
2018, the Group had net debt of US$325 million, with gearing of 6%
(measured as a percentage of net debt against adjusted
shareholders' funds([2]) ).
While Group earnings will be lower during the redevelopment
period due to lost earnings from The Excelsior, the Group's results
will soon benefit from the re-opening of its hotels in London and
Madrid which are currently under renovation. Once completed, the
new building is expected to generate significantly higher, and more
stable, cash flows with less ongoing capital expenditure compared
to a renovated hotel. The redevelopment itself is not expected to
adversely impact the recent level of dividends paid.
James Riley, Group Chief Executive of Mandarin Oriental Hotel
Group, said "The Excelsior has always been an important and
much-loved hotel in the Group's portfolio. We will ensure there are
plenty of opportunities over the next few months for local and
international guests to visit the property and celebrate 45 years
of memories. The hotel has enjoyed a long and successful history,
not least because of the extraordinary service provided by our
colleagues on property through the years. The Group is committed to
ensuring that all Excelsior colleagues are treated fairly, with
many to be offered positions in other Mandarin Oriental
properties."
Mandarin Oriental currently operates 31 hotels and seven
residences in 21 countries and territories. Mandarin Oriental
International Limited is incorporated in Bermuda and has a standard
listing on the London Stock Exchange, with secondary listings in
Bermuda and Singapore. It is a member of the Jardine Matheson
Group.
- end -
For further information, please contact:
Mandarin Oriental Hotel Group International Limited
Jill Kluge (44) 20 7908 7831
Sally de Souza (852) 2895 9167
Brunswick Group Limited
Karin Wong (852) 3512 5077
Elizabeth Liang (852) 3512 5058
Tom Burns (44) 20 7396 5308
This and other Group announcements can be accessed through the
internet at 'www.mandarinoriental.com'.
[1] The Pro Forma numbers presented have not been audited and
are shown for illustrative purposes only.
[2] The Group's freehold and leasehold interests are carried in
the consolidated balance sheet at amortised cost. The adjusted
shareholders' funds for 30th June 2018 were adjusted to include the
market value of the Group's freehold and leasehold interests
appraised at 31st December 2017. The market value assumed for The
Excelsior Hotel was that of a site for commercial redevelopment and
not that for an operating hotel.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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