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Friday, May 2, 2008

IGB in no hurry to sell Renaissance

PROPERTY developer and hotel owner IGB Corp Bhd is in no hurry to sell the five-star Renaissance Kuala Lumpur, its executive director Tan Boon Lee said.

IGB made public its intention to sell the 910-room property last year.

IGB executive director Tan Boon Lee talks to Business Times about plans to open four more Cititel Express.

"The Renaissance is on the market. It is not one of the strategic properties that we want to grow. Renaissance is a non-core asset, so we will look to dispose of it," Tan told Business Times in an interview.

"Every year, the value of the property is going up. It's a matter of time. We are in no hurry to sell," Tan said.

IGB hopes to make RM800 million from the sale of the 12-year-old property. The hotel is held equally by IGB and Hong Kong's New World Development.

"The hotel is yielding, but not as high as (our) Cititel hotels. We want to unlock the value of the property and put (the investment) into new Cititel hotels," Tan said.

Both Cititel and Cititel Express cater for the mid-range market segment. The hotels, which typically have 400 rooms and 250 rooms respectively, bring in gross operating profit (GOP) of 60 per cent.

GOP is gross revenue (from rooms, food and beverage, laundry or business centre) minus cost of operations (wages, electricity and amenities).

When asked why it has been difficult to make a deal, Tan said: "There is an eight-year management agreement in place. A lot of buyers these days want to put in their own brand or want to self-manage, (but) we (at RM800 million) are selling below the replacement value."

The net book value of the property as at December 2007 was RM647 million, while its market value quoted by an analyst was RM654 million.

Last October, the hotel's general manager said that the hotel would undergo a US$16.7 million (about RM53 million) facelift this year and next.

The renovation and refurbishment, to be carried out over two phases, would involve the 510-room East Wing, followed by the 400-room West Wing.

The hotel, opened in June 1996, comprises two towers resting on a podium housing a convention centre which can accommodate 1,000 people.

Initially, the property was divided into the four-star New World and the five-star Renaissance hotels.

In 2004, in line with its global strategy to streamline hotel names, the New World brand was dropped and the popular Renaissance adopted.

Renaissance is part of the Marriott International Group hotel chain.

By New Straits Times (by Vasantha Ganesan)

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