KUALA LUMPUR (April 24): Property developer Plenitude Bhd is investing  a hotel in South Korea for RM83.3 million via its indirect Singaporean subsidiary, Bizcentre Capital Pte Ltd as part of its diversification into the hospitality industry. 

Bizcentre and KPH Top Pte Ltd entered into a conditional beneficiary sale and purchase agreement (BCA) today with Military Mutual Aid Association (MMAA) to acquire 85% and 15% respectively of Korea Investment Private Placement Business Hotel REIT. The REIT had invested into a 14-storey hotel in Seoul, Korea. 

Bizcentre and KPH will form a limited liability company, Pinetree Hotel LLC, and a conditional JV agreement will be formed to govern their relationships, Plenitude said in a stock exchange filing yesterday. The property counter is linked to Tun Daim Zainuddin, chairperson of the Council of Eminent Person.

The hotel is a 224 room 14-storey midscale hotel constructed on two freehold parcels of land in Seoul, South Korea, with an aggregate land area of 1,079 square metres and a hotel gross floor area of 9,974 square metres. It was completed in 2015 and is currently operating under the name “Holiday Inn Express Euljiro”.

The purchase consideration of KRW27 billion (about RM98 million) under the BCA agreement is exclusive of the REIT’s settlement of an existing loan of KRW29 billion, Plenitude said.

“The aggregate of the purchase consideration and a new loan to be taken by the REIT from a Korean bank to refinance the existing loan will be KRW59 billion (about RM212.2 million),” the filing added.

The refinancing loan will be secured, inter alia, by the hotel, an assignment of lease agreement and insurance in respect of the hotel, and by proportionate corporate guarantees from the Plenitude and KPH’s parent company Datapulse Tech Ltd.

“The proposed investment shall be financed by way of combination of internally generated funds and bank borrowings,” Plenitude said. Its indirect ownership of the BCA and of the shareholding will be an effective 60% following the completion of the agreements.

The filing noted that the market value of the hotel was determined by the independent valuer at KRW61.8 billion (about RM222 million). 

Although the proposed investment is not expected to materially impact Plenitude’s earnings for its financial year ending June 30, 2019, the group expects positive future contributions from the investment.

“Barring any unforseen circumstances, the Proposed Investment is expected to be completed by June 21, 2019,” it said.

As of yerterday's closing, Plenitude’s share price was down 1 sen or 0.66% at RM1.50, leaving the group with a market capitalisation of RM572.3 million.