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16 Apr, 2007

Kingdom Hotels Buys 6th Hotel in Asia

Kingdom Hotel Investments (KHI), the company chaired by Saudi investor Prince Alwaleed bin Talal, has bought a 100% stake in a hotel in Kunshan, China, the sixth hotel it has picked up in the past 12 months as part of a vigorous Asian expansion spree.

According to a KHI announcement, the purchase of the 387-room property for approximately US$58 million is KHI’s first acquisition in China. The name of the hotel was not announced, but is believed to be the Traders Hotel, a part of the Shangri-La Group.

Opened in October 2005, the property was long posted for sale on the Jones Lang Lasalle website and attracted KHI because of Kunshan’s location as a fast-growing economic and industrial hub in the Pearl River Delta region near Shanghai, which will bring with it a stream of both business and leisure travellers.

The purchase raises KHI’s global hotel ownership interests to 34 properties in 17 countries including 20 operational hotels and resorts and 14 hotels and resorts currently under construction.

KHI has embarked upon an expansion spree in Asia as it seeks to diversify and balance its portfolio of assets. In the last 12 months, it has expanded into Thailand, Vietnam, Malaysia and the Philippines.

Listed on the Dubai and London stock exchanges, the Dubai-based hotel and resort acquisition and development company focuses on first-class and luxury market segments in markets such as the Middle East, Asia, Africa, emerging markets and Europe.

It has “strategic partnerships” and ownership links with Four Seasons Hotels and Resorts, Fairmont Hotels and Resorts and Mövenpick Hotels and Resorts.

By extension, the company also gains interests in sub-brands. For example, Fairmont Raffles Hotels International, headquartered in Toronto, owns and manages 120 hotels in 25 countries under four brands, Fairmont Hotels & Resorts, Raffles Hotels & Resorts, Swissôtel Hotels & Resorts and Delta Hotels as well as vacation ownership properties managed by Fairmont Heritage Place.

The desire to expand into the relatively more stable and high-growth markets of Asia has been motivated by the somewhat unpredictable nature of the Middle East market where KHI’s interests were affected last year by the September 2006 war in the Lebanon, which also had a corresponding impact in Syria, where KHI owns the Four Seasons Hotel in Damascus.

According to a report presented to the Dubai stock market, “Softer than expected market conditions have also affected the trading performance of KHI’s operating assets in the Red Sea and Mauritius. Additionally, sales of ancillary real estate assets in the second half of 2006 were slower than market expectations, mostly driven by timing.”

As a result of these factors, earnings for 2006 were “lower than previously anticipated”, KHI said.

Now, Asia is a keen target of the company’s expansion plans.

The first investments were made in 2006 in Phuket and Phang-nga. These included the 100% purchase of the former Karon Beach Hotel in Phuket for $98.5 million, which was converted to Mövenpick Karon Beach Resort, and the purchase of land in Phang Nga on which KHI plans to develop a first class Resort and Residences at a cost of US$115 million.

This year, three more ASEAN countries have attracted KHI’s interest.

Last January, KHI acquired a beach site to develop a luxury Raffles resort and residences for sale in Da Nang, Vietnam. To be built for an estimated US$65 million, the resort will be KHI’s first hotel in Vietnam. It is planned to open in 2011 with 150 hotel suites and 15 private residential villas.

Da Nang was targeted because of its proximity to three UNESCO World Heritage sites, popularity on the Vietnam tourist circuit and direct air-links to Singapore, Hong Kong, Bangkok and other key regional markets.

In March, KHI acquired the Four Seasons Hotel in Langkawi for US$114.2 million with 91 suites. It plans to expand the resort by adding an additional 20 keys and developing 14 luxury villas that will be sold as Four Seasons Residences. The estimated cost is US$35 million with a projected completion in Q4 2008.

The latest acquisition was also last March with the purchase of 7,377 m² of prime freehold land on Makati Avenue in Manila for the development of two hotels and residences in Manila’s central business district. The acquisition was made through an economic joint venture which is 80% owned by KHI and 20% by Ayala Land, Inc. The total project cost is an estimated US$152 million.

The development will comprise a 300-room Fairmont Hotel, a 30-suite Raffles hotel and 189 Raffles-branded private residences. These residences will be sold and placed back into a rental pool programme.

In early April, Prince Alwaleed visited Jakarta and Bali, and also met with Indonesian President Dr. Susilo Bambang Yudhoyono to discuss further investment prospects. Alwaleed’s investments in Indonesia include Citigroup, three Four Seasons hotels and two Raffles hotels.

With the interest generated in Bali now that Qatar Airways has become the first Middle East airline to start flying there, the prospects of additional investments in that resort island are certain.

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