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10 Sep, 2007

Kingdom Hotel Investments Targets Asia for Growth

The Asian investment diversification policy of Saudi-owned Kingdom Hotel Investments (KHI) has contributed substantially to the company’s first half earnings, and is expected to grow in the years ahead

Nearly all the hotel expansion undertaken by KHI, owned by Prince Alwaleed Bin Talal, in the past year has been in Asia, a region which generated 21% of the group’s total consolidated hotel revenues in Jan-June 2007, up from a fractional 1% in the same period of 2006, the company reported.

Total revenues increased 74% to US$74.3 million in the first half of 2007 primarily as a result of 6 operating hotel acquisitions since the start of 2006, three of which were in Asia, and ancillary real estate leases and revenue from sales.

The company’s sole Thai-owned property, the 339-room Mövenpick Resort & Spa, at Karon Beach, grew its revenue per available room from US$ 41.9 in the first half of 2006 to US$ 83.6 in the first half of 2007, a growth of 99%. Total revenues have grown from US$ 3.99 million to US$ 7.51 in the same period.

KHI sold 13 apartments in the property for a profit of US$1.3 million. The hotel was bought 100% in May 2006 at a cost of US$ 71.5 million.

Another Thai property, the 120-room and 25-villa Raffles Phang Nga Resort, in which KHI has an 80% interest, is under development. The project cost is US$ 115 million.

Incorporated in the Cayman Islands in May 2000, KHI is quoted on the Dubai International Financial Exchange. It has either controlling or significant investments in over 32 hotel investments in 20 countries, with a total of about 7,000 rooms. About one-third (11 hotels and 2,000 rooms) are under development.

The company reported that its “strong results” for the six months to 30 June, 2007 “were underpinned by the ongoing diversification of KHI’s hotel portfolio into new territories like Asia and the strength of the performance of existing hotels.

Total revenue increased 74% to $74.3 million as the company continued to execute its strategy of diversifying income streams and developing its ancillary real estate business.

Hotel revenue rose by 63% to $66.5 million, while hotel EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), rose by 103% to $19.2 million driven by acquisitions, comparable hotel performance and build up of recently opened hotels.

All its new hotel acquisitions in the first half of 2007 were in Asia:

<> Raffles Da Nang Resort and Residences, Da Nang (Vietnam):80% equity interest, in a project of 150 rooms and ancillary real estate of 15 luxury villas for sale

<> Fairmont Makati Hotel and Raffles Suites, Makati City, Manila (Philippines): 80% equity interest, in a project expected to include a 300-room Fairmont Hotel, a 30-suite Raffles hotel and ancillary real estate for sale of 240 Raffles-branded residences (negotiations with the management company is underway)

<> Four Seasons Resort, Langkawi (Malaysia): 90% equity interest, 91 rooms for $114.2 million. An expansion plan includes the addition of 20 rooms and the selling of 24 luxury residential villas.

<> Swissotel Kunshan, Kunshan (China): 100% equity interest, 387 rooms for $58 million.

Since 30 June 2007, KHI has invested further in more Asian hotels (not covered in the financial report for the first half):

<> Raffles Hotel Le Royal in Phnom Penh (170 rooms) and the Raffles Grand Hotel d’Angkor in Siem Reap, Cambodia (125 rooms) for $36 million.

<> The Four Seasons Jakarta, (365 rooms) for a total of $48 million, with the transaction expected to close this month.

o Raffles Praslin Island, Seychelles, a new development (90 villas and 17 residential villas for sale).

The company said that it “will continue to execute its capital deployment strategy by the leveraging of its balance sheet with an ongoing focus on diversification and operating acquisitions, primarily in emerging Asian market, as well as execution on its new developments.”

It also plans to continue execution of hotel asset management plans and integration of the newly acquired hotels in China, Malaysia, Cambodia and Indonesia, as well as the sale of apartments in Phuket and villa pre-sales at the Four Seasons Mauritius.

The leveraging of recent acquisitions and refinancing of existing operations is expected to generate new debt of more than $100 million, the company said.

Chief Executive Officer Sarmad Zok was quoted as saying: “Since the beginning of 2006, KHI has acquired interests in approximately $2 billion worth of hotels in high growth emerging markets. The 19 hotels acquired since 2006 represented a strong delivery on our acquisition objectives.

“We are now approaching a new phase in our development as we focus on integrating the diversified assets in our portfolio; we are on track to continue deploying capital in key areas of under penetrated growth or where we have invested.”

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