Kingdom Hotel Investments: partial sale of Fairmont shareholding

The sale of US$12.6 million to OMERS, the Ontario Municipal Employee Retirement System, a leading Canadian pension fund management company. This transaction is further to OMERS' acquired stake in Fairmont Raffles Holdings following their recent acquisition of seven Fairmont managed hotels in Canada.

Proceeds from the sale will be used for further expansion and development of the KHI portfolio.

KHI originally purchased shares in Fairmont Hotels & Resorts Inc. in October 2004 at a cost of US$27.98 per share (total consideration of US$9.1 million). In April 2006, KHI contributed its shares in Fairmont Hotels & Resorts Inc. to a new joint venture set up between Kingdom Hotels International and Colony Capital that acquired Fairmont and combined it with Raffles Hotels & Resorts, in exchange for which KHI obtained an approximate shareholding of 0.87% in Fairmont Raffles Holdings. At that time KHI's shares were re-valued in aggregate at US$14.7 million (US$45 per share). Further, the Chief Executive Officer of KHI, Sarmad Zok, was appointed as a director on the Board of Fairmont Raffles Holdings.

The partial disposal of KHI's share in Fairmont Raffles Holdings to OMERS consists of the disposal of 0.5% of Fairmont Raffles Holdings shares for a consideration of US$12.6 million (i.e. a net profit of US$7.4 million). This pricing is equivalent to US$67.7 per share on an adjusted basis or a 242% multiple on KHI's initial investment cost in Fairmont two years ago.

KHI will retain a 0.37 % stake in Fairmont Raffles Holdings and its representation on the Board. The share sale represents a Realised Return of 138% of KHI's invested capital in Fairmont and an Equity IRR of 56.1 %.

Other shareholders in Fairmont Raffles Holdings have also agreed to sell part of their shareholding to OMERS on similar terms to the KHI disposal. Collectively, KHI and other shareholders in Fairmont Raffles Holdings will have sold approximately 2.5% of their shares.

Sarmad Zok, Chief Executive Officer of KHI said:

'This transaction not only permits KHI to continue to maintain our strong relationship with Fairmont and retain a board seat in the Company, but also allows us to realise an opportunity to monetise our investment at a favourable price and at attractive returns on our initial investment. The cash proceeds will allow us to continue to evaluate and pursue hotel and property developments in emerging markets to further develop our portfolio.'