CDL makes its move on NY hotel market.

CDL Hotels International has already purchased two Manhattan hotels and is now in the due diligence phase for number three: the trophy Plaza Hotel.

The timing of those purchases was not coincidental admits Simon Cheong, regional real estate head for C.S. First Boston Asia, who is advising CDL on their purchases, but was rather a strategic move to keep from creating a higher priced market.

"When we were looking at the Millennium, the Plaza was available. When we looked at the Macklowe, the Plaza was still available. But we didn't want to distort the market," explains Cheong. "Otherwise everybody says, `If you buy The Plaza you are shooting yourself in the foot.' So we figured this animal would wait for us. So we did our little deals first.

Both hotels were purchased for less than their replacement costs from lenders - the 561-room Millenniumat $75 million and the 629-room Macklowe for around $103 million.

Now, Cheong grins, "if someone would step up to the podium and buy The Plaza, my Macklowe is worth more."

CDL is currently in the process of conducting due diligence on The Plaza and if all goes well, expects to close before the Summer. The price is around $325 million.

"If you look at the price, and [that of] the Macklowe and Millennium, the price is high, but it is a trophy,' said Cheong.

In coming to a price per room, he said he looks for something very consistent: yield.

The price is a yield on the bottom line. Cheap is no use," he explained. In the CDL case, they look for 10 percent yield. "So now the Plaza qualifies under that yield.'

In Dallas and Houston, Cheong was also looking at hotels. While the prices were about 20 percent of the construction cost, the hotels did not have half the yield that the hotels in New York were making. "I can pay $30,000 a room in Dallas, but it doesn't give you the same yield as the Macklowe or Millennium," he noted.

Cheong said they are still in the process of structuring the Plaza deal. "We have an intention to buy 100 percent of the value of this hotel," he insisted. As far as we are concerned, we are waiting for our tax consultant and legal consultants to advise us. We are not out there to bid them [Citicorp] out, we are not in the charity business."

While Citicorp wants to divest of the Plaza, sources close to the deal have stated they intend to remain in for a percentage, and also to avoid certain tax consequences. Cheong categorizes Citicorp as "a good friend" that has done deals all over the world for CDL. In Singapore, home of CDL, they are the bankers to CDL. "They are very close bankers and have done lots of deals for CDL," said Cheong.

But CDL is not intending to go this deal alone. "We have arranged for Saudi Prince Al-Waleed [Bin Palal Bin Abdul Aziz], the nephew of King Fahad [Bin Abdul Aziz] to become our partner." The Saudi Prince bought into and rescued Euro Disney. He bought 25 percent of the Four Seasons hotel chain, and 50 percent of the trophy Fairmont Hotel on Nob Hill in San Francisco.

They are 50/50 partners, but CDL's chairman, Kwek Leng Beng, is leading the deal, Cheong added.

And what happeas to Donald J. Trump, the current owner of 51 percent of The Plaza, who operates the hotel on a daily basis?

It is the intention to include Donald Trump as one of the partners," said Cheong. "He is a very key player. He has so much expertise and he has run it very well. We have a lot of respect as to his ability. He will most likely stay on as a partner. We met several times. He is a friend. We have begun to like him. We have a good rapport and he plays a big roll in the development of The Plaza. Trump is the Plaza."

Cheong alluded to other possibilities down the road in terms of a relationship with Trump, but says there bas been no discussion of Trump managing their other New York hotels.

"He wants to stay in the glitz," laughed Cheong.

CDL, a Singapore-based company, is listed on the Hong Kong stock exchange. The initials stand for City Developments Limited. This is one of the largest real estate conglomerates in Singapore. Cheong said they own the largest private land bank aside from the govemment of Singapore.

The company is still owned and controlled by the Kwek family of Singapore. It was started by the late patriarch, Kwek Hong Png. He came to Singapore from the Fuiian province in South China. Beginning at the age of 16, he built up one of the largest conglomerates in Southeast Asia, basically from the hardware trading business. In other words, from trading and selling pots and pans.

This is a typical story of a family business," said Cheong. Just like those immigrants who came over from Europe to the United States.

The company is now run by his eldest son, Kwek Leng Beng, who is the current chairman of the group.

CDL Hotels Intemational was formed as a subsidiary about five years ago to consolidate the hotel holdings and end a confusion of identity in the markets. It is controlled by CDL, but separately listed on the Hong Kong stock exchange.

The Singapore CDL is really a real estate company, explained Cheong. "They buy land, build residential units and sell, and are also one of the largest owners of office buildings in Singapore."

CDL Hotels International owns 33 hotels. In the last two years they have accumulated prominent hotels in London and New York. In London they own the 600-room Gloucester, Bailey's and tbe Chelsea, next to Haffods department store.

So in last two years they decided it is a window of opportunity to spread their wings globally," said Cheong.

They have not invested in Tokyo, since real estate prices have not yet come down to a comfortable level.

In Kuala Lumpur they own the Regent, in the Four Seasons group; the 1,000-room Grand Hyatt in Taipei; the Nikkei in Hong Kong, and opened a new hotel in Manila two months ago. They are also looking to put a flag in Jakarta, as well.

They passed on the UN Plaza and decided to buy the Macklowe instead. "The [UN] is niore reliant on intemational business, "said Cheong. "If they decide to ship the UN to Geneva, that's the end of my investment."