Financial Times

Asian Hotels plans Rs. 1.5 bln Crescat expansion
Asian Hotels has revived the original vision for its Crescat City property in Kollupitiya and plans to build the second residential tower of 160 apartments at a cost of Rs 1.5 billion.

The construction is to be completed by the end of 2005 and the management hopes to finance the project through pre-sales of apartments. It plans to begin pre-selling by the beginning of 2004, stock market analysts SC Research said.

The original plans called for the property to have four towers of apartments. It plans to add new facilities to Crescat City such as a new 16,000 square foot spa and gym complex, which will be managed by the Singaporean-based company the "Banyan Tree". This new operation will be opened by the first quarter of 2004.

The management also plans to improve the food court, identified as the biggest crowd puller, with new stalls, including a new Italian restaurant with full dining facilities called "Toscas" will open by the end of 2003.

Asian Hotels is in an ideal position to take advantage of the boom in tourism as it controls over 40 percent of the five-star hotel rooms in Colombo, SC Research said.
The company is focusing on its core business as a property developer and manager and hopes to benefit from synergies and economies of scale through greater integration of its operations.

The group owns Crescat City which consists of the hotel Crescat Plaza, the condominium building Crescat Residencies, which consists of 152 apartments, and the shopping mall, the Crescat Boulevard, all set on 12 acres of Colombo's prime property. It is the majority shareholder of Trans Asia Hotel in which it holds a 43 percent stake.

The group's strategy is to become an "integrated property developer and manager" so that each property can complement the other by cross providing services and products to customers, SC Research said.

Asian Hotels has announced a merger with its wholly owned subsidiary Crescat Developments Ltd, to enable the group to take advantage of recent tax reforms that will give the new entity, Crescat Developments, the benefit of a 12-year tax holiday.
SC Research said the boom in the property market has improved the profitability of Crescat Residencies.

Prior to the change in government in December 2001, when the economy was languishing, the company was struggling to sell its apartments at attractive prices.
"The dramatic turnaround in the political situation in 2002 had a direct impact on the property market," it said. "Crescat Developments sold 28 apartments in FY 2/03. This was the main cause for the reversal in the fortunes of the group."

Revenue from apartment sales was up 65 percent to Rs. 501 million while group revenue was up 38 percent to Rs. 1.5 billion compared to the previous year. Net profit for FY 2/03 was Rs. 133 million.

The company is now involved in negotiations with international hotel chains such as Marriott, Hyatt and Starwood to take over the management of the Colombo Plaza hotel.

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