Ascott Residence Trust grows longer-stay portfolio with JPY10.4bn deal

Ascott Residence Trust (ART) is expanding its longer-stay lodging portfolio with new investment in Japan.

ART will acquire four rental housing properties and its first student accommodation property in Japan for JPY 10.4 billion (S$125.0 million).

The yield-accretive acquisitions are set to increase ART’s pro forma FY 2021 Distribution per Stapled Security by approximately 1.7%. The average NOI yield is expected to be about 4.0%.

The five properties will be acquired on a turnkey basis from two different sellers on a willing buyer and willing seller basis. The transactions are expected to be completed between 1Q 2022 and 2Q 2023. 

With these latest acquisitions, ART has invested about S$905 million in longer-stay properties since January 2021. The acquisitions of the five freehold rental housing and student accommodation properties will increase ART’s longer-stay properties to 17% of its total portfolio value.

ART aid it is on track to meet its medium-term target of 25-30% for its longer-stay properties, strengthening the resilience of ART’s portfolio.

Three of the rental housing properties are located in Central Osaka, the economic and logistics centre of Japan while one rental housing property is located in Fukuoka, one of the fastest growing cities in the country.

The student accommodation property in Osaka serves the main campus of Kindai University (KU), which is just a two-minute walk away. KU has over 30,000 undergraduate students.

Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “ART continues to build up our longer-stay portfolio to boost income stability. Post-acquisition, on a pro forma basis, ART’s longer-stay properties are expected to contribute 17% to gross profit, up from 15% in FY 2021. As the five properties will be acquired on a turnkey basis, there is no development risk. Minimal down payment is required, and majority of the payment will be made upon completion of the transactions. We remain committed to delivering sustainable, long-term value to our Stapled Securityholders.”

“The addition of four more rental housing properties will boost the overall resilience of our portfolio. Leases for the four properties are about two years in length, providing better visibility and stability in future cashflows. ART’s existing rental housing properties in Japan have achieved a strong average occupancy rate of over 95% in 2021 despite COVID-19. The three rental housing properties in Sapporo have performed well since our acquisition in June 2021. We expect the four new rental housing properties to perform strongly too. Our first student accommodation property in Japan adds to our quality portfolio of eight student accommodation properties in the USA.  It is located close to a highly reputable university with a large student population, and there is limited competing supply. The property in Japan is under a 15-year master lease with the largest student accommodation operator in the country, generating stable income for ART,” added Beh.