Ascott Residence Trust (ART) has proposed to acquire nine serviced residences, rental housing and student accommodation properties across five countries from its sponsor, The Ascott Limited.
At an estimated total capitalised cost of S$318.3 million, the yield-accretive acquisition is set to increase ART’s distribution by S$9.2 million and its pro forma FY 2021 Distribution per Stapled Security by 2.8%.
The assets are predominantly located in Asia-Pacific with seven of the assets in Australia, Japan and Vietnam, and two in France and the USA. The acquisition of the nine properties with a total of 1,018 units will grow ART’s total assets to S$8.3 billion as of 31 December 2021 on a pro forma basis, further consolidating ART’s position as Asia-Pacific’s largest hospitality trust.
Post-acquisition, ART’s portfolio will exceed 100 properties, with over 18,000 units across 47 cities and 15 countries.
The acquisition will enhance ART’s income resilience as 92% of the nine assets’ gross profit are from stable income sources. It will further increase ART’s total proportion of stable income from 69% to 71% of its gross profit.
ART is acquiring three serviced residences – Quest Cannon Hill in Brisbane, Australia and La Clef Tour Eiffel Paris in France that are on master leases; and Somerset Central TD Hai Phong City in Hai Phong, Vietnam which caters mainly to corporate guests and has an average length of stay of about 11 months.
The five rental housing properties in Japan have typical lease tenures of about two years. They are in Kyoto, Osaka, Hyogo and Nagoya. The acquisition will expand ART’s footprint to Hai Phong, Hyogo and Nagoya, further diversifying its portfolio.
In South Carolina, USA, ART is doubling its stake in Standard at Columbia, acquiring an additional 45% stake in the student accommodation property. Student accommodation properties typically have an average length of stay of about one year.urrently under development, Standard at Columbia is slated for completion in 2Q 2023.
Ms Serena Teo, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “We are proposing to acquire nine quality assets that will increase ART’s stable income and further strengthen the resilience of our portfolio, demonstrating our focus to deliver long-term value for our Stapled Securityholders. The acquisition will enhance our geographically diverse portfolio while deepening our presence in our key markets of Australia, France, Japan, USA and Vietnam. The addition of the five rental housing properties in Japan and a student accommodation property in the USA will increase the proportion of our longer-stay portfolio from 17% to 19% of ART’s total portfolio value. This will bring us closer to our target of 25% – 30% for longer-stay assets in the medium term. The acquisition is also set to boost ART’s proportion of green-certified properties, reinforcing our focus on sustainability. ART continues to seek yield-accretive investments while remaining committed to sustainability and taking a disciplined approach in managing our capital and costs.”
The transaction is expected to be completed by November 2022, subject to Stapled Securityholders’ approval at an Extraordinary General Meeting to be held on 9 September 2022. The acquisition is to be funded by debt and/or proceeds from a private placement.
Post-acquisition, ART will have a gearing of 38.5% which is well below the 45% gearing threshold set by the Monetary Authority of Singapore. ART remains in a strong financial position to continue to make yield-accretive acquisitions. With ART’s longer-stay portfolio comprising 19% of its total portfolio value and the strength of its balance sheet, ART is also resilient against any potential economic volatility.
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