On Sept 4, 2019, CapitaLand Ascott Trust HMN 1.1% (CLAS) issued $150 million perps at 3.88% p.a. The first distribution rate reset falls on Sept 4 this year. OCBC Credit Research calculates that a potential reset would cost 5.6% assuming that the Sora rate on March 15 is used as a replacement benchmark. As aggregate leverage as at end-FY2023 was 37.9%, replacing with debt would push leverage above 40%.

 

OCBC Credit Research expects CLAS&rsquo s manager to replace the 3.88% perps with a new perpetual if it were to call.

 

CLAS did not call its 3.68% $250 million perpetual securities on its first call date of June 30, 2020. Instead, CLAS&rsquo manager announced they would not be redeemed and the distribution rate was reset to 3.07%.  

 

On March 11, Frasers Property TQ5 0.00% (FPL) announced it is redeeming its $600 million 4.98% perpetual securities ahead of its first call date of Aprill 11 this year. OCBC Credit Research says this is the first Singapore dollar non-financial corporate perpetual redemption at the first call date since March 2023.

 

Issuers which have opted not to redeem their perpetual securities on the first call data include ARA Asset Management&rsquo s 5.65% perpetual with a call date of March 14, 2023 and Mapletree Logistics Trust M44U -0.7% &rsquo s 5.2074% perp with a call date on March 28, 2023.

 

OCBC Credit Research says FPL&rsquo s call is likely to have been driven by the discontinuation of Sor as a benchmark for the 4.98% perp. &ldquo In comparison, FPL&rsquo s 4.38% $300 million perp was not called on its 1st call date on January 17 2023 and remains outstanding despite the option for the issuer to call every six months,&rdquo OCBC says. &ldquo We believe this is due to presence of step-up and reset on the first call date for FPL&rsquo s 4.98% perp while FPL&rsquo s 4.38% perp&rsquo s step-up and reset dates are five years after its first call date.&rdquo

 

&lsquo Even if a replacement benchmark were inserted, FPL should be economically incentivised to redeem the FPL 4.98% perp as the step-up and reset should drive distribution rates above 7% upon non-call. Comparatively, we estimate the cost of debt at around 4% or above,&rdquo OCBC adds.

 

On October 5, 2022, FPL redeemed and cancelled $350 million, 3.95% perpetual securities with issue dates of Sept 21, 2017, and Oct 3, 2017.

 

AIMS APAC REIT (AA REIT) issued $125 million 5.65% perpetual securities on Aug 14, 2020, and a further $250 million 5.375% perpetual securities on Sept 1, 2021. A reset in August 2025 at current Sora levels would cause a reset distribution rate of 8.5%, OCBC Credit Research calculates. 

 

Although AA REIT' s aggregate leverage was 32.2% as at Dec 31, 2023, it has a high proportion of perps in its capital structure. Hence, OCBC Credit Research reckons the $125 million perp tranche is likely to be replaced with a new perp. If the $125 million perps were replaced with debt, aggregate leverage would rise to 37%. 

 

CapitaLand Ascendas REIT (CLAR) issued $300 million of perpetual securities priced at 3% with the first distribution reset rate falling on Sept 17, 2025. As at Dec 31, 2023, CLAR' s aggregate leverage was 37.9%. OCBC Credit Research says redemption would lift leverage to 39.6% of redemption is funded by debt. 

 

Keppel REIT issued a total of $300 million perpetual securities at 3.15% on Sept 11 2020 and Oct 7 2020. Based on current levels of Sora, a reset in September 2025 would lead to a reset distribution of 5.9%.  

 

Keppel REIT' s aggregate leverage as at Dec 31, 2023 was 38.9%. If the perps were refinanced with debt, aggregate leverage would rise to around 42%. Hence OCBC Credit Research expects these two tranches of perpetuals to be replaced with new perps if Keppel REIT redeems these perps.   

 

THE managers of CapitaLand Ascott Real Estate Investment Trust (CapitaLand Ascott Reit) and CapitaLand Ascott Business Trust said on Friday (Mar 8) that Ascott Reit MTN &ndash a wholly-owned subsidiary of the trustee of CapitaLand Ascott Reit &ndash has issued S$120 million of 3.69 per cent notes due Mar 15, 2029.

 

The notes are issued under its S$2 billion multicurrency debt issuance programme established in September 2009 and amended in July 2020.

 

The payment obligations of Ascott Reit under the notes will be unconditionally and irrevocably guaranteed by DBS Trustee, in its capacity as trustee of CapitaLand Ascott Reit.

 

The net proceeds arising from the issue of the notes will be used for refinancing the existing borrowings of CapitaLand Ascott Reit and its subsidiaries.

 

DBS Trustee has entered into a swap transaction to swap part of the Singapore dollar denominated proceeds of the notes into euro, amounting to approximately 78.6 million euros (S$114.4 million) at a fixed interest rate of 3.547 per cent per annum.

 

CapitaLand Ascott Reit and CapitaLand Ascott Business Trust make up the stapled group CapitaLand Ascott Trust : HMN -0.55% (Clas).

 

CAPITALAND Ascott Trust : HMN +1.04% (Clas) is divesting Citadines Mount Sophia Singapore for S$148 million in a deal that is estimated to complete in the first quarter of 2024.

 

On Friday (Feb 2), its managers said the consideration is 19.4 per cent above the 154-unit serviced residence&rsquo s book value as at end-2023.

 

It also represents a divestment of &ldquo close to S$1 million per key, which is a significant premium to book value&rdquo , said the managers&rsquo chief executive Serena Teo.

 

The transaction is expected to result in net proceeds of about S$138.6 million, as well as a net gain of some S$14.6 million.

 

Based on Clas&rsquo FY2023 earnings before interest, taxes, depreciation and amortisation, the exit yield for Mount Sophia Citadines Singapore would stand at 3.2 per cent.

 

Teo said the sale of Citadines Mount Sophia Singapore brings Clas&rsquo divested asset value over the last eight months to S$408.1 million across 10 mature assets. In turn, this is estimated to unlock S$38.9 million in gains, at an average exit yield of about 3.8 per cent.

 

Clas&rsquo managers intend to use capital from the sale of these 10 assets to reduce the group&rsquo s debt, fund asset-enhancement initiatives, or redeploy it into higher-yielding investments to increase the returns of its portfolio.

 

These divestments can offer Clas greater financial flexibility and potentially lower its gearing by close to two percentage points, said Teo.

 

Looking ahead, she said Clas seeks to &ldquo expand (its) portfolio opportunistically with more yield-accretive assets&rdquo .

 

&ldquo Over the past three years, distribution income gained from our investments has more than replaced the distribution income from the properties that were divested.&rdquo

 

Stapled securities of Clas were trading S$0.01 or 1 per cent higher at S$0.97 as at the midday trading break on Friday, after the news.

 

Citadines Mount Sophia Singapore is located at 8 Wilkie Road, a mixed-used development in Selegie.

 

While Clas&rsquo managers only referred to the buyer of Citadines Mount Sophia Singapore as an &ldquo unrelated third party&rdquo , Hong Kong-headquartered rental accommodation brand Weave Living announced on the same day that it had acquired a property at the same address through a joint venture with asset manager BlackRock.

 

Weave Living&rsquo s founder and group chief executive Sachin Doshi said the property would &ldquo undergo an extensive year-long renovation&rdquo , and reopen under the company&rsquo s serviced-accommodation brand, Weave Suites, by early 2025.

 

The announcement confirms an earlier report by The Business Times (BT) that BlackRock and Weave Living were conducting due diligence for a potential acquisition of Citadines Mount Sophia. At the time, BT reported the property&rsquo s expected sale price to be around S$150 million.

 

Last month, a fund managed by Keppel acquired the office and retail components of Wilkie Edge for S$348 million.

The Ascott Limited, the lodging arm of CapitaLand Investment, announced that it has grown its Oakwood portfolio by by over 20% since the group acquired Oakwood Worldwide in 2H2022. 

 

To recap, Ascott acquired Oakwood Worldwide from Mapletree Investments. Although the group did not disclose the acquisition amount, it is estimated that the consideration would have been within the range of $40 million to $50 million. 

 

At the time of the announcement in July 4, 2022, 8,500 out of 15,000 keys were operational and the fee-related earnings (FRE) per 10,000 operational and stabilised keys is around $20 million. The Oakwood brand has been kept, but Ascott has implemented a brand refresh across all the Oakwood properties.

 

Today, Ascott has expanded Oakwood&rsquo s presence to 48 cities, entering new destinations

including Busan in South Korea, Batam and Bali in Indonesia, Penang and Kota Kinabalu in Malaysia,

Visakhapatnam, Chennai and Navi Mumbai in India, as well as Ha Long in Vietnam. With almost 18,000 units to date, the Oakwood portfolio has grown by more than 20% post-acquisition, making it one of the fastest growing global brands in the Ascott portfolio with over 20 new signings since the acquisition.

 

In its media release, Ascott said that the successful integration of the Oakwood brand into its ecosystem enabled it to drive revenue uplift, improve operational efficiencies and optimise cost synergies of the Oakwood portfolio. By enhancing its conversion-friendly value proposition, Ascott won over new contracts of properties managed by other operators and expeditiously transitioned them to operate under its Oakwood brand, such as the Oakwood Hotel & Apartments Taman Mini Jakarta and Oakwood Makati Avenue that were newly inked in 2023 and started operations just within months of signing. 

 

Kevin Goh, CEO for Ascott and CLI Lodging says: " The uplift in revenue and improved margins are testament of Ascott&rsquo s ability to leverage pricing power and meet market demand, contributing to an overall enhanced financial performance of the Oakwood portfolio post-acquisition."

Goh adds that with more operationally ready properties coming onstream at a faster pace, Ascott is seeing immediate contribution of the Oakwood portfolio to its recurring fee income, which is in line with the group' s aim to double fee earnings to more than $500 million by 2028. 

 

Already, Ascott in 2023 has launched about 70 properties globally, which translates to about 13,500 units, across all its brands. 

 

&ldquo Ascott will continue to pursue transformative deals which can accelerate our expansion and provide us

with immediate access to new markets, diverse customer bases, and valuable synergies. The strategic

benefits of inorganic expansion extend beyond incremental growth," says Goh, adding that inorganic expansion has supported the group' s efforts to unlock economies of scale, streamline operations, and enhance overall competitiveness.

 

Tan Bee Leng, Ascott&rsquo s managing director for brand & marketing says: " Against the backdrop of the surge in bleisure travel, a portmanteau of business and leisure, we have harnessed Oakwood&rsquo s deep rooted understanding of corporate travel, to kickstart a brand refresh that aligns with the needs of business travellers today."

 

The refreshed Oakwood brand aims to provide thoughtful in-property amenities and productivity tools to attract the growing market of bleisure (business and leisure) travellers, or business travellers who view work trips as opportunities to extend their stays for leisure purposes. 

 

Some of Oakwood brand signatures include the Oakroom, a lobby space that receives guests with a sense of arriving home to familiarity various dining options within the properties food-related events and activities as well as professional and warm ambassadors known as Oakwood GEM (an acronym for genuine, empowered and meticulous). 

 

The Oakwood brand refresh comes on the back of the refreshed Citadines, Somerset, and Ascott brands, which were unveiled over the last two years. It is part of Ascott&rsquo s Brand-360 strategy, a groupwide exercise to strengthen its brand portfolio through sharpened brand stories and the introduction of signature experiences and programmes unique to each brand.

 

CapitaLand Ascott Trust (CLAS) is divesting its three hotels in Japan to an unrelated third party for 10.7 billion yen ($99.8 million). The hotels, which are all located in Osaka, are Hotel WBF Honmachi, Hotel WBF Kitasemba East and Hotel WBF Kitasemba West.

 

The total amount is about 15% above the hotels&rsquo book value based on the independent valuation as at Dec 31, 2022.

 

The divestment is expected to net CLAS proceeds of 3.9 billion CLAS will recognise a net gain of 1.1 billion yen.

 

&ldquo The divestment of the three properties is part of our active portfolio reconstitution strategy. The properties are situated outside the prime districts in Osaka and the divestment enables CLAS to unlock the value of the properties, redeploying capital to assets and/or asset enhancement initiatives that can generate stronger yields, uplifting the overall value of our portfolio,&rdquo says Serena Teo, CEO of the managers.

 

She adds that Japan is still an attractive market for the trust with its strong tourism sector and population growth in its gateway cities.

 

&ldquo The overall positive demand-supply dynamics bode well for our portfolio of hospitality and longer-stay assets in Japan,&rdquo she continues.

 

In addition, CLAS is set to complete a turnkey acquisition of a 258-unit rental housing property in Fukuoka, Japan in 1Q2024. CLAS has also completed the acquisition of three prime lodging assets in London, Dublin and Jakarta at an ebitda yield of 6.2%.

 

&ldquo The assets have begun contributing to CLAS&rsquo s income, enhancing our returns. We remain focused on delivering long-term sustainable returns to our stapled securityholders,&rdquo says Teo.

 

After the divestment, CLAS will have a portfolio of about 30 properties comprising serviced residences, hotels, rental housing and student accommodation properties in Japan&rsquo s gateway cities of Tokyo, Fukuoka, Hiroshima, Osaka and Sapporo.

 

The divestment of the three properties is expected to be completed on 1Q2024.