CapitaLand Ascott Trust (CLAS) is divesting two hotels in Sydney, Australia for a total of A$109.0 million ($95.6 million).

 

The two properties, which are Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, will be divested at about 5% above book value. The divestments are expected to be completed by 1Q2024 and 3Q2024 respectively.

 

Following the divestment, the trust will net proceeds of A$98.0 million.

 

The exit yield is 4.4% based on CLAS&rsquo s FY2022 ebitda and CLAS will recognise a net gain of A$14.2 million.

 

&ldquo The divestment of these two properties outside of central Sydney is part of our active portfolio reconstitution strategy. CLAS remains focused on assets that offer better yields and will further uplift the value for our portfolio,&rdquo says Serena Teo, CEO of the managers. &ldquo As additional capital will be required to upgrade these two mature properties, the divestment will enable us to redeploy the proceeds into more optimal uses such as but not limited to paying down debt and funding our other asset enhancement initiatives (AEI).&rdquo

 

&ldquo The exit yield is also at an attractive level that compares favourably against the current cost of borrowing in Australia. We recently divested four mature serviced residences in regional France at an exit yield of about 4%. Part of the divestment proceeds will also be used to partially finance our acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%, further enhancing our returns to stapled securityholders,&rdquo she adds.

 

According to Teo, Australia remains a key market for the trust, which continues to see a strong demand from both corporate and leisure guests and boosted by large-scale sporting events.

 

&ldquo Post-divestment, our remaining seven serviced residences and hotels under management contracts will enable us to capture the travel demand while our five serviced residences under master leases will continue to provide us with stable income,&rdquo says Teo.

 

In the 3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS&rsquo s properties in Australia rose by 18% y-o-y to A$152, exceeding its 3QFY2019 pro forma RevPAU by 13%.

 

CAPITALAND Ascott Trust : HMN -1.08%&rsquo s (Clas) gross profit for the third quarter rose 13 per cent as compared to the same period last year.

 

This was led by revenue growth that offset increased operating and financing costs, said Clas&rsquo managers on Monday (Oct 30).

 

About 44 per cent of the gross profit came from management contracts of serviced residences and hotels. The remaining 56 per cent was from stable income from longer-stay properties, master leases, and management contracts with minimum guaranteed income.

 

Revenue per available unit (RevPAU) grew 17 per cent to S$154, above pre-Covid levels, as demand for lodging remained healthy, with key markets showing strong growth.

 

While Singapore and UK continued to exceed pre-Covid RevPAU levels, Japan, Australia and the US showed robust quarterly growth to reach higher RevPAU than pre-Covid on a pro forma basis. This excluded those divested properties between 2019 and 2022.

 

As at the end of September, the stapled group&rsquo s net asset value per stapled security stood at S$1.12.

 

While about half of its total assets in foreign currency were hedged, Clas registered a 0.7 per cent loss due to foreign exchange impact after hedges on growth profit for the nine months.

 

The managers also highlighted its &ldquo financing flexibility&rdquo . Clas&rsquo gearing stood at 35.2 per cent with a debt headroom of about S$2.3 billion before reaching aggregate leverage of 50 per cent.

 

The ratio of net debt to net assets for Clas stood at 52.4 per cent. Weighted average debt to maturity was 3.7 years.

 

Clas&rsquo managers said that its debt due in 2023 were largely refinanced or repaid, and it remains at a healthy financial position with a low effective borrowing cost at 2.4 per cent.

 

The managers also highlighted a high proportion of debt on fixed rates of 83 per cent as at Sep 30, 2023.

 

&ldquo Gearing and property valuations are expected to remain healthy, supported by active portfolio reconstitution and positive operating performance.

 

&ldquo Clas is well-positioned to navigate the higher-for-longer interest rate environment,&rdquo the managers added.

 

CAPITALAND Ascott Trust : HMN -1.12% (Clas) on Monday (Oct 9) said it will seek approval from stapled securityholders for several interested person transactions at its upcoming Oct 24 extraordinary general meeting.

 

These include the S$530.8 million acquisition of three lodging assets in London, Dublin and Jakarta, announced in August, as well as the renewal of three master leases for serviced residence properties in France, expiring on Dec 31, 2023.

 

The managers said in a bourse filing that master lease agreements were entered into with Citadines SA &ndash which is indirectly owned by The Ascott &ndash for La Clef Louvre Paris, Citadines Presqu&rsquo ile Lyon and Citadines Place d&rsquo Italie Paris.

 

Each of the renewed master leases, to be inked with Citadines SA, will span 12 years from Jan 1, 2024. The renewals will have the same terms and conditions except for higher rent, lease duration and the co-sharing of renovation expenses between Clas and the lessee. 

 

The new rent for FY2024 will be 5.6 million euros (S$8.1 million), 33.3 per cent higher than the existing FY2022 rent of 4.2 million euros.

 

The rent received under each agreement will be either the fixed and variable rent per annum, whichever is higher. The fixed rent is indexed to the French commercial lease index published by the French national statistics bureau, the managers noted.

 

They added that having fixed rents will provide certainty to Clas&rsquo income, while having variable rent will allow the stapled group to benefit from any upside from travel recovery and demand drivers in Paris and Lyon.

 

&ldquo The city of Paris is also hosting the 2024 Summer Olympics, which will be an added tourism boost to the city,&rdquo the managers said.

 

The managers said in a bourse filing that purchase agreements were entered into with sponsor The Ascott for The Cavendish London hotel in the UK, the Temple Bar Hotel in Dublin, Ireland, and the Ascott Kuningan Jakarta serviced residence in Indonesia.

 

The stapled group will acquire the holding company that owns the largest asset &ndash the 230-unit Cavendish London &ndash at a purchase consideration of £ 116.3 million (S$194.1 million). The property is situated in Mayfair, a high-end shopping district in central London.

 

The consideration takes into account the holding company&rsquo s consolidated net asset value (NAV) of £ 62.2 million, an agreed property value of £ 215 million, and £ 54.1 million in shareholder loans extended by The Ascott as at May 31.

 

Clas will acquire the 136-unit Temple Bar Hotel for a purchase consideration of 70 million euros &ndash equal to the agreed property value. The amount takes into account the hotel&rsquo s independent valuations.

 

The holding company that owns serviced residence Ascott Kuningan Jakarta will be acquired for US$40 million &ndash based on a consolidated NAV of US$1.6 million, an agreed property value of 620 billion rupiah (S$54.1 million), and S$50.7 million in shareholder loans from The Ascott as at May 31.

 

The managers expect the total acquisition outlay to be around S$378.6 million.

 

This comprises the purchase consideration of S$357.8 million, a S$5.3 million acquisition fee payable to the managers, and S$15.5 million in estimated professional and other fees and expenses.

 

Upon completion, the property holding companies that own the three properties will enter into separate management agreements with certain Ascott wholly owned subsidiaries.

 

Clas is also expected to increase its total distribution by S$13.5 million and its distribution per stapled security by 1.8 per cent on a FY2022 pro forma basis. Meanwhile, its distribution yield is projected to rise to 5.5 per cent from 5.4 per cent.

 

The managers expect to complete the proposed acquisitions by the fourth quarter of 2023.

 

As the sellers of three assets are wholly owned subsidiaries of The Ascott, which is, in turn, wholly owned by CapitaLand Investment (CLI), the proposed acquisitions have been classified as both an interested person transaction and an interested party transaction. CLI also wholly owns both of Clas&rsquo managers.

 

Similarly, the master lease renewals have been deemed an interested person transaction as The Ascott wholly owns Citadines.

 

Stapled securityholders will have to vote to approve the two transactions at an EGM to be convened on Oct 24 at 3 pm.

 

Independent financial adviser Deloitte & Touche Corporate Finance has said that the interested person transactions are on normal commercial terms and not prejudicial to the interests of Clas and its minority stapled securityholders.

 

The managers&rsquo independent directors have also recommended that stapled securityholders vote in favour of the resolutions.

 

CapitaLand Ascott Trust (CLAS) HMN 0.00% has completed the divestment of four of its properties in regional France for EUR44.4 million ($64.7 million).

 

The four properties, Citadines Croisette Cannes, Citadines Prado Chanot Marseille, Citadines Castellane Marseille and Citadines City Centre Lille, were divested to an unrelated third party.

 

The sum received represents 63% above the properties&rsquo book value as at Dec 31, 2022, with the REIT receiving net proceeds of around EUR34.1 million. The exit yield, based on CLAS&rsquo s FY2022 ended Dec 31, 2022 ebitda, is about 4% with CLAS receiving a net gain of some EUR1.2 million.

 

Following the completion of the divestment, CLAS has 12 properties in France that are predominantly located in Paris. Of the 12 properties, La Clef Tour Eiffel Paris and Citadines Les Halles Paris are undergoing asset enhancement initiatives (AEIs). Both properties will remain open during their AEIs, which include the refurbishment of guest rooms and general public areas.

 

&ldquo We have divested the four mature properties as part of our active portfolio reconstitution strategy to deliver sustainable returns to our stapled securityholders. As these properties have reached the optimal stage of their life cycles, the divestment enables CLAS to redeploy the proceeds to higher-yielding assets. Proceeds from the divestment will be used for our AEI in Europe. It will also be used to partially finance CLAS&rsquo recent proposed acquisition of three prime lodging assets in the capital cities of London, Dublin and Jakarta,&rdquo says Serena Teo, CEO of the manager.

 

CLAS had signed a memorandum of understanding (MOU) with its sponsor, The Ascott Limited, in August for a proposed acquisition of three lodging assets in London, Dublin and Jakarta at an agreed property value of $530.8 million.

 

&ldquo Over the past three years, we have successfully divested properties at a premium to book value and invested the proceeds in higher-yielding assets, increasing our total distribution. With the recent proposed acquisition, we expect to further increase our total distribution by $13.5 million and our distribution per stapled security (DPS) by 1.8% on a FY2022 pro forma basis upon completion of the acquisition,&rdquo she adds. &ldquo The ebitda yield of the proposed acquisition is 6.2% on a FY2022 pro forma basis, more than 2% higher than the exit yield from the divestment of the four properties in regional France. Post-renovation for The Cavendish London and Temple Bar Hotel as well as milestone payments for the acquisition, we expect to achieve an increased yield of 6.8%.&rdquo

 

UOB Kay Hian analyst Jonathan Koh is maintaining his &ldquo buy&rdquo call on Capitaland Ascott Trust (CLAS) HMN 0.00% after the trust proposed to acquire three lodging assets in the UK, Ireland and Indonesia.

 

On Aug 2, CLAS signed a memorandum of understanding (MOU) with its sponsor, The Ascott Limited, to acquire the three assets, which are the 230-unit The Cavendish London, the 136-unit Temple Bar Hotel in Dublin and the 185-unit Ascott Kuningan in Jakarta. The consideration for the acquisition stood at an agreed price of $530.8 million.

 

All three assets are located in prime locations within their capital cities, with The Cavendish, the Temple Bar Hotel and the Ascott Kuningan providing an ebitda yield of 4.1%, 7.6% and 6.7% respectively.

 

While the acquisition will be accretive to CLAS&rsquo s distribution per unit (DPU) by 1.8% on a pro forma basis, Koh has trimmed his FY2024 DPU forecast by 3% due to the depreciating foreign currencies against the Singdollar. As at Koh&rsquo s report dated Aug 29, the Australian dollar (AUD) was down by 6.1% y-o-y the Chinese renminbi (RMB) was down by 10.1% y-o-y and the Japanese yen (JPY) was down by 8.5% y-o-y.

 

AEIs to benefit CLAS

 

CLAS&rsquo s intention to conduct asset enhancement initiatives (AEIs) for The Cavendish and Novotel Sydney Central, will also impact the trust positively, notes Koh.

 

See also: Analysts view FCT&rsquo s Changi City Point divestment favourably Citi upgrades to &lsquo buy&rsquo

 

The Cavendish will be renovated from 4QFY2024 to 4QFY2025 and rebranded under The Crest Collection brand, a luxury brand managed by Ascott. Its average daily rate (ADR) is expected to increase from GBP250 ($429) to above GBP500 given The Cavendish&rsquo s positioning as an entry-level luxury hotel.

 

The property&rsquo s valuation is also expected to increase by GBP101 million to GBP316 million after renovation and stabilisation in FY2027. The ebitda yield on total capitalised cost is therefore expected to improve by 2.4 percentage points (ppt) to 6.5% at stabilisation.

 

The 255-room Novotel Sydney Central will be undergoing an AEI from 4QFY2024 to 1QFY2026, whilst the 192-unit Citadines Holborn-Covent Garden London will be undergoing an AEI from 3Q2023 to 1QFY2024.

 

The number of rooms at Novotel Sydney Central will increase by 72 or 28% with an eight-storey extension above the car park podium. Development approval for the additional gross floor area (GFA) of 2,400 square metres (sqm) was already obtained. The yield on AEI cost is 11.3%.

 

Valuation is expected to increase by A$173.3 million ($151.7 million) to A$339.8 million in FY2028. The yield on AEI cost for the Citadines Holborn-Covent Garden London is 10.6%, whilst valuation is expected to increase by GBP29.5 million to GBP 125.3 million in FY2025.

 

Meanwhile, renovation commenced for the 336-room Riverside Hotel Robertson Quay Hotel (RHRQ) in Singapore on March, which is aimed for completion in 4QFY2023. Following the renovation, the RHRQ will be rebranded as The Robertson House, also under the The Crest Collection brand.

 

A new 192-unit Somerset serviced residence at Clarke Quay is also under construction which is on track for completion in 2HFY2025.

 

RevPAU to trend higher in 3QFY2023

 

CLAS&rsquo s revenue per available room (RevPAU) is expected to trend higher in the 3QFY2023 ending Sept 31 as 2HFY2023 is typically a seasonally stronger period.

 

In his report, Koh points out that the growth will be supported by recently-opened markets such as Japan and China, as well as large-scale events like the FIFA Women&rsquo s World Cup and the F1 Singapore Grand Prix. International arrivals are also projected to further recover to 80% to 95% of pre-pandemic levels by the end of the year. CLAS&rsquo s management also expects overall international travel to pick up the pace as flight capacities increase, says the analyst.

 

In the 2QFY2023, CLAS&rsquo s RevPAU grew by 20% y-o-y to $149, which is 98% of CLAS&rsquo s pre-pandemic levels. The RevPAU for key markets in Australia, Japan, Singapore, the UK and US was above pre-pandemic levels based on same-store basis, whilst China and Vietnam outperformed with a RevPAU growth of 78% and 83% y-o-y respectively.

 

CLAS&rsquo s portfolio occupancy, which stood at around 75% as at June 30, has &ldquo room to improve&rdquo , according to Koh.

 

To the analyst, catalysts to CLAS&rsquo s unit price include the recovery of international arrivals and the continued recovery in corporate demand as airlines increase flight capacities, as well as yield-accretive acquisitions for student accommodation and rental housing.

 

CAPITALAND Ascott Trust (Clas) : HMN -1.5% has received valid acceptances of 36.6 per cent for the 100.5 million new stapled securities to be issued under the preferential offering announced on Aug 3.

 

In a bourse filing on Monday (Aug 28), the manager of the stapled group said that a further 28.1 per cent of the new stapled securities were subscribed for under the preferential offering.

 

The manager also noted that the stapled group&rsquo s sponsor, The Ascott, together with itself, Somerset Capital, Carmel Plus, CapitaLand Ascott Business Trust Management have accepted their respective provisional allotments of 29,622,829 in new stapled securities.

 

In total, 65.1 million new stapled securities, or 64.7 per cent of the total number of new stapled securities offered under the preferential offering, were subscribed for.

 

The manager said that the joint lead managers, bookrunners and underwriters have agreed to subscribe for portions of the remaining securities that were not subscribed for.

 

The new stapled securities were sold at an issue price of S$1.025 apiece to raise gross proceeds of about S$103.1 million.

 

Together with the S$200 million raised from a separate private placement, gross proceeds totalling S$303.1 million have been raised from this round of equity fundraising.

 

About S$170.2 million, or 56.1 per cent of the proceeds, will fund Clas&rsquo proposed S$530.8 million acquisition of assets from its sponsor. This includes the hotel, The Cavendish London.

 

The preferential offering new stapled securities will be listed and quoted on the mainboard of the Singapore Exchange from 9 am on Sep 4.