Ascott Trust: HMN +1.51% (ART) will acquire three rental housing properties in Japan for 6.78 billion yen (S$85.2 million), it said on Tuesday.

 

The properties - City Court Kita 1 jo, Big Palace Minami 5 jo and Alpha Square Kita 15 jo - have a total of 411 units and are located in central Sapporo.

 

Their average Ebitda (earnings before interest, tax, depreciation and amortisation) yield is about 4 per cent, the stapled hospitality group added.

 

The acquisitions will be funded by debt and part of the net proceeds from recent property sales including Somerset Xu Hui Shanghai, and are expected to complete by the end of June.

 

Bob Tan, chairman of ART' s managers, said the acquisitions will help " diversify from hospitality assets which are facing headwinds due to Covid-19" .

 

In 2020, amid Covid-19, ART' s 11 rental housing properties in Japan had an average occupancy rate of 96 per cent. " Rental housing leases, which are typically two years in length, also provide greater visibility and stability in future cash flows," said Beh Siew Kim, chief executive of the managers.

 

Including the earlier acquisition of its first student accommodation asset, ART' s student accommodation and rental housing portfolios will expand to about 8 per cent of its total property value. The managers aim to grow that figure to about 15 to 20 per cent in the medium term, Mr Tan said.

 

After the acquisitions of the Japanese rental properties, ART' s managers said it will still have access to about S$1.2 billion comprising cash, credit facilities and net divestment proceeds.

 

The trust has a debt headroom of S$1.9 billion and gearing of 36.8 per cent.

ASCOTT Residence Trust (ART) posted a 10 per cent quarter on quarter increase to S$55 for its revenue per available unit (RevPAU) of its properties under management contracts and management contracts with minimum guaranteed income, excluding rental housing and student accommodation properties.

 

In an update for the quarter, the managers noted an increase in average portfolio occupancy from mid-40 per cent in Q4 2020 to about 50 per cent in Q1 2021, which was supported by block bookings.

 

However, its RevPAU was 47 per cent lower year on year.

 

ART also saw a varied pace of recovery across markets, with China leading in Q1 2021 RevPAU year on year on a same-store basis. Countries with long stays like Indonesia, the Philippines and Vietnam were more resilient with smaller RevPAU declines year on year.

 

Distributable income was boosted by a termination fee of S$9.8 million from the terminated divestments of Citadines Xinghai Suzhou and Citadines Zhuankou Wuhan, and a one-off realised exchange gain of S$5.6 million.

 

The trust' s longer-stay properties such as rental housing and student accommodation had registered occupancies of over 95 per cent, while its master leases, management contracts with minimum guaranteed income and longer-stay properties contributed over three quarters of gross profit in Q1 2021.

 

ART said that its stable income sources provided downside protection and resilience against the impact of Covid-19.

 

With about 88 per cent of its properties in operation, its portfolio also continued to generate operating profits and positive cash flow. Six out of 10 properties which were temporarily closed continued to receive fixed rent, while temporarily closed properties are set to reopen progressively in Q2.

 

The trust also posted " strong capital management" with a net asset value per unit of S$1.15 and with 51 per cent of its total assets in foreign currency hedged.

 

As at March 31, 2021, ART recorded a gearing level of 36.1 per cent with about S$1.9 billion debt headroom, and about S$1.2 billion total available funds in its reserves.

 

Despite the challenging near-term outlook, ART noted that it is " well-positioned to capture the upturn" with its " scale, diversification, predominantly extended-stay portfolio and strong financial capacity and flexibility" .

ASCOTT Residence Trust (ART) has agreed to sell Somerset Xu Hui Shanghai at an aggregate value of 1.05 billion yuan (S$215.6 million) to an unrelated third party.

 

Somerset Xu Hui Shanghai is a 32-storey serviced apartment building with a five-storey commercial podium and a basement car park. The property' s agreed value is 171 per cent above its book value, said the managers in a pre-market filing on Tuesday.

 

ART is expecting to net a gain of 536.6 million yuan from the sale, which is slated to take place in Q2 2021. Estimated net proceeds of about 944.6 million yuan may be used to pare down the debts of ART, fund potential acquisitions or for other general corporate purposes, said the managers in its filing.

 

Due to the ongoing Covid-19 situation in China and strict government regulations to cool the country' s property market, ART' s managers said it sees limited operational growth prospects and capital appreciation upside to the property.

 

Somerset Xu Hui Shanghai' s sale therefore presents an opportunity to unlock the asset' s underlying value and redeploy the proceeds in higher yielding assets to enhance the returns of ART' s portfolio, they added.

 

For illustration purposes, the trust would have booked a FY2020 distribution per stapled security (DPS) of 2.94 Singapore cents as opposed to 3.03 cents had the transaction completed on Jan 1, 2020.

 

Its net asset value (NAV) for the financial year would have been S$3.7 million rather than S$3.6 million, which translates to an FY2020 NAV per stapled security of S$1.18 instead of S$1.15.

 

In 2020, ART sold its Ascott Guangzhou in China and Citadines Didot Montparnasse Paris in France for a total of S$191.4 million.

 

The trust last reported a DPS of 1.99 Singapore cents for the half-year ended Dec 31, 2020, representing a 52 per cent decline from its DPS of 4.18 cents a year ago.

 

CGS-CIMB has downgraded its " add" call on Ascott Residence Trust (ART) to " hold" while raising its target price on the stapled hospitality group to S$1.08 from S$1.05 previously.

 

The research house' s downgrade comes after ART on Wednesday reported a H2 distribution per stapled security (DPS) of 1.99 cents, while also announcing that it had acquired its first purpose-built student accommodation asset for US$95 million.

 

In a report on Wednesday, CGS-CIMB analysts noted that ART' s valuation has recovered to its five-year mean of 0.9 times price-to-book value (P/BV) at the price of S$1.05 per stapled security. Further recovery remains volatile and hinges on the effective distribution of Covid-19 vaccines, said the analysts, who believe the trust lacks catalysts going forward.

 

The brokerage nonetheless has raised its estimations for ART' s FY 2020-2022 DPS by 4-10 per cent after factoring in its acquisition of the US student accommodation asset, recent divestments, and an expected S$10 million capital distribution for FY2021.

 

" Despite the pandemic, ART' s balance sheet remains robust with gearing at 36 per cent and S$1.05 billion of liquidity reserves, which could cover about three years of fixed cost under a zero-income scenario," said the analysts.

 

" Upside/downside risks include more accretive acquisitions and capital distribution/weaker-than-expected revenue per available unit (RevPAU)," they added.

 

Meanwhile, both DBS and Maybank Kim Eng have retained their " buy" calls on the trust with the respective target prices of S$1.20 and S$1.25.

 

DBS said in its report on Thursday that it sees " compelling value" in ART, and believes the stapled group is poised to benefit from a rebound in domestic travel and long-stay segment markets ahead of its peers. According to its analysts, recovery in travel demand could be front-end loaded post the distribution of a Covid-19 vaccine this year.

 

" We see compelling value in ART at 0.8 times price to net asset value, more than -1.5 standard deviation of its historical 10-year mean, with an attractive 6.9 per cent FY2022 dividend yield with upside if travel rebound occurs faster than expected," said the DBS analysts.

 

Maybank KE analyst Chua Su Tye also believes ART' s valuations are currently undemanding at 0.8 times at a forward FY2021 price-to-book. However, he thinks the trust will face slow RevPAU recovery in the financial year ahead given the uneven progress of vaccine rollouts.

 

" We continue to like ART for its diversified portfolio, concentrated long-stay assets, strong balance sheet, and S$200 million in residual divestment gains which may lift capital distributions amid slower DPS growth," said Mr Chua in a report on Wednesday.

 

ASCOTT Residence Trust' s (ART) distribution per stapled security (DPS) fell by 52 per cent to 1.99 Singapore cents for its half year ended Dec 31, 2020 compared to 4.18 cents a year ago, reported its managers on Wednesday morning.

 

This brings ART' s DPS for the full year to 3.03 cents, down 60 per cent from its 2019 DPS of 7.61 cents and in line with its profit guidance issued on Jan 15.

 

Revenue for H2 2020 fell 39 per cent on year to S$161.4 million as opposed to S$266.6 million a year ago.

 

The decline was mainly due to lower revenue from the trust' s existing portfolio and post the divestment of Somerset Liang Court Singapore and Somerset West Lake Hanoi. Additional contributions from ART' s acquisitions of Ascendas Hospitality Trust' s portfolio and Quest Macquarie Park Sydney helped to partially offset this decrease.

 

Due to the lower revenue, gross profit for the half-year fell by S$69.2 million or 53 per cent to S$61.1 million, partially offset by lower operating costs from cost containment measures and government support measures. The decrease in gross profit was S$87.3 million on a same-store basis.

 

ART' s managers note that about two-thirds of gross profit came from master leases and management contracts with minimum guaranteed income, which they believe will provide the trust with more stability.

 

The distributable income for H2 was S$61.7 million, which is 32 per cent lower than the H2 2019 distributable income of S$90.9 million.

 

This comes after including a one-off partial distribution of divestment gain of S$40 million, and the release of S$5 million of distributable income retained in H1 2020 to stapled securityholders.

 

Bob Tan, chairman of the managers, said: " Given the resurgence and uncertainty around new strains of the coronavirus, global economic recovery remains fragile. Nonetheless, ART is well-capitalised and continues to build on our financial strength."

 

As at end-2020, ART had a total of about S$1 billion in cash on-hand and unutilised credit facilities, while gearing stood at 36.3 per cent. Its managers said the cash on-hand is sufficient to cover more than three years' fixed costs under a worst-case, zero-income scenario.

 

Separately, ART that it has acquired its first purpose-built student accommodation asset, Signature West Midtown, for US$95 million.

 

The asset is a 183-unit student accommodation asset in Atlanta, Georgia in the US. Its transaction is expected to be completed by end Q1 2021.

 

" We continue to actively reconstitute and enhance ART' s portfolio as we remain disciplined in managing our capital and costs. The student accommodation asset we have acquired has strong domestic demand with high average occupancy rate of 95 per cent despite Covid-19 and will add an approximate 4.4 per cent to DPS for FY2020 on a pro forma basis," said Beh Siew Kim, chief executive of the managers.

 

The refurbishment of Hotel Central Times Square, formerly known as DoubleTree by Hilton Hotel New York - Times Square South, will commence in Q2 of 2021. It was previously postponed to conserve cash.

 

lyf one-north Singapore, ART' s maiden development project, is expected to complete in Q4 of 2021.

ASCOTT Residence Trust (ART) expects to cut distribution per stapled security (DPS) by between 60 per cent and 70 per cent in FY2020, the managers warned on Friday.

 

The projected fall in DPS, from the 7.61 Singapore cents paid out in FY2019, comes as distributable income could drop by 40-50 per cent year-on-year, taking into account realised exchange gains and partial distribution of divestment gains.

 

The profit guidance was based on the managers' preliminary review of its financial statements for the year to Dec 31, 2020, which are due to be released on Jan 27, 2021.

 

ART could see its portfolio value decline by 6-8 per cent and cause unrealised fair value losses of S$325-345 million, although these losses will not affect distributable income.

 

The managers for ART, which comprises Ascott Real Estate Investment Trust and Ascott Business Trust, had earlier warned that the trust' s financial performance would suffer from the impact of the Covid-19 pandemic on the global hospitality industry.

 

Still, the managers said they " wish to emphasise that ART has a strong financial position with sufficient liquidity to meet its operating and financial commitments" .

 

They added that they will make updates as needed when there are material developments, while stapled security holders and potential investors are advised to exercise caution when dealing or trading ART.

 

CAPITALAND' S The Ascott has built a four-year straight streak of record growth in property units in 2020 as it boosts recurring fee income through management and franchise contracts.

 

In 2020, Ascott added 14,200 units across 71 properties globally. Despite Covid-19, the additional units exceeded the total number of units added in 2019 of some 14,100 units based on numbers disclosed as at Dec 2019.

 

These units signed here refer to units signed up based on management contracts, franchises, and strategic alliances, said Ascott.

 

The new units added in 2020 are expected to boost Ascott' s annual fee income by over S$27 million as the properties progressively open and stabilise.

 

Ascott chief executive Kevin Goh, who is also CapitaLand' s chief executive for lodging, said more than 80 properties with about 17,000 units are slated to open in 2021.

 

Among these are over 70 properties with more than 15,000 units in the Asia Pacific region, which is expected to lead the global economic recovery, he added. Ascott' s business in China continues to lead its global expansion.

 

Mr Goh said Ascott will continue to build its future recurring fee income stream through the new management and franchise contracts signed.

 

" We will continue to look for opportunities to expand our presence through management contracts, franchises, strategic alliances, and stand ready to seize good investment opportunities," said Mr Goh.

 

" While we were not spared the short-term operational impact of Covid-19, we believe that the fundamental demand for lodging remains intact and will bounce back quickly once the global pandemic is brought under control."

 

Separately, Ascott introduced 25 new properties in 2020 that added more than 3,900 units to Ascott' s global inventory. This includes the opening of 10 properties with more than 1,800 units just in China.

 

For comparison, in 2019 the number of properties opened alone contributed to the addition of 7,500 units.