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Operating its serviced residences mostly under the Citadines, Ascott and Somerset brands, ART’s asset value will increase by 33 percent to $7.6 billion after the merger. Image source: CapitaLand.
The proposed combination of Ascott Residence Trust (ART) and Ascendas Hospitality Trust (A-HTrust) came about after the merger of their respective parent companies –CapitaLand and Ascendas-Singbridge – resulted into an overlap in investment mandates between the two trusts.
The $1.2 billion proposed merger of ART and A-HTrust took only three days to be approved and announced to the public.
“Many didn’t expect it to be so fast because the announcement of the completion of CapitaLand and Ascendas-Singbridge merger was made end-June and on July 3, we announced this proposed combination,” Beh Siew Kim, CEO of Ascott Residence Trust Management which manages ART, told The Business Times.
“We practically only went to Ascendas side just prior to the completion of the merger of CapitaLand and Ascendas-Singbridge on the possibility of us coming together.”
Operating its serviced residences mostly under the Citadines, Ascott and Somerset brands, ART’s asset value will increase by 33 percent to $7.6 billion after the merger while distribution per unit (DPU) will grow 2.5 percent for FY 2018 on a pro forma basis.
For the combined entity, pro forma gross revenue and pro forma gross profit for FY 2018 will increase 37 percent and 36 percent to around $705 million and $325 million, respectively, reported The Business Times.
“Within Singapore, we will be two-and-half times larger than the next hospitality Reit, which is CDL Hospitality Trust. So, it propels us in size and scale. Within Asia-Pacific, we will be one-and-a-half times larger than the next hospitality trust. That puts us in a very advantageous footing in the hospitality space,” said Beh.
She expects the combined entity to be “the first stop for those who want to divest their hospitality assets” considering its stature as Asia-Pacific’s biggest hospitality trust and backing of a strong sponsor in CapitaLand, which holds a 40 percent stake in it.
The combined Reit owns 88 properties in 39 cities across over 15 countries in Asia-Pacific, the United States and Europe, each contributing not more than five percent in terms of gross profit.
“What does this mean? If you look at a hospitality trust with only exposure to Hong Kong, occupancy is now very low and a lot more volatile. But ART is global, half of our income comes from master leases which are stable. From unitholders, they are assured in terms of stability of returns from the Reit,” explained Beh.
And with Asia leading global growth, experiencing a burgeoning middle class and a boom in tourism, asset allocation will continue to be Asia-Pacific-centric. After the merger, Asia-Pacific will account for around 70 percent of the total portfolio valuation of the Reit and contribute 68 percent of its gross profit.
“That combination is almost like a marriage made in heaven,” said Beh added. “We still want an allocation that is more Asia-Pac-centric. 60:40 in favour of Asia-Pac. That has always been our strategy.”
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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