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CapitaLand Ascott Trust to raise $300 mil, proposes to acquire three lodging assets for $530.8 mil

Jovi Ho
·4-min read

CapitaLand Ascott Trust will raise $300 million via a private placement and a preferential offering.

CapitaLand Ascott Trust (CLAS) HMN has proposed to acquire three lodging assets at $530.8 million.

The three assets are a 230-unit hotel in London, The Cavendish London; a 136-unit hotel in Dublin, Temple Bar Hotel; and a 185-unit serviced residence in Jakarta, Ascott Kuningan Jakarta.

Upon completion of the proposed acquisition, CLAS is expected to increase its total distribution by $13.5 million and its distribution per stapled security (DPS) by 1.8% on a FY2022 pro-forma basis.

The ebitda yield of the proposed acquisition is 6.2% on a FY2022 pro-forma basis, say CLAS’s managers on Aug 2.

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The managers have also proposed equity fundraising comprising an offering of new stapled securities in CLAS to raise gross proceeds of approximately $300.0 million.

This will include a private placement of between 187,794,000 and 192,123,000 new stapled securities at between $1.041 and $1.065 to raise gross proceeds of approximately $200 million, and a pro-rata and non-renounceable preferential offering of up to 100,538,407 new stapled securities at an issue price of between $1.025 and $1.044 to raise gross proceeds of approximately $100 million.

The market revenue per available unit (RevPAU) in London, Dublin and Jakarta have exceeded pre-pandemic levels of 2019, say CLAS’s managers.

London’s market RevPAU for 1HFY2023 ended June was 112% of the same period in 2019, while Dublin’s market RevPAU was 110% over the same period. In Indonesia, Jakarta’s market RevPAU in the first half of 2023 was 111% over the same period.

The Cavendish London presents an excellent value-add opportunity for CLAS, says the managers. The property will be renovated and rebranded under The Crest Collection brand, a luxury collection brand managed by Ascott. The property’s valuation is expected to be £316.0 million ($547.2 million) following the renovation and stabilisation of the property in 2027.

This is an increase of approximately £101.0 million from the as-is valuation of £215.0 million as at June 30.

The property is expected to achieve an ebitda yield on total capitalised cost of approximately 6.5% at stabilisation. The renovation for The Cavendish London will be carried out in phases from 4Q2024 to 4Q2025.

Temple Bar Hotel in Ireland will also undergo renovation from 1Q2024 to 4Q2024.

Serena Teo, chief executive officer of the managers of CLAS, says: “London has been one of our stronger-performing markets and Jakarta has been a historically resilient market for us. Our entry to Ireland offers an additional boost to our revenue. Dublin is an attractive destination for leisure visitors, home to some of the world’s largest pharmaceutical companies, and one of the IT hubs of Europe.”

Teo adds: “In keeping with our focus to marry growth with stability, The Cavendish London and Temple Bar Hotel provide CLAS with upside as travel demand continues to recover and downside protection through minimum guaranteed income, while Ascott Kuningan Jakarta’s higher proportion of long-stay guests provides added income resilience.”

CLAS reported its earnings for 1HFY2023 ended June last week, posting revenue and net property income (NPI) of $346.9 million and $154.4 million, up 30% and 31% y-o-y respectively, mainly due to improvement in operating performance of its properties and the acquisition of 14 longer-stay assets in FY2022 and 2QFY2023. Meanwhile, CLAS’s DPS increased 19% y-o-y to 2.78 cents.

At the July 28 results briefing, CLAS announced that it had entered into a sale and purchase agreement to divest four properties in France for EUR44.4 million ($63.4 million). The sale price is 63% above book value, translating to an exit yield of some 4% and unlocking net gains of EUR0.2 million. Management expects the sale to be completed in 4QFY2023.

CLAS still has $300 million in divestment gains which have yet to be deployed, said its managers. It is also undertaking AEIs at five properties from 1Q2023 to 2Q2024, and redeveloping Somerset Liang Court, which is slated for completion in 2H2025.

Units in CapitaLand Ascott Trust closed flat at $1.12 on Aug 1. Trading has been halted since before market open on Aug 2.

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