CapitaLand Ascott Trust Expands Portfolio with Strategic Divestments and New Acquisitions
Lim & Tan Securities
Daily Review | 09 October 2024
CapitaLand Ascott Trust (CLAS), Asia Pacific’s largest lodging trust, continues to strengthen its portfolio through strategic divestments and acquisitions aimed at optimizing returns for its Stapled Securityholders. With a diversified portfolio spanning key cities globally, CLAS has strategically divested mature assets to reinvest in higher-yielding opportunities, positioning itself for sustained growth in the hospitality and lodging sector.
Strategic Divestment of Citadines Karasuma-Gojo Kyoto
A key development for CLAS has been the divestment of its Citadines Karasuma-Gojo Kyoto property in Japan. The 124-unit serviced residence was sold to an unrelated third party for JPY6.18 billion (approximately S$53.1 million), a transaction that was 40.1% above the property’s book value. The sale yielded an exit EBITDA of approximately 0.3%, with net proceeds amounting to JPY4.4 billion (S$37.8 million). This transaction aligns with CLAS’s active portfolio reconstitution strategy, which focuses on recycling capital from mature assets into higher-yielding investments.
Ms. Serena Teo, CEO of CapitaLand Ascott Trust Management Limited, highlighted that the divestment is part of CLAS’s broader plan to redeploy capital into properties that offer greater potential for growth. She also reaffirmed the trust’s commitment to Japan as a key market, where CLAS continues to seek new investment opportunities, including properties that can enhance its income stream.
Key Acquisitions and Portfolio Enhancement
Alongside the divestment, CLAS has been actively expanding its portfolio with strategic acquisitions. One notable purchase was the proposed acquisition of the lyf Funan Singapore for S$263 million. This deal is expected to increase CLAS’s total distribution by S$3.5 million, translating to a 1.5% accretion in Distribution per Stapled Security on a FY2023 pro forma basis. The acquisition is anticipated to be completed by 4Q 2024, subject to the approval of Stapled Securityholders.
In the first half of 2024, CLAS completed other significant acquisitions, including Teriha Ocean Stage, a rental housing property in Fukuoka, Japan, and Standard at Columbia, a student accommodation property in the United States. These acquisitions contribute to CLAS’s objective of creating a sustainable and diversified income stream by enhancing geographic and asset-class diversification.
Focus on Asset Enhancement Initiatives (AEIs)
CapitaLand Ascott Trust is also focusing on Asset Enhancement Initiatives (AEIs) to further elevate the value of its portfolio. In the first half of 2024, CLAS completed AEIs for four properties, and another four properties are in the pipeline for completion between 2H 2024 and 2026. These initiatives are expected to raise the value of the trust’s properties by capturing growing lodging demand and enhancing the quality of assets.
Post-divestment of Citadines Karasuma-Gojo Kyoto, CLAS will maintain a robust portfolio of 29 properties in Japan, encompassing a mix of serviced residences, hotels, rental housing, and student accommodation. These properties are located in key gateway cities such as Tokyo, Osaka, Fukuoka, and Sapporo, ensuring a steady stream of revenue from high-demand markets.
Valuation and Future Prospects
CapitaLand Ascott Trust remains an attractive investment proposition with its forward dividend yield of 6.3%, based on an annualized payout of 6 cents. Trading at 0.8 times price to book, CLAS is well-positioned to benefit from the resurgence in global tourism and a potential decline in interest rates. Based on Bloomberg’s consensus target price of S$1.46, CLAS offers an impressive upside potential of 47%.
The trust’s strategy of recycling capital from lower-yielding, mature assets into growth-oriented properties continues to deliver value for investors. CLAS’s proactive approach to portfolio management, combined with its strong financial standing and commitment to growth, makes it a compelling choice for long-term investors.
Conclusion
CapitaLand Ascott Trust’s focus on strategic divestments, acquisitions, and asset enhancements demonstrates its commitment to delivering sustainable returns for its investors. With a diversified portfolio of properties in prime locations and a clear strategy for growth, CLAS is well-positioned to capitalize on the increasing demand in the global hospitality and lodging sectors.
Lim & Tan Securities
Daily Review | 09 October 2024
