CapitaLand Ascott Trust (CLAS): Riding Portfolio Reconstitution and Strategic Growth Initiatives in 1Q 2025

Report by: CapitaLand Ascott Trust

Date of Report: April 28, 2025

CapitaLand Ascott Trust (CLAS) has released its 1Q 2025 business updates, showcasing a period of strategic portfolio reconstitution, resilient performance, and forward-looking initiatives. As the largest lodging trust in Asia Pacific, CLAS continues to navigate the macroeconomic landscape with a diversified portfolio and proactive management strategies.

CLAS Overview: Asia Pacific’s Lodging Giant

CapitaLand Ascott Trust stands as the largest lodging trust in Asia Pacific, boasting a significant portfolio:

• Total Assets: S\$8.9 billion [[5]]
• Properties: 102 [[5]]
• Cities: 46 cities across 16 countries [[5]]
• Units: Over 19,000 [[5]]
• Market Capitalisation: S\$3.3 billion [[5]]

CLAS is a constituent of the FTSE EPRA Nareit Global Developed Index, underscoring its significance in the global real estate investment landscape. The trust’s properties span across key regions including the United States, the United Kingdom, China, Japan, and Southeast Asia, among others. CLAS maintains a diversified lodging asset base, with a mix of serviced residences, hotels/business hotels, rental housing, and student accommodation [[5]].

Strategic Positioning: Delivering Sustainable Returns

CLAS is strategically positioned to deliver sustainable returns through a well-balanced and diversified portfolio [[6]]. Its global presence is firmly anchored in Asia Pacific, with a core focus on large domestic markets and key gateway cities. The trust aims for a geographical allocation that is predominantly in Asia Pacific, with the remainder in Europe and the USA. In terms of asset allocation, CLAS targets:

• 70-75% in serviced residences and hotels. [[6]]
• 25-30% in rental housing and student accommodation. [[6]]

The target asset allocation includes 45% serviced residences, 38% hotels, 6% rental housing, and 11% student accommodation [[6]].

1Q 2025 Financial Highlights: Gross Profit Growth

CLAS reported a 4% year-on-year increase in gross profit for 1Q 2025 [[8]]. This growth is attributed to portfolio reconstitution initiatives and stronger operating performance. New properties acquired in 1Q 2025 effectively replaced the gross profit lost from divestments in 2024. The swift redeployment of divestment proceeds minimized the impact on CLAS’ income. On a same-store basis, excluding acquisitions and divestments between 1Q 2024 and 1Q 2025, gross profit was 1% higher year-on-year. Additionally, stronger performance from properties renovated in 2024 contributed to the growth in 1Q 2025 [[8]].

CLAS benefits from a mix of growth and stable income sources. Stable income, derived from master leases and management contracts with minimum guaranteed income (MCMGI), comprised 70% of 1Q 2025 gross profit [[9]].

• Master leases and MCMGI: 51% [[9]]
• Management contracts of hospitality properties: 30% [[9]]
• Management contracts of longer-stay properties: 19% [[9]]

Key Market Updates: Performance Summary

Most key markets registered growth year-on-year. Here’s a summary of 1Q 2025 RevPAU (Revenue Per Available Unit) performance [[11]]:

• Australia: AUD 175 (+4%) [[11]]
• Japan: JPY 14,264 (-11%) [[11]]
• Singapore: S\$ 183 (+1%) [[11]]
• United Kingdom: GBP 139 (+12%) [[11]]
• USA: USD 160 (+11%) [[11]]

France (all master leases) EUR 5.6 mil (+2%) [[11]]

The master lease expiry profile is well-staggered, with 69% of gross rental income expiring in 2029 and beyond [[11]].

Regional Performance Analysis

Australia: Healthy RevPAU Growth

Australia, representing 10% of CLAS’s total assets, saw healthy RevPAU growth in 1Q 2025. RevPAU for properties under management contracts and MCMGI increased by 4% year-on-year to AUD 175. On a same-store basis, RevPAU was 13% higher year-on-year. This increase was due to higher leisure demand and group bookings during the 2025 Australian Open [[12]]. The outlook for 2Q 2025 remains positive, with uplift expected from sporting events and Katy Perry concerts. Revenue from master leases was stable year-on-year [[12]].

France: Revenue Growth Following Master Lease Renewals

France, accounting for 7% of CLAS’s total assets, saw a 2% year-on-year increase in revenue, reaching EUR 5.6 million [[13]]. This was driven by higher rent from master leases renewed in October 2024 and rent indexation. The underlying operating performance of CLAS’ France portfolio improved following renovations at Citadines Les Halles Paris and La Clef Tour Eiffel Paris. A positive outlook is expected for 2Q 2025 due to large-scale events like the Paris Air Show [[13]].

Japan: Robust International Leisure Demand

Japan, with 17% of CLAS’s total assets, experienced varied performance. Overall RevPAU was 11% lower year-on-year at JPY 14,264, primarily due to the addition of the Kanazawa property, which has a lower RevPAU [[14]]. However, on a same-store basis, excluding new acquisitions and divestitures, RevPAU was 17% higher at JPY 21,393, driven by higher ADR (Average Daily Rate). International leisure bookings remained strong, with most guests from Asia. The rental housing portfolio maintained stable income with an average occupancy of over 95% [[14]]. The outlook remains robust for 2Q 2025, supported by demand during the cherry blossom season and long weekends.

Singapore: Mitigating Absence of High-Profile Events

Singapore, holding 19% of CLAS’s total assets, saw mixed results. RevPAU for properties under MCMGI and management contracts increased by 1% year-on-year to S\$183. On a same-store basis, RevPAU was 3% lower, mainly due to the absence of high-profile concerts and MICE events held in 1Q 2024. This was partially mitigated by stronger performance of The Robertson House and long stays at serviced residences [[15]]. The newly-acquired lyf Funan Singapore contributed revenue from January 1, 2025, reflecting stronger RevPAU performance. Market demand for corporate and relocation stays is expected to be subdued in 2Q 2025, while transient demand is expected to be higher [[15]].

United Kingdom: RevPAU Growth Driven by Citadines Holborn-Covent Garden London

The United Kingdom, with 11% of CLAS’s total assets, saw a 12% year-on-year increase in RevPAU to GBP 139. This was mainly driven by higher RevPAU at Citadines Holborn-Covent Garden London (CHCGL) post-AEI. Room rates at CHCGL are over 20% higher than pre-AEI 1Q 2023. Higher demand from corporate travelers also contributed to the stronger performance [[16]]. RevPAU growth in the coming quarters is expected to be supported by stronger performance at CHCGL. All properties are under MCMGI, offering downside protection and upside potential from increased lodging demand.

United States: Healthy Performance at Hotels and Student Accommodation

The United States, with 19% of CLAS’s total assets, showed healthy performance. RevPAU increased by 11% year-on-year to USD 160, driven by strong leisure demand and an increased proportion of corporate bookings [[17]]. The average leased occupancy for student accommodation properties for the academic year 2024-2025 is approximately 90% as of March 2025. Rent growth for the academic year 2024-2025 is approximately 4.5% over the previous year. In 2Q 2025, CLAS’ hotels are expected to be less impacted by negative sentiments towards the USA, given the higher proportion of domestic guests. Long holiday weekends and corporate and entertainment events are expected to provide an uplift. Limited new supply of hotel rooms is also expected to support performance [[17]].

Portfolio Updates: Proactive Investment and Reconstitution

CLAS is focused on building a stronger portfolio through proactive investment and portfolio reconstitution [[19]]. Key strategies include:

• Accretive Investments: Investing in prime locations within key gateway cities supported by strong demand drivers. [[19]]
• Asset Enhancement: Uplifting performance and valuations through AEIs. [[19]]
• Divestments: Unlocking value by divesting properties that have reached the optimal stage of their life cycle. [[19]]

Divestments and Acquisitions in 2024 and YTD 2025

CLAS completed over S\$500 million in divestments at up to a 55% premium to book value and completed accretive acquisitions of approximately S\$530 million in quality assets at higher yields [[20]].

Divestments:

• Courtyard by Marriott Sydney-North Ryde
• Novotel Sydney Parramatta
• Citadines Mount Sophia Singapore
• Hotel WBF Kitasemba East, Hotel WBF Kitasemba West and Hotel WBF Honmachi (WBF hotels)
• Infini Garden
• Citadines Karasuma-Gojo Kyoto
• Somerset Olympic Tower Tianjin (Completed on 15 Apr 2025)

Acquisitions:

• Teriha Ocean Stage
• Remaining 10% stake in Standard at Columbia
• lyf Funan Singapore
• ibis Styles Tokyo Ginza (Completed on 31 Jan 2025)
• Chisun Budget Kanazawa Ekimae (Completed on 31 Jan 2025)

Accretive Acquisition of 2 Japan Hotels in Jan 2025

CLAS acquired two freehold limited-service hotels in Tokyo and Kanazawa in Japan for JPY 21.0 billion (S\$178.5 million). The acquisition was funded by JPY-denominated debt and proceeds from the divestments of the three WBF hotels and Infini Garden in Japan in 2024 [[21]]. The blended NOI yield of 4.3% compares favorably to the blended exit NOI yield of approximately 2.0% of the divested properties. The acquisition is expected to result in a DPS accretion of +1.6% on a FY 2024 pro forma basis [[21]].

Asset Enhancement and Development Initiatives

CLAS is undertaking asset enhancement initiatives (AEIs) to uplift the value and profitability of properties in prime locations of key gateway cities [[23]]. The company completed 6 out of 8 announced AEI projects in FY 2024. Total capital expenditure of approximately S\$250 million for the 8 AEIs is partially funded by master lessee/operator. CLAS’ capital expenditure for the remaining 2 projects is approximately S\$130 million. Given the uncertain global outlook, CLAS will monitor the macroeconomic situation, lodging demand, and renovation costs, and may adjust the AEI schedules as appropriate [[23]].

Ongoing projects include:

• Development of Somerset Liang Court Singapore
• The Cavendish London (2025 to 2026)
• Sydney Central Hotel (2025 to 2026)

Sustainability Highlights

CLAS is aligned with CapitaLand Investment’s 2030 Sustainability Master Plan (SMP) [[24]]. Key highlights include:

• ‘Industry Mover’ in the S&P Global Sustainability Yearbook 2025. [[24]]
• Global Listed Sector Leader – Hotel in GRESB for the 4th consecutive year. [[24]]
• Ranked #1 in the Singapore Governance and Transparency Index (REITs and Business Trusts) for the 4th consecutive year. [[24]]
• ‘Negligible Risk’ ESG risk rating from Sustainalytics. [[24]]
• Constituent of iEdge-UOB APAC Yield Focus Green REIT Index and iEdge-OCBC Singapore Low Carbon Select 50 Capped Index. [[24]]

CLAS has approximately S\$830 million in sustainable financing to date. In 2024, CLAS was the first lodging trust to secure an OCBC 1.5°C loan [[24]].
CLAS’ sustainability report is externally assured in accordance with ISAE 3000. The company is working towards 2030 reduction targets, including carbon emissions intensity by 72%, energy consumption intensity by 15%, and water consumption intensity by 15% (using 2019 as a base year) [[24]].

Capital and Risk Management

CLAS maintains a strong financial and liquidity position [[26]]. Key metrics include:

• Gearing: 39.9% (approximately S\$1.7 billion debt headroom) [[26]]
• Unencumbered Property Value: 67% [[26]]
• Interest Cover: 3.2X [[26]]
• Effective Borrowing Cost: 2.9% per annum [[26]]
• NAV per Stapled Security: S\$1.11 [[26]]
• Hedged Assets: 49% of total assets in foreign currency hedged [[26]]
• Available Funds: Approximately S\$1.43 billion, comprising cash on-hand and available credit facilities [[26]]

CLAS has a BBB rating from Fitch Ratings (Stable Outlook). The company has a well-staggered debt maturity profile and diversified funding sources [[27]]. Approximately 76% of total debt is on fixed rates. The weighted average debt to maturity is 3.5 years. The debt breakdown by currency is JPY 42%, USD 19%, SGD 16%, EUR 13%, GBP 9%, and KRW 1% [[27]].

Looking Ahead: Navigating Macroeconomic Uncertainties

CLAS is prepared to navigate macroeconomic uncertainties, including interest rate and foreign currency volatility, reduced lodging demand, and higher costs [[29]]. The company’s diversification and stable income sources cushion the impact from tariffs. Strategies to mitigate these risks include:

• Leaner cost structures compared to full-service hospitality properties. [[29]]
• Flexibility to adjust room rates to mitigate inflationary pressures. [[29]]
• Cost management, including deferring non-essential capital expenditure. [[29]]
• Stable income sources comprising 60% – 70% of CLAS’ gross profit. [[29]]
• Diversified guest mix across corporate, leisure, international, and domestic segments. [[29]]
• High proportion of debt effectively on fixed rates. [[29]]
• Geographical diversification with 12 foreign currencies. [[29]]

CLAS remains committed to delivering stable distributions to Stapled Securityholders through resilient operating performance, portfolio reconstitution, asset enhancement, and capital management [[30]].