CapitaLand Ascott Trust divests two hotels in Australia for A$109.0 mil

CapitaLand Ascott Trust to acquire lyf one-north Singapore in $82m deal

CapitaLand Ascott Trust (CLAS) announced that it is divesting two hotel properties in Sydney, Australia, for a total of A$109 million ($95.6 million). The two properties, Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, are expected to be completed by 1Q2024 and 3Q2024 respectively, and the divestment will see CLAS net proceeds of A$98 million.

The exit yield for the two hotels is 4.4% based on CLAS’s FY2022 ebitda, and a net gain of A$14.2 million will be realised. According to CEO Serena Teo of the its managers, the divestment is part of the active portfolio reconstitution strategy, and capital raised will be used to pay down debt and fund other asset enhancement initiatives (AEI) such as upgrading.

Teo further noted that the divestment yield is attractive when compared against the current cost of borrowing in Australia. CLAS had recently divested four mature serviced residences in regional France at an exit yield of approximately 4%. The proceeds from the divestment will also partially finance its acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%, which will enhance the returns to stapled securityholders.

Despite the divestment, Australia remains a major market for CLAS. Teo suggests that the trust’s remaining seven serviced residences and hotels under management contracts will benefit from the travel demand, while its five serviced residences under master leases will provide a stable income.

In its 3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS’s properties in Australia was A$152, a rise of 18% from the previous year, which beats the 3QFY2019 pro forma RevPAU by 13%.

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The divestment of these mature Australian assets further cements CLAS’s portfolio reconstitution strategy and provides the trust with an opportunity to reinvest in higher yielding investments. This move will potentially generate greater returns for stapled securityholders, enabling CLAS to remain competitive in the market while benefiting from the Australia’s strong travel demand.