Singapore’s CapitaLand Sets Up $600M APAC Co-Living Fund

CapitaLand Investment (CLI) aims to raise as much as $600 million for a newly established Asia Pacific fund targetting serviced residence and co-living opportunities which it is seeding with a pair of assets from its Ascott lodging division, the Singapore real estate giant said on Wednesday.

CapitaLand Ascott Residence Asia Fund II (CLARA II), which targets key cities across Asia Pacific, has already achieved a first closing on an unspecified amount of capital, through backing from both European and Asian institutional investors, CapitaLand said.

The new vehicle will be seeded with two co-living properties to be acquired from Ascott, including a half stake in Singapore’s Hotel G, which the lodging operation and investment firm acquired from Hong Kong’s Gaw Capital in a 50:50 joint venture with CapitaLand Wellness Fund, a Southeast Asia-focused private vehicle which Capitaland set up in October.

“CLARA II will target markets that have strong economic fundamentals and transparent regulations,” said Mak Hoe Kit, managing director for lodging private equity funds at CLI. “We see good investment and value-add opportunities in these key developed Asia Pacific markets.”

Seeded with Ascott Assets

CLI said it will retain a 20 percent stake as sponsor of the new fund while third-party investors will hold the remaining 80 percent. A company representative declined to disclose details of the investors but said they “include new relationships for CLI’s private funds business.”

The new vehicle is being established as a follow-on fund to the Ascott Serviced Residence Global Fund (ASRGF) set up by Ascott Ltd as a 50:50 joint venture with the Qatar Investment Authority in 2015.

After raising $600 million that strategy was fully deployed by 2022, with the partners acquiring Lyf Ginza Tokyo that year as the last addition to its portfolio. That 140-unit property opened in November of last year and “has since exceeded its average target rent, according to Mak.

The new fund will start off with 308 rooms from the Hotel G, with that property near Singapore’s Bugis area valued at S$240 million, or S$779,220 per key, when Ascott and CapitaLand Wellness Fund bought it from Gaw Capital Partners last month. The new owners are already at work making enhancements to the budget hostelry, which they plan to rebrand as Lyf Bugis Singapore when it reopens in mid-2025.

The second seed asset in CLARA II’s portfolio is Lyf Shibuya Tokyo, with the fund acquiring that 200-unit Japanese property from Ascott for an unspecified amount.

The Tokyo property is one of eight new Lyf locations Ascott announced last month, and is scheduled to open within a five-minute walk of Shibuya station during the fourth quarter.

With Ascott managing the assets, Kevin Goh, chief executive officer for Ascott and CLI Lodging, said they expect CLARA II’s portfolio to benefit from the company’s established network as well as the growing preference among travellers for trusted accommodation brands.

“This enables us to enhance the value of the assets and deliver sustainable returns to investors. Investors will further benefit from the strong demand for lodging as international travel continues its upward trajectory,” Goh said.

European Lodging on the Itinerary

Focusing on providing premium long-stay accommodation with flexible leasing durations, Mak said serviced residences and co-living assets have piqued investor interest due to their ability to generate stable income in the face of changing market conditions.

“With trends such as increased global mobility, co-living becoming mainstream and travellers spending more time overseas, the sector is strategically positioned to offer attractive returns,” he added.

Beyond Asia Pacific, Goh said CLI is also looking at establishing lodging private funds in Europe and other regions.

Including projects under development, Ascott has more than 5,500 units under its Lyf brand across 30 properties globally, with the majority located in its home city in Singapore. By 2030, the firm aims to grow that co-living portfolio by more than fivefold to 30,000 units across 150 locations.