CapitaLand Ascott Trust Sells Citadines Kyoto Asset to Hilton for $42M

CapitaLand Ascott Trust has sold a serviced apartment block in Japan’s ancient capital of Kyoto to Hilton’s vacation-home brand for JPY 6.2 billion ($42 million).

The 124-unit Citadines Karasuma-Gojo Kyoto was divested at 40.1 percent above its book value and at an exit EBITDA yield of 0.3 percent, the Singapore-listed REIT’s managers said Wednesday in a release. The buyer, Hilton Grand Vacations, plans to convert the property into 63 one-bedroom timeshare units for sale.

The disposal of the 2010-vintage Kyoto property is in line with CLAS’s active portfolio reconstitution strategy, said the managers, which are owned by Temasek-controlled CapitaLand Investment. The deal follows the trust’s $111 million sale of the 154-unit Citadines Mount Sophia in Singapore’s Bugis area earlier this year and $204 million buy of the 329-room Lyf Funan Singapore announced last week.

“The mature property has reached the optimal stage of its lifecycle,” said Serena Teo, CEO of the managers. “We plan to redeploy the divestment proceeds into higher-yielding investments to further grow our returns to stapled securityholders.”

Strong Investor Appetite

Citadines Karasuma-Gojo Kyoto will be Hilton Grand Vacations’ first property in Kyoto and third overall in Japan, the company said in a release. It previously opened two Hilton clubs, The Bay Forest Odawara in 2018 and The Beach Resort Sesoko in 2021.

Renovation of the Kyoto asset is expected to begin in the second quarter of 2025 and conclude in the first quarter of 2026, with sales starting next year. JLL assisted in brokering the transaction between Hilton Grand Vacations and CLAS.

“We continue to see strong appetite from global investors for Japanese hotel assets with vacant possession and upside capital expenditure potential,” said Charlie Macildowie, executive vice president for APAC investment sales in JLL’s hotels and hospitality group. “The attractiveness of the Japanese hotel market is a defining story for cross-border investors in 2024 and we expect momentum to remain high.”

After Kyoto welcomed a record 75 million tourists in 2023, the city has played host to some notable hospitality deals this year, including AXA IM Alts’ JPY 6.8 billion ($44 million) purchase of a 13-storey property that the French investor is repositioning as the Holiday Inn Kyoto Gojo, with the 183-key hotel set to be completed in early 2025.

In July, AB Capital announced its acquisition of the Randor Residential Hotel Kyoto Suites, an apartment-hotel, as part of a deal in which the Hong Kong-based fund manager also picked up the Randor Hotel Namba Osaka Suites.

Still Seeking Opportunities

CLAS’s net proceeds from the Kyoto divestment amount to JPY 4.4 billion, with the REIT recognising a net gain of JPY 900 million. Elsewhere in Japan, the trust completed the acquisition of Teriha Ocean Stage, a Fukuoka rental housing property, in January at an expected net operating income yield of 4 percent.

“Japan remains a key market for CLAS and is one of our strongest-performing markets,” Teo said. “We continue to seek opportunities to strengthen our portfolio in Japan.”

Post-divestment, CLAS will have 29 Japan properties including serviced residences, hotels, rental apartments and student housing assets across the key markets of Tokyo, Osaka, Fukuoka, Hiroshima and Sapporo.

In another recent disposal, the Ascott Serviced Residence Global Fund, a joint venture of CapitaLand Investment’s The Ascott Ltd and the Qatar Investment Authority, sold the Lyf Ginza Tokyo hotel to Singapore’s Invictus Developments for an undisclosed price in a deal also brokered by JLL.