Ascott REIT Adding Five Properties to Japan Portfolio for $90M

After amassing a portfolio of US student housing assets throughout 2021, Ascott Residence Trust has turned its attention to Japan with the acquisition of five freehold properties for a combined JPY 10.4 billion ($90 million).

The Singapore-listed REIT has agreed to buy a rental housing property in Fukuoka, along with three more multifamily assets and a student accommodation complex in Osaka, the trust’s managers said Wednesday in a release. Serving the main campus of Kindai University, the student accommodation property is ART’s first such asset in Japan.

The deals with two separate, unnamed sellers are expected to close between the first quarter of 2022 and the second quarter of 2023 as the trust sponsored by Ascott Ltd, a rental housing unit of property giant CapitaLand, shifts towards longer-stay assets as its traditional serviced apartment theme continues to suffer from the downturn in international travel.

“Post-acquisition, on a pro forma basis, ART’s longer-stay properties are expected to contribute 17 percent to gross profit, up from 15 percent in FY 2021,” said Beh Siew Kim, chief executive of the trust’s managers. “As the five properties will be acquired on a turnkey basis, there is no development risk. Minimal down payment is required, and majority of the payment will be made upon completion of the transactions.”

Heavy Enrolment

The student accommodation property, called Eslead College Gate Kindaimae, comprises 112 studio apartments and sits a two-minute walk from private Kindai University and its 30,000 undergraduate students, who form the highest enrolment in Osaka and fourth highest in Japan. The asset will be managed by a major student accommodation operator based in the country.

The three rental housing properties in Osaka are known as Bentencho 5chome, Nakatsu 4chome and Sagisu 5chome and will offer 120, 70 and 108 studio units under the management of third-party operators when they open. Centrally located in Japan’s third most populous city, each of the three assets is an 11-minute walk or shorter from a metro station.

The multi-family asset in Fukuoka, dubbed Japan’s fastest-growing city with a population of 1.6 million, will offer 247 units in a mix of studios and one-bedroom apartments near the Hakata waterfront. All four of the rental housing properties have leases of about two years in length, ART said.

Upon completion of the five acquisitions, ART will have 2,500 units across 19 rental housing and student accommodation properties in Japan — including three rental housing assets in Sapporo acquired last year — plus more than 2,600 units across eight serviced residences and hotels in the country.

“ART’s existing rental housing properties in Japan have achieved a strong average occupancy rate of over 95 percent in 2021 despite COVID-19,” Beh said.

Steady Income

Last December, ART announced that it was doubling its US student accommodation portfolio to eight assets with the acquisition of four properties across the states of Pennsylvania, North Carolina and Ohio for $213 million.

The acquisition followed four separate transactions totalling $303.5 million to add US student housing assets since the start of 2021, with ART seeking dependable income streams as its hospitality-heavy portfolio reeled from the COVID-19 pandemic.

ART is the largest hospitality trust in Asia Pacific, with an asset value of S$7.7 billion ($5.6 billion) at the end of 2021.

The SGX-listed REIT’s portfolio comprises 93 properties with 17,000 units in 43 cities across Asia Pacific, Europe and the US, mostly operating under the Ascott The Residence, Somerset, Quest and Citadines brands.