Singapore-listed Ascendas Hospitality Trust has made its first foray into South Korea with a 73 billion won ($68.3 million) deal for a 215-room hotel in Seoul.
The trust, which already owns a portfolio of 11 hotels with over 4,000 rooms across Australia, China, Japan and Singapore, is picking up a 98.7 percent stake in the KY-Heritage Hotel Dongdaemun, while the trust’s sponsor Ascendas (Korea) Pte Ltd takes the remaining stake. Ascendas Hospitality Trust will pay $67.2 million for its interest in the property, located in the retail and tourism hotspot of Dongdaemun.
The vendor is Seoul-based KY-Development Co, which completed the 20-storey hotel in 2015. Ascendas Hospitality Trust is managed by subsidiaries of Singaporean developer Ascendas-Singbridge Group.
Seoul Hotel Generates 4.1% Yield
The hotel is changing hands at a price 3.2 percent cheaper than its latest valuation, equating to a pro forma net property income yield of 4.1 percent. Accendas Hospitality Trust said the purchase, which awaits regulatory approval in Korea, is expected to take place by June and would be fully funded by debt.
The hotel, which is currently owner-operated, will be managed by “an established regional hotel management company” after completion of the deal. “We believe there is potential to enhance asset value through rebranding and repositioning,” Tan added.
The hotel is located at 226 Jangchoongdan-ro, Jung-gu, above the Dongdaemun History & Culture Park subway station on lines 2, 4 and 5. Sitting on freehold land, the property is down the street from the Dongdaemun Design Plaza, a landmark exhibition and retail space, and the Doota Mall shopping complex.
Equipped with a restaurant, cafe, conference rooms and a gym, the hotel is poised to benefit from a steadily improving hospitality market in Seoul, driven by efforts to foster tourism and slower growth in the supply of rooms. Revenue per room is projected to see a compound annual growth rate of 4.9 percent over the decade through 2028, according to an analysis by CBRE Korea of a competitive set of hotels nearby the newly traded asset.
Ascendas-Singbridge Checks into Korean Hospitality Market
Ascendas-Singbridge is an active investor in Korea, with around $591 million of office and commercial assets under management in the country, after buying ICON Yeoksam, a mid-rise office building in Seoul’s Gangnam district through a new fund last November.
The firm’s Ascendas Hospitality Trust, a stapled group comprising the Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust, was listed in 2012 and currently manages a S$1.6 billion ($1.2 billion) portfolio across key cities in Asia.
This past January, the vehicle sold a pair of Beijing hotels to a joint venture of US private equity firm TPG and NASDAQ-listed China Lodging Group – also known as Huazhu Hotels – for a total of RMB 1.18 billion ($186 million).