Ascott Residence Trust said Monday it has agreed to sell the Ascott Guangzhou and the Citadines Didot Montparnasse Paris serviced apartments for S$191.4 million ($138.8 million) as the Singapore-listed real estate investment trust seeks to monetize assets despite the COVID-19 pandemic ravaging the global hospitality industry.
The unit of Singapore-government linked real estate giant CapitaLand will book an extraordinary gain of S$23.2 million from the transactions.
That cash haul may provide a welcome boost for ART, which warned earlier this month that the REIT’s income distribution in the first half of 2020 will drop between 65 percent and 75 percent due to the economic fallout from the pandemic.
“Despite the COVID-19 situation, the opportunistic sale of Ascott Guangzhou and Citadines Didot Montparnasse Paris at an attractive price allows ART to rejuvenate its portfolio and unlock the strong underlying value of these properties,” said Beh Siew Kim, CEO of ART’s manager. He added that, “The proceeds may also be used to pare down ART’s debt and reduce its gearing, as distribution to stapled securityholders, or for general corporate purposes.”
Limited Growth Prospects for Ascott Guangzhou
ART said it has agreed to sell the Ascott Guangzhou to an unidentified buyer for RMB 780 million ($111.4 million) or 52 percent above the property’s book value. The investment vehicle will record an exceptional gain of S$19.4 million once the sale of the property in the capital of southern China’s Guangdong province is completed in the first quarter of 2021.
The trust, which has over S$7 billion of serviced apartment assets under management globally, said it decided to divest the property to avoid spending on needed improvements as growth prospects dim in the current environment.
“To maintain the performance and competitiveness of the property, it is expected that additional capital expenditure will be required in the near future,” the trust’s manager said. “Given that the growth prospects of the property are limited due to changes in the operating environment, any capital expenditure at this time would not be prudent.”
ART had purchased Ascott Guangzhou from its sponsor, The Ascott Limited in 2012 for RMB 431 million. The 207-unit serviced residence is located within walking distance of the Shipaiqiao subway station in the Chinese port city’s Tianhe financial district, where the project sits directly opposite Swire Properties’ Taikoo Hui shopping mall along Tianhe East Road.
Following the sale of Ascott Guangzhou, ART still owns and manages over 1,200 rooms across six other properties in China including the Somerset Grand Central Dalian, Somerset Heping Shenyang, Somerset Olympic Tower Tianjin and Somerset Xu Hui Shanghai.
ART said it also agreed to sell the Citadines Didot Montparnasse Paris for 23.6 million euros ($27.6 million) to an unidentified buyer, with that price ranking 69 percent above the property’s book value. The transaction, which is expected to be completed in the fourth quarter of 2020, will result in ART realising an exceptional gain of S$3.8 million.
Following the sale, ART will still own and operate over 1,500 rooms across 16 properties in France. The Citadines Didot Montparnasse Paris was one of 28 properties ART acquired from The Ascott Limited for a total sum of S$1.39 billion in 2010.
Ongoing Asset Renewal
The disposals fit with ART’s custom of regularly divesting assets as the trust, which owns and operates over 16,000 rooms across 39 cities in 15 countries across Asia, Europe and the US looks for opportunities to redeploy capital into acquiring fresh properties.
In January 2019, the company sold the historic 20-storey Ascott Raffles Place Singapore to Singaporean property tycoon Cheong Sim Lam for S$353.3 million. Eight months later, ART bought a freehold serviced residence project in Sydney for S$192 million.
“In 2019, in line with ART’s strategy to continuously enhance the portfolio, we have unlocked more than S$200 million in net gains and added approximately S$1.9 billion in asset value through the acquisition of quality assets,” Beh said. “During these uncertain times, we will continue to be prudent in managing our capital and cash flow, as well as ensure that ART remains resilient with its geographically diversified portfolio focused on the long-stay segment.”
In its home city of Singapore, ART is working together with CapitaLand and City Developments Ltd to redevelop the Liang Court shopping complex in Clarke Quay, a conserved historical landmark along the Singapore River on the fringe of the central business district.
The partners will invest S$300 million to redevelop the property, which will have two residential towers, a 475-room hotel and a 192-serviced apartment component when completed. The project will open in phases starting from 2024.