Capitaland Ascott Trust 2H 2024 Payout Falls 7% Despite Revenue Uptick

CapitaLand Ascott Trust’s (CLAS) unitholders earned 7 percent less from their securities in the second half of 2024, as foreign exchange losses and higher interest rates weighed on returns, despite higher revenue.

The Singapore-listed hospitality trust’s distribution per stapled security (DPS) fell in the second half of 2024 to 3.55 Singapore cents from 3.80 Singapore cents in the first half of the year. The decline in payout comes despite the trust’s gross profit growing 8 percent to S$198 million ($147.4 million) during the final six months of the year. Revenue also increased 6 percent to S$423.2 million during the period.

CapitaLand Ascott Trust’s managers, which are owned by Temasek-controlled CapitaLand Investment, attributed the lower distributions in part to foreign exchange losses arising mainly from debt repayment. The trust, which holds a portfolio dominated by Asia Pacific locations, with additional assets in Australia, France, and the United States, also incurred higher financing costs during the period.

As the trust continues to reconstitute its portfolio in favour of higher grade hospitality assets and longer-stay apartments, while also investing in improvements to existing properties, Serena Teo, CEO of CapitaLand Ascott Trust’s managers said there may be some near-term unevenness in the trust’s operational income due to divestments or properties undergoing enhancements.

“However, these efforts will enhance CLAS’ income and generate more value to stapled securityholders over time, as we have seen from properties that have completed AEIs such as Citadines Holborn-Covent Garden in London and The Robertson House by The Crest Collection in Singapore,” Teo said in a release on Friday,

Steady Core

The trust, which holds a portfolio composed 46 percent of serviced apartments, including properties under CapitaLand’s Ascott, Somerset, Quest, Citadines and Lyf brands, saw foreign exchange losses soar to S$14.3 million in the last six months of 2024, reversing the S$11.5 million in gains that it enjoyed during the same period in 2023.

The foreign exchange losses came as the REIT’s divestments jumped to over S$500 million last year from S$260.1 million a year earlier.

In October 2024, CapitaLand Ascott Trust completed its S$53.1 million divestment of the Citadines Karasuma-Gojo Kyoto to Hilton Grand Vacations, as well as its sale of the Infini Garden a rental housing property in Fukuoka to Goldman Sachs for S$108 million.

The trust also sold a pair of Australian properties, including the Novotel Sydney Parramatta, for a total of A$109 million (now $68.6 million) in September last year. CapitaLand Ascott Trust ended the year with a portfolio of 100 properties across 16 countries.

Higher interest rates also caused its finance costs to rise by 15 percent to S$51.7 million in the second half of the year.

These expenses led to a 4 percent decrease in CapitaLand Ascott Trust’s total distribution in the second half of 2024, despite a 3 percent increase in its core DPS, which excludes non-periodic items relating to loan repayment and currency exchange, during the period.

Revenue per available unit (REVPAU) grew 6 percent to S$167 in the second half of 2024, with that figure rising 9 percent in the final quarter to S$176, on higher daily rates and occupancy that climbed to 81 percent from 77 percent in the same period in 2023.

Portfolio Reshuffle

The REIT reported 9 percent annual revenue growth for 2024, reaching S$809.5 million, and a 10 percent increase in gross profit to S$370.9 million. The managers said the gains were due in part to contributions from newly acquired properties and existing assets which had been upgraded or improved.

Including the finalisation of its S$263 million purchase of the lyf Funan Singapore hotel last month, CapitaLand Ascott Trust completed three acquisitions in 2024. That deal followed its June buy of the remaining 10 percent stake in the Standard at Columbia, a student housing project in South Carolina in a deal which valued the asset at S$139.3 million and its January acquisition of Teriha Ocean Stage – a rental housing property in Fukuoka, Japan for S$82.6 million in January 2024.

Analysts said the trust’s portfolio rebalancing is positive for its long-term growth and sustainability despite dips like the period’s decline in distribution, with Maybank equity analyst Krishna Guha saying that the bank maintains a buy rating for the REIT following the financial report disclosure.

Bank of Singapore senior research analyst Andy Wong characterised the trust’s portfolio as resilient and well-diversified, with exposure to geographies in different stages of recovery.

“While discretionary travel spending is subject to the ebbs and flows of the economic cycles – and looks set to normalise as pent-up travel demand post-pandemic fizzles out – we take comfort in the fact that CLAS has exposure to long-term stay properties like student accommodation in the US and rental housing in Japan, for which demand is less likely to be affected by any weakening in the broad macroeconomic outlook,” Wong said.

In addition to its serviced apartment holdings, as of 31 December, 37 percent of CapitaLand Ascott Trust’s portfolio consisted of hotels, 17 percent longer-stay accommodation, 11 percent student accommodation and 6 percent rental housing.

Note: This story has been updated to clarify the origins of CapitaLand Ascott Trust’s foreign exchange losses and the nature of the higher finance costs reported during the period. The new version also clarifies that the A$109 million in Australian disposals was for two properties. Mingtiandi regrets the errors.