CapitaLand Ascott Trust Selling Central Tokyo Hotel to Mizuho Leasing for $166M

CapitaLand Ascott Trust continues to make moves to enhance its portfolio, with the Singapore-listed lodging REIT announcing a deal Thursday to sell an ageing hotel in central Tokyo for JPY 25 billion ($166 million).

Japan’s Mizuho Leasing is buying the 206-key Citadines Central Shinjuku Tokyo at a 100 percent premium to book value and a 40.4 percent premium to the average of two independent valuations, according to the trust’s managers, which are owned by Temasek-controlled CapitaLand Investment. CLAS expects the disposal to generate a net gain after tax of JPY 5.7 billion and net proceeds of JPY 21 billion.

The Mizuho affiliate — which on several occasions has acted as an intermediary to purchase properties on behalf of Tokyo-listed REITs — is set to pay JPY 121.3 million ($805,667) per key for the 2008-built hotel, which CLAS acquired in 2014 for JPY 8 billion and has never refurbished.

“After evaluating the property’s age, substantial capital expenditure required and the potential income loss during renovation, we are proposing to divest Citadines Central Shinjuku Tokyo at this opportune time,” Serena Teo, CEO of the trust’s managers, said in a release. “It will enhance our financial flexibility to further optimise our portfolio.”

Japan Still Key

Located in Shinjuku ward’s Kabukicho nightlife zone, Citadines Central Shinjuku Tokyo enjoys a range of nearby retail, dining and entertainment options and sits within a 10-minute walk of JR Shinjuku rail station. CLAS estimates an exit yield of 3.2 percent based on 2024 earnings before interest, tax, depreciation and amortisation.

As part of the trust’s portfolio reconstitution strategy, the divestment will enable CLAS to redeploy capital to more effective uses like repaying debt, funding asset enhancement initiatives and reinvesting in higher-yielding properties, the managers said.

The first half saw CLAS’s rental housing portfolio continue to generate stable income with an average occupancy rate exceeding 95 percent, according to the managers. Both revenue and gross profit from the trust’s Japan properties rose 12 percent year-on-year during the period.

After completing the sale of Citadines Central Shinjuku Tokyo in the fourth quarter, CLAS expects Japan to contribute 16 percent of the REIT’s gross profit. The portfolio’s 29 remaining assets in the country include one serviced residence, four hotels, 23 rental housing properties and a student accommodation facility.

“Japan remains a key market for CLAS,” Teo said. “The country’s rising pace of urban migration and limited supply of prime housing options bode well for our rental housing assets, strengthening our resilient income base.”

Portfolio Revamp Continues

CLAS on Tuesday posted a 6 percent year-on-year jump in first-half gross profit to S$182.5 million ($141.8 million) as the managers credited stronger operating performance, portfolio reconstitution and asset enhancement initiatives at Asia Pacific’s biggest lodging REIT.

The trust reworked the portfolio in 2024 with the acquisitions of Teriha Ocean Stage, a rental housing property in Japan’s Fukuoka; Standard at Columbia, a South Carolina student housing asset; and Lyf Funan Singapore, a hotel in the city-state’s downtown; as well as disposals including Citadines Mount Sophia in the Bugis area and three Osaka hotels.

The moves continued earlier this year with the purchase of two Japan hotels, Ibis Styles Tokyo Ginza in the capital’s retail and entertainment hub and Chisun Budget Kanazawa Ekimae on Honshu island’s western coast.

In January, Mizuho Leasing agreed to sell the Hilton Fukuoka Sea Hawk to Japan Hotel REIT, the hospitality trust managed by Singapore-based SC Capital Partners, for JPY 64.4 billion ($420 million).

The Mizuho affiliate had acquired the 1,053-key property from Singapore sovereign giant GIC last September in a $452 million transaction representing Asia Pacific’s biggest single-hotel deal during the fourth quarter, according to data provider MSCI.