CapitaLand Ascott Trust Selling Osaka Hotels to Alyssa-Managed Fund for $75M

CapitaLand Ascott Trust announced on Sunday that it will divest three hotels in Osaka for JPY 10.7 billion ($75 million) as part of what the Singapore-listed REIT described as a portfolio reconstitution effort.

CLAS said in a press release that it will divest Hotel WBF Honmachi, Hotel WBF Kitasemba East and Hotel WBF Kitasemba West in a transaction expected to close in January 2024. The REIT added that the sale would allow CLAS to realise a net gain of JPY 1.1 billion, with the transaction pricing the three assets at 15 percent above their collective book value.

“The divestment of the three properties is part of our active portfolio reconstitution strategy,” said Serena Teo, chief executive officer of Capitaland Ascott Trust. She added that, “…the divestment enables CLAS to unlock the value of the properties, redeploying capital to assets and/or asset enhancement initiatives that can generate stronger yields, uplifting the overall value of our portfolio.”

The trust’s manager is selling the properties in central Osaka’s Chuo ward to an Alyssa Partners-managed fund backed by an unnamed offshore investor, according to market sources who spoke with Mingtiandi.

Prime Locations

Having all been completed in 2018, the trio of hotels has a total of 518 keys with each asset located within a 15 minute’s drive of Osaka castle. All three are managed by Hotel WBF, a local chain that operates properties in Osaka, Hokkaido, and Fukuoka.

A representative of the REIT’s manager told Mingtiandi that, due to the pandemic, two of the hotels have been closed since the first half of 2020. The third asset, Hotel WBF Honmachi, also halted operations from January until September this year, according to a statement from the hotel’s operator.

The hotels are situated close to Yumeshima, an artificial island which will host the 2025 World Expo starting in April 2025. The area will also be home to the country’s first casino, which is scheduled to open in 2029.

“There is no shortage of international investors that would seek out such an opportunity of well-located properties in Osaka,” said Dan Voellm, chief executive officer of AP Hospitality Advisors. “Funds and family offices alike may find this a compelling opportunity, drawn by the low yen and positive net yields.”

The trust’s manager noted that it will continue to pursue opportunities to invest in Japanese lodging assets, especially as tourism in the country rebounds.

“Japan remains an attractive market for CLAS.  Its strong tourism sector receives robust demand from both international and domestic sources,” said Teo. “The overall positive demand-supply dynamics bode well for our portfolio of hospitality and longer-stay assets in Japan.”

According to a report from the Japanese National Tourism Organisation, the country welcomed 2.5 million visitors in October, over twice as many as during the same month in 2019.

Once the divestment is finalised, CLAS will own around 30 Japanese properties comprising hotels, rental housing, and student accommodation assets. In the July to September period, the trust’s serviced residences in the island nation recorded revenue per available unit (RevPAU) of JPY 13,804, almost three times as much as during the same quarter last year.

Alyssa Partners declined to comment when contacted by Mingtiandi.

Debt Reduction

Prior to this latest disposal, CLAS sold a set of French properties for S$64.7 million ($49 million) in September, and then exited a pair of Australian assets in November for A$109 million ($71 million). From 38.6 percent in June the trust lowered its gearing ratio to 35.2 percent in September, giving it debt headroom of around S$2.3 billion as of 30 September.

During the first half of the year the trust’s finance costs jumped 26 percent to S$37.8 million from the equivalent period last year, according to its first half financials.

Within 2024 the trust will need to refinance S$496 million worth of debt, accounting for 18 percent of their total borrowings.

At the close of trading on Monday, equity in CLAS was trading at S$0.96 per unit, down by 1 percent from the closing price of S$0.97 on Friday.