Ascott Residence Trust purchased a 224 room hotel near New York’s Times Square in the Singapore-listed REIT’s third New York hospitality acquisition in under two years, according to an announcement today by Ascott Residence Trust Management (ARTML), which manages the S$5.3 billion listed vehicle.
Ascott REIT is buying the DoubleTree by Hilton Hotel New York – Times Square South for $106 million from a subsidiary of Rhode Island-based hotel investment and management firm Magna Hospitality Group, to add to its portfolio of 75 hotel, serviced apartment and other hospitality properties in 14 cities globally.
The REIT manager, which already bought a Times Square area hotel in 2015, sees its new Manhattan property as likely to benefit from its location near New York’s $30 billion Hudson Yards project, as US assets account for a growing share of the listed trust’s income.
Getting a 6% Yield in New York
Ascott is making its latest New York deal at a 6.0 percent yield, according to a statement by the REIT manager, with the price working out to $473,214 per key for the upscale business property.
Robert A. Indeglia’s privately-held Magna Hospitality Group had purchased the 25-storey building in November 2011 for $91.5 million, according to information from real estate data provider Real Capital Analytics. The Midtown property had been valued at $109 million by JLL earlier this month.
The Singaporean hospitality REIT is counting on a combination of Times Square’s 40 million annual visitors and an upswing in business from the 5.8 million square feet of offices planned or under construction at Hudson Yards to provide steady demand for rooms at its new property.
“The property has a good mix of corporate and leisure guests, and has been achieving strong performance since its opening in 2008, said Beh Siew Kim, ARTML’s chief executive officer. She added that, “We expect demand for the property to increase as the nearby Hudson Yards, the largest private development in the US, progressively opens.” Hudson Yards opened its first office tower a year ago, with the project expected to be completed by 2025.
Following the transaction the hotel will continue to managed by CM 36 under the DoubleTree by Hilton brand.
The REIT manager expects the new asset to increase Ascott Reit’s pro forma distribution income in FY 2016 by US$0.9 million (S$1.2 million1), translating to a rise in distribution per unit from 7.23 cents2 to approximately 7.29 cents on a pro forma basis, according to a statement to the stock exchange. The acquisition is expected be funded by bank loans, perpetual securities or a combination of the two.
Singapore REIT Loves NY
Ascott REIT’s acquisition of the DoubleTree by Hilton follows its $158 million purchase of the Sheraton Tribeca New York Hotel in March 2016, and its $163.5 million deal for the 411-key Element New York Times Square West hotel in Midtown in July 2015. The three Manhattan properties give the REIT a combined 1,004 units in New York.
“The US market was our top contributor to revenue in 2016 and 1Q 2017. Acquisition of yet another quality property in Manhattan would strengthen our foothold in New York, which saw record high visitor arrivals in 2016,” said ARTML chairman Bob Tan. Following the acquisition, 12.3 percent of the REIT’s assets are in the US, making it the listed trust’s fourth largest market after Singapore, Japan and mainland China, respectively.
Tan added that “Manhattan has the strongest performing hotel market in the US with the highest revenue per room,” while noting that “We will continue to seek opportunities to acquire a scalable portfolio of stable, operating assets in key gateway cities in the US.” The REIT manager also says that it is actively looking for properties in gateway cities in Australia, Japan and Europe.