CapitaLand Ascott Trust to Buy Hotels in London, Dublin, Jakarta for $268M

Singapore-listed CapitaLand Ascott Trust plans to buy a pair of hotels in Europe and a serviced apartment building in Southeast Asia for a total of S$357.8 million ($267.5 million) as it moves to profit from a global travel rebound.

The SGX-listed REIT signed a memorandum of understanding with its sponsor, The Ascott Ltd, the hospitality and rental housing division of property giant CapitaLand’s investment arm, to buy a hotel each in London and Dublin, along with a serviced residence in Jakarta, according to a disclosure on Wednesday.

“Our accretive acquisition of the three prime lodging assets will enhance the quality and yield of CLAS’ (CapitaLand Ascott Trust) portfolio,” said Serena Teo, chief executive officer of the REIT manager. “They are well-positioned to capture travel demand and the expected growth trajectory of these assets will continue to strengthen CLAS’ income streams.”

Asia Pacific’s largest lodging trust is scheduled to ink sale and purchase agreements for the properties with The Ascott Ltd by 30 November.

Ireland Debut

Together the three assets total 551 keys and the largest among the trio is the 230-room Cavendish London hotel in the West End’s affluent Mayfair district, which the trust has agreed to purchase for GBP 116.3 million ($148.7 million) or about GBP 505,650 per key.

Located at 81 Jermyn Street, St James, the 1964-vintage hotel is within 10 minutes’ drive of famous tourist destinations like Buckingham Palace, Big Ben and Trafalgar Square, with the REIT planning to renovate and rebrand the property under its Ascott, The Crest Collection luxury brand.

The manager said that it expects to make improvements to the Cavendish London that could increase its valuation by nearly 50 percent to GBP 316 million once the property is stabilised in 2027, from GBP 217 million as of end-June. Renovations of the hotel would be rolled out in phases starting in the fourth quarter of next year and continuing through the fourth quarter of 2025.

The manager of CapitaLand Ascott Trust has agreed to buy the 136-key Temple Bar Hotel in central Dublin for EUR 70 million ($76.9 million) or EUR 514,700 per room, marking the REIT’s entry into Ireland.

“London has been one of our stronger performing markets and Jakarta has been a historically resilient market for us. Our entry to Ireland offers an additional boost to our revenue,” Teo said.

Located at 13 to 17 Fleet Street within the tourist and entertainment district of Temple Bar, the 30-year-old hotel would also be renovated, starting from the first quarter of 2024 through the last three months of the year.

Under the terms of the deal, The Ascott would continue to operate the assets, and would also have to contribute to renovation costs and pay the REIT a minimum guaranteed income equivalent to GBP 10.8 million per fiscal year for the London hotel and EUR 4.2 million per year for the Dublin property until renovations start. Once refurbishments commence, the guaranteed income will be reduced depending on the length of time that the properties are unable to operate.

Demand Bounces Back

CapitaLand Ascott Trust has agreed to buy Indonesia’s 185-unit Ascott Kuningan Jakarta for $40 million, or roughly $216,200 per room. Located in the Indonesian capital’s central business district, the property forms part of the Ciputra World 1 integrated development, which also houses the Lotte Shopping Avenue mall, an office tower and the Artpreneur Centre arts venue.

Teo said Ascott Kuningan Jakarta will provide income resilience for the REIT thanks to its higher proportion of long-stay guests.

Revenue per available unit (RevPAU), a common financial metric in hospitality investment, has already surpassed pre-pandemic levels in all three markets, the REIT’s manager said.

RevPAU in London during the first half of 2023 reached 112 percent of the figure achieved in first six months of 2019, while the RevPAU in Dublin hit 110 percent and Jakarta 111 percent of the 2019 first-half marks, CapitaLand Ascott Trust’s manager said, citing statistics from hotel data provider STR.

First Half Revenue Jumps

Once completed, the portfolio acquisition is expected to deliver a yield of 6.2 percent on an earnings before interest, taxes, depreciation and amortisation (EBITDA) basis, which would boost the trust’s distributions per share by 1.8 percent on a pro forma basis.

At the same time that it announced the acquisition CapitaLand Ascott Trust unveiled a S$330 million rights issue to help fund the purchases. The trust’s manager said that it plans to finance the acquisition through a mix of debt and asset sale proceeds in addition to the equity offering.

The trust is expecting to free up some EUR 44.4 million from the sale of four hospitality assets in France in a transaction set to close in the fourth quarter, according to a recent presentation to investors.

Revenues for the S$8.1-billion REIT surged 30 percent year on year to reach S$350 million in the first half 2023 as a rebound in travel lifted its portfolio RevPAU by 44 percent to S$138 during the period.

CapitaLand Ascott Trust’s portfolio includes over 19,000 keys across 47 cities in 15 countries in Asia Pacific, Europe and the United States.