Almost $1b of luxury properties

Ascott Reit acquisitions make it 6th-largest property trust in S’pore

Ascott Residence Trust (Ascott Reit) is acquiring 28 properties from its sponsor and 48-per-cent shareholder, The Ascott, for $969.6 million to become the sixth-largest property trust in Singapore in terms of assets.

In turn, The Ascott will buy a serviced apartment building, Ascott Beijing, from Ascott Reit for $214 million, to broaden its footprint in China.

Ascott Reit said the acquisitions would boost its assets to $2.85 billion and expand its portfolio of 65 properties spanning across 23 cities worldwide.

Among the properties it is acquiring, 26 are in Europe, including 14 serviced residences in London and Paris. Despite the euro zone debt crisis, Ascott Reit said it was optimistic about the prospects of serviced apartments in the region.

“Three quarters of the properties are located in very established markets like London and Paris … Over the last few years, the occupancy for these two cities is in the range of 75 to 80 per cent. ” said Ascott Reit chief executive Chong Kee Hiong.

The trust will partly fund the acquisition by raising some $560.6 million by issuing 487.5 million new units, subject to unitholders’ approval.

Meanwhile, The Ascott said the divestment was in line with its 100 per cent parent CapitaLand’s business model of holding stable income-producing assets in real estate investment trusts.

“We are looking at the transformation of Ascott. Part of the transformation of Ascott really is to strengthen Ascott Reit. Ascott Reit will be the platform where we can actually put our stabilised asset in, and then recycle the capital.” said Mr Lim Ming Yan, chief executive of The Ascott.

The Ascott, which expects the divestments to yield a net gain of $52.1 million, said it might acquire more properties in second-tier Chinese cities to tap on the growing domestic inter-city travel and urbanisation in the world’s most populous country.

On its Ascott Beijing purchase, Mr Lim said: “We will continue to run it as a serviced apartment for the time being. At the same time, we will be looking at repositioning and some asset enhancement in preparation for a potential strata-title sale in the future. That is where the value add is.”

Meanwhile, Ascott Reit is selling the property because the gain from its capital appreciation is higher than the rental yield, Mr Chong said.

“The divestment is 66 per cent above the property’s valuation as at 30 June 2010 of $181.8 million and will realise a gain of approximately $106.2 million,” he said.

Source : Today – 21 Aug 2010

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