CapitaLand to merge Ascott Reit, Ascendas unit to form largest hospitality trust in Asia-Pacific

CapitaLand to merge Ascott Reit, Ascendas unit to form largest hospitality trust in Asia-Pacific

Singapore’s CapitaLand will combine Ascott Residence Trust (Ascott Reit) and Ascendas Hospitality Trust (A-HTRUST) to form the largest hospitality trust in the Asia-Pacific region, it was announced on Wednesday (Jul 3).

The proposed combination will result in the combined entity becoming the eighth largest hospitality trust globally, with an asset value of S$7.6 billion, the two trusts announced in a joint news release.

It will also become the seventh largest trust listed on the Singapore Exchange by asset value.

The transaction will bring together Ascott Reit’s global portfolio comprising predominately of serviced residences and A-HTRUST’s 14 hotels in the Asia-Pacific region, creating a portfolio of 88 properties with more than 16,000 units in 15 countries across Asia Pacific, Europe and the United States of America.

It will also further diversify Ascott Reit’s portfolio into new cities: Brisbane and Seoul.

ACCESS TO LARGER CAPITAL BASE

“The combined entity will have a higher proportion of stable income derived from master leases; well balanced by growth income derived from management contracts,” said Ascott Residence Trust Management Limited’s Chairman Bob Tan.

“With access to a larger capital base and a higher debt headroom of about S$1 billion, we will have greater financial flexibility to seek more accretive acquisitions and value enhancements.”

He added: “The combined entity can then be strategically positioned to potentially enjoy a positive re-rating of the unit price and gain a wider investor base, which would be beneficial to all our unitholders.”

The total consideration for the combination is S$1,235.4 million, comprising S$61.8 million in cash and 902.8 million new Ascott Reit-BT stapled units.

Through a trust scheme of arrangement, Ascott Reit will acquire all the A-HTRUST stapled units for a consideration of S$1.0868 per unit, comprising S$0.0543 in cash and 0.7942 Ascott Reit-BT stapled units issued at a price of S$1.30.

Ascott Reit will establish Ascott Hospitality Business Trust (Ascott BT), and all the units in Ascott Reit will be stapled with units in Ascott BT to form a stapled trust.

Pursuant to the trust scheme of arrangement, all the units in A-HTRUST will be unstapled, Ascott Reit will acquire all the unstapled units in A-HTRUST REIT and Ascott BT will acquire all the unstapled units in AHTRUST BT, and A-HTRUST will then be delisted.

LARGER EXPOSURE TO ASIA PACIFIC

The combination will enable larger exposure to the Asia-Pacific region, said CEO of Ascott Residence Trust Management Beh Siew Kim in an interview with CNA938 radio.

“Through this combination, we actually increase our Asia Pacific exposure by 11 per cent, and 71 per cent of our portfolio will be in Asia Pacific,” she said.

“Asia Pacific is also experiencing a boom in tourism, underpinned by (an) expanding middle class,” she added. “So an enlarged portfolio will actually position us to capture the fastest-growing hospitality market in Asia Pacific driven by business and leisure demands.”

The new entity will also be “well-positioned” to benefit from a strong sponser in CapitaLand and its lodging unit The Ascott, said Mr Chia Kim Huat, lead independent director of the A-HTRUST Managers.

“The combined entity will be CapitaLand’s sole listed hospitality trust platform with an enlarged portfolio and mandate to invest globally,” he said.

The proposed transaction is subject to the approval of Ascott Reit unitholders and A-HTRUST stapled unitholders at their respective extraordinary general meetings and scheme meetings expected to be held by this year.

A-HTRUST comprises Ascendas Hospitality Real Estate Investment Trust (A-HTRUST REIT) and Ascendas Hospitality Business Trust (A-HTRUST BT), and its portfolio is valued at about S$1.8 billion as at Mar 31, 2019.

It is managed by Ascendas Hospitality Fund Management (the manager of A-HTRUST REIT) and Ascendas Hospitality Trust Management (the trustee-manager of A-HTRUST BT), both wholly-owned subsidiaries of CapitaLand.

Ascott Reit is Singapore’s first and largest hospitality real estate investment trust and has an asset value of S$5.7 billion as at Mar 31, 2019.

It is managed by Ascott Residence Trust Management, an indirect wholly-owned subsidiary of CapitaLand.

CapitaLand owns about 45 per cent and 28 per cent of outstanding units in Ascott Reit and A-HTRUST respectively.

After the completion of the proposed combination, CapitaLand expects to have about a 40.2 per cent stake in the combined entity.

The real estate developer announced in February that its full-year net profit jumped 12.3 per cent, coming in at S$1.76 billion last year. This marks its highest net profit since 2008.

Source: CNA – 3 Jul 2019

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