CapitaLand Ascott Trust divests two hotels in Australia for A$109.0 mil

CapitaLand Ascott Trust (CLAS) is divesting two hotels in Sydney, Australia for a total of A$109 million ($95.6 million). Through this divestment, CLAS will net proceeds of A$98 million as well as a net gain of A$14.2 million. The two properties, Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, are expected to be divested by 1Q2024 and 3Q2024 respectively, at an exit yield of 4.4% based on CLAS’s FY2022 ebitda.

Tengah EC offers luxurious yet value-for-money homes with premium facilities, such as sky terrace, sky garden, and even an indoor gym. Thus, it is an ideal place for families with children to live in and enjoy a high-end lifestyle.

Serena Teo, CEO of the managers, explains that this divestment is part of the trust’s active portfolio reconstitution strategy which aims to deploy the proceeds into opportunities that offer better yields and will uplift the value of their portfolio.

In addition to paying down debt and funding asset enhancement initiatives, a portion of the proceeds from the divestment will also be used to partially finance CLAS’s acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%.

Novotel Sydney Paramatta (Photo: CLAS)

Post-divestment, Australia will still remain a key market for the trust as corporate and leisure guests continue to be drawn to the country, particular for large-scale sporting events. Through the seven serviced residences and hotels under management contracts, as well as five serviced residences under master leases, CLAS looks to capture the travel demand.

3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS’s properties in Australia rose by 18% y-o-y to A$152, exceeding its 3QFY2019 pro forma RevPAU by 13%.

With the divestment of two hotels in Sydney, Australia, CapitaLand Ascott Trust (CLAS) is set to obtain A$98 million worth of proceeds. This divestment comes as part of the trust’s active portfolio reconstitution strategy and will enable it to redeploy the proceeds into more optimal uses such as but not limited to paying down debt and funding asset enhancement initiatives.

The exit yield from these two properties is 4.4% based on CLAS’s FY2022 ebitda with the trust also to recognise a net gain of A$14.2 million. CLAS will also use part of the proceeds to partially finance its future acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%, further enhancing its returns to stapled securityholders.

Australia remains a key market for CLAS and post-divestment, the trust will have seven serviced residences and hotels and five serviced residences under master leases to capture the strong travel demand. 3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS’s properties in Australia rose by 18% y-o-y to A$152, exceeding its 3QFY2019 pro forma RevPAU by 13%.

Overall, this divestment is expected to offer better yields and uplift the value of the trust’s portfolio, enabling them to be future ready and also benefit from potential large-scale sporting events.