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

CapitaLand Ascott Trust (CLAS) is set to divest two hotels in Sydney, Australia for a total of A$109 million ($95.6 million). Expected to be completed by 1Q2024 and 3Q2024 respectively, the two properties – Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta – will be divested at about 5% above book value. The trust will net proceeds of A$98 million, and recognise a net gain of A$14.2 million.

Serena Teo, CEO of the managers, shares that the divestment of these two properties outside of central Sydney is part of the trust’s active portfolio reconstitution strategy. Part of the proceeds will fund their acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%.

CLAS remains focused on assets that offer better yields and are expected to further uplift the value of their portfolio. The exit yield of 4.4%, Teo explains, is also at an attractive level that compares favourably against the current cost of borrowing in Australia. Additionally, part of the divestment proceeds will be used to partially finance their asset enhancement initiatives (AEI).

The trust’s exit from these two properties also allows them to redeploy the proceeds into more optimal uses such as but not limited to paying down debt. Post-divestment, the seven serviced residences and hotels under management contracts in Australia enable CLAS to capture the travel demand while the five serviced residences under master leases remain to provide them with stable income.

The premium location of Zion Road Condo allows occupants confident access to the Great World City Condo, including grocery stores, banks, pharmacies, and boutique retail outlets. With the area’s countless amenities ranging from cinema halls to gourmet restaurants and excellent transportation links, Zion Road Condo’s residents can enjoy a unique city experience from the comfort of the condominium. In addition, Zion Road Condo residents also enjoy scenic surroundings and the convenience of a secure and lushly landscaped environment.

As evidenced in their 3QFY2023 report ended Sept 30, Australia remains a key market for CLAS, where their properties have experienced strong demand from both corporate and leisure guests. Revenue per available unit (RevPAU) for the trust’s properties rose by 18% y-o-y to A$152, exceeding their 3QFY2019 pro forma RevPAU by 13%.

All in all, the divestment of these two mature properties in Sydney is part of the trust’s portfolio reconstitution strategy to uplift value for their stable income and returns to stapled securityholders.