A MOVE by Ascott Residence Trust (Ascott Reit) to spend $298.3 million to acquire seven property assets in Australia and Japan is part of a larger plan to boost its portfolio size to $6 billion by 2017, the trust's manager said yesterday.
The plan involves purchasing a serviced residence in Melbourne from CapitaLand subsidiary The Ascott and four Osaka rental housing properties in which The Ascott already holds an 18.9 per cent stake. The Reit will acquire the Osaka properties in full, buying stakes from both The Ascott and unrelated third parties.
It will also acquire from The Ascott the remaining 40 per cent interest in two serviced residences in Tokyo and Kyoto.
The acquisitions, which will enlarge Ascott Reit's asset size to $4.4 billion from $4.1 billion, "will provide very stable income for the Reit", said Mr Ronald Tay, the chief executive of Ascott Residence Trust Management, the trust's manager.
Ascott Reit announced on Tuesday that it had raised $250 million by issuing perpetual securities. It will allocate $150 million from these funds to the acquisition. The remainder of the purchase price will be funded through debt.
Mr Tay said "we are using predominantly yen debt" because Ascott Reit is hedging foreign exposure and not looking to raise Australian loans.
The trust will seek unit-holder approval next month for the deal.
The acquisition will increase its Australian assets from 2.9 per cent to 6.6 per cent of its portfolio. Meanwhile, its assets will expand from 14.8 per cent to 16.1 per cent in Japan - its second-largest location, behind only China.
Mr Tay described the markets in Australia and Japan as "mature and stable", adding that "we are very bullish over Japan", citing in particular market growth, tax reforms and the Reit's experience there, as well as a weak yen.
The 2020 Tokyo Olympics have added a shine to the Japanese market. Moreover, Ascott Reit is confident that "Japan as a market won't allow the hospitality sector to collapse following the Olympics", said Mr Tay.
The sector seems to be particularly hot at present. Earlier this month, Frasers Centrepoint bought boutique hotel operator MHDV Holdings, which owns 29 hotels in Britain, for €363.4 million (S$769 million).