SINGAPORE - Ascott Residence Trust (Ascott Reit) is buying a 150-room business hotel near Sydney Airport in Australia for A$60.6 million (S$58.8 million), the hospitality trust announced on Wednesday (March 27) during the mid-day trading break.
The freehold limited-service Felix Hotel will be rebranded as Citadines Connect Sydney Airport upon completion of the deal in May 2019, the trust manager said.
The acquisition will be the trust's first business hotel in Australia and its first property to be managed by its sponsor, The Ascott Ltd, under the new Citadines Connect brand. It will be funded by bank loans, divestment proceeds from the previously announced sale of Ascott Raffles Place Singapore, or a combination of both. The deal has an Ebitda (earnings before interest, tax, depreciation and amortisation) yield of 6 per cent.
Assuming that the acquisition is fully funded by bank loans, the trust's gearing will increase from 37.4 per cent as at end-Dec 2018 and accounting for funding for lyf one-north Singapore, to 38.2 per cent, before accounting for proceeds from the Ascott Raffles Place divestment, which is due to complete in May.
Rooms at the hotel, which was completed in February 2018, range fro 18 to 40 square metres. The building sits next to the 91-unit Quest Mascot, which is also owned by Ascott Reit and has an occupancy rate of more than 85 per cent.
Ms Beh Siew Kim, chief executive of the trust manager, said the acquisition "will enable us to leverage scale and increased operational efficiency from the clustering effect across these Ascott-managed properties".
"With this enhanced presence in the vicinity of Sydney Airport, Ascott Reit is not only well positioned to benefit from the growing transient traveller traffic, but more importantly gain access to a significant number of transport and logistics-related national corporate accounts, as well as to capture demand from the growing industries in its neighbouring suburbs," she added.
Citing the Sydney Airport Masterplan 2039, Ascott Reit's manager said the airport is expected to receive about 60.7 million passengers by 2033, up from the 44.4 million served in 2018.
The acquisition will raise Ascott Reit's Australia exposure to more than 900 units across six properties. Three of those properties are in Sydney.
Ascott Reit units were trading at $1.17 on Wednesday before the announcement, down 0.85 per cent or one cent on the day.
Correction note: An earlier version of the story referred to Ms Beh Siew Kim as Mr Beh. We are sorry for the error.