SINGAPORE - Mainboard-listed Ascott Residence Trust (Ascott Reit) is expanding its footprint to the US by acquiring the 411-key Element New York Times Square West hotel for US$163.5 million (S$220.7 million)
The acquisition is expected to increase Ascott Reit's distribution income in financial year 2014 by US$800,000, translating to a rise in distribution per unit to 8.51 cents from 8.44 cents on a pro forma basis, the company said.
It follows Ascott Reit's purchase of three quality serviced residences and four rental housing properties in Australia and Japan.
Sad Mr Lim Jit Poh, Ascott Residence Trust Management Limited's (ARTML) Chairman, said: "Our entry into the U.S. will not only further diversify Ascott Reit's portfolio across different countries and property cycles but also catapult Ascott Reit into a global hospitality player."
Mr Lim added: "This US acquisition and our recent acquisitions in Australia and Japan with a total of 1,563 units will broaden Ascott Reit's earning base and increase our scale to 11,779 units. Ascott Reit's asset size will also increase by $519 million to $4.6 billion."
"When the acquisition of the new Cairnhill serviced residence in Singapore is completed in 2017 as targeted, Ascott Reit's asset size will expand by another $405 million to over $5.0 billion."
"As we aim to grow Ascott Reit's asset size to S$6.0 billion by 2017, we will continue to actively seek acquisition opportunities from both third parties and our sponsor, The Ascott Limited, in key cities in the Asia Pacific, Europe and the U.S."
Mr Ronald Tay, ARTML's Chief Executive Officer, said: "This is an accretive acquisition of a quality asset that is centrally located in Times Square of Midtown Manhattan, which is not only the largest central business district in the U.S., but also the country's largest commercial, entertainment and media centre."
"With 411 rooms, this relatively new property, which opened in November 2010, has been achieving strong performance with over 90 per cent occupancy in the last three years."
After the acquisition, the hotel will continue to be operated by LG-39 Management LLC and its affiliates under the "Element" brand through a franchise by Starwood Hotels & Resorts Worldwide.
Ascott Reit will partly fund the acquisitions of the properties in Australia, Japan and the U.S. with the $250 million proceeds from its issuance of perpetual securities at a fixed distribution rate of 4.68 per cent per annum. The perpetual securities received strong investor participation with orders exceeding four times of the issue size.
Mr Tay added: "Perpetual securities is a good source of funding to finance our acquisitions while maintaining our gearing at about 40 per cent. Our maiden issuance of $150 million perpetual securities in October last year has been trading above par, demonstrating the high demand for our perpetual securities."