SINGAPORE (THE BUSINESS TIMES) - Ascott Residence Trust (ART) on Monday (Aug 15) proposed the acquisition of nine properties from its sponsor, The Ascott Limited, at an estimated total capitalised cost of $318.3 million.
The acquisition is expected to strengthen ART's presence in its existing markets, the stapled hospitality group's managers said in bourse filings before the market opened.
The assets - serviced residences, rental housing and student accommodation - are predominantly located in the Asia-Pacific region, with seven of the assets in Australia, Japan and Vietnam, and two in France and the United States.
The acquisition will increase ART's distribution by $9.2 million and its pro forma financial year 2021 distribution per stapled security by 2.8 per cent.
The trust also launched a private placement on Monday to raise $150 million, with the offer of new stapled securities to be made to eligible institutional, accredited and other investors. The issue price will range between $1.11 and $1.14 per new stapled security, representing a 2.8 per cent to 5.4 per cent discount to ART's $1.1733 volume-weighted average price.
ART will tap $122.3 million of the placement proceeds to partly fund the $215.2 million consideration for the properties. Another $25.3 million from the placement will partly fund any future potential acquisitions, while $2.4 million will be spent on professional and other expenses.
The acquisition of the nine assets is expected to be completed by November, subject to security holders' approval at an extraordinary general meeting to be held on Sept 9.
Three of the assets are serviced residences - Quest Cannon Hill in Brisbane, Australia, and La Clef Tour Eiffel Paris in France, which are on master leases; and Somerset Central TD Hai Phong City in Vietnam. The latter caters mainly to corporate guests and has an average length of stay of about 11 months.
La Clef Tour Eiffel Paris has an occupancy rate of 80 per cent, while those of Quest Cannon Hill and Somerset Central TD Hai Phong City stand at 95 per cent and over 90 per cent respectively.
ART also plans to buy five rental housing properties in Japan that have lease tenures of about two years. They are located in Kyoto, Osaka, Hyogo and Nagoya.
Over in the United States, ART is doubling its stake in Standard at Columbia, acquiring an additional 45 per cent stake in the student accommodation property. Currently under development, Standard at Columbia is slated for completion in the second quarter of 2023.
"The addition of the five rental housing properties in Japan and a student accommodation property in the US will increase the proportion of our longer-stay portfolio from 17 per cent to 19 per cent of ART's total portfolio value. This will bring us closer to our target of 25 per cent to 30 per cent for longer-stay assets in the medium term," said Ms Serena Teo, chief executive of ART's managers.
The nine assets, totalling 1,018 units, will grow ART's total assets to $8.3 billion as at end-2021 on a pro forma basis. Post-acquisition, ART will have a gearing of 38.5 per cent.
Some 92 per cent of the nine assets' gross profit is from stable income sources, which include master leases, management contracts with minimum guaranteed income and management contracts of rental housing and student accommodation. This will raise ART's total proportion of stable income from 69 per cent to 71 per cent of its gross profit.
ART closed at $1.18 on Friday, up one cent or 0.9 per cent, before requesting a trading halt on Monday prior to the announcement. It will resume trading on Tuesday morning.
