SINGAPORE - CapitaLand's wholly owned serviced residence arm, The Ascott Ltd, has made two major investments this month aimed at solidifying its position as one of the world's largest international serviced residence operators, while transforming its business to be increasingly asset-light.
Ascott is acquiring an 80 per cent stake in Synergy Global Housing for US$33.7 million, thereby tripling Ascott's portfolio in the United States from more than 1,000 units to about 3,000 units. Globally, Ascott's portfolio will have almost 70,000 units after the transaction, which is its first corporate housing business on the US west coast.
The move is also the latest in Ascott's acquisition spree to scale up its global presence. Early this month, Ascott announced its A$180 million acquisition of a 60 per cent stake in Quest Apartment Hotels to become the largest serviced residence provider in Australasia.
"Ascott used to be asset-heavy. When we began, we liked to manage properties we owned. But we saw huge opportunity ... in managing other people's properties and collecting fee income. ... As your network continues to build, your fee income gets stronger and drives more returns to the bottomline," Mr Lee Chee Koon, Ascott's chief executive, told reporters yesterday.
Synergy, for example, leases apartments from partners and property owners to rent to corporate clients from the healthcare, manufacturing, entertainment, social networking and technology industries. It is an accommodation provider for many Fortune 500 companies and major Silicon Valley technology firms.
Going forward, Ascott will continue to take asset positions or real estate investments in key gateway cities, "where real estate assets are more liquid among institutional investors" he added. It may also take asset positions in second- or third-tier cities if there is corporate demand.
Out of the 70,000 units, some 30-35 per cent of properties are owned and operated by Ascott, and the remaining 65 per cent are third-party management contracts or franchise-operated, Ascott chief investment officer Gerald Yong said.