Ascott Trust acquires 5 longer-stay lodging assets in Japan for $125 million

These properties will be acquired on a turnkey basis from 2 different sellers, and the transactions are expected to complete between Q1 of 2022 and Q2 of 2023. PHOTO: ASCOTT RESIDENCE TRUST

SINGAPORE (THE BUSINESS TIMES) - Ascott Residence Trust (ART) is acquiring four rental housing properties and a student accommodation property in Japan for a total investment of 10.4 billion yen (S$125 million).

In an announcement on Wednesday (March 9), the stapled group's managers said they expect the latest acquisitions to be yield accretive, increasing ART's pro forma financial year 2021 distribution per stapled security (DPSS) by 1.7 per cent with an average net operating income yield of about 4 per cent.

These properties will be acquired on a turnkey basis from two different sellers, and the transactions are expected to complete between the first quarter of this year and the second quarter of next year.

Out of the four rental housing properties, three are in Central Osaka and offer 120, 70 and 108 studio units respectively. They are each located within walking distance of Osaka's public transportation network and will be managed by third-party operators when they open.

The remaining rental housing property is in Hakata, Fukuoka, and offers 247 units through a mix of studio and one-bedroom apartments with waterfront views. It will be managed by a third-party operator upon opening.

ART's managers said it expects this property to perform well, given increasing rental rates in the city and expectations for supply to remain low in the next few years.

Acquiring the four properties will also boost the overall resilience of ART's portfolio, they added, as leases for the assets are about two years in length and will therefore provide better visibility and stability in future cash flows.

Meanwhile, the student accommodation property acquisition is a first for ART in Japan. Located in Osaka and a 15-minute walk to the Nagase railway station, it serves as the main campus of Kindai University and offers 112 studio apartments. The property is under a 15-year master lease with a fixed monthly rent.

With the latest transaction, ART's longer-stay properties are now expected to contribute 17 per cent to the stapled group's gross profit, up from 15 per cent in financial year 2021.

It brings ART's portfolio of rental housing and student accommodation properties to 19 properties across five cities in Japan, with a total of 2,500 units. The stapled group also has eight serviced residences and hotels across Tokyo, Kyoto and Osaka, to collectively offer 2,600 units.

The managers say ART remains on-track to meet its medium-term target of 25 per cent to 30 per cent for its longer-stay properties, which will strengthen the resilience of the stapled group's portfolio.

Ms Beh Siew Kim, chief executive of the managers, highlighted that as the five properties will be acquired on a turnkey basis, there is no development risk.

"Minimal down payment is required, and majority of the payment will be made upon completion of the transactions," she said.

ART is a stapled group comprising Ascott Real Estate Investment Trust (Ascott Reit) and Ascott Business Trust (Ascott BT).

Its managers comprise Ascott Reit's manager and the trustee-manger of Ascott BT, both of which are wholly owned subsidiaries of CapitaLand Investment.

Stapled securities of ART ended Tuesday flat at $1.03.

Join ST's Telegram channel and get the latest breaking news delivered to you.