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CAPITALAND's wholly owned subsidiary Ascott Residence Trust (Ascott Reit) has expanded into the United States by acquiring a hotel in New York's Times Square for US$163.5 million.
The accretive acquisition of the 411-room Element New York Times Square West hotel in Midtown Manhattan, at an Ebitda (earnings before interest, taxes, depreciation and amortisation) yield of 6.2 per cent, is expected to increase Ascott Reit's distribution income in FY14 by US$0.8 million, translating into a rise in distribution per unit from 8.44 cents to 8.51 cents on a pro forma basis.
The property, which opened in November 2010, has had over 90 per cent occupancy in the last three years, according to Ascott Residence Trust Management CEO Ronald Tay.
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, Inc, he added.
Ascott Residence Trust Management chairman Lim Jit Poh said that the acquisition will enable the trust to capitalise on the burgeoning hospitality market. "The US economy has been growing steadily in the past few years and is forecasted to expand by 2.4 per cent in 2015 and 2.5 per cent in 2016."
Mr Lim added that recovery in the US hospitality market has also gained momentum, with revenue per available room (RevPAR), particularly in gateway cities such as New York where there is high demand for accommodation, having improved significantly.
RevPAR in the US is expected to increase by about 7 per cent in 2015, he said.
The latest acquisition comes on the heels of Ascott Reit's purchase of three serviced residences and four rental housing properties in Australia and Japan. In total, Ascott Reit has increased its scale to 11,779 units and its asset size by S$519 million to S$4.6 billion.
Ascott Reit will partly fund the acquisitions of the new properties with the S$250 million proceeds from its issuance of perpetual securities at a fixed distribution rate of 4.68 per cent per annum.
Ascott Reit today has an international portfolio comprising 90 properties in 37 cities across 13 countries. It listed on Singapore Exchange in March 2006.
Mr Lim said the team aims to grow Ascott Reit's asset size to S$6 billion by 2017, by seeking opportunities from both third parties and its sponsor, The Ascott Limited, in key cities in the Asia-Pacific, Europe and the US.
When the acquisition of the new Cairnhill serviced residence in Singapore is completed in 2017 as targeted, the trust's asset size will expand by another S$405 million to over S$5 billion.