Ascott acquires Melbourne property for A$71m

CAPITALAND's wholly owned serviced residence business unit, The Ascott Limited, is acquiring its first serviced residence in Docklands, Melbourne, for A$71 million (S$71 million) through a 50:50 joint venture between Ascott and Qatar Investment Authority (QIA).

The purchase of the 221-unit property is part of Ascott's A$500 million partnership with Quest Apartment Hotels, one of the largest serviced apartment operators in Australia.

In a filing to the bourse operator on Tuesday, CapitaLand said Quest will lease the serviced residence, which will be named Quest NewQuay Docklands, and operate it under Quest's franchise when the property opens in 2019.

Quest NewQuay Docklands will be Quest's largest property in its network.

Lee Chee Koon, Ascott's CEO, said the Melbourne property is the company's first acquisition in Australia in partnership with QIA and its fourth within a span of seven months.

Ascott's real estate investment trust, Ascott Residence Trust, has also acquired three operating serviced residences in Greater Sydney from Quest. Quest Sydney Olympic Park, Quest Campbelltown and Quest Mascot are being operated under franchises by Quest.

"Ascott is a global serviced residence leader that owns and manages over 46,000 units worldwide and we have a strong base of customer accounts that are multinational companies, while Quest is a leading operator in Australia with more than 80 per cent of its customers from Australia's top companies. Through our strategic partnership with Quest, we can combine our expertise to drive Ascott's expansion in Australia and enjoy stable income as Quest will provide fixed leases for the properties and operate them under its well-established franchise," said Mr Lee.

Through the Ascott-Quest alliance formed in late 2014, Ascott will invest up to A$500 million in new properties that Quest will secure for its franchise in Australia until 2019.

Ascott has a right of first refusal to acquire the properties sourced by Quest. Quest will provide a lease for the properties, which will be operated under franchises using the Quest brand. In addition, Ascott acquired a 20 per cent stake in Quest, with an option to increase it to 30 per cent.

Ascott aims to hit 80,000 apartment units globally by 2020.

Its serviced residence global fund was set up through a 50:50 joint venture with QIA in July 2015, with each contributing US$300 million of equity funds. The fund invests in serviced residences and rental housing properties with an initial focus on Asia-Pacific and Europe.

Ascott's four acquisitions made in partnership with QIA have a total investment amount of US$270 million and would be funded partly by debt.

Paul Constantinou, chairman of Quest Apartment Hotels, said Quest has the largest and fastest growing network of serviced apartments in Australia.

"Our partnership with Ascott will fast-track our plans to grow the Quest network to about 200 properties in Australia and New Zealand by the end of the decade. We are actively sourcing for opportunities particularly across the central business district and suburban areas of Sydney, Brisbane and Melbourne."

He added that Melbourne's accommodation sector has been getting high occupancies of above 80 per cent, driven by its strong events calendar, growing convention market and business activities.

In Australia, Ascott currently manages five serviced residences with more than 670 apartment units in Melbourne, Perth and Hobart under the Citadines and Somerset brands.

Quest has more than 150 properties with over 8,000 existing units in Australia, New Zealand and Fiji, and a further 1,500 units under construction.