Ascott Residence Trust extends master leases, grants rent abatements to Citadines properties in France

ASCOTT Residence Trust (ART) has extended the master lease agreements and revised rents for some of its properties in France managed by Citadines.

It has also entered into rent abatement agreements for some of these properties, the stapled hospitality group said in a Singapore Exchange filing.

Fifteen of these properties will have their leases renewed for periods of two to three years, with their new termination dates falling between December 2023 and September 2024.

The fixed rent components for these properties have also been adjusted for 2021, and will range from 180,000 euros (S$292,600) to two million euros. Based on a comparison with 2019 figures, most of these have been adjusted downwards.

Variable rent will amount to 10.35 per cent of each property's total revenue.

ART said the proposed rent structure falls within the range recommended by the independent consultant, HVS. In a report published in December 2020, HVS has opined that the fixed rent for the operating lease market is within 15-31 per cent of total revenue, while variable rent is within nil to 13 per cent of total revenue.

Rent abatement during specific lock-down periods has also been granted to 13 of its properties in France, with the revised rent during the abatement period calculated based on a certain percentage of the property's total revenue during these periods.

Based on ART's projections, its distribution per stapled security (DPS) to fall 0.8 per cent to 7.55 Singapore cents after the renewal of the master leases.

DPS is expected to fall 2.3 per cent to 7.44 Singapore cents after rent abatement.

The group said that changing operators and brands amid uncertainty due to the Covid-19 pandemic is expected to disrupt the properties' performance and operations.

International visitor arrivals could take up to four years to return to 2019 levels, adversely affecting recovery in the hospitality sector, it noted.

"Demand for accommodation in Europe is expected to remain muted, as the region is currently experiencing a second wave (of infections)," ART said.

The group also noted that rent abatement reflects the market norm in France. "Given the pro-tenant environment in France and grounds for the rent abatement, there is no certainty that there would be a favourable outcome from engaging in legal proceedings," it added.