Ascott Residence Trust to sell Guangzhou, Paris serviced residences for S$191.4m

ASCOTT Residence Trust (ART) has entered into conditional agreements to sell Ascott Guangzhou in China and Citadines Didot Montparnasse Paris in France to two unrelated third parties respectively, for a total of about S$191.4 million.

ART is expected to realise total estimated net gains of about S$23.2 million when both transactions are completed, comprising S$19.4 million from the Guangzhou deal and S$3.8 million from the Paris deal, its managers said on Monday.

The Ascott Guangzhou serviced residence in China carries a divestment price of 780 million yuan (S$155 million), which is about 52 per cent above the property's book value and about 81 per cent higher than the acquisition price in 2012. This transaction is expected to complete in the first quarter of next year.

For the French serviced residence, the divestment price is 23.6 million euros (S$36.4 million), which is some 69 per cent above the property's book value and about 60.4 per cent higher than the acquisition price in 2010. This transaction is expected to complete in the fourth quarter of this year.

The "opportunistic" sales of Ascott Guangzhou and Citadines Didot Montparnasse Paris at "attractive" prices allow the stapled hospitality group to rejuvenate its portfolio and unlock the properties' underlying value, said ART managers' chief executive Beh Siew Kim.

"We will look out for opportunities to deploy the proceeds to other higher yielding assets for ART," Ms Beh added.

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The proceeds may also be used to pare ART's debt and reduce its gearing, as distribution to stapled securityholders, or for general corporate purposes.

Ascott Guangzhou is a 207-unit luxury serviced residence in the city's financial hub of Tianhe, and has been operational for 12 years. ART acquired Ascott Guangzhou from its sponsor, The Ascott Limited, for 431 million yuan in 2012. The property comprises one, two and three-bedroom apartments.

In explaining the rationale for the sale, ART's managers said in a separate filing that additional capital expenditure is expected to be required in the "near future" to maintain the Guangzhou property's performance and competitiveness.

"Given that the growth prospects of the property are limited due to changes in the operating environment, any capital expenditure at this time would not be prudent," they added.

Citadines Didot Montparnasse Paris was one of the 28 properties ART acquired from The Ascott Limited for a total sum of S$1.39 billion in 2010. The 80-unit serviced residence has studio and one-bedroom apartments, and is near open-air markets and the Georges-Brassens park in France's capital city.

ART has six other properties in China, and 16 other properties in France as at Monday.

Meanwhile, the stapled group's real estate investment trust also plans to sell its 100 per cent stake in the Chinese subsidiary that owns the Guangzhou serviced residence.

The managers announced in a separate filing that the trust's wholly-owned subsidiary has inked a conditional sale and purchase agreement with an unrelated third party to divest the interests in Guangzhou Hai Yi Real Estate Development Co.

The existing management agreement with the Guangzhou property's manager, which is a wholly-owned subsidiary of The Ascott Limited and a controlling stapled securityholder of ART, will be terminated. A termination compensation will be paid in accordance with the terms of the management agreement.

Stapled securities of ART were flat at 94.5 Singapore cents at Friday's close.