ASCOTT Residence Trust (ART) HMN : HMN 0%is acquiring 4 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 (Mar 9), the stapled group's managers said they expect the latest acquisitions to be yield accretive, increasing ART's pro forma FY2021 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 2 different sellers, and the transactions are expected to complete between Q1 of 2022 and Q2 of 2023.

Out of the 4 rental housing properties, 3 are in Central Osaka and offer 120, 70 and 108 studio units respectively. They are each located within walking distance to 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 1-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.

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Acquiring these 4 rental housing properties will also boost the overall resilience of ART's portfolio, they added, as leases for the assets are about 2 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, Eslead College Gate Kindaimae serves 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 FY2021.

It brings ART's portfolio of rental housing and student accommodation properties to 19 properties across 5 cities in Japan with a total of 2,500 units. The stapled group also has 8 serviced residences and hotels across Tokyo, Kyoto and Osaka to collectively offer 2,600 units.

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

Beh Siew Kim, chief executive of the managers, highlights that there is no development risk in the 5 properties as they will be acquired on a turnkey basis.

"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 Limited.

Stapled securities of ART ended Tuesday flat at S$1.03.

READ MORE: 

• Ascott Residence Trust posts 14.1% rise in H2 DPS; sets new target to grow longer stay assets

• Ascott Residence Trust doubles student accommodation assets with US$213m acquisition

• Ascott Residence Trust to buy three Japan rental housing assets for 6.78b yen

• Why Japan's demographics have not scared off Singapore property groups