CapitaLand Ascott Trust to buy lyf Funan Singapore at S$263 million agreed value
The purchase consideration is estimated at S$146.4 million
CAPITALAND Ascott Trust (Clas) has proposed to acquire Victory SR Trust (VSRT), which directly holds a 100 per cent interest in lyf Funan Singapore.
On Tuesday (Oct 1), its managers said the purchase consideration is estimated at S$146.4 million after accounting for VSRT’s net asset value (NAV) based on the property’s agreed value of S$263 million, and agreed adjustments to the NAV.
Including the repayment of an existing facility taken out by VSRT’s trustee amounting to S$113 million, along with the purchase consideration and other acquisition-related fees, Clas’ managers foresee an acquisition outlay of around S$265.1 million.
The S$146.4 million purchase consideration is expected to be largely funded from Clas’ sale of Citadines Mount Sophia Singapore, which was completed in March 2024.
The property’s agreed value of S$263 million is at a 1.9 per cent discount to the average of two independent valuations.
Its managers project the acquisition to increase Clas’ total distribution by S$3.5 million while keeping its gearing under “a healthy” 40 per cent.
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Based on FY2023 pro forma estimates, the higher total distribution translates to a distribution per stapled security (DPS) accretion of 1.5 per cent, as well as an earnings before interest, taxes, depreciation and amortisation (Ebitda) yield of 4.7 per cent.
Clas said the acquisition of this property is therefore in line with the stapled group’s portfolio reconstitution strategy.
Serena Teo, chief executive of the managers, noted that the entry Ebitda yield for lyf Funan Singapore is 150 basis points higher than the investment exit Ebitda yield of about 3.2 per cent for Citadines Mount Sophia Singapore.
“The DPS-accretive acquisition of lyf Funan Singapore will increase our presence in Singapore… Additionally, income contribution from Singapore will balance the contribution from Clas’ overseas markets,” she said.
Clas’ sponsor The Ascott Limited holds a 50 per cent stake in Ascott Serviced Residence Global Fund, which indirectly wholly owns the vendor of VSRT.
Located at 67 Hill Street at the fourth level of Funan, lyf Funan Singapore is a 329-room hotel development under Ascott’s lyf hospitality concept.
Acquiring this asset will bring Clas’ total properties in Singapore to five, and increase the proportion of its total assets in the country to 19 per cent versus 16 per cent as at end-June 2024.
Optimism in Singapore’s hotel industry
The acquisition indicated Clas’ optimism of the performance of Singapore’s hotel industry, said Teo in a media briefing on Tuesday morning.
She noted that Singapore hotel’s revenue per available room, or RevPAR, has exceeded 2019 levels by 16 per cent. With travel still recovering to pre-Covid levels, she expects future demand for Singapore hotels to remain healthy.
Lyf Funan Singapore, which has a hotel licence, is also “performing well”, said Teo. She pointed out that it is currently more than 80 per cent occupied, and has an average daily rate of more than S$200. The average daily rate refers to the daily average rental revenue earned for an occupied room.
These figures are in line with comparable properties in the market, she said. Moreover, lyf Funan Singapore, which is centrally located, caters to both short and long-stay travellers across different ages, she added.
In response to a question at the briefing, Teo disagreed that Clas was buying the asset when the hotel market has peaked.
“I think Singapore will always have a resilient demand (for hotels). There could be some ups and downs across months… but when we look at travel statistics from the Singapore Tourism Board, actually the demand in Singapore remains healthy,” she said.
Post-acquisition, Clas also intends to ink a master lease with Ascott for lyf Funan Singapore. The agreement will come with an initial term of 20 years, with the master lessee paying rent equivalent to 93.5 per cent of the property’s gross operating profit.
Completion of the deal is slated for the fourth quarter of 2024.
Both the acquisition and entry into the master lease are subject to approval from Clas’ stapled securityholders at an extraordinary general meeting scheduled to take place in November.
Apart from the acquisition of lyf Funan Singapore, Teo said that the manager is eyeing further acquisitions in developed markets such as Japan and Europe where Clas has a presence in. It is also in the midst of divestment negotiations for some of its existing properties.
Stapled securities of Clas ended Monday S$0.005 or 0.5 per cent higher at S$0.975.
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