CapitaLand Ascott Trust buying overseas properties for S$530.8 million, plans S$300 million equity fundraising

CAPITALAND Ascott Trust (Clas) has announced plans to acquire three lodging assets from its sponsor at an agreed property value of S$530.8 million. It also intends to launch a fundraising exercise to raise at least S$300 million to partially fund the acquisition with the issue of new stapled securities.

The three assets are The Cavendish London hotel in the UK, the Temple Bar Hotel in Dublin, Ireland, and the Ascott Kuningan Jakarta serviced residence in Indonesia.

Clas’ manager said on Wednesday (Aug 2) that it expects the proposed acquisition to raise its total distribution by S$13.5 million and its distribution per stapled security (DPS) by 1.8 per cent on an FY2022 pro forma basis. It added that the earnings before interest, taxes, depreciation and amortisation (Ebitda) yield of the acquisition is 6.2 per cent on a FY2022 pro forma basis.

The manager also said that the acquisitions will boost the trust’s income flows and help it capitalise on strong lodging demand amid travel recovery. Serena Teo, chief executive of the manager, said at a briefing that the three assets are well-located in key gateway capital cities that have outperformed their pre-Covid levels.

The 230-unit The Cavendish London is the largest among the three assets being acquired, with an agreed property value of £215 million (S$368 million). The property is located in Mayfair, a high-end shopping district in central London.

Teo noted that there is opportunity to value-add and uplift the Ebitda yield of the property to 6.5 per cent from around 4.1 per cent currently. Clas will be renovating and rebranding the property into a luxury product under The Crest Collection brand. Average daily rates are expected to rise from about £250 to around £500 post-asset enhancement initiative (AEI).

The manager expects an Ebitda uplift of around £10 million compared to the pre-renovation level. Expectations are for the valuation of the property to increase by £101 million from the AEI.

Renovation for The Cavendish London will be carried out in phases from the fourth quarter of 2024 to Q4 2025. The renovation cost will be co-shared with Clas’ sponsor, Teo said.

Meanwhile, the Temple Bar Hotel in Dublin will also undergo renovations in 2024. Part of the purchase consideration of The Cavendish London and Temple Bar Hotel would be made only upon substantial completion of renovations at the respective properties.

Teo said that the manager is confident of delivering at least 1.8 per cent accretion to DPS from the acquisition. “Even on a full (equity fundraising) basis, the accretion immediately after acquisition is expected to continue to be positive,” she said, adding there could be further accretion after major renovations are completed in the coming years. “That should give another boost to accretion to the trust.”

The equity fundraising comprises a private placement of between 187.8 million and 192.1 million new stapled securities within the proposed issue price range of S$1.041 to S$1.065, as well as a pro rata and non-renounceable preferential offering of up to 100.5 million new stapled securities at between S$1.025 and S$1.044.

The private placement price range represents a discount of 4.9 per cent to 7 per cent to the volume weighted average price (VWAP) of S$1.1195 per stapled security of all trades on Aug 1. Meanwhile, the preferential offering price range represents a 6.7 per cent to 8.4 per cent discount to the VWAP of S$1.1195.

About S$170.2 million of the amount raised will go towards partially funding the acquisitions. The proceeds would also be used to finance two other AEIs.

Clas is planning to renovate Citadines Holborn-Covent Garden London for around £11.5 million, and the works are expected to enable the raising of room rates.

The manager also plans to extend and renovate Novotel Sydney Central, which could increase gross floor area by about 10 per cent, with the addition of eight floors and 72 rooms. The extension and renovation – estimated to cost A$90 million (S$79.2 million) – could result in A$10.1 million incremental Ebitda on stabilisation, with a yield of 11.3 per cent on AEI cost.

“Combined with the AEI of The Cavendish London, we expect a S$385.5 million increase in property value for the three properties upon completion and post-stabilisation,” Teo said. “The proposed acquisition and AEIs are excellent opportunities to increase accretion and asset value.”

Clas’ manager requested a trading halt on Wednesday morning before the acquisitions and equity fundraising were announced. Stapled securities of Clas ended Tuesday unchanged at S$1.12.