CAPITALAND Ascott Trust : HMN 0% (Clas) sold four mature serviced residences in regional France for a total of 44.4 million euros (S$64.6 million) as part of its portfolio reconstitution strategy, its manager said on Monday (Sep 25).

The divestment was made 63 per cent higher than the book value dated the end of 2022, and its net proceeds were about 34.1 million euros.

Based on FY2022’s earnings before interest, taxes, depreciation and amortisation (Ebitda), the exit yield was approximately 4 per cent.

This translated to a net gain of around 1.2 million euros, the manager noted.

The four properties divested – Citadines Croisette Cannes, Citadines Prado Chanot Marseille, Citadines Castellane Marseille and Citadines City Centre Lille – have reached the “optimal stage of their life cycles”. The divestment enables Clas to redeploy the proceeds to higher-yielding assets, chief executive of the trust’s managers Serena Teo said.

The sale’s proceeds will be used for asset enhancement initiatives (AEIs) in Europe and to partially finance Clas’ recent proposed acquisition of three prime lodging assets in London, Dublin and Jakarta.

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In August, Clas signed a memorandum of understanding with its sponsor Ascott for a proposed accretive acquisition of three lodging assets, namely The Cavendish London, Temple Bar Hotel in Dublin and Ascott Kuningan Jakarta, at an agreed property value of S$530.8 million.

“Over the past three years, we have successfully divested properties at a premium to book value and invested the proceeds in higher-yielding assets, increasing our total distribution,” said Teo.

She highlighted that the proposed acquisition is expected to increase the total distribution by S$13.5 million and the distribution per stapled security (DPS) by 1.8 per cent on a FY2022 pro forma basis.

The Ebitda yield of the proposed acquisition would be 6.2 per cent on a FY2022 pro forma basis, more than 2 percentage points (*see amendment note) higher than the exit yield from the divestment of the four properties in France.

After renovations are completed for The Cavendish London and Temple Bar Hotel, as well as milestone payments for the acquisition, the trust manager expects an increased yield of 6.8 per cent.

In the previous financial year, Clas invested S$420 million in 15 accretive acquisitions, contributing to the 19 per cent increase in its DPS in H1 2023.

“The new properties (in the proposed acquisition) are largely longer-stay properties with average occupancy rates of over 95 per cent, further enhancing Clas’ stable income streams,” Teo added.

Clas still holds 12 properties in France post-divestment, predominantly located in Paris. These include La Clef Tour Eiffel Paris and Citadines Les Halles Paris, which are undergoing AEIs to uplift their profitability, said the manager.

Clas’ stapled securities closed Friday down S$0.005 or 0.5 per cent at S$0.975.

*Amendment note: An earlier version of this story incorrectly said that the Ebitda yield of the proposed acquisition would be more than 2 per cent higher than the exit yield from the divestment based on Teo’s quote. CapitaLand Ascott Trust has since corrected the unit error and said it should be more than 2 percentage points higher. This article has been revised to reflect the change.