CapitaLand Ascott Trust proposes renewal of three French master leases
Vivienne Tay
CAPITALAND Ascott Trust (Clas) on Monday (Oct 9) said it will seek approval from stapled securityholders for several interested person transactions at its upcoming Oct 24 extraordinary general meeting.
These include the S$530.8 million acquisition of three lodging assets in London, Dublin and Jakarta, announced in August, as well as the renewal of three master leases for serviced residence properties in France, expiring on Dec 31, 2023.
The managers said in a bourse filing that master lease agreements were entered into with Citadines SA – which is indirectly owned by The Ascott – for La Clef Louvre Paris, Citadines Presqu’ile Lyon and Citadines Place d’Italie Paris.
Each of the renewed master leases, to be inked with Citadines SA, will span 12 years from Jan 1, 2024. The renewals will have the same terms and conditions except for higher rent, lease duration and the co-sharing of renovation expenses between Clas and the lessee.
The new rent for FY2024 will be 5.6 million euros (S$8.1 million), 33.3 per cent higher than the existing FY2022 rent of 4.2 million euros.
The rent received under each agreement will be the higher of the fixed and variable rent per annum. The fixed rent is indexed to the French commercial lease index published by the French national statistics bureau, the managers noted.
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They added that having fixed rents will provide certainty to Clas’ income, while having variable rent will allow the stapled group to benefit from any upside from travel recovery and demand drivers in Paris and Lyon.
“The city of Paris is also hosting the 2024 Summer Olympics, which will be an added tourism boost to the city,” the managers said.
The managers said in a bourse filing that purchase agreements were entered into with sponsor The Ascott for The Cavendish London hotel in the UK, the Temple Bar Hotel in Dublin, Ireland, and the Ascott Kuningan Jakarta serviced residence in Indonesia.
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The stapled group will acquire the holding company that owns the largest asset – the 230-unit Cavendish London – at a purchase consideration of £116.3 million (S$194.1 million). The property is situated in Mayfair, a high-end shopping district in central London.
The consideration takes into account the holding company’s consolidated net asset value (NAV) of £62.2 million, an agreed property value of £215 million, and £54.1 million in shareholder loans extended by The Ascott as at May 31.
Clas will acquire the 136-unit Temple Bar Hotel for a purchase consideration of 70 million euros – equal to the agreed property value. The amount takes into account the hotel’s independent valuations.
The holding company that owns serviced residence Ascott Kuningan Jakarta will be acquired for US$40 million – based on a consolidated NAV of US$1.6 million, an agreed property value of 620 billion rupiah (S$54.1 million), and S$50.7 million in shareholder loans from The Ascott as at May 31.
The managers expect the total acquisition outlay to be around S$378.6 million.
This comprises the purchase consideration of S$357.8 million, a S$5.3 million acquisition fee payable to the managers, and S$15.5 million in estimated professional and other fees and expenses.
Upon completion, the property holding companies that own the three properties will enter into separate management agreements with certain Ascott wholly owned subsidiaries.
Clas is also expected to increase its total distribution by S$13.5 million and its distribution per stapled security by 1.8 per cent on a FY2022 pro forma basis. Meanwhile, its distribution yield is projected to rise to 5.5 per cent from 5.4 per cent.
The managers expect to complete the proposed acquisitions by the fourth quarter of 2023.
As the sellers of three assets are wholly owned subsidiaries of The Ascott, which is, in turn, wholly owned by CapitaLand Investment (CLI), the proposed acquisitions have been classified as both an interested person transaction and an interested party transaction. CLI also wholly owns both of Clas’ managers.
Similarly, the master lease renewals have been deemed an interested person transaction as The Ascott wholly owns Citadines.
Stapled securityholders will have to vote to approve the two transactions at an EGM to be convened on Oct 24 at 3 pm.
Independent financial adviser Deloitte & Touche Corporate Finance has said that the interested person transactions are on normal commercial terms and not prejudicial to the interests of Clas and its minority stapled securityholders.
The managers’ independent directors have also recommended that stapled securityholders vote in favour of the resolutions.
Clas’ counter was trading 1.1 per cent or S$0.01 lower at S$0.885 as at 11.39 am on Monday.
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