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Ascendas-HTrust no longer for sale (Amended)

The board has decided not to sell because the trust still has room to grow, including into new markets, says chairman

"I spent 30 years in the business," says Mr Ko. "I am one of the more established veterans in the hotel space in Asia-Pacific or even globally."


SIX months after turning down several third-party offers to buy out the property trust, Ascendas Hospitality Trust (A-HTrust) is no longer looking to exit the market.

The recently named chairman of the trust, Miguel Ko, who is also group CEO of Ascendas-Singbridge, told The Business Times that after careful examination of the offers, the board had decided that it was in unitholders' best interests for the management to continue to grow the trust instead of selling it.

This is because its assets still has some runway to grow, he said. "A lot of our assets still have untapped opportunities, whether in the form of adding extra rooms or by improving the performance of these assets."

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Currently, the trust's hotels in Tokyo and Osaka are benefiting from a wave of tourists from China and South Korea into Japan, as well as growing domestic travel driven by the popularity of low-cost carriers. Mr Ko believes that closer to the 2020 Summer Olympics hosted by Tokyo, Japanese hotel room rates will rise further.

He also noted the growing valuation of his Japanese hotels: Hotel Sunroute Ariake & Oakwood Apartments Ariake Tokyo has grown from 15.9 billion yen (S$213.3 million) at listing to 21.8 billion yen. As for Hotel Sunroute Osaka Namba, it was acquired for 8.9 billion yen in April 2014 and ended last fiscal year at 17.5 billion yen - nearly doubling in value.

In Sydney, where it has four hotels and where there is very little new supply coming onstream, room rate increases are also very likely, he added.

Does this mean that the board thinks the trust is worth more than what bidders offered? Mr Ko replied: "I would put it this way: that the earnings stream can be further enhanced."

Asked if this meant that when the trust has reached a more mature stage of growth, the manager would be more open to selling it, he chose his words carefully, saying: "To answer your question in a short way: no. We are not looking for an exit. We are looking to grow this alongside the other two public funds in our stable."

He was wearing his sponsor hat when referring to these other two trusts, namely Ascendas Reit, which owns industrial properties mostly in Singapore and Australia, and Ascendas India Trust, which owns IT business parks in India. The former has yielded an average return of approximately 16.7 per cent per annum over the past 14 years since it listed; the latter has likewise outperformed competitors in a challenging market over the past nine years.

Mr Ko said: "We believe we can create the same kind of track record . . . This is year five compared to the other two public trusts, but we are here for the long haul to grow this hospitality trust into one of scale."

Talk in the market in April was that the trust manager, in seeking a higher price, had brought forward its annual independent valuation exercise by three months. The revaluation showed a 20 per cent uplift in its net asset value per unit to S$0.842, and valued its 11 properties at S$1.49 billion. The manager then reportedly asked the bidders to submit fresh bids, but still was not satisfied with the eventual numbers. It thus rejected all the bids in the end.

The bidders' names were never made public but those bandied about by media reports included Blackstone, Gaw Capital, a joint venture from Varde Partners and Westmont Hospitality, Starwood Capital and Fosun International.

Many analysts at the time believed that the sponsor was looking to dispose of A-HTrust because hospitality was never its strong suit; its expertise was mostly industrial.

Commenting on this, Mr Ko, a three-decade hotel veteran, said: "This may be an adjacent business to (Ascendas-Singbridge's) core business. However, personally, this is not my adjacent business. I spent 30 years in the business; I am one of the more established veterans in the hotel space in Asia-Pacific or even globally."

He added that he, A-HTrust CEO Tan Juay Hiang and head of asset management Bernard Teo have a combined 65 years of hospitality and real estate experience - "as strong as any other team you can see in the market".

Asked how the sponsor can possibly support the trust when it does not even have many hospitality assets to inject into the Reit (most are just hospitality components of mixed-use developments), Mr Ko said that the sponsor would look into development projects going forward. Otherwise, A-HTrust can continue to acquire independently, and is already eyeing new territories such as Hong Kong and South Korea.

Merger and acquisition (M&A) activity has begun to take place, quietly and sporadically, in the Singapore real estate investment trust space. For example, the empty shell of Saizen Reit, after selling all of its Japanese properties, is undergoing a reverse takeover with Sime Darby Property to have the latter's Australian assets injected into the trust for A$356 million (S$371 million).

Last week, a transaction disclosure also showed that an entity related to private equity firm Warburg Pincus, called e-Shang Infinity Cayman, had signed a deal with three unitholders of Cambridge Industrial Trust to buy a 10.65 per cent stake in the trust. Market watchers believe that this may be a precursor to an M&A. Already, the manager's main owners, Oxley Global and National Australia Bank, have received expressions of interest for their combined 80 per cent holding.

Mr Ko said that consolidation was normal in a market of varying performances among players, but A-HTrust's priority is to deliver shareholders predictable earnings and grow its asset values.

"We are not in the M&A world of trying to capture other Reits," he said. While it remains on the lookout for upscale hotels that complement its portfolio, acquiring platforms for the sake of growth will not be a priority; the Reit prefers business as usual.


Amendment note: An earlier version of this article said Ascendas Reit has yielded on a compounded basis a return of 16 per cent over the past 14 years. It should be on an average per-annum basis. The article also named Bernard Teo as head of operations at Ascendas Hospitality Trust; he should be head of asset management. We are sorry for the error.