Merger of Ascott Reit, Ascendas Hospitality Trust makes sense

CAPITALAND's announcement on Wednesday that it would merge Ascott Residence Trust (ART) and Ascendas Hospitality Trust (A-HTrust) should not be a surprise to market watchers, following the merger of their respective parents.

The two Reits (real estate investment trusts) had been subject to much speculation since January after ART's parent, CapitaLand, announced its S$11 billion acquisition of Ascendas-Singbridge, A-HTrust's parent.

The merger of the parents to become one of Asia's largest diversified real estate players, with over S$123 billion of assets under management (AUM), has resulted in an overlap in investment mandates between their two trusts.

Regulation-wise, there is no reason for CapitaLand to retain two hospitality vehicles. Commercially, the merger makes a lot of sense. These days, operators of hotel and service apartment businesses must be big to compete - a trend that is witnessed globally…