Ascendas Hospitality Trust

(06-04-2013, 07:42 AM)dydx Wrote: Is the just announced and proposed acquisition of the 306-room Park Hotel Clarke Quay for a total acquisition cost of approx. $308.0m a smart move?
http://info.sgx.com/webcoranncatth.nsf/V...4003D1C10/$file/Citrine_SGX_Announcement.pdf?openelement [announcement]
http://info.sgx.com/webcoranncatth.nsf/V...4003D1C10/$file/Press_release_A-HTRUST.pdf?openelement [press release]
http://info.sgx.com/webcoranncatth.nsf/V...4003D1C10/$file/Citrine_Announcement_Slides.pdf?openelement [presentation slides]

I guess only financial engineers investing other people's money - including using a proportionately high amount of debt financing - would cut and do such a deal!

Smart move or not - let the mkt decide. Afterall, REITS are incepted as a marketable business. If all goes well, then everyone smiles. A H REIT appears to be a pure fund manager with little experience of operating hotels. They are reliant on established operators to run the hotels for them.

Now that they are listed, one can never rule out that they may re-approached St****** to buy hotels Down Under since they have readily access to funds. Just that, they may face tougher negotiations if they ever approach Ow CK again.

GG

i find some points in the presentation slides rather hilarious:
1) entry to Sg hospitality market => what's so attractive abt entering the market now where RevPar has been flat, oversupply of rooms in 2014-2015, rising labor costs, general slowdown of global economy?
2) rental structure of fixed+3% escalation => this is redundant since it is pure engineering.
3) what's the incentive for the lessee to increase RevPar? the only penalty is a one-time payment of 250k
4) 29% increase in NAV => so right now they have a bunch of foreign hotels and all of a sudden they overload the ptf with one solitary overweight.

will be interesting to see the financing means and the gearing after.
also, given this is an entry to the local market <1y after listing, sounds to me like plenty of future equity raising.

(06-04-2013, 09:52 AM)AlphaQuant Wrote: i find some points in the presentation slides rather hilarious:
1) entry to Sg hospitality market => what's so attractive abt entering the market now where RevPar has been flat, oversupply of rooms in 2014-2015, rising labor costs, general slowdown of global economy?

I was looking at CDL H-Trust's latest Results Presentations,

- Pg 14 : CDLHT Singapore Hotels Annual RevPAR Comparison shows good growth from 2009 but it does look like it may have peaked in 2012. Doesn't look flat to me. Perhaps it's due to their having a few Singapore Hotels which helps to overcome any flattening effect.

- Pg 25 : STB Expects 17 Million Visitor Arrivals by 2015. 4-Yr CAGR of 6.6% projected, slightly better than the 5.8% for the previous 10-Year CAGR.

- Pg 27 : Hotel Room Supply is expected to grow at a CAGR of 5.1% for the next 3 years. However, the estimated increase of over 4,000 rooms in the next 12 months will contribute to a more competitive environment. ie. Oversupply is perhaps immediate but will moderate towards 2014-5. On the bright side, it's slower than the STB projected Visitor Arrivals.

Lastly, I do agree that as far as REITs / Biz Trusts are concerned, any acquisitions is almost always all about financial engineering. Not that difficult to do yield accretive acquisitions by playing with the debt portion, some may even fund lousy assets acquisitions fully with debts and it's still yield accretive...

Amazing that even at current prices Aberdeen is accumulating. Either they see a structural pattern that I dont see...

Financial Engineering, used in a polite way, is what enables REITs and some Companies to be able to do their M&A. Some call it LBO, but it is essentially playing around with financing and a mix of debt-equity to make something look attractive. I must admit I am not too good with such stuff, but I agree with dydx on his comment.

Just curious and trying to follow your line of thought:

>> structure of fixed+3% escalation => this is redundant since it is pure engineering.

Why do you say a fixed based rental is redundant? Doesn't it give the Trust a certain level of rental protection? And why do you say its "pure engineering"?

Thanks

(06-04-2013, 01:08 PM)wee Wrote: Just curious and trying to follow your line of thought:

>> structure of fixed+3% escalation => this is redundant since it is pure engineering.

Why do you say a fixed based rental is redundant? Doesn't it give the Trust a certain level of rental protection? And why do you say its "pure engineering"?

Thanks

i was referring to the 3% escalation feature i.e.
A fixed rent component starting at S$11.5m for the initial
12-months period with an annual 3% escalation (“Fixed
Rent”)

for a 10y period, a 11.5mio initial with 3% fixed escalation is the same thing as a fixed rent of 13.18mio for 10y. (disregarding discounting of the termstructure)

but does the former sound better than the latter? and is this meant to create an impression of "increasing rent is better than fixed"?

maybe i am mistaken and it actually means 11.5mio fixed +3% escalation "of something" (e.g. CPI in PLife case), but if it is a pure 3% of previous, then i think it is meaningless.

There is a variable component to the lease which will capture any upside in the hotel operating income. Without any knowledge of the hotel current EBITDA, I cannot safely say how much it will entail to.

(Not Vested)

It is about $892k per key for Park Hotel.

Using CDL hotel 2011 valuation,
Grand Copthorne Waterfront Hotel is about $610k per key
Novotel Singapore Clarke Quay is about $734k per key
Even Orchard Hotel is only about $768k per key.

Even though park hotel has a longer lease, the price was still pretty high.

(06-04-2013, 02:34 PM)yeokiwi Wrote: It is about $892k per key for Park Hotel.

Using CDL hotel 2011 valuation,
Grand Copthorne Waterfront Hotel is about $610k per key
Novotel Singapore Clarke Quay is about $734k per key
Even Orchard Hotel is only about $768k per key.

Even though park hotel has a longer lease, the price was still pretty high.

How about dividing your figures by the no. of years of balance lease and see what kind of figures you'll get ? Can use latest 2012 Valuations here.