CapitaLand Ascott Trust (CLAS)

[greengiraffe]

They are armed with too much of Ah Gong $... I cannot trust mgt that keeps backflipping... anyway, hospitality sector is a tougher sector than ALZ's development and investment prop division...

Odd Lots Vested
GG

Mr Lee said the announcements affirm Ascott’s confidence in Australia’s serviced residence segment, despite parent company CapitaLand’s exit from the market by divesting its stake in developer Australand in March.

SINGAPORE — Property developer CapitaLand’s wholly-owned serviced residence offshoot The Ascott Limited is deepening its presence Down Under with a series of moves that include a A$500 million (S$558 million) investment to forge a strategic partnership with a major Australian player, in a bid to tap the growing business travel industry there.

Under the partnership with Quest Serviced Apartments, Ascott said yesterday that it will invest up to the amount over the next five years on acquisitions of new properties that will be leased and operated under Quest’s franchise model. Ascott is also taking a 20 per cent stake in Quest for A$28.8 million with the option to increase the holding to 30 per cent in a move to strengthen its foothold in the business travel segment in Australia, chief executive Lee Chee Koon said yesterday.

“Competition in the travel industry has stiffened with the emergence of players such as Airbnb … They pose a lot of competition to players that capture only the leisure market, but our focus has predominantly been corporate travellers and it’s the same for Quest, so we think that we can combine our global network and that will help us to dominate this particular market segment,” Mr Lee said.

“Ascott and Quest have complementary strengths. For Ascott, a lot of our business comes through international customers to Australia, while Quest’s sales and distribution is more to domestic corporate travellers,” he added.

Quest currently has the largest network of serviced apartments in Australia with 112 properties, most of them located in the state of Victoria. Its chairman Paul Constantinou said the company has opened an average of eight new properties each year and the partnership with Ascott will help to more than double its portfolio to 250 properties in Australia and New Zealand before the end of this decade.

Separately, Ascott Residence Trust, a real estate investment trust 46 per cent owned by Ascott, is buying three properties in Greater Sydney from Quest at A$83 million which will significantly boost its Australian footprint from one property in Perth currently. The accretive acquisitions at an EBITDA (earnings before interest, taxes, depreciation and amortisation) yield of 7.7 per cent are expected to increase the trust’s distribution per unit from 8.4 Singapore cents to 8.46 cents on a pro forma basis.

Following the acquisition, the trust will receive fixed rent by taking over the leases for the three serviced residences — Quest Sydney Olympic Park, Quest Campbelltown and Quest Mascot.

“Fixed rent from the three serviced residences is underpinned by long-term master leases and will enhance the stability of Ascott REIT’s income … Demand is anticipated to grow due to the urban development plans earmarked at each of the locations,” said Mr Ronald Tay, chief executive of Ascott Residence Trust Management, the manager of the REIT.

Mr Lee said the announcements affirm Ascott’s confidence in Australia’s serviced residence segment, despite parent company CapitaLand’s exit from the market by divesting its stake in developer Australand in March.

“The Australian accommodation sector continues to expand with more than 100 properties expected to be opened over the next few years. Foreign investment in the sector has been on the rise in recent years due to the reliable legislative environment, resilient economy and stable returns in Australia,” he said.