A proposed combination of Ascott Residence Trust (Ascott Reit) and Ascendas Hospitality Trust (A-HTRUST) will result in the largest hospitality trust in Asia-Pacific, and the eighth largest globally, with an asset value of S$7.6 billion (US$5.6 billion).
The combination will be effected by way of a trust scheme of arrangement, with Ascott Reit acquiring all the A-HTRUST Stapled Units. The total consideration for the combination is over S$1.2 billion, comprising S$61.8 million in cash and 902.8 million new Ascott Reit-BT Stapled Units.
The transaction will bring together Ascott Reit’s global portfolio, which comprises predominantly serviced residences, and A-HTRUST’s 14 hotels in Asia-Pacific, creating an enlarged portfolio of 88 properties with more than 16,000 units in 39 cities and 15 countries across Asia-Pacific, Europe and the US.
It will also further diversify Ascott Reit’s global portfolio with foray into new gateway cities – Brisbane and Seoul.
“The enlarged portfolio will be further diversified with no single country accounting for more than 20 per cent of gross profit, thereby reducing concentration risk,” commented Tan Juay Hiang, CEO of the A-HTRUST Managers.
Chia Kim Huat, lead independent director of the A-HTRUST Managers, sees CapitaLand and its lodging unit, The Ascott, as a strong sponsor for the combined entity.
For Bob Tan, Ascott Reit’s chairman, the combination is a win-win for both parties’ unitholders. “Ascott Reit as a combined entity will see our asset value grow by 33 per cent to S$7.6 billion and our distribution per unit increase by 2.5 per cent for FY2018 on a pro forma basis.”
He expects that the entity will have a higher proportion of stable income derived from master leases, balanced by growth income derived from management contracts.
“With access to a larger capital base and a higher debt headroom of about S$1 billion, we will have greater financial flexibility to seek more accretive acquisitions and value enhancements. The combined entity can then be strategically positioned to potentially enjoy a positive re-rating of the unit price and gain a wider investor base, which would be beneficial to all our unitholders.”
Beh Siew Kim, Ascott Reit’s CEO, added: “This will present an enlarged capacity to acquire more assets as well as undertake more development and conversion projects, thereby increasing their asset values over time – all with an aim to bring about greater income stability through a resilient and well-diversified portfolio.”
Earnings contribution from developed countries is expected to increase to 82 per cent on a pro forma basis, according to Beh, which will facilitate the inclusion of Ascott Reit into the FTSE EPRA Nareit Developed Index and potentially result in higher trading liquidity and a larger investor base.
The combined entity will also the seventh largest trust listed on the Singapore Exchange by asset value.