CapitaLand Ascott Trust divests two hotels in Australia for A$109.0 mil

CapitaLand Ascott Trust (CLAS) is divesting two hotels in Sydney, Australia for a total of A$109 million ($95.6 million). The exit yield is 4.4% based on CLAS’s FY2022 ebitda and CLAS will recognise a net gain of A$14.2 million from the divestment.

Holland Village offers an enviable array of amenities such as supermarkets, cafes, banks, pharmacies, and numerous dining options within walking distance. These opportunities for shopping, retail therapy, and socializing make this area highly sought after. Moreover, there are also a wealth of sporting venues and leisure facilities. Holland Drive Condo residents are particularly fortunate to enjoy the convenience of shopping and leisure that the village has to offer.

What is more, the community is serviced by an excellent transport system, making commuting a breeze. The area is well connected to major expressways, bus stops, and MRT stations, making it an ideal choice for those who need quick and easy access to different parts of the city. Residents of Holland Condo can also take advantage of other transport options such as taxis and bicycle share schemes for added convenience.

Overall, Holland Village provides an ideal mix of convenience, amenities, and transport options that make it a great place to live for those who value easy access to a wide range of facilities and attractions.

Serena Teo, CEO of the managers says,”The divestment of these two properties outside of central Sydney is part of our active portfolio reconstitution strategy. CLAS remains focused on assets that offer better yields and will further uplift the value for our portfolio.”

The two properties, Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, will be divested at about 5% above book value. Net proceeds of A$98 million are expected from the divestment and will be used to partially finance CLAS’s acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%.

Teo adds,”The exit yield is also at an attractive level that compares favourably against the current cost of borrowing in Australia.”

The divestments are expected to be completed by 1Q2024 and 3Q2024 respectively. The proceeds from the divestments will also be used for other purposes such as paying down debt and funding CLAS’s other asset enhancement initiatives.

Post-divestment, CLAS will remain focused on capturing the travel demand in Australia. CLAS’s seven serviced residences and hotels under management contracts will enable it to do so. The trust’s five serviced residences under master leases will continue to provide CLAS with stable income.

In the 3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS’s properties in Australia rose by 18% y-o-y to A$152, exceeding its 3QFY2019 pro forma RevPAU by 13%.

Through the divestment, CLAS will further enhance its returns to stapled securityholders. Australia remains a key market for the trust, which continues to see a strong demand from both corporate and leisure guests and boosted by large-scale sporting events.

Divesting the two hotels in Sydney will enable CLAS to redeploy the proceeds into more optimal uses and take advantage of the attractive exit yield compared to the current cost of borrowing.