CapitaLand Ascott Trust (Clas) to Acquire lyf Funan Singapore for $146.4 Million
CapitaLand Ascott Trust (Clas) has announced its proposal to acquire the 329-room lyf Funan Singapore from Ascott Serviced Residence Global Fund (ASRGF) for a whopping $146.4 million. This move is set to have a significant impact on Clas’ portfolio and financial standing.
Key Details of the Acquisition
- Clas’ sponsor, The Ascott Limited, holds a 50 per cent stake in ASRGF.
- The acquisition is expected to be funded mostly from the sale of Citadines Mount Sophia Singapore, completed in March 2024.
- The trust’s managers anticipate that this acquisition will increase Clas’ total distribution by $3.5 million, representing a 1.5 per cent accretion to its distribution per stapled security (DPS) on a financial year 2023 pro forma basis.
- The deal will also provide an earnings before interest, taxes, depreciation and amortisation (Ebitda) yield of 4.7 per cent on the same pro forma basis.
Strategic Implications
The acquisition of lyf Funan Singapore aligns with Clas’ portfolio reconstitution strategy. Serena Teo, chief executive of the managers, highlighted that the entry Ebitda yield for lyf Funan Singapore is significantly higher than the investment exit Ebitda yield for Citadines Mount Sophia Singapore. She emphasized that this move will enhance Clas’ presence in Singapore and balance its income contribution from overseas markets.
Impact on Clas’ Portfolio
Located at 67 Hill Street, lyf Funan Singapore is a hotel development under Ascott’s innovative lyf hospitality concept. Acquiring this asset will increase Clas’ total properties in Singapore to five, boosting the proportion of its total assets in the country to 19 per cent.
Future Plans and Approval
Post-acquisition, Clas intends to establish a master lease with Ascott for lyf Funan Singapore, with an initial term of 20 years. The agreement will see the master lessee pay rent equivalent to 93.5 per cent of the property’s gross operating profit. The completion of the deal is expected in the fourth quarter of 2024, pending approval from Clas’ stapled securityholders at an extraordinary general meeting scheduled for November.
Market Reaction
Following the announcement, stapled securities of Clas were trading down 0.5 per cent at 97 cents as of 9.25am on Oct 1.
Analysis
In essence, the acquisition of lyf Funan Singapore by CapitaLand Ascott Trust (Clas) signifies a strategic move to strengthen its presence in the Singapore market and enhance its overall portfolio. This acquisition is expected to boost Clas’ financial performance, increase its income contribution from Singapore, and align with its portfolio reconstitution strategy. With a clear plan for the future and meticulous attention to financial details, Clas is positioning itself for sustained growth and success in the competitive real estate market.