CapitaLand Ascott Trust increased FY 2023 Distribution per Stapled Security by 16% through stronger operating performance and new acquisitions

CapitaLand Ascott Trust (CLAS) has increased its distribution per Stapled Security (DPS) for FY 2023 by 16% year-on-year (y-o-y) to 6.57 cents.  Despite the pandemic, its DPS has increased every year since FY 2020.  Excluding one-off items[1], adjusted DPS for FY 2023 rose 14% y-o-y to 5.44 cents.  Total distribution for FY 2023 rose 25% y-o-y to S$237.0 million.  The rise was due to stronger operating performance and contributions from 18 new acquisitions.  DPS for 2H 2023 was up 14% y-o-y to 3.80 cents and CLAS’ total distribution for 2H 2023 grew 24% y-o-y to S$140.8 million.

CLAS’ properties saw strong demand as international travel continued to recover.  CLAS’ revenue per available unit (REVPAU[2]) in 2H 2023 reached 103% of pre-pandemic levels in 2H 2019 on a pro forma basis[3], increasing by 10% y-o-y to S$157. REVPAU also rose 23% y-o-y to S$148 for FY 2023.  In 4Q 2023, majority of CLAS’ key markets such as China, Japan, United States of America (USA) and Vietnam also registered y-o-y REVPAU growth.

CLAS’ gross profit for 2H 2023 rose 12% y-o-y to S$183.9 million compared to 2H 2022.  This is 106% of pre-pandemic levels.  Revenue for 2H 2023 also increased by 12% to S$397.6 million compared to 2H 2022.  This was mainly attributed to higher revenue received from CLAS’ existing portfolio and contributions from its new acquisitions.  On a same-store basis excluding the new acquisitions, gross profit and revenue increased by 5% and 8% respectively compared to 2H 2022.  In 2H 2023, stable income sources contributed about 54% of CLAS’ gross profit, while the remaining 46% was generated from growth income sources.

CLAS achieved a fair value gain of S$156 million, about 2% increase in portfolio valuation due to stronger operating performance and outlook for its portfolio despite higher capitalisation rates and discount rates.  Markets with valuation gains include Australia, Europe, Japan, Singapore and United Kingdom.

Mr Bob Tan, Chairman of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “CLAS continued to deliver strong performance.  Our balanced portfolio of stable and growth income streams enables CLAS to capture growth opportunities while remaining resilient amidst uncertainties.  As part of CLAS’ active portfolio reconstitution strategy, we completed 18 yield-accretive acquisitions in the past two years, boosting CLAS’ income.  In the last seven months, we also announced the divestment of nine mature properties[4] at a premium to book value.  Our strengthened financial position will enable us to redeploy capital towards more optimal uses such as investments into higher-yielding assets, funding our asset enhancement initiatives (AEI) or paring down debt.  We remain committed to delivering sustainable returns to Stapled Securityholders.”

Ms Serena Teo, Chief Executive Officer of the Managers of CLAS, said: “Through our active portfolio reconstitution and AEI, we are enhancing the quality of our portfolio to create further value for Stapled Securityholders.  We have eight properties undergoing or will undergo AEI.  The AEI is expected to uplift the value of the properties post completion.  Looking ahead, the diversification of CLAS’ portfolio across geographies, lodging asset classes and contract types will continue to provide income stability.”

Delivering returns through CLAS’ active portfolio reconstitution strategy

CLAS has announced divestments of S$260.1 million of assets at a premium to book value in the last seven months.  The divestment of nine assets will unlock S$24.3 million in net gains, at an average exit yield of about 4.3%[5].  Other than deploying capital to higher-yielding assets or AEI, the divestments also boost CLAS’ financial flexibility, potentially enabling CLAS to strengthen its balance sheet and lower its gearing.

CLAS completed the S$530.8 million yield-accretive acquisition of three prime lodging properties[6] in London, Dublin and Jakarta in November 2023, delivering EBITDA yield of 6.2%[7], about 1.9 percentage points higher than the average exit yield on its divestments.  In January 2024, CLAS also completed the turnkey acquisition of Teriha Ocean Stage, a 258-unit rental housing property in Fukuoka, Japan at an estimated net operating income yield of about 4% on a stabilised basis.

Uplifting the value and profitability of CLAS’ portfolio through new developments and asset enhancement initiatives

Previously under development, Standard at Columbia in the USA, a student accommodation property was topped out in June 2023 and received its first batch of students in August 2023.  In Singapore, construction of the new Somerset serviced residence at the popular riverfront lifestyle and entertainment precinct of Clarke Quay is slated for completion in 2H 2025.

CLAS also announced AEI for eight properties to create additional tailwind beyond the travel recovery.  Unlocking growth potential, the uplift in performance post renovation is expected to enhance the properties’ profitability and valuation.  Riverside Hotel Robertson Quay was rebranded and unveiled as The Robertson House by The Crest Collection in October 2023.  The AEI is on track for full completion in 1Q 2024.  AEI for the seven other properties[8] are set to be completed between 2024 and 2026.

CLAS’ strong financial capacity and healthy liquidity position

CLAS is in a strong financial position and continues to be prudent in its capital management.  Despite a high interest rate environment, CLAS’ average cost of debt remains low at 2.4% per annum as at 31 December 2023.  CLAS increased its proportion of debt on fixed rates to 81% and has a total of approximately S$1.32 billion in cash on-hand and available credit facilities.  CLAS’ interest rate cover is also healthy at 4 times.  It has a debt headroom of about S$2 billion and a gearing of 37.9%, which is well below the 50% gearing limit allowable under the property funds appendix issued by the Monetary Authority of Singapore.

Summary of Results

(1) Total distribution for 2H 2023 and FY 2023 included one-off items relating to realised exchange gain arising from repayment of foreign currency bank loans and settlement of cross currency interest rate swaps.

(2) Total distribution for 2H 2022 and FY 2022 included one-off items relating to realised exchange gain arising from repayment of foreign currency bank loans.

(3) Adjusted DPS for the one-off items mentioned in notes 1 and 2 above.

Distribution and Book Closure Date

On 14 August 2023, 191,755,000 new Stapled Securities were issued through CLAS’ private placement.

For the existing Stapled Securityholders, CLAS paid an advanced distribution of 0.701 cents per Stapled Security on 11 October 2023. This distribution was for the period from 1 July 2023 to 13 August 2023, in lieu of the semi-annual distribution.  

CLAS will pay 3.095 cents to Stapled Securityholders on 29 February 2024 based on the distribution income from 14 August 2023 to 31 December 2023. Semi-annual distributions will resume thereafter.

[1] Excluding one-off items comprising realised exchange gain in FY 2022 and FY 2023.

[2] Revenue per available unit of properties excludes master leases, rental housing and student accommodation.

[3] The combination with Ascendas Hospitality Trust (A-HTRUST) was completed on 31 Dec 2019 and the 2019 pro forma figures include the performance of the A-HTRUST portfolio.

[4] The nine properties comprise four properties in regional France, two properties in Australia and three properties in Japan.

The exit yield of the France and Australia properties is computed based on FY 2022 Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). The exit yield of the Japan portfolio is not meaningful and has not been included in the average exit yield computation as the properties were largely closed in 2022. If included, the average exit yield will be about 2.6%.

[6] The Cavendish London, Temple Bar Hotel in Dublin and Ascott Kuningan Jakarta.

[7] Excluding the Milestone Payments which are to be made only when 70% of the renovations of The Cavendish London and Temple Bar Hotel are completed. Including the Milestone Payments, the EBITDA yield is 5.1% on a FY 2022 pro forma basis.

[8] The seven properties are Citadines Holborn-Covent Garden London, Citadines Les Halles Paris, Citadines Kurfürstendamm Berlin, La Clef Tour Eiffel Paris, Temple Bar Hotel, The Cavendish London and Novotel Sydney Central.