CapitaLand Ascott Trust proposes S$530.8 million acquisition of three lodging assets in London, Dublin and Jakarta

CapitaLand Ascott Trust (CLAS) has signed a Memorandum of Understanding (MOU) with its sponsor, The Ascott Limited (Ascott), for a proposed DPS-accretive acquisition of three lodging assets in the United Kingdom (UK), Ireland and Indonesia at an agreed property value of S$530.8 million. The three assets are a hotel in London, The Cavendish London; a hotel in Dublin, Temple Bar Hotel; and a serviced residence in Jakarta, Ascott Kuningan Jakarta. The acquisition will enable CLAS to enhance its income streams and capitalise on the travel recovery and robust lodging demand.

Upon completion of the proposed acquisition, CLAS is expected to increase its total distribution by S$13.5 million and its DPS by 1.8% on a FY 2022 pro forma basis. The earnings before interest, taxes, depreciation and amortisation (EBITDA) yield of the proposed acquisition is 6.2% on a FY 2022 pro forma basis.

All three properties are in prime locations within key capital cities. The 230-unit The Cavendish London is well-located in the exclusive Mayfair high-end shopping district of central London and the 136-unit Temple Bar Hotel is in the Temple Bar district, both of which are high-traffic areas near iconic attractions. The 185-unit Ascott Kuningan Jakarta is in the capital city’s central business district, close to embassies and commercial offices.

The Cavendish London presents an excellent value-add opportunity for CLAS. The property will be renovated and rebranded under The Crest Collection brand, a luxury collection brand managed by Ascott. The property’s valuation is expected to be GBP316.0 million (approximately S$547.2 million) following the renovation and stabilisation of the property in 2027. This is an increase of approximately GBP101.0 million (S$174.9 million) from the as-is valuation of GBP215.0 million (approximately S$372.3 million) as at 30 June 2023. The property is expected to achieve an EBITDA yield on total capitalised cost of approximately 6.5% at stabilisation. The renovation for The Cavendish London will be carried out in phases from 4Q 2024 to 4Q 2025. Temple Bar Hotel will also undergo renovation from 1Q 2024 to 4Q 2024.

Ms Serena Teo, Chief Executive Officer of the Managers of CLAS, said: “Our accretive acquisition of the three prime lodging assets will enhance the quality and yield of CLAS’ portfolio. They are well-positioned to capture travel demand and the expected growth trajectory of these assets will continue to strengthen CLAS’ income streams. London has been one of our stronger performing markets and Jakarta has been a historically resilient market for us. Our entry to Ireland offers an additional boost to our revenue. Dublin is an attractive destination for leisure visitors, home to some of the world’s largest pharmaceutical companies, and one of the IT hubs of Europe. In keeping with our focus to marry growth with stability, The Cavendish London and Temple Bar Hotel provide CLAS with upside as travel demand continues to recover and downside protection through minimum guaranteed income, while Ascott Kuningan Jakarta’s higher proportion of long-stay guests provides added income resilience.”

“AEIs are also in place for two of our existing properties – Novotel Sydney Central and Citadines Holborn-Covent Garden London. Both properties are in prime, city-centre locations, and the AEIs are expected to enhance the assets' value and yield. Novotel Sydney Central’s AEI includes a significant brownfield initiative to increase room inventory by approximately 28%. Combined with the AEI of The Cavendish London, we expect a S$385.5 million increase in property value for the three properties upon completion and post-stabilisation. The proposed acquisition and AEIs are excellent opportunities to increase accretion and asset value,” added Ms Teo.

The market revenue per available unit (RevPAU) in London, Dublin and Jakarta have exceeded pre-pandemic levels of 2019. London’s market RevPAU for the first half of 2023 was 112% of the same period in 2019. In the first half of 2023, Dublin’s market RevPAU was 110% of pre-COVID-19 levels over the same period and is poised to grow even stronger as international travel resumes. In Indonesia, Jakarta’s market RevPAU in the first half of 2023 was 111% of the pre-COVID-19 levels over the same period.

With the acquisition of the three lodging assets, CLAS’ proportion of green certified properties (by gross floor area) is also expected to increase to approximately 39%, bringing CLAS closer to its target to green 50% of its global portfolio by 2025.

AEIs for two existing assets in Sydney and London expected to increase property values by S$210.6 million and provide yields on AEI cost of approximately 11%
Novotel Sydney Central in Australia and Citadines Holborn-Covent Garden London in the UK will remain operational during the AEIs.

Novotel Sydney Central will undergo extension and renovation, adding 72 rooms across eight more floors, an approximate 28% increase from the hotel’s current inventory. This brownfield initiative is expected to increase revenue for the property and expand its gross floor area by approximately 10%. Development approval has been obtained. A new retail space will be added on the ground floor; the hotel’s existing 255 rooms, lift lobbies, corridors and façade will also be refreshed. The AEI is expected to take place from 4Q 2024 to 1Q 2026. Post AEI and stabilisation, the property is expected to achieve a valuation of A$339.8 million (approximately S$312.6 million) in 2028, an increase of approximately A$173.3 million (S$159.5 million) from the valuation as at 31 December 2022. Based on the valuation by Colliers, the incremental EBITDA on stabilisation is expected to amount to A$10.1 million (approximately S$9.3 million) which translates to a yield on AEI cost of approximately 11.3%.

Citadines Holborn-Covent Garden London is located at the heart of London’s historical and cultural precinct. The AEI for Citadines Holborn-Covent Garden London will take place from 3Q 2023 to 1Q 2024, refreshing the design of the serviced residence’s 192 units and façade. The property’s common areas and facilities such as the gym, meeting rooms and corridors will also be upgraded. The valuation is expected to be GBP125.3 million (approximately S$217.0 million) following the renovation and stabilisation of the property in 2025, which is approximately GBP29.5 million (S$51.1 million) higher than the valuation as at 31 December 2022. Based on the valuation by HVS, the incremental EBITDA is expected to amount to GBP1.2 million (approximately S$2.1 million) which translates to a yield on AEI cost of approximately 10.6%.

With the completion of AEIs for Novotel Sydney Central, Citadines Holborn-Covent Garden London and The Cavendish London, the total property value of the three properties is expected to increase by S$385.5 million post-stabilisation.