CapitaLand Ascott Trust (CLAS) recently acquired two freehold limited-service hotels in Japan for a total of JPY21 billion ($178.5 million). The two properties, ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are located in prime areas and offer attractive discounts compared to independent valuations.
This acquisition is expected to have a positive impact on CLAS’ distribution per stapled security (DPS), with an accretion of 1.6% on a FY2024 pro forma basis. Additionally, the blended net operating income (NOI) yield for these two hotels is estimated to be 4.3% in FY2024. To hedge against currency fluctuations, the acquisition was financed through JPY-denominated debt and proceeds from the divestment of four properties in Japan.
The 224-unit ibis Styles Tokyo Ginza is situated in the heart of Tokyo’s shopping and entertainment district, next to the popular Ginza Six retail mall and Uniqlo flagship store. The iconic Ginza Wako clock tower is also within a 10-minute walk. Meanwhile, the 392-unit Chisun Budget Kanazawa Ekimae is located in the historical city of Kanazawa, known for its traditional gardens, cultural sites, and preserved Edo period architecture.
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Including the recent acquisitions, CLAS has invested approximately $530 million in the past year, at higher yields compared to its divestments. This has bolstered its income distribution and improved the quality of its portfolio. Notable investments in 2024 include Teriha Ocean Stage, a rental housing property in Fukuoka, Japan, and lyf Funan Singapore. On the other hand, divestments in the same period amounted to over $500 million, resulting in a net gain of $74 million.
According to Serena Teo, CEO of CLAS’ manager, this acquisition is part of their strategy to reconstitute the portfolio and deliver stable returns to stapled securityholders. She also notes that the FY2024 NOI yield of these two hotels is significantly higher compared to the blended exit yield of approximately 2.0% for the four previous divestments in Japan. With the swift redeployment of divestment proceeds into higher-yielding assets, the income from the four sold properties has been fully replaced.
As of now, CapitaLand Ascott Trust’s unit price stands at 90 cents per unit.