CapitaLand Ascott Trust (CLAS) recently made a significant move by acquiring two freehold limited-service hotels in Japan for a total of JPY 21 billion ($178.5 million). The hotels, named ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are located in the country’s capital and Kanazawa respectively. This acquisition was made at an 8.3% discount to the independent valuation.
On a FY2024 pro forma basis, the addition of these two hotels is expected to result in a distribution per stapled security (DPS) accretion of 1.6%. Additionally, the blended net operating income (NOI) yield of the two hotels is projected to be 4.3% in FY2024. To mitigate currency fluctuations, the acquisition was funded through JPY-denominated debt and the proceeds from CLAS’ divestment of four properties in Japan.
Ibis Styles Tokyo Ginza is situated in the heart of the city’s shopping and entertainment district. With 224 units, the hotel is in close proximity to Ginza Six, a popular high-end retail mall, and the well-known Uniqlo global flagship store. The iconic Ginza Wako clock tower is also just a 10-minute walk away.
On the other hand, Chisun Budget Kanazawa Ekimae is located in Kanazawa, a city in the northwest of Japan known for its historical attractions, traditional gardens, and cultural landmarks. Guests staying at this 392-unit hotel will have easy access to popular destinations such as Kanazawa Castle, Kenrokuen Garden, and the geisha and samurai districts featuring preserved architectural designs from Japan’s Edo period.
This latest acquisition brings CLAS’ total investments in the last 12 months to approximately $530 million. These investments are expected to yield higher returns compared to CLAS’ divested properties, thus strengthening the trust’s income distribution.
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In 2024 alone, CLAS completed multiple acquisitions, including a rental housing property in Fukuoka, Japan called Teriha Ocean Stage in January, the remaining 10% stake in Standard at Columbia, a student accommodation property in the United States in June, and the acquisition of lyf Funan Singapore in December.
Over the course of 2024, CLAS divested properties worth over $500 million, resulting in a net gain of about $74 million. This has allowed the trust to swiftly redeploy the proceeds into higher-yielding assets, fully replacing the income from the four divested properties.
Serena Teo, CEO of CLAS’ manager, states that this acquisition is a part of the trust’s strategy to enhance the quality of its portfolio and provide stable returns to Stapled Securityholders. She adds, “The FY2024 NOI yield of the two hotels is 230 basis points higher than the blended exit yield of approximately 2.0% for the four previous divestments in Japan. By swiftly redeploying divestment proceeds into these higher-yielding assets, we have fully replaced the income from the four divested properties.”
As of now, CapitaLand Ascott Trust’s closing unit price stands at 90 cents.