CapitaLand Ascott Trust (CLAS) is divesting two mature hotels in Sydney, Australia to an unrelated third party for a total of AUD109.0 million (S$95.6 million[1]).  Situated outside of the city centre, the two properties are Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta.

The two properties will be divested at about 5% above book value[2] and net proceeds of the divestment is expected to be AUD98.0 million (S$85.9 million).  The exit yield[3] is 4.4% and CLAS will recognise a net gain of AUD14.2 million (S$12.4 million)[4].  The divestment of Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta is expected to be completed in 1Q 2024 and 3Q 2024 respectively.

Ms Serena Teo, Chief Executive Officer of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “The divestment of these two properties outside of central Sydney is part of our active portfolio reconstitution strategy.  CLAS remains focused on assets that offer better yields and will further uplift the value for our portfolio.  As additional capital will be required to upgrade these two mature properties, the divestment will enable us to redeploy the proceeds into more optimal uses such as but not limited to paying down debt and funding our other asset enhancement initiatives (AEI).  The exit yield is also at an attractive level that compares favourably against the current cost of borrowing in Australia.  We recently divested four mature serviced residences in regional France at an exit yield of about 4%.  Part of the divestment proceeds will also be used to partially finance our acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%[5], further enhancing our returns to Stapled Securityholders.”

“Australia remains a key market for CLAS.  We continue to see strong demand from corporate and leisure guests for our serviced residences and hotels in Australia, boosted by large scale sporting events.  Post-divestment, our remaining seven serviced residences and hotels under management contracts will enable us to capture the travel demand while our five serviced residences under master leases will continue to provide us with stable income,” added Ms Teo.

In 3Q 2023, revenue per available unit (RevPAU[6]) for CLAS’ properties in Australia was 18% higher year-on-year at AUD152, exceeding 3Q 2019 pro forma RevPAU[7] by 13%.  After the divestment of Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, CLAS will have 12 remaining serviced residences and hotels in Australia, in cities such as Brisbane, Melbourne, Perth and Sydney.

This includes Novotel Sydney Central, one of eight properties that are in CLAS’ AEI pipeline to create greater value for Stapled Securityholders.  Novotel Sydney Central will undergo an extensive AEI which includes a brownfield extension to add eight more floors and 72 more rooms, a 28% increase from the current inventory.  The property’s gross floor area will also expand by 10%.  Post-AEI, the property’s value[8] is expected to increase by about AUD173.3 million (approximately S$151.9 million) as compared to the valuation as at 31 December 2022 of AUD166.5 million (approximately S$150.3 million).  Based on the valuation by Colliers, the property’s EBITDA is expected to increase by AUD10.1 million (approximately S$8.9 million) on a stabilised basis, with an 11.3%[9] yield on AEI cost.

The Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta sold by Michael Simpson and Vasso Zographou of CBRE Hotels

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1. Based on an exchange rate of AUD1 to S$0.87683 unless stated otherwise.
2. Based on the independent valuation by Colliers in October 2023.
3. Exit yield is computed based on FY 2022 Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA).
4. This includes a reversal of deferred tax liability previously provided.
5. 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.
6. Pertains to the hotels and serviced residences under management contracts only.
7. The combination of Ascott Residence Trust (prior to it being renamed as CapitaLand Ascott Trust in 2022) with Ascendas Hospitality Trust (A-HTRUST) was completed on 31 Dec 2019 and the 2019 pro forma RevPAU includes the performance of the A-HTRUST properties.
8. Based on the valuation by Colliers, the valuation is expected to be about AUD339.8 million (about S$297.9 million) following the extension, renovation and stabilisation of the property in 2028.
9. Based on stabilised EBITDA before FF&E reserves in 2028 versus EBITDA in 2019 over estimated project cost attributable to CLAS of AUD90.0 million (approximately S$78.9 million).