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CapitaLand Ascott Trust (CLAS) has recently finalized the acquisition of two 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, were purchased at a discount of 8.3% based on independent valuation.
Based on projections for FY2024, the acquisition of these two hotels is expected to bring in an accretion of 1.6% in distribution per stapled security (DPS). With a blended net operating income (NOI) yield of 4.3%, the acquisition is aimed at hedging against currency fluctuations and was funded by JPY-denominated debt and proceeds from CLAS’ divestment of four properties in Japan.
The ibis Styles Tokyo Ginza is located in the bustling shopping and entertainment district of the country’s capital. The 224-unit hotel is situated next to the popular Ginza Six shopping mall and the renowned Uniqlo flagship store. The iconic Ginza Wako clock tower is also just a short walk away.
Meanwhile, the Chisun Budget Kanazawa Ekimae is a 392-unit hotel in Kanazawa, a city known for its historical attractions, traditional gardens, and cultural landmarks such as the Kanazawa Castle and Kenrokuen Garden. The district also boasts preserved architectural designs from Japan’s Edo period and is easily accessible for guests.
Including these two properties, CLAS has completed a total of $530 million in investments in the past year. These acquisitions have been made at higher yields compared to CLAS’ divestments, resulting in a positive impact on the trust’s income distribution.
In addition to ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, other recent acquisitions by CLAS include Teriha Ocean Stage, a rental housing property in Fukuoka, Japan, in January 2024; Standard at Columbia, a student accommodation property in the United States, in June 2024; and the lyf Funan Singapore in December 2024. On the divestment front, CLAS has completed over $500 million in sales in 2024 and unlocked a net gain of approximately $74 million.
According to Serena Teo, CEO of CLAS’ manager, the acquisition is part of the trust’s portfolio reconstitution strategy aimed at enhancing the quality of its portfolio and delivering stable returns to its Stapled Securityholders. She also added that the projected NOI yield for FY2024 for the two new hotels is 230 basis points higher than the blended exit yield of 2.0% for the previous divestments in Japan. By quickly reinvesting the divestment proceeds into properties with higher yields, CLAS has successfully replaced the income from the four divested properties.
On the stock market, CapitaLand Ascott Trust closed at 90 cents per unit.