(01 Jun 2021) Ascott Residence Trust (ART) has entered into agreements to acquire three freehold rental housing properties in central Sapporo for a total of JPY 6.78 billion (S$85.2 million).
The three properties – City Court Kita 1 jo (pictured), Big Palace Minami 5 jo, and Alpha Square Kita 15 jo – are within walking distance from train stations, a wide range of retail and entertainment options, and are either within or near the central business district.
The average EBITDA yield of the three acquisitions is approximately 4% and the transactions are expected to complete by end June 2021.
The acquisition of the three rental housing properties will be funded by debt and part of the net proceeds from recent divestments.
Mr Bob Tan, Chairman of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART), said, “Through ART’s active portfolio reconstitution, we are able to create value for Stapled Securityholders by reinvesting proceeds from our recent divestments at a lower capitalisation rate of about 2% into higher yielding and resilient rental housing properties in Japan at about 4% yield.
“ART’s acquisitions of these rental housing properties will increase our presence in the longer-stay accommodation segment and diversify from hospitality assets which are facing headwinds due to COVID19, further enhancing income stability.
“ART’s acquisition of our first student accommodation asset Paloma West Midtown in Georgia, USA in February 2021 was also another step to increase our stable income. With the acquisitions, our student accommodation and rental housing portfolios will expand to about 8% of our total property value. We aim to grow it to about 15% – 20% in the medium term. We will continue to actively reconstitute ART’s portfolio and seek yield-accretive investment opportunities to deliver long-term value for our Stapled Securityholders.”
In other news, on 27 May 2021, ART successfully completed the divestment of Somerset Xu Hui Shanghai to an unrelated third party for RMB 1.05 billion (S$216.6 million).
The divestment price was 171% above the property’s book value and the exit yield was approximately 2%. Through the transaction, ART has received net proceeds of about RMB 953.9 million (approximately S$196.8 million) and realised a net divestment gain of about RMB 582.6 million (approximately S$120.2 million).
Ms Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART), said, “ART is further maximising returns to our Stapled Securityholders with the acquisitions of the three rental housing properties. On a FY 2020 pro forma basis, ART’s Distribution per Stapled Security is expected to increase by 2.6%. In 2020 amid COVID19, ART’s 11 rental housing properties in Japan performed well at an average occupancy rate of 96%, especially those located close to key demand drivers such as the working population in the central business districts or students from universities. Rental housing leases, which are typically two years in length, also provide greater visibility and stability in future cashflows.”
Sapporo is the capital of Hokkaido and a key economic and logistics hub. Rates of rental housing properties in the city have remained stable and ART expects strong demand for the three properties given the limited new supply.