CapitaLand Ascott Trust (CLAS) has recently made a significant acquisition in Japan, adding two freehold limited-service hotels to its portfolio for a total of JPY21 billion ($178.5 million). The two hotels, which are ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are strategically located in Tokyo and Kanazawa, respectively. The purchase price for this acquisition was at an 8.3% discount to its independent valuation.
On a FY2024 pro forma basis, the acquisition has a distribution per stapled security (DPS) accretion of 1.6%, which is a positive boost for investors. Additionally, the blended net operating income (NOI) yield of the acquisition is expected to be 4.3% in FY2024. To hedge against currency fluctuations, the acquisition was funded by JPY-denominated debt and proceeds from CLAS’ divestment of four properties in Japan.
The first hotel, ibis Styles Tokyo Ginza, is located in Tokyo’s bustling shopping and entertainment district. With 224 units, the hotel is situated next to Ginza Six, a popular high-end retail mall. The famous Uniqlo global flagship store is also just a stone’s throw away. In addition, the Ginza Wako clock tower, an iconic landmark in the district, is within a 10-minute walk from the hotel.
The second hotel, Chisun Budget Kanazawa Ekimae, is located in Kanazawa, a city in the northwest of Japan. Similar to Kyoto, Kanazawa is renowned for its historical attractions, traditional landscaped gardens, and cultural icons which guests can easily access. These include the Kanazawa Castle, Kenrokuen Garden, and heritage geisha and samurai districts that feature well-preserved architectural designs from Japan’s Edo period.
Including these two new acquisitions, CLAS has completed investments totaling approximately $530 million in the past 12 months. These purchases have been made at higher yields compared to the divestments, which have helped to enhance the trust’s income distribution.
Some of the notable acquisitions made in 2024 include Teriha Ocean Stage, a rental housing property in Fukuoka, Japan; Standard at Columbia, a student accommodation property in the US; and lyf Funan Singapore. In addition to these purchases, CLAS also completed divestments worth more than $500 million in 2024, unlocking approximately $74 million in net gains.
Serena Teo, CEO of CLAS’ manager, explained, “The acquisition is part of our portfolio reconstitution strategy to enhance the quality of our portfolio and deliver stable returns to our Stapled Securityholders. 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 is trading at 90 cents per unit. With its recent acquisition and divestment activities, the trust is on track to deliver strong results for its investors.