CapitaLand Ascott Trust (CLAS) has recently acquired two freehold limited-service hotels in Japan for a total of JPY21 billion ($178.5 million). The two hotels, ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are situated in the country’s capital and Kanazawa, respectively. This strategic acquisition was made at a discounted price of 8.3% based on independent valuation.
Upon completion, the acquisition is projected to contribute to a pro forma distribution per stapled security (DPS) accretion of 1.6% in FY2024. The blended net operating income (NOI) yield of the two hotels is expected to be 4.3% in the same year. To mitigate risks associated with currency fluctuations, the purchase was funded using JPY-denominated debt and proceeds from CLAS’ divestment of four properties in Japan.
Located in Tokyo’s bustling shopping and entertainment district, ibis Styles Tokyo Ginza boasts 224 units and is situated near popular retail mall Ginza Six and the renowned Uniqlo flagship store. The iconic Ginza Wako clock tower is also within walking distance from the hotel.
Meanwhile, Chisun Budget Kanazawa Ekimae offers 392 units and is located in the historical city of Kanazawa, known for its cultural and heritage sites such as Kanazawa Castle and Kenrokuen Garden. The hotel is also easily accessible to popular tourist attractions, including preserved geisha and samurai districts showcasing traditional Japanese architecture from the Edo period.
CLAS’ recent acquisitions, including the two hotels, amount to over $530 million in the past year. These purchases were made at higher yields compared to the four properties divested, resulting in a boost to CLAS’ income distribution.
In addition to ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, CLAS has also secured other properties such as Teriha Ocean Stage in Fukuoka, Japan, Standard at Columbia in the United States, and lyf Funan Singapore in the past year. The divestments in 2024, totaling over $500 million, have generated a net gain of approximately $74 million.
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Serena Teo, CEO of CLAS’ manager, highlights the strategic significance of this acquisition and its impact on the company’s portfolio. “The acquisition aligns with our portfolio reconstitution strategy to enhance portfolio quality and deliver stable returns to our Stapled Securityholders,” she says. She adds that the projected NOI yield for FY2024 is 230 basis points higher than the blended exit yield from the four previous divestments in Japan, indicating a favorable outcome.
At the end of trading, CapitaLand Ascott Trust closed at 90 cents per unit.