CapitaLand Ascott Trust has agreed to acquire the 329-room lyf Funan Singapore from Ascott Serviced Residence Global Fund (ASRGF) for an agreed property value of $263 million. The hotel is independently valued at $265 million by SG&R Singapore and $271 million by Colliers Singapore.
CLAS's sponsor, The Ascott Limited, holds a 50% stake in ASRGF. The other 50% is held by the Qatar Investment Authority.
The acquisition is expected to cost CLAS a total of $265.1 million, which includes the purchase consideration of $146.4 million, loan repayment of $113 million and $5.7 million fees. This will largely be funded by the proceeds from the divestment of Citadines Mount Sophia Singapore, which was completed in March. It will also be financed with debt while the acquisition fee will be paid with CLAS’s stapled securities.
The proposed acquisition is expected to increase CLAS’s total distribution by $3.5 million or a 1.5% accretion to its distribution per stapled security (DPS) on a FY2023 pro forma basis.
The accretion is calculated based on the exit yield of 3.2% for Citadines Mount Sophia Singapore and the 4.7% ebitda yield on the proposed acquisition on a pro forma basis for FY2023.
After the proposed acquisition, CLAS’s aggregate leverage is expected to be 39.1%.
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Upon completion of the proposed acquisition, CLAS will enter into a master lease with Ascott for lyf Funan Singapore. The master lease will have an initial term of 20 years and is renewable for a five-year period thereafter subject to mutual agreement by both parties.
lyf Funan was built in 2019 and has around 54 years left on its leasehold tenure. It has an occupancy rate of over 80%.
The proposed acquisition is expected to be completed by the fourth quarter of 2024.
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"The DPS-accretive acquisition of lyf Funan Singapore will increase our presence in Singapore, our home ground. Being a key gateway city, growth in demand in the Singapore hospitality market is expected to outpace supply as global flight connectivity and capacity increase. Additionally, income contribution from Singapore will balance the contribution from CLAS’ overseas markets," says Serena Teo, CEO of the managers.
Units in CLAS closed at 97.5 cents on Sept 30.
