CapitaLand Ascott Trust (CLAS) is divesting two hotels in Sydney, Australia for a total of A$109.0 million ($95.6 million).
The two properties, which are Courtyard by Marriott Sydney-North Ryde and Novotel Sydney Paramatta, will be divested at about 5% above book value. The divestments are expected to be completed by 1Q2024 and 3Q2024 respectively.
Following the divestment, the trust will net proceeds of A$98.0 million.
The exit yield is 4.4% based on CLAS’s FY2022 ebitda and CLAS will recognise a net gain of A$14.2 million.
“The divestment of these two properties outside of central Sydney is part of our active portfolio reconstitution strategy. CLAS remains focused on assets that offer better yields and will further uplift the value for our portfolio,” says Serena Teo, CEO of the managers. “As additional capital will be required to upgrade these two mature properties, the divestment will enable us to redeploy the proceeds into more optimal uses such as but not limited to paying down debt and funding our other asset enhancement initiatives (AEI).”
“The exit yield is also at an attractive level that compares favourably against the current cost of borrowing in Australia. We recently divested four mature serviced residences in regional France at an exit yield of about 4%. Part of the divestment proceeds will also be used to partially finance our acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%, further enhancing our returns to stapled securityholders,” she adds.
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According to Teo, Australia remains a key market for the trust, which continues to see a strong demand from both corporate and leisure guests and boosted by large-scale sporting events.
“Post-divestment, our remaining seven serviced residences and hotels under management contracts will enable us to capture the travel demand while our five serviced residences under master leases will continue to provide us with stable income,” says Teo.
In the 3QFY2023 ended Sept 30, revenue per available unit (RevPAU) for CLAS’s properties in Australia rose by 18% y-o-y to A$152, exceeding its 3QFY2019 pro forma RevPAU by 13%.
Units in CLAS closed 0.5 cents lower or 0.54% down at 92.5 cents on Nov 3.
