Increasing Resiliency Through Pivot To Longer-stay Accommodation
ART is acquiring three serviced residences in Australia, France and Vietnam, five rental housing properties in Japan and an additional 45% stake in student accommodation The Standard at Columbia in the US for S$318.3m. The acquisitions expand ART’s exposure to longer-stay accommodation from 17% to 19% of portfolio valuation and are accretive to 2021 DPU by 2.8%. Distribution yield is expected to improve from 4.9% for 2022 to 5.8% for 2023. Maintain BUY. Target price: S$1.36.
WHAT’S NEW
• Strengthening presence in key markets. Ascott Residence Trust (ART SP) has announced the acquisition of the following nine properties from its sponsor The Ascott Limited at a total capitalised cost of S$318.3m.
a) Three serviced residences ? Quest Cannon Hill in Brisbane, Australia, Le Clef Tour Eiffel Paris in France, and Somerset Central TD Hai Phong in Hai Phong, Vietnam.
b) Five rental housing properties in Kyoto, Osaka, Hyogo and Nagoya in Japan.
c) An additional 45% stake in The Standard at Columbia near University of South Carolina, which is currently under development and slated for completion in 2Q23, brings its interest in the student accommodation property to 90%.
• Pivot to longer-stay properties in Japan and the US. The acquisitions deepen ART’s presence in its key markets of Australia, France, Japan, the US and Vietnam. The nine properties have 1,018 units and expand ART’s total assets by 7.8% to S$8.3b. Longer-stay accommodation will expand from 17% to 19% of portfolio valuation, bringing ART closer to its target of 25-30%. Like most student accommodation properties, The Standard at Columbia has an average length of stay of one year. The five rental housing properties in Japan have typical lease tenure of two years.
• Serviced residences have healthy occupancies. The luxurious Le Clef Tour Eiffel Paris has healthy occupancy of 80% and its average daily rate (ADR) was already 30% above prepandemic levels as of Jul 22. It is located near many tourist attractions, such as the Eiffel Tower, Arc de Triomphe and Avenue Champs-Elysees. The property will remain operational during refurbishment, which is targeted for completion by end-24. Paris will be hosting the Summer Olympics in 2024. Quest Cannon Hill’s occupancy is healthy at 95%. Somerset Central TD Hai Phong’s occupancy is over 90%. The property caters mainly to corporate guests and has an average length of stay of 11 months. Hai Phong is the top destination for foreign direct investments in Vietnam.
