CapitaLand Ascott Trust Divests French Properties for EUR44.4 million – What’s Next?

September 25, 2023

CapitaLand Ascott Trust (SGX: HMN), also known as CLAS, is in the spotlight following a strategically astute divestment of four of its properties in France.

This transaction, totalling an impressive EUR 44.4 million ($64.7 million), surpassed expectations by representing a significant 63% above the properties’ book value.

The deal has bolstered CLAS’s financial position, resulting in net proceeds of approximately EUR 34.1 million.

This forward-thinking move was a key component of the REIT’s ongoing strategy to cultivate sustainable returns through active portfolio reconstitution.

The divested properties, including Citadines Croisette Cannes, Citadines Prado Chanot Marseille, Citadines Castellane Marseille, and Citadines City Centre Lille, have been acquired by an unrelated third party.

These funds are set to lay a robust foundation for the reinvestment in high-yielding assets and fuel asset enhancement initiatives (AEIs) across the European continent.

A glimpse into CLAS’s future strategy

CLAS is poised for continued growth and diversification.

The substantial proceeds from the divestment are earmarked for the AEIs in Europe and partly finance the acquisition of prime lodging assets in the dynamic capital cities of London, Dublin, and Jakarta.

CLAS had signed a memorandum of understanding (MOU) with its sponsor, The Ascott Limited, in August to acquire three of the lodging assets in London, Dublin and Jakarta, at an agreed property value of $530.8 million.

This reinvestment strategy underscores CLAS’s commitment to amplifying its global presence and fortifying its diverse portfolio.

Enhancement initiatives in progress

With a retained portfolio of 12 properties predominantly located in Paris, CLAS is concentrating on optimising its existing assets.

Notably, La Clef Tour Eiffel Paris and Citadines Les Halles Paris are undergoing refurbishments aimed at revitalizing guest rooms and public areas, thereby elevating the overall value of CLAS’s portfolio.

Anticipating a boost from Chinese tourists

The anticipated return of Chinese tourists in the second half of 2023 and throughout 2024 presents an additional layer of potential for CLAS.

The resurgence of tourism from one of the world’s largest tourist demographics could significantly elevate occupancy rates and revenues for CLAS’s diverse properties, especially those located in popular European destinations.

Why Invest in CLAS?

1. Strategic Vision

The active portfolio management highlights CLAS’s sound strategy and financial acumen, promising potential for sustained growth for investors.

2. Potential for increased DPS

The strategic acquisition plans are projected to increase the total distribution by $13.5 million and boost the distribution per stapled security (DPS) by 1.8%, making it an attractive option for investors seeking returns.

3. Diversified portfolio

CLAS’s commitment to enhancing and acquiring diverse properties globally signifies a robust and balanced portfolio.

4. Decent valuation

CLAS is currently trading with a forward dividend yield of around 3.6% and a price-to-book ratio of 0.84 times.

5. Recovery could further be stimulated by the return of Chinese tourists

The hospitality subsector of Singapore REIT is likely to be a dark horse if China’s reopening trajectory regains momentum.

As CLAS has a global footprint and attractive yields, this should benefit the REIT in the event that the return of Chinese tourists surpasses market expectations.

Opportunities to accumulate hospitality REIT with global exposure

CLAS’s global footprint presents a compelling investment case for long-term investors looking to accumulate hospitality REIT.

It has a strong track record and delivers decent yield with potential growth on the horizon.

For investors on the hunt for a blend of exciting opportunities and steadfast professional strategy, CLAS emerges as a compelling candidate.

The anticipated influx of Chinese tourists further sweetens the deal, painting a promising picture of the trust’s future prospects.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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