CapitaLand Ascott Trust (CLAS) has recently made a significant acquisition in Japan, purchasing two freehold limited-service hotels for a total of JPY21 billion ($178.5 million). The two hotels, ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are strategically located in Tokyo and Kanazawa respectively. The acquisition was made at an 8.3% discount to independent valuation.
On a pro forma basis for FY2024, the addition of these two hotels is expected to result in a distribution per stapled security (DPS) accretion of 1.6%. Additionally, the blended net operating income (NOI) yield for the acquisition is expected to be 4.3% in FY2024. To protect against currency fluctuations, the acquisition was funded primarily with JPY-denominated debt and proceeds from the divestment of four other properties in Japan.
Situated in Tokyo’s shopping and entertainment district, ibis Styles Tokyo Ginza is a 224-unit hotel that offers guests easy access to popular destinations like Ginza Six and the iconic Ginza Wako clock tower. Meanwhile, Chisun Budget Kanazawa Ekimae, with its 392 units, is located in Kanazawa, known for its historical attractions and traditional gardens. This includes the Kanazawa Castle, Kenrokuen Garden, and preserved architectural designs from Japan’s Edo period.
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CLAS has completed investments of approximately $530 million in the last 12 months, including the recent acquisitions of ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae. These purchases were made at higher yields compared to CLAS’ divestments, resulting in an overall enhancement of the trust’s income distribution.
In addition to the two aforementioned hotels, CLAS completed several other investments in 2024, including Teriha Ocean Stage, a rental housing property in Fukuoka, Japan, Standard at Columbia, a student accommodation property in the United States, and lyf Funan Singapore. In the same year, CLAS also completed divestments worth over $500 million, generating a net gain of approximately $74 million.
“The acquisition is part of our portfolio reconstitution strategy to improve the quality of our portfolio and provide stable returns to our Stapled Securityholders,” says Serena Teo, CEO of CLAS’ manager. “The FY2024 NOI yield of these two hotels is 230 basis points higher than the blended exit yield of approximately 2.0% for the four previous divestments in Japan. By quickly reinvesting the divestment proceeds into these higher-yielding assets, we have fully replaced the income from the four sold properties.” As of the close of business, CapitaLand Ascott Trust traded at 90 cents per unit.