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 hotels, which are ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, are strategically located in Tokyo and Kanazawa respectively. This acquisition was made at an 8.3% discount to an independent valuation.
On a pro forma basis for FY2024, the addition of these two hotels is expected to increase the distribution per stapled security (DPS) by 1.6%, while also providing a blended net operating income (NOI) yield of 4.3%. In order to mitigate currency fluctuations, the acquisition was financed through JPY-denominated debt as well as proceeds from the divestment of four properties in Japan by CLAS.
The ibis Styles Tokyo Ginza is situated in the bustling shopping and entertainment district of the capital city. The 224-unit hotel is conveniently located next to Ginza Six, a popular high-end retail mall, and is within walking distance of the iconic Ginza Wako clock tower. Additionally, the well-known Uniqlo global flagship store is just a stone’s throw away.
Meanwhile, the Chisun Budget Kanazawa Ekimae, with 392 units, is situated in Kanazawa, known for its historical attractions and traditional landscaped gardens. Guests can easily access popular landmarks such as the Kanazawa Castle, Kenrokuen Garden, and various geisha and samurai districts, which showcase Japan’s rich cultural heritage from the Edo period.
With the addition of these two properties, CLAS has completed investments of over $530 million in the past 12 months. These acquisitions have been made at higher yields compared to CLAS’ divestments, thereby enhancing its overall income distribution to stakeholders.
Some other notable investments made by CLAS in 2024 include the Teriha Ocean Stage, a rental housing property in Fukuoka, as well as the acquisition of the remaining 10% stake in Standard at Columbia, a student accommodation property in the United States. In December, CLAS also completed the acquisition of lyf Funan Singapore.
In the same year, CLAS divested over $500 million worth of properties, resulting in a net gain of about $74 million. This strategic portfolio reconstitution strategy has allowed CLAS to increase the quality of its portfolio and deliver stable returns to its stakeholders, according to Serena Teo, CEO of CLAS’ manager.
“The FY2024 NOI yield of the two hotels is 230 basis points higher than the blended exit yield of approximately 2.0% for the four previous divestments in Japan. By swiftly redeploying divestment proceeds into these higher-yielding assets, we have fully replaced the income from the four divested properties,” she explains.
As of now, CapitaLand Ascott Trust is trading at 90 cents per unit.