This article was originally published on Wednesday, 3 July 2019 at 9:06 A.M. SGT; it has since been updated.
Ascott Residence Trust entered a deal acquire Ascendas Hospitality Trust for S$1.24 billion in cash and units, potentially creating the largest hospitality trust in the Asia Pacific region, with an asset value of S$7.6 billion, the trusts said in filing to SGX Wednesday.
Under the deal, Ascott REIT will pay S$1.0868 per Ascendas Hospitality Trust stapled unit, comprising S$0.05543 in cash and 0.7942 Ascott REIT-BT stapled unit at an issue price of S$1.30 each, the filing said.
In total, Ascott REIT will pay S$61.8 million in cash and 902.8 million new Ascott REIT-BT stapled units at S$1.30 each, the filing said.
The deal will combine Ascott REIT’s portfolio of 74 mainly serviced-residence properties with Ascendas Hospitality Trust’s 14 hotels in Asia Pacific, for a total portfolio of 88 properties in 39 cities and 15 countries in Asia Pacific, Europe and the U.S., the filing said.
Asia Pacific will make up around 71 percent of the portfolio valuation and contribute 68 percent of gross profit, the filing said.
Chia Kim Huat, lead independent director of Ascendas Hospitality Trust’s managers, said the deal was “transformational.”
“The combined entity would be well-positioned to benefit from a strong sponsor in CapitaLand and its lodging unit, The Ascott Limited,” Chia said in the statement.
“The combined entity will be CapitaLand’s sole listed hospitality trust platform with an enlarged portfolio and mandate to invest globally,” he added.
Bob Tan, chairman of Ascott REIT’s manager, said the deal would boost Ascott REIT’s distribution per unit by 2.8 percent on a fiscal 2018 pro forma basis.
“The combined entity will have a higher proportion of stable income derived from master leases; well balanced by growth income derived from management contracts,” Tan said in the statement. “With access to a larger capital base and a higher debt headroom of about S$1.0 billion, we will have greater financial flexibility to seek more accretive acquisitions and value enhancements.”
Beh Siew Kim, CEO of Ascott REIT’s manager, said the deal would boost the earnings contribution from developed countries to 82 percent on a pro forma basis, which would help the REIT be included in the FTSE EPRA Nareit Developed Index, potentially boosting trading liquidity and widening the investor base.
Tan Juay Hiang, CEO of Ascendas Hospitality Trust’s managers, said the enlarged portfolio would be more diversified, with no one country accounting for more than 20 percent of gross profit, reducing concentration risk.
The deal is expected to be completed in December.
The deal is subject to approval by unitholders of Ascott REIT and Ascendas Hospitality Trust, the filing said.
CapitaLand said in a separate SGX filing that has a total interest of around 45.0 percent and 28.0 percent in Ascott REIT and Ascendas Hospitality Trust, respectively. After the deal’s completion, CapitaLand said it expected to have a 40.2 percent interest in the combined entity.
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