Ascott Reit to raise $1.39bln properties in Asia and Europe

The property manager will acquire two Asian and 26 European properties, as well as divest Ascott Beijing for $301.8 million.

In an announcement on Friday, Ascott Residence Trust (Ascott Reit) said it has entered into conditional sale and purchase agreements with subsidiaries of The Ascott Limited (Ascott) to acquire two Asian and 26 European properties at an value of approximately S$1.39 billion.

More so, Ascott Reit said it will divest Ascott Beijing, China for an agreed sale price of S$301.8 million with a gain of approximately S$106.2 million.

After the transactions, Ascott Reit’s portfolio asset size will almost double from S$1.59 billion to S$2.85 billion.

According to the report, the annualised FY 2010 EBITDA3 yield of the target acquisitions at 5.7% is higher than the 5.5% for Ascott Reit’s existing portfolio. The yield-accretive acquisitions will be funded by a combination of equity, debt and sale proceeds from the divestment of Ascott Beijing.

The divestment is expected to unlock the value of the property at 66% above the property’s valuation as at 30 June 2010 of S$181.8 million.

To part finance the yield accretive acquisitions, Ascott Reit said it will be seeking unitholders’ approval at an extraordinary general meeting (EGM) to raise approximately S$560.6 million4 through an equity fund raising (EFR) which will comprise a non-renounceable preferential offering to existing unitholders and a private placement. The proposed EFR is expected to increase Ascott Reit’s free float by approximately 73% from S$385.3 million5 to S$665.3 million6.

Upon completion, Ascott Reit’s forecast annualised distribution per unit (DPU) for FY2010 and projected DPU for FY2011 will be approximately 7.35 cents and 7.74 cents respectively for the enlarged portfolio7. This represents a DPU accretion of approximately 1.9% and 4.8% over the forecast annualised DPU of the existing portfolio for the same periods.

Mr Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “The acquisitions represent a rare and attractive opportunity to acquire a substantial portfolio of mainly freehold serviced residences. Furthermore, the completion of the Transactions and EFR will almost double Ascott Reit’s asset size, and significantly increases its market capitalisation and free float. This could potentially raise the profile of Ascott Reit among global investors and enlarge its unitholder base. Ascott Reit's increased market capitalization would also enhance its competitive positioning with respect to its acquisition growth strategy.”

Mr Chong Kee Hiong, ARTML’s Chief Executive Officer, said, “The acquisitions will further increase Ascott Reit’s presence in Singapore and Vietnam. The Europe properties are largely located in London and Paris, which are global cities and are stable and established markets for serviced residences. Overall, about 75% of the acquired properties by value are in Singapore, London and Paris. Ascott Reit will continue to enjoy significant exposure to the economic growth in key Pan-Asian cities while benefiting from the added diversification to Europe’s stable economies. Going forward, the Pan-Asian region will continue to constitute a significant portion of the portfolio.”

“Following the completion of the Transactions, Ascott Reit will enjoy increased income stability as its master lease and guaranteed income8 as a percentage of the annualised FY2010 EBITDA9, will increase from 3.9% for the existing portfolio to 47.2% for the enlarged portfolio,” said Mr Chong. “In conjunction with the acquisitions, we are divesting Ascott Beijing to unlock the value of the property at the optimal stage of its life cycle at an exit EBITDA yield of 1.6%. The divestment is 66% above the property’s valuation as at 30 June 2010 of S$181.8 million, and will realise a gain of approximately S$106.2 million.”

Ascott Reit’s portfolio is looking at expanding from 3,644 apartment units in 38 properties to 6,681 apartment units in 65 properties. Its geographical footprint will also grow from 11 cities across seven countries in the Pan-Asian region to become an international REIT10 with a presence in 23 cities across 12 countries.