Leverages strong financial position and capital recycling strategy to enhance resilience of ART’s global portfolio.
SINGAPORE – Ascott Residence Trust (ART) posted a distributable income of S$61.7 million in 2H 2020 and S$94.2 million in FY 2020 amidst the COVID-19 pandemic. The distributable income for 2H 2020 is a 32% decline compared to 2H 2019. To mitigate the impact of COVID-19, replace loss income from divested assets and to share past divestment gains with Stapled Securityholders, a one-off partial divestment gain of S$40.0 million will be distributed to Stapled Securityholders. ART also released the S$5.0 million of distributable income which was retained in 1H 2020. Distribution per Stapled Security (DPS) for 2H 2020 is 1.99 cents, a 52% decrease compared to 4.18 cents in 2H 2019.
Mr Bob Tan, Chairman of Ascott Residence Trust Management Limited (ARTML) and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “ART’s properties that cater predominantly to the long-stay customer segment, our geographically diversified presence, and mix of stable and growth income streams have helped to cushion the impact of COVID-19 on ART’s financial performance. About two-thirds of ART’s gross profit was from master leases and management contracts with minimum guaranteed income which provide us with more stability. Given the resurgence and uncertainty around new strains of the coronavirus, global economic recovery remains fragile. Nonetheless, ART is well-capitalised and continues to build on our financial strength.”
Mr Tan added: “As part of our capital recycling strategy, we have divested two properties at the end of last year with two more to be completed in 1Q 2021, all at a premium to their book values. Proceeds from the sale of these properties will be deployed into higher yielding assets. The expansion of our investment mandate to include student accommodation assets and acquisition of our first student accommodation asset will bolster our resilience and increase our stable income stream. We will look for opportunities to invest in longer stay lodging assets with longer weighted average lease expiry (WALE). We remain committed to delivering sustainable, long-term value to our Stapled Securityholders.”
Ms Beh Siew Kim, Chief Executive Officer of ARTML and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “We continue to actively reconstitute and enhance ART’s portfolio as we remain disciplined in managing our capital and costs. The student accommodation asset we have acquired has strong domestic demand with high average occupancy rate of 95% despite COVID-19 and will add an approximate 4.4% to DPS for FY 2020 on a pro forma basis.”
Ms Beh added: “Despite the near-term headwinds, there is significant pent-up demand for travel. The domestic, leisure and free independent segments are expected to continue to lead the recovery. As vaccinations become widely available, travel is expected to resume. In the meantime, we have proactively sourced for alternative businesses such as guests looking for spaces to work-from-home to supplement our long-stay business, and increased our digitalisation initiatives. We have also stepped up our sustainability efforts. ART was the first hospitality trust in Singapore to secure a green loan and we aim to green ART’s global portfolio by 2030. This will prepare us for the upturn with a future-ready portfolio as we do our part as a responsible hospitality trust.”
Ascott Residence Trust forays into the student accommodation asset class with first acquisition in the USA for US$95 million
ART will foray into the student accommodation asset class with its first acquisition in the United States of America (USA) for US$95 million (S$126.3 million). The purpose-built student accommodation asset, Signature West Midtown, is a freehold property with 525 beds across 183 units located in the heart of Atlanta, Georgia. The transaction is expected to be completed by end 1Q 2021. In conjunction with the acquisition, ART will expand its investment mandate to include student accommodation. The accretive acquisition will increase the pro forma FY 2020 Distribution per Stapled Security (DPS) by approximately 4.4%.
Mr Bob Tan said: “ART has remained resilient amid COVID-19 mainly due to the long stay guests of our serviced residences and rental housing properties. The expansion of ART’s investment mandate to include student accommodation will further enhance the stability of ART’s portfolio. Student accommodation, with leases that typically last for a year, will build on our stable income streams. It will offer a new platform for growth and also diversify our portfolio beyond traditional hospitality assets, mitigating the near-term headwinds faced in the hospitality sector.”
“Student accommodation is one of the most resilient real estate asset classes and has maintained high occupancy during the COVID-19 situation in the USA. ART will continue to seek opportunities for quality student accommodation assets in key markets with strong student population growth. We will also look at expanding our rental housing portfolio. We remain focused on delivering sustainable value for our Stapled Securityholders,” added Mr Tan.
Ms Beh Siew Kim, Chief Executive Officer of ARTML and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “ART’s foray into the student accommodation asset class capitalises on the growing education industry. Enrolment at reputable universities continue to expand, supported by the rising middle class and population growth. The student accommodation asset class is also countercyclical in nature as students tend to invest in education during a recession in preparation for economic recovery. Divestment proceeds are expected to be redeployed into the accretive acquisition of Signature West Midtown, which will add an approximate 4.4% to DPS for FY 2020 on a pro forma basis. The acquisition will also increase the proportion of our longer stay assets and further enhance the quality of ART’s portfolio.”
Ms Beh added: “Signature West Midtown is an attractive asset with a high occupancy rate of 95% despite COVID-19. It serves close to 40,000 undergraduate and graduate students attending the Georgia Institute of Technology (Georgia Tech) and is less than a five-minute walk from the university. About 80% of Georgia Tech’s students are domestic and enrolment has been increasing at a compound annual growth rate of 6.7% in the past 10 years. We also expect positive, long-term rental growth for Signature West Midtown with Georgia Tech’s plan to develop Technology Enterprise Park, a research and commercial hub nearby which will drive up economic activities and general rent levels around West Midtown.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
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