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CapitaLand Ascott Trust’s gross profit up 80% in 2H 2022

  • Citadines On Bourke Melbourne.
  • Ascott Orchard Singapore.
  • In Singapore, Riverside Hotel Robertson Quay will be rebranded as The Robertson House by The Crest Collection (pictured) and refurbishment is expected to commence in 1H 2023 and complete by end 2023.

Distribution per Stapled Security (DPS) rose to 5.67 cents on stronger operating performance in FY 2022; excluding one-off items, DPS increased 106% year-on-year.

SINGAPORE – CapitaLand Ascott Trust (CLAS) achieved an 80% increase in gross profit for 2H 2022 to S$164.6 million compared to 2H 2021. This was mainly attributed to higher revenue from CLAS’ existing portfolio and contributions from its expanded portfolio of longer-stay assets, comprising student accommodation and rental housing properties in the United States of America (USA) and Japan, newly acquired serviced residences in Australia, France and Vietnam, as well as from lyf one-north Singapore which soft opened in 4Q 2021. On a same-store basis, gross profit for 2H 2022 increased by 67% compared to 2H 2021.

CLAS’ properties continued to achieve strong operating performance as international travel recovers. Revenue per available unit (REVPAU1) increased 81% year-on-year (y-o-y) to S$143 for 2H 2022. 4Q 2022 REVPAU rose 78% y-o-y to S$155, reaching pre-pandemic levels in line with 4Q 2019 pro forma REVPAU2. All of CLAS’ key markets registered quarter-on-quarter REVPAU growth, with the biggest improvements in Japan, Australia and the USA.

With the strong portfolio performance, CLAS increased its Distribution per Stapled Security (DPS) for 2H 2022 by 47% y-o-y to 3.33 cents. DPS for FY 2022 increased 31% y-o-y to 5.67 cents; and excluding one-off items3, adjusted DPS for FY 2022 rose 106% y-o-y to 4.79 cents.

CLAS recorded a gross fair value gain of about S$200 million[4] on the value of its portfolio, notwithstanding higher capitalisation and discount rates. This was due to stronger operating performance and improving outlook for its properties. Key markets with valuation gains include Australia, Singapore, United Kingdom (UK) and USA.

Mr Bob Tan, Chairman of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS) said: “CLAS’ robust performance is underpinned by our diversified and well-balanced portfolio. Growth income contribution increased to 48% in 2H 2022 as our properties saw an upswing in demand with the recovery in the hospitality sector post COVID-19, while our stable income streams offered resilience against downside risks. To further enhance our stable income portfolio, CLAS invested S$420 million in 15 accretive acquisitions in FY 2022, predominantly in the longer-stay segment. We remain committed to delivering sustainable returns to Stapled Securityholders.”

Ms Serena Teo, Chief Executive Officer of the Managers of CLAS said: “While macroeconomic challenges remain, we are cautiously optimistic of the continued recovery in the hospitality industry. We expect CLAS to continue to benefit from the reopening of more destinations and the pent-up demand for travel. In the coming year, we will be carrying out asset enhancement initiatives (AEI) for four properties in Singapore, France, Germany and UK. The AEI will uplift the value and profitability of these properties and further enhance our income streams.

“We remain prudent in our capital management approach as we seek opportunities to reconstitute our portfolio. Our latest acquisition of a rental housing property in Fukuoka will enhance CLAS’ income resilience. It is situated in one of the fastest growing cities in Japan and our existing rental housing properties in Fukuoka have performed well.” added Ms Teo.

New developments and AEI to uplift the value and profitability of CLAS’ portfolio

The student accommodation property, Standard at Columbia, in the USA has topped out in 2Q 2022 and is on track for completion in 2Q 2023. Construction of the new Somerset serviced residence at Clarke Quay in Singapore is slated for completion in 2H 2025.

Four properties are scheduled to undergo AEI and the properties will remain operational during the refurbishment. The refurbishment for Citadines Les Halles Paris in France and Citadines Holborn-Covent Garden London in the UK are expected to commence in 2Q 2023 and complete in 1Q 2024. For Citadines Kurfürstendamm Berlin in Germany, refurbishment is expected to commence in 2Q 2023 and complete in 4Q 2023. In Singapore, Riverside Hotel Robertson Quay will be rebranded as The Robertson House by The Crest Collection and refurbishment is expected to commence in 1H 2023 and complete by end 2023.

Marrying growth with stability

In 2H 2022, CLAS’ stable income sources[5] contributed about 52% of the total gross profit. CLAS’ master leases registered an increase in gross profit of 6% y-o-y, mainly due to the stronger performance of the existing properties and contributions from new acquisitions. Gross profit for the management contracts with minimum guaranteed income was 99% higher y-o-y as the properties continued to recover from COVID-19.

CLAS’ student accommodation and rental housing properties recorded a strong average occupancy rate of over 95%. CLAS’ operating student accommodation properties in the USA are 99% leased for the 2022-2023 academic year, up from the over 95% last academic year, with above-market rent growth of about 6% y-o-y.

CLAS’ strong financial position through disciplined capital management

CLAS has a strong financial position and remains prudent in its capital management. It has increased its proportion of debt on fixed rates to 78% as at 31 December 2022, further mitigating the impact of rising interest rates. It has also successfully refinanced about S$740 million of debt in 2022, of which about S$420 million was issued as sustainable financing.

As at 31 December 2022, CLAS had a total of approximately S$1.43 billion in cash on-hand and available credit facilities. It has a debt headroom of S$1.8 billion and a gearing of 38%, which is well below the 50% gearing limit allowable under the property funds appendix issued by the Monetary Authority of Singapore. CLAS improved its interest cover to 4.4 times and its effective borrowing cost remains low at 1.8% per annum.

[1] Revenue per available unit of properties excludes master leases, rental housing and student accommodation
[2] CLAS’ combination with Ascendas Hospitality Trust (A-HTRUST) was completed on 31 Dec 2019 and the 2019 pro forma figures include the performance of the A-HTRUST portfolio
[3] Excluding one-off items comprising (1) divestment gain of S$45 million distributed in FY 2021, (2) realised exchange gain in FY 2021 and FY 2022 and (3) termination fee income of S$9.8 million received upon termination of the sale of two China properties in FY 2021
[4] The fair value gain (net of tax and minority interest) is S$166.7 million
[5] Stable income sources include properties under master leases, management contracts with minimum guaranteed income; as well as rental housing and student accommodation properties

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