DPU accretive transaction to create an enlarged trust with wider investor base and greater financial flexibility.
Singapore – Ascott Residence Trust (Ascott Reit) and Ascendas Hospitality Trust (A-HTRUST) today jointly announced a proposed combination, which will result in the combined entity becoming the largest hospitality trust in Asia Pacific1, and the eighth largest globally1, with an asset value of S$7.6 billion (the “Combination”). The combined entity will also become the seventh largest trust1 listed on the Singapore Exchange by asset value.
The total consideration for the Combination is S$1,235.4 million, comprising S$61.8 million in cash and 902.8 million new Ascott Reit-BT Stapled Units2. The Combination will be effected by way of a trust scheme of arrangement, with Ascott Reit acquiring all the A-HTRUST Stapled Units for a consideration of S$1.0868 per A-HTRUST Stapled Unit, comprising S$0.0543 in cash and 0.7942 Ascott Reit-BT Stapled Units issued at a price of S$1.30. The consideration is based on a gross exchange ratio of 0.836x, derived from the audited net asset values (NAV) per A-HTRUST Stapled Unit and Ascott Reit Unit3.
The transaction brings together Ascott Reit’s global portfolio that comprises predominantly serviced residences and A-HTRUST’s 14 quality hotels in Asia Pacific, creating an enlarged portfolio of 88 properties with more than 16,000 units in 39 cities and 15 countries across Asia Pacific, Europe and the United States of America. It will also further diversify Ascott Reit’s global portfolio with foray into new gateway cities – Brisbane and Seoul.
Mr Bob Tan, Ascott Residence Trust Management Limited’s Chairman, said: “The Combination is a win-win for both Ascott Reit’s and A-HTRUST’s unitholders. Ascott Reit as a combined entity will see our asset value grow by 33% to S$7.6 billion and our Distribution per Unit increase by 2.5% for FY 2018 on a 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. 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. The combined entity can then be strategically positioned to potentially enjoy a positive re-rating of the unit price and gain a wider investor base, which would be beneficial to all our unitholders.”
Ms Beh Siew Kim, Ascott Residence Trust Management Limited’s Chief Executive Officer, said: “The Combination is in line with Ascott Reit’s commitment to deliver stable returns to unitholders through continual portfolio optimisation. It will present us with an enlarged capacity to acquire more quality assets as well as undertake more development and conversion projects, thereby increasing their asset values over time – all with an aim to bring about greater income stability through a resilient and well-diversified portfolio. Earnings contribution from developed countries is expected to increase to 82% on a pro forma basis. This will facilitate the inclusion of Ascott Reit into the FTSE EPRA Nareit Developed Index4 and potentially result in higher trading liquidity and a larger investor base for us.”
Mr Chia Kim Huat, Lead Independent Director of the A-HTRUST Managers, said: “The combined entity would be well-positioned to benefit from a strong sponsor in CapitaLand and its lodging unit, The Ascott Limited. The Combination is a transformational transaction consistent with A-HTRUST’s strategy to create a stronger, diversified and resilient platform that will deliver sustainable growth to investors. The combined entity will be CapitaLand’s sole listed hospitality trust platform with an enlarged portfolio and mandate to invest globally. It will also become Asia Pacific’s largest hospitality trust, raising its profile amongst the investment community and increasing its funding flexibility, setting it up for long-term success.”
Commenting on the transaction, Mr Tan Juay Hiang, Chief Executive Officer of the A-HTRUST Managers, said: “The Combination, which will see the addition of 14 quality properties from A-HTRUST to the combined entity, would be a landmark event in the development of both A-HTRUST and Ascott Reit. The enlarged portfolio will be further diversified with no single country accounting for more than 20% of gross profit, thereby reducing concentration risk. Besides being Distribution per Unit-accretive for the A-HTRUST Stapled Unitholders, the Combination will result in a significant increase in market capitalisation and free float for the enlarged trust, thereby enhancing the combined entity’s flexibility and ability to drive growth.”
Notes:
[1] Based on data extracted from Bloomberg as at 28 June 2019.
[2] Based on an issue price of S$1.30 for each Ascott Reit-BT Stapled Unit and calculated based on a total of 1,136.7 million A-HTRUST Stapled Units.
[3] Based on A-HTRUST’s audited NAV per Stapled Unit as at 31 March 2019 of S$1.02 divided by Ascott Reit’s audited NAV per Unit as at 31 December 2018 of S$1.22.
[4] FTSE EPRA Nareit Developed Index tracks the performance of listed real estate companies and REITs worldwide.
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