The managers of Ascott Residence Trust (ART) have proposed to acquire nine quality assets across five countries from its sponsor, The Ascott Limited.
The assets, which comprise serviced residences, rental housing and student accommodation properties, come at an estimated total capitalised cost of $318.3 million.
The assets, which total 1,018 units, are predominantly located in Asia-Pacific with seven of the assets in Australia, Japan and Vietnam. The remaining two are located in France and the US.
The acquisition is said to be accretive to ART’s yield and will increase its distribution by $9.2 million. On a pro forma basis, ART’s distribution per stapled security for the FY2021 would have increased by 2.8%. The calculations assume that 54% of the acquisition cost is funded by debt and the remainder funded by private placement.
The acquisition will also grow ART’s total assets to $8.3 billion as at Dec 31, 2021, on a pro forma basis.
In addition, it will enhance ART’s income resilience as 92% of the assets’ gross profit are from stable income sources, as well as increase its total proportion of stable income from 69% to 71% of its gross profit.
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Stable income sources include master leases, management contracts with minimum guaranteed income, management contracts of rental housing and student accommodation; growth income sources include management contracts of serviced residences and hotels.
Post-acquisition, ART’s portfolio will exceed 100 properties, with over 18,000 units across 47 cities and 15 countries. The transaction is expected to be completed by November.
“The acquisition will enhance our geographically diverse portfolio while deepening our presence in our key markets of Australia, France, Japan, USA and Vietnam. The addition of the five rental housing properties in Japan and a student accommodation property in the USA will increase the proportion of our longer-stay portfolio from 17% to 19% of ART’s total portfolio value,” says Serena Teo, CEO of the managers.
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“This will bring us closer to our target of 25% - 30% for longer-stay assets in the medium term. The acquisition is also set to boost ART’s proportion of green-certified properties, reinforcing our focus on sustainability. ART continues to seek yield-accretive investments while remaining committed to sustainability and taking a disciplined approach in managing our capital and costs,” she adds.
Private placement
In a separate filing, ART has proposed to place $150.0 million worth of new stapled securities to partially fund the aggregate purchase consideration of the properties it has proposed to acquire.
The private placement will see ART placing new stapled securities in the trust to institutional, accredited and other investors at an issue price of between $1.11 and $1.14 per new stapled security.
The placement is subject to an upsize option to raise an additional $50.0 million.
The issue price range of $1.11 and $1.14 represents a respective discount of 2.8% and 5.4% to the volume weighted average price (VWAP) of $1.1733 per stapled security in ART as at Aug 12.
Of the $150.0 million in gross proceeds, ART intends to use $122.3 million to partly fund the purchase consideration of the assets.
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Another $25.3 million will go towards partially funding any future potential acquisitions.
The remaining $2.4 million will go towards the fees incurred from the private placement.
The new stapled securities will be issued in reliance on a general mandate as given to the managers in ART’s annual general meeting (AGM) held on April 22.
JP Morgan Securities and UOB were appointed as the joint lead managers and underwriters.
Units in ART closed at $1.18 on Aug 12.
