Ascott Residence Trust (Ascott Reit) is expanding its footprint to the United States of America (U.S.) by acquiring the 411-key Element New York Times Square West hotel located in Midtown Manhattan for USD163.5 million. This acquisition comes hot on the heels of Ascott Reit’s purchase of three quality serviced residences and four rental housing properties in Australia and Japan.
Strategically located on 39th Street between 8th and 9th Avenue, the property benefits from having one of New York City’s most desirable addresses – Times Square.
Mr Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “Our first acquisition in the U.S. is a strategic step that will enable us to capitalise on the burgeoning hospitality market. The U.S. economy has been growing steadily in the past few years and is forecasted to expand by 2.4% in 2015 and 2.5% in 2016. Recovery in the U.S. hospitality market has also gained momentum. Revenue per available room (RevPAR), particularly in gateway cities like New York where there is high demand for accommodation, has improved significantly. RevPAR in the U.S. is expected to increase by about 7.0% in 2015. With future demand growth expected to continue to outpace supply, we are confident that this acquisition will further enhance Ascott Reit’s portfolio and Unitholders’ returns.”
Mr Lim said: “Ascott Reit started in the Asia Pacific in 2006, expanded to Europe in 2010 and now we are acquiring a prime asset in the key gateway city of New York that will provide us with a strong foothold to expand our presence in the high demand market of the U.S. Our entry into the U.S. will not only further diversify Ascott Reit’s portfolio across different countries and property cycles but also catapult Ascott Reit into a global hospitality player.”
Mr Lim added: “This U.S. acquisition and our recent acquisitions in Australia and Japan with a total of 1,563 units3 will broaden Ascott Reit’s earning base and increase our scale to 11,779 units. Ascott Reit’s asset size will also increase by S$519 million to S$4.6 billion. When the acquisition of the new Cairnhill serviced residence in Singapore is completed in 2017 as targeted, Ascott Reit’s asset size will expand by another S$405 million to over S$5.0 billion. As we aim to grow Ascott Reit’s asset size to S$6.0 billion by 2017, we will continue to actively seek acquisition opportunities from both third parties and our sponsor, The Ascott Limited, in key cities in the Asia Pacific, Europe and the U.S.”
Mr Ronald Tay, ARTML’s Chief Executive Officer, said: “This is an accretive acquisition of a quality asset that is centrally located in Times Square of Midtown Manhattan, which is not only the largest central business district in the U.S., but also the country's largest commercial, entertainment and media centre. As the trade and cultural epicentre of Manhattan, Times Square is also one of the world’s most popular tourist destinations visited by more than 40 million tourists annually. With 411 rooms, this relatively new property, which opened in November 2010, has been achieving strong performance with over 90% occupancy in the last three years.”
“After the acquisition, the property will continue to be operated by LG-39 Management LLC and its affiliates under the ‘Element’ brand through a franchise by Starwood Hotels & Resorts Worldwide, Inc. Ascott Reit’s focus is on properties for extended stay and ‘Element’ is a widely recognised international brand for extended stay with an established sales network. We expect the property to continue to perform well and further boost the performance of Ascott Reit’s portfolio.”
Mr Tay said: “The current operator, which has been running the property since its opening, is well established in New York. It currently operates 19 hotels with over 3,800 rooms in the U.S. Ascott Reit remains open to acquiring properties that are operated by reputable third parties as long as such acquisitions meet our investment criteria and there is avenue for growth.”