CapitaLand Ascott Trust (CLAS) has announced the divestment of three Osaka hotels, marking a major transaction in Japan’s hotel market. The deal, which amounts to a striking JPY10.7 billion (approximately USD 99.8 million), involves the sale of Hotel WBF Honmachi, Hotel WBF Kitasemba East, and Hotel WBF Kitasemba West to an unrelated third party. This strategic divestment by CLAS is a reflection of the dynamic nature of the Osaka hotels market and indicates a reshuffling of assets within the industry.
The divestment process, which is slated to be finalized in the first quarter of 2024, stands out for its profitability. The sale price is about 15% above the book value, leading to net proceeds of around JPY3.9 billion (USD 36.4 million) and enabling CLAS to recognize a net gain of JPY1.1 billion (USD 10.1 million). The successful divestment of these Osaka hotels underscores CLAS’s adeptness in asset management and strategic portfolio reconstitution.
Serena Teo, Chief Executive Officer of CapitaLand Ascott Trust Management Limited, highlighted the divestment as part of CLAS’s active portfolio reconstitution strategy. According to Teo, the properties, located outside the prime districts of Osaka, presented an opportunity for CLAS to unlock their value. The divestment aligns with CLAS’s broader strategy of redeploying capital towards assets or enhancements that promise stronger yields, thereby uplifting the overall value of the portfolio.
Despite the sale, Japan remains an attractive market for CLAS. The country’s robust tourism sector, driven by both international and domestic demand, along with the population growth in gateway cities, continues to create favorable demand-supply dynamics. These factors bode well for CLAS’s portfolio, which includes hospitality and longer-stay assets.
Looking ahead, CLAS is not merely retracting but also expanding its footprint. The trust is set to complete the acquisition of a 258-unit rental housing property in Fukuoka, Japan, in the first quarter of 2024. Additionally, CLAS has recently acquired three prime lodging assets in London, Dublin, and Jakarta, projecting an EBITDA yield of 6.2%. These new assets have already begun contributing to CLAS’s income, signifying a focus on long-term sustainable returns for stakeholders.
The divestment significantly alters CLAS’s portfolio composition in Japan. Post-divestment, the trust will hold approximately 30 properties across various Japanese cities, including Tokyo, Fukuoka, Hiroshima, Osaka, and Sapporo. The portfolio spans serviced residences, hotels, rental housing, and student accommodation properties. In 2022, CLAS expanded its Japanese holdings with 11 acquisitions, focusing on longer-stay assets.
The performance of CLAS’s serviced residences in Japan, particularly after the full reopening of the country’s borders, has been notable. Revenue per available unit (RevPAU) for these residences in the third quarter of 2023 was 198% higher year-on-year, surpassing pre-COVID-19 levels by 17%. The average daily rate for Tokyo properties has also seen a substantial increase, exceeding pre-pandemic levels by over 20%. This robust performance, coupled with the variable rent received from two of its hotels under master leases, further strengthens CLAS’s income stream.
In conclusion, the divestment of the three Osaka hotels by CapitaLand Ascott Trust is a strategic move that not only capitalizes on the current market conditions but also aligns with the trust’s long-term vision of portfolio optimization and growth. As the trust continues to adapt and expand in the evolving landscape of the hospitality industry, its focus on strategic acquisitions and divestments positions it well for sustained success.
