CapitaLand Ascott Trust (CLAS)

[Shrivathsa]

Just noticed that in the latest quarterly update, Capitaland Ascot has indicated that their all in interest rate is now 3%. In the 2H 2023 annual report it was 2.4%, so, that is an increase of around 0.6% (25% higher interest rates for the year).

Assuming that the impact is over whole of FY 2024, that means, the annual interest expense (finance cost in annual report) will go from 86.8 Million SGD to SGD 108.5 million, an increase by SGD 21.7 million.

In the quarterly update, gross profit growth on a like for like basis excluding divestments is 7% "On a same-store basis, excluding acquisitions and divestments, between 1Q 2023 and 1Q 2024, gross profit was 7% higher y-o-y due to stronger operating performance". 7% growth is 23.6 Million Gross profit growth.

Assuming that all else remains equal, in essence, the DPU growth will be 1.9 million SGD divided by the 4 billion units, which is essentially flat.

I guess that is still decent performance, especially in a high interest rate scenario and DPU growth is too much to hope for in the current scenario.

[weijian]

Hi Shrivathsa

A few additional thoughts to the things that will not remain constant:

(1) As of end March2024, CLAS has 102 properties, a reduction of 4 from end 2023. Interest expenses from the mortgages attached to the 4 sold properties will not be incurred in FY24. Also, cash proceeds from the divestments may be used to pay down "higher interest" loans. So while effective interest rate will be higher but overall borrowings should be reduced.

(2) Towards the end of last year, some of the Paris hotels were converted from master leases to management contracts. With Paris Olympics coming in 2024, this will allow CLAS to enjoy the upside. Granted this is only a few hotels and probably add +/-1mil to the overall gross income.

[weijian]

In the EGM, OPMIs had questioned about the viability of acquiring a hotel with 54years remaining lease, on a master lease (unable to enjoy upside) and not been a distressed asset. IMHO, the biggest reason for acquiring lyf is probably the economies of scale from the master lessee (Ascott) and the ability to avoid paying the 10-15% OTA fees with Ascott Star Rewards (ASR).

On another note, I wonder why CLAS did not hold the EGM at their own hotels?

MINUTES OF THE EXTRAORDINARY GENERAL MEETING HELD AT HELICONIA BALLROOM, LEVEL 3, SANDS EXPO AND CONVENTION CENTRE, 10 BAYFRONT AVENUE, SINGAPORE 018956 ON MONDAY, 18 NOVEMBER 2024 AT 2.00 P.M. (SINGAPORE TIME)

Goh Soon Keat Kevin (“Mr Goh”), non-executive non-independent director of the Managers, added that when evaluating business prospects of hotels, footfall is not a key factor unlike for retail properties. Mr Goh stated that majority of the sales of the hotel comes from the loyalty programme, being the Ascott Star Rewards Programme and from corporate sales. Mr Goh stated that the property has a good track record and is one of the best performing properties, compared to the other properties in the CLAS portfolio.

https://links.sgx.com/FileOpen/20241213_...eID=827895

[CY09]

Ascott hotels are business hotels (think hotel sunroute, APA hotel type in Japan), service residence and budget tourist types. They do not have the ballroom space within their hotel properties to hold meetings/conventions

[weijian]

CLAS is selling a property in Japan for ~100% above its last valuation (done in Dec2024) and 40% above the updated valuation done most recently. As per CLAS, the property is soon due for an AEI to "remain competitive". So everything looks great until the net gain after tax is only ~50.8mil, or about 50% despite the sale price at ~100% of last recorded book value.

A big portion of the gains have been taken away by ~34mil sgd of taxes to be paid and it looks pretty huge IMO. I wonder how do the taxes play out in Japan? But it does suggest that market cap trading at discounts to book value is probably more justified than not.

THE PROPOSED DIVESTMENT OF CITADINES CENTRAL SHINJUKU TOKYO, AS AN INTERESTED PERSON TRANSACTION

The REIT Manager has commissioned an independent valuer, Cushman & Wakefield K. K (“C&W”), and the REIT Trustee has commissioned an independent valuer, Colliers Property at JPY18.1 billion (approximately S$161.2 million) as at 10 July 2025, while Colliers has valued the Property at JPY17.5 billion (approximately S$155.9 million) as at 10 July 2025.

The divestment consideration, which was negotiated on a willing-buyer and willing-seller basis1 with reference to the independent valuations by the Independent Valuers, is JPY25.0 billion (approximately S$222.7 million) (the “Divestment Consideration”) and represents an approximate 40.4% premium to the average of the two independent valuations. The Divestment Consideration also represents an approximate 100% premium over the book value of the Property as at 30 June 2025. The estimated net gain after tax on the Proposed Divestment is approximately JPY5.7 billion (approximately S$50.8 million).

The estimated total cost of the Proposed Divestment (the “Total Divestment Cost”) is approximately S$36.4 million, comprising:

(i) the divestment fee payable in Stapled Securities to the REIT Manager pursuant to the CapitaLand Ascott REIT Trust Deed for the Proposed Divestment (the “Divestment Fee”) of approximately S$1.1 million (being 0.5% of the Enterprise Value1 of S$222.7 million)2;

(ii) the estimated tax expense to be incurred by CLAS in connection with the Proposed Divestment of approximately S$34.0 million; and

(iii) the estimated professional and other fees and expenses incurred or to be incurred by CLAS in connection with the Proposed Divestment of approximately S$1.3 million.

https://links.sgx.com/FileOpen/20250731_...eID=853855