CapitaLand Ascott Trust slated to acquire lyf Funan Singapore

CapitaLand Ascott Trust (CLAS) entered an agreement with the Ascott Serviced Residence Global Fund (ASRGF) for the acquisition of lyf Funan Singapore at an agreed property value of S$263 million.  

CLAS’ sponsor, The Ascott Limited (Ascott), holds a 50 percent stake in ASRGF.  

This acquisition is in line with CLAS’ portfolio reconstitution strategy, as the yield-accretive purchase stands to enhance the quality of CLAS’ portfolio and sustainability of returns to its stapled securityholders.

At the same time, the impending acquisition will increase CLAS’ total distribution by S$3.5 million, which translates to a Distribution per Stapled Security (DPS) accretion of 1.5%.  

The earnings before interest, taxes, depreciation and amortisation (EBITDA) yield of the proposed acquisition is 4.7 percent on a pro forma basis for FY 2023.  The purchase consideration of S$146.4 million will be largely funded by the proceeds from the divestment of Citadines Mount Sophia Singapore which was completed in March 2024.  

CLAS’ gearing is expected to remain under 40 percent after the proposed acquisition.

Upon completion of the proposed acquisition, CLAS will enter into a master lease with Ascott for lyf Funan Singapore.  The proposed acquisition and entry into the master lease are subject to approval from Stapled Securityholders at the Extraordinary General Meeting scheduled in November 2024.  The transaction is targeted to be completed in Q4-2024.

Part of portfolio reconstruction

Serena Teo, CEO of CLAS’ parent firms CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte Ltd, said: “The proposed acquisition of lyf Funan Singapore is exemplary of our portfolio reconstitution strategy to recycle capital into higher yielding assets.  Citadines Mount Sophia Singapore was divested at an exit EBITDA yield of about 3.2 percent, while the entry EBITDA yield for the proposed acquisition of lyf Funan Singapore is 150 basis points higher, delivering accretion to CLAS’ DPS.  

“The DPS-accretive acquisition of lyf Funan Singapore will increase our presence in Singapore, our home ground.  Being a key gateway city, growth in demand in the Singapore hospitality market is expected to outpace supply as global flight connectivity and capacity increase.  Additionally, income contribution from Singapore will balance the contribution from CLAS’ overseas markets.”

Teo added that lyf Funan Singapore outperformed other comparable properties in the submarket in the first half of this year, achieving a strong average occupancy rate of more than 80 percent.  

The other lyf-branded property in the company’s portfolio, lyf one-north Singapore is also seeing robust demand with a similar average occupancy rate.  

The addition of another prime lyf property into the company’s portfolio puts it in a good position for further growth as travel continues to recover.