Singapore-listed real estate investors Ascott Resident Trust (Ascott Reit) and Ascendas Hospitality Trust (A-HTRUST) have announced a merger proposal to potentially create Asia Pacific’s largest hospitality trust with an asset value of S$7.6 billion ($5.6 billion).
The proposed combined entity, which will be the eighth largest in the world, will also become the seventh largest trust listed on the Singapore Exchange by asset value, according to a joint statement.
The total consideration for the combination is S$1.24 billion ($915 million), comprising S$61.8 million ($45.6 million) in cash and 902.8 million in new Ascott Reit-BT Stapled Units, according to the statement.
Activist fund Quarz Capital Management has been pushing for a merger of the Reits to boost shareholder value and avoid potential conflicts after a deal in January effectively made CapitaLand the owner of the managers of the two Reits.
The combination will be effected by way of a trust scheme arrangement, with Ascott Reit acquiring all the A-HTRUST stapled units for a consideration of S$1.0868 per unit, comprising S$0.0543 in cash and 0.7942 Ascott Reit-BT Stapled Units.
The combined entity will bring together the global portfolio of Ascott Reit and A-HTRUST’s 14 quality hotels in the Asia Pacific region, creating an enlarged portfolio of 88 properties with more than 16,000 units in 39 cities and 15 countries across Asia, Europe, and the US.
“The combination is a win-win for both Ascott Reit’s and A-HTRUST’s unitholders,” said ARTML chairman Bob Tan, adding that the combined entity will have a higher proportion of stable income derived from master leases; well balanced by growth income derived from management contracts.
Chia Kim Huat, Lead Independent Director of the A-HTRUST Managers, said the combined entity would be well-positioned to benefit from a strong sponsor in CapitaLand and its lodging unit, The Ascott Limited.
“The combination is a transformational transaction consistent with A-HTRUST’s strategy to create a stronger, diversified and resilient platform that will deliver sustainable growth to investors,” Chia said.
The new entity will enjoy a stronger presence in the Asia Pacific, where accommodation continues to be underpinned by the growing middle-income demographics, increasing tourism and economic activities, as well as infrastructure development, according to the statement.
Asia Pacific will make up about 71 per cent of its total portfolio valuation and contribute 68 per cent of its gross profit, with a balance between stable and growth income.