This 411-key asset – Element New York Times Square West hotel – is located in Midtown Manhattan.
This acquisition comes within days of Ascott Reit’s purchase of three serviced residences and four rental housing properties in Australia and Japan.
The acquisition at an EBITDA yield of 6.2 per cent is expected to increase Ascott Reit’s distribution income in FY 2014 by $0.8 million, translating to a rise in distribution per unit from 8.44 cents to 8.51 cents on a pro forma basis, the company said in a regulatory filing.
Ascott Reit will partly fund the acquisitions of the properties in Australia, Japan and the US with the S$250 million proceeds from its issuance of perpetual securities at a fixed distribution rate of 4.68 per cent per annum. The perpetual securities received strong investor participation with orders exceeding four times of the issue size, the company added.
Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) chairman, said: “This US acquisition and our recent acquisitions in Australia and Japan with a total of 1,563 units 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,”he added.
Ronald Tay, ARTML’s chief executive officer, said: “With 411 rooms, this relatively new property, which opened in November 2010, has been achieving strong performance with over 90 per cent occupancy in the last three years.”
He further said that post 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,” Try added.
The current operator, which has been running the property since its opening, also operates 19 hotels with over 3,800 rooms in the US.
“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,” Tay said.