CapitaLand’s wholly owned serviced residence business unit, The Ascott Limited’s serviced residence global fund, has jointly acquired two prime properties in Paris and Tokyo for US$104 million in partnership with the Qatar Investment Authority (QIA).
The fund will invest another USD33 million (S$46 million) to convert the office building in Paris into a luxury serviced residence and embark on asset enhancement to reposition the serviced residence in Tokyo, bringing the total investment to USD137 million (S$191 million). These acquisitions strengthen their portfolio.
Commenting on the transaction, Lee Chee Koon, Ascott’s chief executive, said, “Ascott serviced residence global fund’s maiden acquisitions are quality assets in key gateway cities where demand for serviced residences by expatriates and travellers remains strong. This is a testament of our strong alignment of interest with our capital partners.”
Lee added, “This value-added fund will capitalise on Ascott’s strong capabilities in developing, repositioning and enhancing the value of serviced residences globally. As we gear up to achieve Ascott’s expansion target of 80,000 units worldwide by 2020, the fund provides the financial boost to support our acquisitions and growth. With the first right to manage properties acquired by the fund, we will be able to increase Ascott’s fee-based income.”
Established in July 2015, the US$600 million serviced residence global fund is Ascott’s largest private equity (PE) fund and a 50:50 joint venture with QIA. It invests in serviced residences and rental housing properties, with an initial focus on the Asia Pacific (APAC) and Europe.
Commenting on the partnership with QIA, Lee stated: “Ascott will continue to build up scale by working with strong capital partners and we will seek investment opportunities in gateway cities. This year, we have added more than 6,000 serviced residence units to our portfolio with over 30 management contracts.
The latest assets are the Citadines Suites Champs-Élysées Paris – the former private residence of the Hennessy family – and Somerset Shinagawa Tokyo, which is located in proximity to Tokyo’s main transportation hub, in the district of Takanawa.
The 70-unit Citadines Suites Champs-Élysées Paris is slated to open in 2018 and is positioned to leverage on Paris’s status as the second most attractive city for foreign investments in Europe. With tourist arrivals in Greater Paris rising by 11.7 per cent to 22.4 million in the 2003-2014 period, while room supply only increased by 5.3 per cent in the same period, demand for accommodation exceeds current supply.
Meanwhile, the 50-unit serviced residence operating as Somerset Shinagawa Tokyo since acquisition will undergo an asset enhancement initiative (AEI), which will reposition the property with additional apartments.
Expected to be completed by end 2016, this AEI is meant to position the property for the growing long-stay accommodation demand in Japan. Currently, The Ascott maintains three brands in its portfolio: Ascott, Citadines and Somerset. This purchase serves to strengthen the footprint of the Citadines and Somerset brands in particular.
The Tokyo asset is also well positioned, given that a number of factors have combined to render Japan an attractive location: an attractiveness for both corporate and leisure travellers; a weakened Japanese yen; eased visa requirements; the proliferation of low-cost carriers; and the the implementation of pro-business policies has boosted Japanese visitor arrivals, an uptrend set to continue.
With these acquisitions, Ascott claims to maintain in excess of 43,000 units across 277 properties, spanning 95 cities across the world. According to a release from The Ascott, this positions the firm as the largest international serviced residence owner and operator. As part of The Ascott’s growth strategy, more strategic alliances and franchises to expand its global presence are likely.
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