Singapore’s Ascott REIT launches S$442.7 million rights issue to acquire its first Frankfurt property and expand in Hamburg
Ascott Residence Trust (Ascott Reit) has launched a fully underwritten renounceable rights issue to raise S$442.7 million. The proceeds will be used to partly fund Ascott Reit’s acquisition of its first property in Frankfurt and its second in Hamburg from The Ascott Limited (Ascott) for €65.4 million (S$97.2 million) . The acquisitions of the two operating serviced residences, Citadines City Centre Frankfurt and Citadines Michel Hamburg, are accretive at an EBITDA yield of 5.4%.
In addition, S$381.6 million will be used to pay for Ascott Reit’s acquisition of Ascott Orchard Singapore, which is expected to be completed by 3Q 2017. After the acquisition of Ascott Orchard Singapore and rights issue, Ascott Reit’s FY 2016 distribution per unit of 8.27 cents is expected to be 7.27 cents on a pro forma basis, and this will further increase to 7.43 cents following the acquisitions in Germany.
Mr Bob Tan, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “The equity fund raising will strengthen Ascott Reit’s balance sheet and give us greater financial flexibility to seize growth opportunities. The rights issue will provide Unitholders with the opportunity to subscribe for the rights units at an attractive price while benefitting from Ascott Reit’s future growth.”
“Ascott Reit’s acquisitions of these quality assets in prime locations will strengthen its portfolio and broaden its earnings base. It will increase our presence in the stable market of Germany, Europe’s largest economy, where we currently own three properties in Berlin, Hamburg and Munich. Ascott Reit will benefit from greater economies of scale by adding a second property in Hamburg which has an established and steadily growing hospitality market. Extending our footprint to Frankfurt will allow us to further diversify Ascott Reit’s portfolio and the master leases for these properties will enhance income stability.”
Mr Tan added: “When the acquisitions in Germany and Singapore are completed, Ascott Reit’s asset size will expand to S$5.3 billion, strengthening its position as the largest hospitality REIT in Singapore. Ascott Reit’s market capitalisation will also grow to S$2.4 billion, increasing its trading liquidity. We remain focused on creating stable returns to Unitholders and will continue to look for acquisitions in gateway cities in markets such as Australia, Japan, Europe and the U.S.”
Elaborating on the German market, Mr Ronald Tay, ARTML’s Chief Executive Officer, said: “There is strong demand for accommodation by corporate travellers in Frankfurt and Hamburg. Frankfurt is Germany’s financial and transportation hub where many global companies are located. Hamburg is Germany’s second largest city and ranked the second best city in Europe for investment2 , after Berlin. Hamburg is also home to Europe’s third largest container port, making the city a key international trade centre in the region. Both Frankfurt and Hamburg host many international and regional trade fairs, attracting millions of visitors each year.”
Source: Ascott REIT