CapitaLand Ascott Trust Extends Cavendish London Hotel Management Agreement and Updates Renovation Costs

Key Developments Announced

• Extension of Hotel Management Agreement (HMA): The term of the Cavendish London Hotel Management Agreement has been extended by 5 years, bringing the total initial term to 35 years.
• Increase in Renovation and Rebranding Costs: The estimated renovation and rebranding costs for The Cavendish London have increased significantly, from GBP55.0 million to GBP77.3 million.
• Cavendish Operator to Contribute More Capital: The Cavendish Operator will now provide an additional estimated GBP11.1 million in “Key Money” towards the increased costs.
• Stable Post-Renovation Yield: The post-renovation stabilised EBITDA yield is expected to be 6.1%.
• Change in Use of Equity Fund Raising Proceeds: The managers intend to redeploy S\$78.4 million from the previously earmarked renovation of Sydney Central Hotel to fund The Cavendish London’s renovation, as these costs are due sooner.
• Interested Person Transaction: The HMA Extension is an “interested person transaction” under SGX rules, as CapitaLand Investment Limited (CLI) is a controlling stakeholder and the Cavendish Operator is an associate.
• Audit & Risk Committee’s Endorsement: The Audit & Risk Committee has reviewed and supports the HMA Extension, stating it is on normal commercial terms and not prejudicial to minority shareholders.

Detailed Insights for Investors

CapitaLand Ascott Trust (“CLAS”) has announced a significant extension to the hotel management structure for The Cavendish London. The Cavendish PropCo (the property owner) and Ascott Hospitality Management (UK) Limited (the hotel operator) have signed a supplemental agreement to increase the management term by five years, extending the initial agreement to 35 years. This extension comes as CLAS finalises its acquisition of the property and reflects confidence in the operator’s expertise, with expectations this will ensure sustained income for the Trust due to the agreement’s minimum guaranteed income clause.

Crucially, the cost structure for the planned renovation and rebranding of The Cavendish London has been updated. Renovation costs are now projected at GBP77.3 million (up from GBP55.0 million), driven by:

1. 2024 regulatory amendments to UK building codes impacting design.
2. Remediation of latent site conditions discovered only during invasive work.
3. Higher-than-expected inflationary pressures in the construction sector.

The Cavendish Operator remains responsible for 50% of these costs. However, with the cost increase, the Operator will contribute an additional estimated GBP11.1 million in “Key Money,” increasing the Operator’s financial commitment and providing direct benefit to CLAS stapled securityholders.

Post-Renovation Financials

• Despite the increased capital outlay, the post-renovation stabilised EBITDA yield is expected to remain robust at 6.1%.
• The post-renovation valuation of The Cavendish London is unchanged at GBP316.0 million.

Independent Review and Rationale

HVS Europe Ltd, an independent hospitality consulting firm, reviewed the HMA Extension and concluded in their report (dated 31 October 2025) that the terms, including the higher Key Money, are more advantageous for CLAS on a present value basis compared to the incremental fees from the extension.

The extension is expected to help ensure long-term income stability for CLAS, especially considering the increased capital support from the Operator.

Regulatory and Shareholder Considerations

• Interested Person Transaction: Because CLI, through its subsidiaries, is the controlling securityholder (holding ~24.7% of CLAS stapled securities), and the Cavendish Operator is an associate of CLI, this transaction falls under SGX Chapter 9 rules on interested person transactions.
• Aggregate Value of Interested Person Transactions: For the current financial year, the total value of such transactions (including this extension and the increased Key Money) is approximately S\$340.4 million with CLI Group, and S\$343.2 million with all interested persons. This exceeds the 3% threshold of CLAS’s latest audited net tangible asset value, triggering mandatory disclosure.
• Audit & Risk Committee Endorsement: The Committee has affirmed the terms are fair and in the interests of minority shareholders.

Change in Use of Equity Fund Raising Proceeds

Notably, CLAS managers now plan to use approximately S\$78.4 million (originally intended for the renovation of Sydney Central Hotel) to help fund The Cavendish London’s renovation. The rationale is one of capital optimisation and prioritisation, as the London project’s costs are due sooner than those for the Sydney property. Shareholders should be aware this represents a strategic redeployment of capital, which may impact the timing and execution of the Sydney project.

Potential Impact on Share Value

• This announcement is potentially price sensitive: The extension of a valuable hotel management agreement, increase in operator capital commitment, and the redeployment of equity funds are material changes that could affect investor expectations and CLAS’s valuation.
• Increased Operator Commitment: The additional Key Money and long-term partnership with a proven operator may be viewed positively by the market.
• Higher Costs and Capital Reallocation: The increase in renovation costs and changes in use of equity proceeds could raise concerns over capital allocation and project returns, though these are offset by the stable expected EBITDA yield.

Investors should monitor: Any further updates on construction progress, final cost adjustments, and the impact of capital redeployment on other properties in CLAS’s portfolio.

Disclaimer: The information above is summarised and interpreted from official CapitaLand Ascott Trust announcements. It does not constitute investment advice. Investors should refer to the original filings and seek professional advice before making investment decisions. The value of investments can fall as well as rise, and past performance is not indicative of future returns.

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