CapitaLand Ascott Trust Strengthens Income Streams with Strategic Japan Acquisition

Overview

CapitaLand Ascott Trust (CLAS), Asia Pacific’s largest lodging trust, has announced the acquisition of three freehold rental housing properties in Southern Kanagawa, Greater Tokyo, Japan for a total consideration of JPY4.6 billion (S\$38.3 million). The properties are Lime Residence Hiratsuka West, Lime Residence Hiratsuka East, and Live Casa Hiratsuka. All three assets are newly built, with completion dates between 2022 and 2024, and currently enjoy average occupancy rates exceeding 95% with average lease terms of around two years, providing stable and recurring income streams.

Key Financial and Strategic Highlights

• Acquisition Details: The purchase was funded by JPY-denominated debt, which may provide natural currency hedging and potentially favourable financing costs in light of Japan’s low interest rate environment.
• Yield and Accretion: On a pro forma FY2025 basis, the acquisition delivers a blended net operating income entry yield of 4.1% and is accretive to Distribution per Stapled Security (DPS) by 0.2%.
• Portfolio Allocation: Post-acquisition, living assets will account for 17.5% of CLAS’ portfolio value. The trust remains on track to achieve its medium-term target of 25%-30% allocation to the living sector and 70%-75% in hospitality assets, indicating ongoing portfolio diversification.

Strategic Rationale and Market Context

• Location Advantages: The properties are situated along the Sagami Bay coastline in Kanagawa, Japan’s second most populous prefecture. They are well-connected, being a short walk to the nearest train station, 30 minutes to Yokohama, and 60 minutes direct to central Tokyo. Major industrial corporations and lifestyle amenities are within easy reach.
• Strong Demand Drivers: Kanagawa’s active workforce, comprising young professionals and foreign workers, is attracted by the region’s diversified economy anchored in manufacturing, technology, and logistics. The properties are positioned to benefit from strong corporate demand from nearby industrial areas and offer an attractive coastal lifestyle for working professionals.
• Asset Details:
  • Lime Residence Hiratsuka West: 115 units, completed in 2023, 2,871 sqm, 11 floors
  • Lime Residence Hiratsuka East: 63 units, completed in 2022, 1,442 sqm, 10 floors
  • Live Casa Hiratsuka: 55 units, completed in 2024, 1,336 sqm, 10 floors

Portfolio Enhancements and Recent Transactions

• Active Portfolio Reconstitution: CLAS continues to divest assets that have reached optimal life-cycle stages and reinvest in higher-yielding, accretive acquisitions. Recent portfolio moves include:
  • Acquisition of ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae hotels in January 2025.
  • Acquisition of rental housing properties Pre de Cort Nishikyogoku (Kyoto), Pregio Esaka South, and Splendide Namba West (Osaka) in August 2025.
  • Divestment of Citadines Central Shinjuku Tokyo for JPY25 billion (S\$222.7 million) at a ~100% premium to book value, unlocking a net gain after tax of S\$47.2 million. Capital will be redeployed to repay high-interest debt, fund asset enhancements, reinvest in high-yielding properties, or for general corporate purposes.
  • Renovation of Sotetsu Grand Fresa Osaka-Namba hotel, slated for completion in 4Q2026, to uplift value and profitability.
• Portfolio Size in Japan: With this acquisition, CLAS will own 35 properties in Japan: 1 serviced residence, 4 hotels, 29 rental housing properties, and 1 student accommodation.

Corporate Overview

CLAS has an international portfolio of 103 properties with over 18,000 units in 45 cities across 16 countries. Its properties are mostly operated under Ascott, Somerset, Quest, and Citadines brands, and are located in key gateway cities globally. CLAS is managed by wholly owned subsidiaries of CapitaLand Investment Limited (CLI), which has S\$125 billion of funds under management and extensive real asset capabilities across multiple sectors.

Shareholder Considerations and Potential Price Sensitivity

• Accretive Acquisition: The acquisition increases DPS by 0.2%, which may positively impact share valuation as it signals improved income generation.
• Portfolio Diversification: The move towards more living sector assets is a strategic diversification, reducing reliance on hospitality and potentially improving resilience against cyclical downturns.
• Active Capital Management: Divestment at a substantial premium and redeployment of proceeds into higher-yielding assets and debt repayment signal strong capital discipline and value creation for investors.
• Growth Potential: High occupancy, prime locations, and robust demand drivers in Greater Tokyo and Kanagawa suggest sustained income streams and long-term value growth.
• Risks: As with all real estate investments, future performance is subject to macroeconomic conditions, interest rate changes, competition, occupancy and rental rates, and regulatory developments.

Contact Information

For further investor inquiries, contact Denise Wong (Vice President, Listed Funds – Investor Relations) at [email protected] or Joan Tan (Vice President, Group Communications) at [email protected].

Disclaimer

This article is for informational purposes only and does not constitute investment advice or an offer to subscribe for any securities. All forward-looking statements are subject to risks and uncertainties, including but not limited to market conditions, economic factors, and company-specific risks. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult professional advisors before making investment decisions. The value and income from investments may fall as well as rise, and investors may lose all or part of their invested capital.

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