The race to acquire Singapore-based Ascendas Hospitality Trust appears to be heating up, with the trust and its interesting set of properties emerging as one of 2016’s first major acquisition targets in the Asia Pacific region.
Ascendas’ S$844 million ($590 million) portfolio is drawing strong interest from potential buyers in China and the US. Hong Kong-based Gaw Capital Partners, Beijing-based Fosun International, Blackstone Group and Starwood Capital Group have all been touted as potential buyers and offers could come in before the end of the month.
The trust offer an interesting opportunity for investors from around the world but it might prove to be particularly attractive to investors from Mainland China, such as Fosun, looking to diversify their currency exposures.
“The Ascendas portfolio provides an interesting set of properties in markets with high barriers to entry,” said Daniel J. Voellm, Managing Partner of HVS Asia Pacific. “Focusing on the middle tier of the market rather than high-end or luxury, these properties generate attractive cash flows at relatively high profitability. The properties in Japan and Australia are freehold which adds appeal.”
Ascendas’ holdings include 11 properties and 4,100 rooms spread across four key Asia Pacific markets: Australia, China, Japan and Singapore. Notable properties including the Novotel Sydney Central, Novotel Beijing Sanyuan, Osaka Namba Washington Hotel Plaza and Park Hotel Clarke Quay. Ascendas’ Australian and Singaporean holdings were the biggest contributors to its net property income in the first three quarters of 2015, accounting for 56 and 16 percent, respectively.
“In terms of strategic value it is unlikely that any of the buyers would have significant synergies with other business lines, making this a pure real estate deal,” Voelim said. “As such, it is about gaining a footprint in Asia, which Starwood Capital and Fosun would be interested in. For Blackstone and Gaw Capital it would be mostly about unlocking value and diversification across markets.”
Voelim added that among the possible buyers mentioned, Gaw Capital and Starwood stood to benefit the most from acquiring Ascendas.
“Gaw Capital might be interested in rebranding some of the properties to the 'G' brand,” he said.
The interest from Chinese investors is not surprising, as many of them are looking to diversify out of RMB-denominated assets.
"The devalued RMB and volatile stock market actually encourage Chinese deep-pocket investors to put their money in different baskets, for example property sector, particularly outside China as the mainland property market has been statured," said David Ji, Director and Head of Research & Consultancy for Greater China at Knight Frank, a real estate management and consultancy company that tracks Chinese investment in the space.
In addition to hotel holdings, Ascendas is also active in the serviced apartments segment. The trust recently acquired the serviced apartments component of Aurora Melbourne Central from UEM Sunrise Berhad for AUD$120 million ($84 million), in a transaction completed in December.
Ascendas Hospitality Trust comprises Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust, and is managed by Ascendas Hospitality Fund Management Pte Ltd.
Last October, Gaw and the Korea Investment Corporation acquired the InterContinental Hong Kong for $940 million.
In March 2015, Fosun Group shortlisted as many as 50 hotels it would be interested in acquiring around the world as part of a drive to invest $500 million in hospitality assets. In February 2015 the company acquired Club Med, after two years of bidding, for $1.01 billion.