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CapitaLand Ascott Trust (CLAS) has announced its agreement to acquire lyf Funan Singapore for S$263 million, aligning with its ongoing strategy to enhance portfolio quality and boost returns for Stapled Securityholders.
The acquisition, which is expected to increase CLAS’ total distribution by S$3.5 million, is a part of CLAS’ broader goal of expanding its presence in Singapore while maintaining a diversified global portfolio.
The acquisition yield for lyf Funan Singapore is projected at 4.7%, a significant increase compared to the 3.2% divestment yield from Citadines Mount Sophia Singapore, which was sold in March 2024. This yield-accretive acquisition is expected to deliver a 1.5% accretion to CLAS’ Distribution per Stapled Security (DPS) on a pro forma basis for FY 2023.
Strategic value of acquisition
In line with its portfolio reconstitution strategy, CLAS aims to recycle capital into higher-yielding assets. The CEO of CapitaLand Ascott Trust Management Limited, Ms. Serena Teo, emphasised the strategic importance of the acquisition: “The acquisition of lyf Funan Singapore exemplifies our strategy to recycle capital into higher-yielding assets. The property’s 4.7% EBITDA yield, which is 150 basis points higher than the exit yield from Citadines Mount Sophia, delivers clear accretion to our DPS.”
Ms. Teo further explained that the acquisition strengthens CLAS’ presence in Singapore, a key gateway city where demand for hospitality is expected to grow faster than supply. “Being a key gateway city, growth in demand in the Singapore hospitality market is expected to outpace supply as global flight connectivity and capacity increase. Additionally, income contribution from Singapore will balance the contribution from CLAS’ overseas markets,” she added.
A flagship property in Singapore
Opened in 2019, lyf Funan Singapore is a 329-room property located in Singapore’s Civic District, part of the integrated Funan development. With its strategic location, the property is well-positioned to attract both short-term and extended-stay guests. lyf Funan’s dynamic design and experience-led social living environment cater to next-generation travellers, making it a prime property within CLAS’ portfolio.
The property’s average occupancy rate in the first half of 2024 exceeded 80%, outpacing other comparable properties in the market. The acquisition will also support CLAS’ sustainability goals, as lyf Funan Singapore holds both the Green Mark GoldPLUS certification and the Global Sustainable Tourism Council certification, contributing to the trust’s commitment to greening 100% of its portfolio by 2030.
The acquisition will be largely funded through proceeds from the divestment of Citadines Mount Sophia, allowing CLAS to maintain a gearing ratio of under 40%. A master lease agreement will be signed with Ascott for an initial term of 20 years, further solidifying the partnership.
The acquisition is set to be completed by the fourth quarter of 2024, pending approval from Stapled Securityholders at an Extraordinary General Meeting scheduled in November 2024.
Ms. Teo expressed confidence in the continued growth of the hospitality market in Singapore, bolstered by an increasing number of new attractions and infrastructure projects scheduled for completion by 2030. For the first eight months of 2024, Singapore’s hotel market saw a year-on-year increase in revenue per available room (RevPAR) of 3.4%, signaling strong demand for hospitality services.
Strengthening CLAS’ global portfolio
This acquisition is the third for CLAS in 2024, following the purchase of Teriha Ocean Stage in Japan and a 10% stake in Standard at Columbia in the U.S. CLAS’ portfolio reconstitution efforts have resulted in the divestment of six properties at a total value of S$340 million, unlocking S$46.2 million in gains. These moves are part of CLAS’ commitment to delivering higher-yielding investments and creating long-term sustainable value for its Stapled Securityholders.
As CLAS continues to evolve, this acquisition reinforces its position as the largest lodging trust in the Asia-Pacific region. With an asset value of S$8.5 billion as of June 2024 and 102 properties across 45 cities in 16 countries, CLAS remains well-poised for future growth in the global hospitality industry. The acquisition of lyf Funan Singapore marks a strategic step forward in CLAS’ growth and portfolio diversification. By leveraging its strong foundation in Singapore and expanding globally, CLAS continues to demonstrate its commitment to delivering sustainable value for its investors.
