CDLHT and Ascott Reit to gain from divestments to Liang Court developers: analyst

W Hotel, which CDLHT traded for, has a RevPAR of $318 per night.

CDL Hospitality Trusts (CDLHT) and Ascott Residence Trust (Ascott Reit) can stand to gain from selling Novotel Clarke Quay and Somerset Liang Court, respectively, to the joint venture between City Developments (CDL) and CapitaLand that will redevelop Liang Court, according to DBS Group research.

In particular, the exit yield of 5.6% or $939,000 per room for CDLHT’s divestment is considered attractive, and its forward purchase of a new hotel from Moxy by Marriott could further anchors its core portfolio in Singapore. In addition, its trading up to the W Hotel, which has a revenue per available room (RevPAR) of $318 per night, can potentially raise occupancy and rates.

A separate report from Maybank Kim Eng also said that the transactions should strengthen CDLHT’s hospitality presence in Singapore, and raise its asset under management (AUM) and net property income (NPI) in the city-state to 68% and 64% from 2025.

For Ascott Reit, its use of proceeds from its partial divestment to redevelop a refreshed service residence is expected to give it more operational flexibility in capturing a broader clientele. It is also considered well-timed as the residence is over 35 years old, and can be funded without additional financing.

In addition, CDL and Capitaland are expected to gain higher returns from buying these properties, given an estimated all-in land cost of $1,400 psf including the top-up premium.

Both developers also own properties within the vicinity, namely CDL’s Central Mall and CapitaLand’s Clarke Quay mall and stake in Park Hotel Clarke Quay, which can create synergies in their partnership.

Photo from CapitaLand