Ascott Residence Trust to acquire Dalian, China asset for $118.6m

Its first serviced residence in the area.

According to OCBC Investment Research, Ascott Residence Trust's has entered into a conditional agreement with a third party to acquire its first serviced residence in Dalian for RMB571m (~S$118.6m) at an EBITDA yield of 5.5%.

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On a pro forma basis, the accretive acquisition is expected to increase FY13 distribution per unit by 1.5% from 8.40 S cents to 8.53 S cents. This is the first acquisition announced after ART's rights issue in Dec 2013 which raised S$253.7m. The 195-unit international serviced residence, which commenced operations in 2009, has an average occupancy of about 80%.

ART will refurbish the property and it will be managed by The Ascott Limited (Ascott) as Somerset Grand Central Dalian when the acquisition is completed, which is expected to be by mid-2014.

Management says it is also looking at potential acquisitions from the sponsor, Ascott, in key cities in China, Japan, Australia, Malaysia and Europe. We maintain our FV of S$1.33 and BUY rating on ART.