UOL betting big on hospitality business

The UOL Group has earmarked some $500 million - or a third of its available funds - to expand its hospitality business in Asia-Pacific over the next three years, the group's president and chief executive Gwee Lian Kheng told BT in an interview.

Lap of luxury: Pan Pacific Serviced Suites is likely to be the only one of its kind, as rising property prices mean that such an offering will be 'hard to replicate', says UOL

The property company plans to add some 15-20 hotels and service apartment properties over the next three years, Mr Gwee said.

'(Right now), if you ask me to put down money, I will put it into hospitality,' he said.

For Singapore especially, the hospitality sector looks to be the brightest going forward - even as the overall property market takes a breather - Mr Gwee said.

Yesterday, UOL launched its new 126-unit service residence development called Pan Pacific Serviced Suites, which the company hopes will be the first of many service residences under the Pan Pacific brand name.

Five such properties could open in the next three years, Mr Gwee said. Next up is Pan Pacific-branded service residences in Bangkok, which will open in about a year.

In Singapore, Pan Pacific Serviced Suites is likely to be the only one of its kind, as rising property prices mean that such an offering will be 'hard to replicate', the company said.

'Moving forward, our strategy is to look at high growth markets such as China, Vietnam, Thailand and Malaysia,' Mr Gwee said.

The Singapore property, which is located right next to Somerset MRT station, cost the group $38.5 million to build. Guests can check in from early April, and pre-opening interest has been strong, UOL said.

The company explored building a small office, home office (Soho) development on the site, but decided to go with service residences in order to ride on the current international business expansion into Singapore and the corresponding growth in expatriates looking for short-term housing, as well as the chance to grow the Pan Pacific brand.

UOL bought the hotel brand last year in a bid to become a key player in hotel management in the Asia-Pacific region.

The deal brought the Pan Pacific group's 12 hotels in the US, Canada and Asia into the UOL portfolio, adding some 3,800 rooms.

Now, UOL is looking to take the brand further with its first foray into service residences.

'Moving into the extended serviced accommodation business is a logical extension of the brand as it is complementary to our current hotel accommodation offering,' Mr Gwee said.

UOL itself, however, is not a newcomer to the service residences scene. It owns such a property under its Parkroyal brand, which it will maintain as a four-star property.

Pan Pacific Serviced Suites, on the other hand, is slated to be a five-star offering.

UOL also bought a hotel plot at Upper Pickering Street in a government tender in October last year. This 'may, or may not' be branded as a Pan Pacific hotel when it is completed by early-2011, Mr Gwee said.

For the overall property market, Mr Gwee said that UOL is 'cautiously optimistic' on the back of the sub- prime lending crisis in the US and the resultant credit crunch.

The developer plans to launch its 'mid-range' condo Breeze by the East on Upper East Coast Road as soon as it can.

Mr Gwee expects mid- level home prices to climb at least 10 per cent this year, pushed up by en-bloc sellers looking for replacement homes.

UOL shares closed four cents down at $3.65 yesterday.

Source : Business Times - 6 Mar 2008

Pan Pacific Serviced Suites: UOL Group unveils new luxury serviced apartment

Property developer UOL Group has unveiled a new luxury serviced apartment, marking its entry into the extended stay business.

Pan Pacific Serviced Suites, located in the Somerset area, will open for business in April. It offers 126 deluxe units, which come with personal assistants to tend to the needs of guests.

Besides waking up to a view of downtown Singapore in an apartment kitted out with designer European furniture, there is also a swimming pool filled with mineral water for one's use.

Ten personal assistants – trained by the former butler of the King of Jordan – will work around the clock to ensure everything goes smoothly.

It might come as no surprise then that the room rates at Pan Pacific Serviced Suites are 20 to 25 percent higher than those at other luxury serviced apartments in Singapore.

Prices start from S$420 a night in an executive suite to over S$1,000 a night in a two-bedroom penthouse. But UOL is sure there will be takers.

Kam Tin Seah, Senior GM, Investment & Strategic Development, UOL Group, said: "We have arranged at least 20 appointments with our existing top client list that Pan Pacific Hotels and Resorts has, as well as new opportunities that we have identified from the current demand level, so I would say we are confident to keep to at least 75 percent occupancy for six months."

UOL said the decision to move into the extended stay business is unrelated to the current hotel crunch. But it expects to benefit as demand spills over from hotels to the serviced suites.

UOL plans to roll out five more Pan Pacific Serviced Suites in the next three years. One will be launched in Bangkok next year and the others in fast-growing countries such as China, Vietnam and Malaysia. - CNA/so

Source : Channel NewsAsia - 5 Mar 2008

Frasers to add Tokyo property to portfolio

SERVICED apartment operator Frasers Hospitality is expanding its footprint in North Asia with a maiden project in Japan.

The group said in a press statement yesterday that it was adding Fraser Place howff Shinjuku, Tokyo to its portfolio as part of its plan to tap the lucrative Japanese premium serviced residences market.

The new property, which belongs to re-plus inc, is one of the largest serviced apartment projects in the country. The building's East Tower with 175 units is scheduled to open next month . A further 200 units in the West Tower will be ready by the second half of this year.

Frasers Hospitality said its latest project is located near the busy Shinjuku Station, in the heart of Tokyo's largest sub-centre and a key commercial, banking and entertainment district.

Fraser Place howff Shinjuku, Tokyo, is designed by Nikken Sekkei Ltd and CKR (Claesson Koivisto Rune Arkitkontor). It comprises one, two and three-bedroom apartments as well as triplex units.

Choe Peng Sum, Frasers Hospitality's chief executive officer, said the group's latest project was a milestone in its North Asian expansion plan as Japan was a key gateway city with foreign investments.

He said the group hoped to meet the demands of both local and foreign corporations for mid- to long-term stay facilities which combined the comforts of home with selected five-star hotel facilities.

Frasers Hospitality is the hospitality arm of Frasers Centrepoint, a wholly-owned subsidiary of the listed Fraser and Neave group.

Source : Business Times - 26 Feb 2008

CapitaLand gains control of 96.7% of Ascott Group

Property developer CapitaLand has gained control of 96.7 per cent of the Ascott Group.

With this level of acceptance, CapitaLand can now compulsorily acquire the remaining shares of Ascott that it does not own.

The move will allow CapitaLand to delist Ascott and take it private.

But Ascott shareholders, who have yet to accept the offer, can still do so before the closing date of 11 March 2008.

CapitaLand had offered to buy all remaining shares of Ascott that it does not own at S$1.73 each.

Ascott shares have been suspended after its free float fell below 10 per cent last Thursday. - CNA/vm

Ascott shares face suspension from SGX

Shares of Ascott Group are likely to be suspended, now that CapitaLand has gained control of 91.7 percent of the company.

Under listing rules, the Singapore Exchange may suspend a stock when its free float falls below 10 percent.

In a statement, CapitaLand says it will not appeal for the trading suspension to be lifted. The company has said that it intends to take the Ascott Group private.

However, it needs to acquire 97 percent of Ascott in order to exercise its right to compulsorily acquire the remaining shares of the company.

CapitaLand has offered to buy all remaining shares of Ascott that it does not own at S$1.73 each. The offer will close at 5.30pm on 26 February. - CNA/ir

Source : Channel NewsAsia - 21 Feb 2008

Ascott investors advised to accept offer

SERVICED apartment operator The Ascott Group’s shareholders should accept an offer from parent CapitaLand of $1.73 apiece for its shares, an independent financial adviser has recommended.

Shareholders ‘who wish to realise their investments’ in Ascott, said PricewaterhouseCoopers Corporate Finance (PwCCF), should either take CapitaLand’s offer or sell the shares on the open market before the offer closes on Feb 26.

PwCCF is advising Ascott’s independent directors on the deal. CapitaLand, it noted, has also stated intentions to delist Ascott. If CapitaLand, which already owns two-thirds of Ascott, succeeds in acquiring enough shares to do so, ‘the trading liquidity of the shares would be aversely affected’.

On Jan 8, CapitaLand made a cash offer for shares of Ascott.

The property firm added it did not intend to revise its offer, which gave a 43 per cent premium over Ascott’s then-last traded price of $1.21.

Ascott is the biggest operator of serviced apartments in Asia and Europe, with almost 15,000 units around the world and another 5,000 more under development.

Its share price closed unchanged at $1.72 yesterday.

Source : Straits Times - 12 Feb 2008

$1.73 decent exit price for Ascott: CIMB

CapitaLand’s offer to buy the remaining shares of its 67-per-cent unit, The Ascott Group, at $1.73 apiece represents a decent exit price for minority owners of the luxury residences operator, according to CIMB, who said the price “is a fair valuation from a historical perspective, but attractive in the current environment of heightened risk aversion”.

Stock markets worldwide have been rocked in recent months by the fallout from the US sub-prime mortgage fiasco, and banks and property counters have bore the brunt of the volatility. The ST Index is down about 12 per cent since the beginning of the year.

In its offer document despatched to Ascott shareholders yesterday, CapitaLand’s fully-owned Somerset Capital unit said the offer was unconditional in all aspects and that payment would be disbursed 10 days after the receipt of acceptances. The offer will close on Feb 26 and the offer price will not be revised. CapitaLand intends to take Ascott private and will exercise its rights of compulsory acquisition.

Source : Today - 30 Jan 2008

Ascott secures deal to manage Shenzhen property

THE Ascott Group has secured a contract to manage a 219-unit serviced residence in Shenzhen, China.

The property, which will be named Ascott Shenzhen Maillen, is scheduled to open in the second half of 2009. It will be the first Ascott-branded serviced residence in the city, but the company's second property in Shenzhen. Earlier this year, it acquired a 173-unit serviced residence, which will be named Somerset Garden City, Shenzhen, when it opens in the second half of 2008.

Ascott Shenzhen Maillen is in the heart of the Shekou commercial and cultural centre, and will be part of an integrated development comprising an existing high-end club with recreational and lifestyle facilities and restaurants.

Ascott also said that the property is a 15-minute drive away from the newly opened Hong Kong-Shenzhen Western Corridor, a bridge which links Shenzhen to Hong Kong.

'Ascott Shenzhen Maillen is the group's fourth Ascott-branded property in China,' said Gerald Lee, Ascott's deputy chief executive of operations. 'It will complement our other 'Ascotts' in Beijing, Shanghai and Guangzhou.'

With the addition of Ascott Shenzhen Maillen, Ascott's portfolio in China will stand at about 4,200 units in 22 properties. The company aims to grow its portfolio to 25,000 units by 2010.

Ascott's shares closed one cent up at $1.73 yesterday. Ascott's parent company, CapitaLand, made a general offer for Ascott on Jan 7 in a deal that values the serviced residence company at $2.8 billion. CapitaLand intends to pay up to $989.5 million - or $1.73 a share - to take Ascott private.

Source : Business Times - 29 Jan 2008

Service apartments seek shorter stays to ease hotel room crunch

Industry association proposes rule on stay of 7 nights or more be lifted

FOR 20 years, there has been a little-known rule governing service apartments: Guests have to stay seven nights or more.

ALMOST LIKE HOME: Facilities offered in service apartments, such as this Fraser Suites two-bedroom apartment outfitted with a kitchen to prepare meals, would 'help bridge the gaps for medical and family tourism'. -- BT FILE PHOTO



Now, with an eye on the current hotel room crunch, the Serviced Apartments Association proposes that this condition be lifted.

There are at least 3,500 service apartment units here, compared to more than 37,000 hotel rooms.

If the association gets the go-ahead, this will have an impact on the short-stay accommodation market. Association president Alfred Ong told The Straits Times it is high time the rule was lifted - a rule he said is unique to Singapore.

He added: 'If Singapore wants to be a first-class city, then it should give customers the choice, whether it be service apartments, hotel rooms or budget accommodation.'

Although the association said it began preliminary discussions with the Singapore Tourism Board (STB) and the Urban Redevelopment Authority (URA) in 2006 and stepped them up last year, the two agencies said they have yet to receive a formal proposal to lift the rule.

Travel industry players said such a move will help ease the room crunch in Singapore where hotels have registered high average occupancy of more than 80 per cent.

This has led to higher room rates, which in turn have led to concerns over Singapore's competitive edge in the mass tourism sweepstakes.

The latest American Express market forecast on hotels in the Asia-Pacific, released last week, predicts that corporate rates in Singapore will go up by some 29 per cent this year.

This is higher than its projections on Hong Kong at 17 per cent, Beijing at 21 per cent and Kuala Lumpur at 20 per cent.

This is despite the 8,850 rooms added last year and this year.

Mr Prashant Aggarwal, head of American Express Consulting for Japan, the Asia-Pacific and Australia, cited increased demand with higher visitor arrivals as part of the reasons driving its projection.

However, Plaza Royal on Scotts hotel general manager Patrick Fiat said the industry should not be too concerned about the rates hike.

He told The Straits Times: 'For the past 10 years, hotel rates have been low. So, the current spike is just hotel rates catching up with rates elsewhere.' He expects levelling out by next year.

However, he is opposed to allowing service apartments to accept shorter stays.

But the service apartment industry sees the proposed move as complementary rather than competitive.

Ms Tonya Khong, general manager of Fraser Suites and Fraser Place, said: 'There may not be much impact on the industry's occupancy if the minimum duration of stay requirement is lifted.

'We foresee that this move can help bridge the gaps for medical and family tourism, as cooking and children-friendly facilities as well as spacious living space will mean a great deal to these visitors.'

Mr Ong said in other Asian cities, most service apartment guests are middle- to long-term guests. Only about 30 per cent are short-stay guests.

But he added that allowing shorter stays will mean more efficient use of service apartments, which always have some spare days between long-term guests.

Source : Straits Times - 21 Jan 2008

Ascott holders should take the money and exit

EARLIER this week, property giant CapitaLand announced that it would make a general offer for its listed subsidiary Ascott Group, offering to buy all Ascott shares it does not own.

For Ascott’s minority shareholders weighing up the offer, there are several factors to consider. Their stock is now seeing poor liquidity and low trading volumes. The company is 66.5 per cent owned by CapitaLand and is tightly held by various institutions. Ascott’s low trading volume - estimated at less than US$2 million a day on average - has been an issue with some institutions that are interested in the company’s growth story, analysts have pointed out.

The offer price of $1.73 a share is decent. The price is 43 per cent higher than Ascott’s last traded price of $1.21 at the time of the offer and also represents a premium of about 145 per cent to Ascott’s unaudited net asset value per share as at Sept 30, 2007.

While the offer is nowhere near Ascott’s one-year high of $2.06 seen in May last year as well as below the target prices assigned to the stock by analysts, Ascott’s share price is unlikely to appreciate much in 2008 in view of the uncertain market.

Said CIMB analyst Khoo Chen Hsung: ‘While we expect Ascott’s share price to rise towards our target price of $2.25, rising equity market risk aversion is likely to limit its ascent to our sum-of-parts valuation of $2.25 over the next 12 months.’

Better offer is unlikely

And if this bid fails, a better offer from CapitaLand is unlikely to be forthcoming. Similarly, it is also unlikely that a competing bidder will emerge in view of the credit market turmoil.

With all this in mind, Ascott’s minority shareholders should take the money and exit a company that has little going for them. After all, those keen on an exposure to Ascott’s business model can instead buy into CapitaLand or Ascott’s listed Ascott Residence Trust (ART).

The market view seems to be that the offer will go through. UBS Investment Research, for example, said that shareholders will accept the offer.

‘Given the fragmented shareholding and volatile market outlook, we think the probability of investors rejecting the bid and a higher offer is low,’ said the research unit in a recent note.

On CapitaLand’s side, shareholders might be a bit concerned about the premium the developer will be forking out for Ascott’s shares. CapitaLand’s investment could hit $990 million - not a small amount by any reckoning.

Dilutive for pro forma earnings

The purchase will also be slightly dilutive for pro forma earnings and net tangible assets, and only mildly positive for revalued net asset value.

But a lot will depend on how well CapitaLand extracts value from a delisted Ascott.

The group has indicated that it will manage a wholly-owned Ascott in a more integrated fashion than it is currently doing, which might allow the service residence unit to grow at a faster pace.

The timing of the privatisation bid also shows that CapitaLand is starting to give more attention to extracting value from its listed vehicles given the weak equity market conditions. The move is timely, as property stocks - including CapitaLand - have taken a knock over the past few weeks.

However, the developer is unlikely to follow the same path with its other listed units, especially its real estate investment trusts (Reits).

CapitaLand is committed to its Reit strategy, and chief executive Liew Mun Leong has said that the group could well have 10 Reits in its portfolio in the long term.

In line with this, ART should remain the main listed Asian service apartment vehicle for CapitaLand. And following the same argument, one should not expect offers by CapitaLand for its other listed Reit associates like CapitaMall Trust and CapitaCommercial Trust.

Source : Business Times - 10 Jan 2008

Ascott shares surge on news of offer

CapitaLand falls 5.3%; analysts say deal is positive for offeror in longer term

NEWS of CapitaLand’s offer to buy out minority owners of its subsidiary Ascott Group sent Ascott’s shares surging yesterday, as CapitaLand’s stock price dropped.

CapitaLand shares shed 33 cents or 5.3 per cent to close at $5.92 on news that the property giant could pay up to $989.5 million to acquire all remaining shares in Ascott. CapitaLand now owns 66.5 per cent of the company.

By contrast, Ascott’s shares gained 50 cents or 41.3 per cent to close at $1.71 yesterday. CapitaLand is offering $1.73 for each Ascott share.

Ascott’s shares rose because the offer is attractive to the company’s minority shareholders, analysts said. But CapitaLand’s shares took a beating because there is uncertainty over whether the deal is equally positive for CapitaLand.

‘We believe the deal looks very positive for Ascott shareholders,’ said Credit Suisse analysts Tricia Song and Teo Leng Chye. ‘For CapitaLand, it is slightly dilutive for pro forma earnings.’

Analysts were also split on whether the CapitaLand’s offer is on the pricey side. At least some think that the offer does not look cheap.

CapitaLand’s offer of $1.73 per share is 43 per cent higher than the last-traded price of Ascott’s stock before the offer was made and represents a premium of about 145 per cent to Ascott’s unaudited net asset value per share at Sept 30, 2007.

Other analysts, however, reckoned that CapitaLand’s offer is ‘fair’.

‘We believe the offer price of $1.73 share is reasonable and falls within the lower band of the fair value range for Ascott Group of $1.72-$2.29 a share,’ UBS Investment Research said in a note.

The deal is likely to be positive for CapitaLand in the longer term, some analysts said.

‘We view the move positively from a strategic standpoint,’ said Deutsche Bank analysts Gregory Lui and Elaine Khoo.

The privatisation of Ascott will allow CapitaLand to expand its service residence business more aggressively and is in line with its long-term plan to grow its fund management business in the long run, some analysts said.

Source : Business Times - 9 Jan 2008

CapitaLand makes $990m offer to take Ascott private

Company sees value in subsidiary that has not been recognised by market, analysts say

Property giant CapitaLand yesterday made a general offer for its listed subsidiary Ascott Group in a deal that values the serviced residence unit at $2.8 billion.

CapitaLand, South-east Asia’s largest property firm by market value, owns 66.5 per cent of Ascott.

Under the unconditional general offer, CapitaLand aims to buy all Ascott shares it does not own at $1.73 a share. CapitaLand said that it could invest up to $989.5 million to acquire the remaining 33.5 per cent of Ascott as well as any outstanding options and awards that could be exercised.

Ascott, which last traded at $1.21 a share on Jan 4, has a market capitalisation of $1.94 billion. CapitaLand’s offer price is 43 per cent higher than the last traded price and represents a premium of 41.8 per cent to the one-month volume-weighted average price of Ascott shares.

The offer price is also a premium of about 145 per cent to Ascott’s unaudited net asset value per share as at Sept 30, 2007.

Analysts said that CapitaLand wants to take Ascott private because the latter’s value has not been fully reflected in its share price performance. The offer is also timely as Ascott’s shares are nowhere close to their peak.

The shares have fallen from their one-year high of $2.06 in May last year. And over the past one year, the company’s stock has fallen 17.7 per cent.

‘CapitaLand sees a lot of value in Ascott, but that has not been recognised by the market,’ said a property analyst.

Interest in the stock has typically been low, the analyst said, as many investors who want a stake in Ascott just buy shares of CapitaLand instead. ‘Ascott has never been that well followed,’ echoed David Lum, an analyst at the Daiwa Institute of Research. ‘It is followed, but not as followed as CapitaLand. It is not a liquid stock.’

Shares of both CapitaLand and Ascott as well as Ascott’s listed trust Ascott Residence Trust (ART) were suspended yesterday pending an announcement.

But in a move that surprised many, CapitaLand first put out a statement saying that it might make a general offer. The actual details of the offer - including the offer price - were released much later last night.

The former announcement led to market speculation that news of the intended offer could have leaked, forcing CapitaLand to first declare that an offer was in the making.

CapitaLand’s Ascott stake is thought to be key as it gives the company a global footprint. Its offer was ‘not unexpected’, analysts said.

Ascott is the biggest operator of serviced apartments in Asia and Europe. The company has close to 14,800 units in the key cities of Asia, Europe and the Gulf region as well as 5,400 units under development - making a total of over 20,200 units.

The company aims to boost revenue by expanding the number of units to 25,000 by 2010. And for its next phase of growth, it will look to emerging markets, its chief executive, Jennie Chua, has said.

If Ascott is delisted, it will be able to move faster on projects together with CapitaLand, the developer said. CapitaLand will also be able to fully integrate Ascott’s business and operations into the whole group, which will allow it to deploy capital and human resources seamlessly within the group.

Analysts compared CapitaLand’s offer for Ascott to OCBC Bank’s bid for its listed unit, Great Eastern Holdings.

OCBC has made offers to buy out Great Eastern in the past and has steadily accumulated shares in its subsidiary over time. However, the bank has not made offers at very high premiums to those shareholders who have yet to sell. CapitaLand is similarly unlikely to offer high premiums to buy out Ascott shareholders who hold out, analysts said.

CapitaLand’s shares closed at $6.25 on Jan 4, the last day of trading before the counter was suspended. The acquisition will be funded by bank borrowings, CapitaLand said. The company, which is one of the biggest listed on the Singapore Exchange, has a market capitalisation of $17.5 billion.

Source : Business Times - 8 Jan 2008

CapitaLand makes $1.73-a-share offer for rest of Ascott

Move to privatise service residence arm a bid to strengthen unit’s market position

PROPERTY giant CapitaLand plans to privatise The Ascott Group, its listed service residence arm, in a bid to strengthen Ascott’s position in the market and streamline the group’s operations.

The move was announced in a statement to the Singapore Exchange late last night. It followed an earlier statement that fore-shadowed the plan.

Trading of both CapitaLand and Ascott shares were halted the whole of yesterday.

Trading in units of the Ascott Residence Trust (ART) was also halted to avoid confusion, although the trust is not involved in the offer.

CapitaLand will offer $1.73 cash for each share, valuing the entire Ascott group at a whopping $2.8 billion.

The offer price gave investors a healthy 43 per cent premium over the $1.21 closing price on Friday, the last trading day before yesterday’s halt.

The property group already owns 67 per cent of Ascott, which was listed on the mainboard in 2001.

Chief executive of CapitaLand Liew Mun Leong said: ‘CapitaLand has created significant value for its shareholders along the entire real estate value chain and by building a capital-efficient business model.’

For Ascott, ‘this approach can be accelerated further if Ascott is privatised’.

In making the offer, CapitaLand cited intensifying competition in the growing global service residence market.

‘As a listed entity, Ascott has to comply with listing and compliance requirements, and this may restrict Ascott from having full flexibility to leverage on the capital base, resources and opportunities of CapitaLand.’

For example, when CapitaLand partners Ascott in a development now, this counts as an ‘interested person transaction’, which lengthens the time to completion.

Secondly, if Ascott is fully owned by CapitaLand, the property giant feels that it will have more flexibility in managing its mix of developments. It will also be better able to respond to demand in different markets.

Cost savings is a third factor.

Yesterday’s preliminary statement that CapitaLand was looking to buy the Ascott shares it does not own caught the market by surprise.

Some baffled analysts were unable to suggest why the offer had been made.

‘It’s not as though Ascott is in trouble,’ said an investment analyst who asked not to be named. ‘Its gearing is not high - in fact, it’s low - and it’s in a sector that’s doing well.’

Ascott is the largest operator of service apartments in Europe and Asia, with a portfolio of more than 20,000 units in 23 countries. It has a market capitalisation of $1.94 billion.

In 2006, the group spun off some assets into ART, a real estate investment trust that now owns 18 properties .

CapitaLand’s move to take Ascott private ‘goes against the grain of an asset-light balance sheet’, a strategy it has stressed repeatedly, said the investment analyst.

But Kim Eng Research analyst Wilson Liew said CapitaLand might ‘think it’s a good time to buy back some Ascott Group shares’.

‘The consensus seems that it is rather undervalued,’ he said.

Since June, at least five research houses have put out an ‘overweight’ or ‘buy’ call on Ascott, with target prices ranging from $2.17 to $2.46.

It has traded mostly between $1.40 and $1.90 over the last year, hitting a high of $2.06 in May and dropping to a low of $1.12 just weeks ago.

The group’s net asset value per share was 70.6 cents as at Sept 30. Revenue for the three months ended Sept 30 rose 17 per cent to $116.5 million, although net profit dipped 41 per cent to $34.1 million.

Source : Straits Times - 8 Jan 2008

CapitaLand to buy rest of Ascott unit

Singapore's CapitaLand, Southeast Asia's largest property firm by market value, said on Monday that one of its wholly-owned subsidiaries may fully take over Ascott Group, its 67-per cent owned service residence unit.

'Details of such offer, if made by the CapitaLand subsidiary, will be set out in an announcement of its firm intention to make the offer,' the property developer said without naming the subsidiary.

The announcement will be made on Jan 8 through the subsidiary's financial adviser, CapitaLand said.

Shares in CapitaLand were halted on Monday pending the announcement. CapitaLand's units Ascott Group and Ascott Residence Trust also halted trading in their shares.

Ascott Group, which has a market value of US$1.35 billion, is the largest serviced residence operator in Europe and Asia, with about 600 units for rent in Singapore.

Ascott Residence Trust, which spun off from Ascott in 2006 and owns 18 properties across Asia and Australia, is 27-per cent owned by CapitaLand and 19-per cent owned by Ascott.

Shares in CapitaLand rose 1 per cent in 2007, underperforming the 17 per cent gain in the benchmark Straits Times Index and the 12 per cent rise in Singapore's property index .

Shares in Ascott slid 24 per cent last year. -- REUTERS

Source : Business Times - 7 Jan 2008

Ruling on rental income cheers serviced apartment operators

But IRAS files appeal with High Court against tax review board’s ruling.

In a landmark decision, the Income Tax Board of Review has ruled that a serviced apartment operator’s rental income should be treated as normal recurrent business income, and not as income from property investments.

This means that serviced apartment operators can claim deductions on expenses and capital allowances beyond the actual income for the year.

The Dec 14 ruling came after the company, believed to be part of the Frasers Centrepoint group, appealed against an earlier ruling of the Inland Revenue Authority of Singapore (IRAS). The latest ruling will have significant implications for not just serviced apartment operators, but also for the operators of the future integrated resorts.

Earlier, IRAS had contended that serviced apartment owners and operators were merely in a business of letting property, and in a ‘business of making investment’ under Section 10E of the Income Tax Act.

Section 10E says that a business which makes investments, including the ‘letting of immovable property’, cannot claim deductions on expenses and capital allowances beyond the actual income for the year.

The tax implication is that any losses sustained for one year will not be allowed to be carried into the following year, as is the case for an ordinary trade or business where losses are generally allowed to be carried forward.

The Board rejected IRAS’ contention that the serviced apartments and the retail mall businesses are businesses of making investments under Section 10E.

Unlike serviced apartment, hotels in Singapore are allowed to carry forward losses.

Industry insiders say the ‘Section 10E’ treatment has troubled the industry for a long time.

As the range and sophistication of services have increased over the years with top-end serviced apartments offering a myriad of products and services, this unequal treatment has become increasingly untenable, they say.

Not surprisingly, many see this as a test case for the industry.

The Board of Review’s decision will also no doubt be welcomed by serviced apartment operators, who argue that it is the correct approach in looking at serviced apartments as a ‘multi-factorial’ one.

The appellants’ counsel, tax lawyer Ong Sim Ho, successfully argued that whether a business was one of making investment had to be determined in the light of all the surrounding facts, including evidence of the intention of the enterprise in embarking on the venture.

He said that where the letting of property was a mere but necessary platform from which business operations are carried out, Section 10E should not be applicable if those business operations constituted the real business of the taxpayer. He urged the Board to consider the wide range of hospitality services provided to the apartment guests.

The Board agreed that the serviced apartment- cum-shopping mall business should be looked at as an integrated whole.

The decision is likely to cause a re-examination of the approach to taxation of serviced apartments generally.

The IRAS has filed an appeal against the decision to the High Court.

Source : Business Times - 2 Jan 2008

Ascott buys another Kuala Lumpur serviced residence

THE Ascott Group is adding another serviced residence in Kuala Lumpur - its sixth property in Malaysia.

The group said yesterday it has signed a conditional agreement to buy a 208-unit serviced residence from HSC Properties (HSCP) for RM112.5 million (S$48.3 million).

The property will be named Somerset Ampang when it opens in the first half of 2010.

Somerset Ampang is in Kuala Lumpur's 'Golden Triangle' - the business, shopping and entertainment district marked by Jalan Ampang, Jalan Sultan Ismail and Jalan Bukit Bintang.

When completed, the serviced residence will be part of an integrated development that will house one of Malaysia's leading medical, heart and diagnostic centres, HSC Medical Centre. The high-end medical centre will be separately owned and managed by HSCP. It will occupy five levels of the 23- storey development, with amenities such as a medical spa, restaurant and cafe.

Ascott's deputy CEO for finance and investment Chong Kee Hiong said: 'Demand for international-class serviced residences, especially in the capital of Kuala Lumpur, is expected to remain strong. Given its excellent location in Kuala Lumpur's business and lifestyle district, Somerset Ampang will enable Ascott to capture a larger share of the serviced residence market.

'Somerset Ampang will cater not only to business travellers but also to visitors to the medical centre who require post-treatment accommodation, as well as their families and friends.'

Somerset Ampang's facilities will include a swimming pool, gymnasium and children's playground, Ascott said.

Its portfolio in Malaysia will increase to more than 760 units when Somerset Ampang opens. Ascott's other properties in the country are Ascott Kuala Lumpur, Somerset Seri Bukit Ceylon in Kuala Lumpur, Somerset Gateway in Kuching and two corporate leasing properties in Kuala Lumpur.

'Somerset Ampang is our second Somerset-branded serviced residence in KL,' said Ascott's deputy CEO for operations Gerald Lee. 'Having more serviced residences in the city enables us to leverage on economy of scale and brand awareness for better operational efficiency and cross-selling. Adding more properties in Malaysia also means that our customers can choose from a wider portfolio.'

The group operates three brands - Ascott, Somerset and Citadines. Its portfolio spans 53 cities in 23 countries, 11 of which are cities where Ascott's serviced residences are being newly developed.

Source : Business Times - 22 Nov 2007

Ascott to buy Wilkie Road serviced apts for $79m

THE Ascott Group has agreed to buy a 99-year leasehold serviced residence in town for $79.3 million, the company announced yesterday.

The property, located at Wilkie Road, is part of lifestyle complex Wilkie Edge, which is under construction. Wilkie Edge is a mixed development consisting of offices, retail, and food and beverage outlets.

The acquisition, to be funded from internal resources and external borrowings, will bring Ascott’s property portfolio in Singapore to 11, with a combined 1,042 units. It will be named Citadines Singapore Mount Sophia and open in the first half of 2009.

‘Citadines Singapore Mount Sophia is strategically located in the heart of Singapore’s upcoming arts, learning and entertainment hub in the Bras Basah-Bugis area,’ said Ascott president and CEO Jennie Chua. ‘It is in the city centre with excellent access to the central business district and the shopping and entertainment attractions of Orchard Road.’

The Ascott Group had earlier inked a memorandum of understanding to manage Wilkie Edge’s serviced residences for an initial 10-year term with an option to extend it for another 10 years.

‘Strong demand for extended-stay accommodation, the vibrant real estate market, and the property’s attractive location are reasons for Ascott to acquire leasehold interests in the serviced residence instead of only managing the property for fee income,’ added Ms Chua. ‘This will enable us to maximise shareholder returns.’

The new property will have 154 units and be Ascott’s first Citadines-branded serviced residence in Singapore. It will cater to the young and trendy, expatriates working in the creative services community as well as foreign students and academics from the nearby Singapore Management University, Nanyang Academy of Fine Arts and LaSalle College of The Arts.

The acquisition agreement is inked between Ascott’s indirect wholly owned subsidiary Ascott Scotts Pte Ltd, CapitaLand Selegie Pte Ltd and HSBC Institutional Trust Services, which is the trustee of CapitaCommercial Trust (CCT).

Just last month, CCT had announced that it is buying Wilkie Edge for $262 million. The pact comes with an option to lease the serviced apartments for a $79.3 million consideration. When this option is exercised, CCT’s purchase price for Wilkie Edge will be reduced to $182.7 million.

Source : Business Times - 30 Aug 2007

Ascott’s new flagship to offer unmatched luxury

THE Ascott Group will lose the management of its flagship Ascott Singapore on Scotts Road at the end of this year, but the listed service residence company is pulling out all the stops to make a recently acquired building its new flagship property.

Last week, Ascott chief executive Cameron Ong announced that his company will spend $50 million to transform the historic Asia Insurance Building (AIB) into the top-of-the-line Ascott Singapore Raffles Place.

When ready in the first half of 2008, the 154-unit Ascott Raffles Place will ‘redefine the concept of luxury living’, said Ascott.

‘Ascott Raffles Place will have a commanding view of the Marina Bay integrated resort,’ says Mr Ong.

‘It has an unbeatable prime address between the old and new business and financial districts, and the facilities and finishing will give travellers to Singapore a new level of luxurious living,’ he added.

AIB is located on Finlayson Green, so once the service apartments are up, travellers who stay there will be close to Raffles Place MRT and the upcoming Business and Financial Centre.

Collyer Quay, which is slated to be developed into a ‘lifestyle hub’ with a mix of restaurants, shops and entertainment outlets, is also just a stone’s throw away.

Perhaps because of this, Ascott is hoping to charge as much as $700 per night for Ascott Raffles Place.

For that amount, visitors will get to stay in one of 154 luxuriously-furnished suites in varying sizes - ranging from about 50 square metres m for a junior suite to 180 sq m for a three-bedroom premier suite.

Each suite will offer up to 50 per cent more space compared to a typical hotel suite, said Ascott.
Facilities include a rooftop pool that will offer an infinity view of the upcoming integrated resort, a bar and lounge, a deli and fine dining restaurant.

Market watchers had been expecting Ascott to unveil plans for a new flagship property ever since the company announced in 2004 that it had sold its Scotts Road building to Wheelock Properties.

The lease for its service apartments there ends at the end of this year.

Earlier this year, Ascott spent $109.5 million to acquire AIB. At 20 storeys, the building was South-east Asia’s tallest when it was built in 1923.

To honour its heritage, Ascott will not tear the place down; rather, it will ‘restore the landmark’s former glory’, and preserve the facade to retain the building’s character.

In line with this, Ascott Raffles Place will showcase Singapore artworks through possible collaboration with the Singapore Art Museum, the company said.

Source : Business Times - 3 Oct 2006

Ascott to open 3 new Singapore properties

SERVICE apartment operator The Ascott Group yesterday said it would open three more properties here by the end of 2008.

This will add about 500 service apartment units to its current portfolio, and is in line with the group’s plan to have 1,600 units in Singapore by 2010.

With the additions, Ascott will have 1,357 units in 13 properties here.

Of the three new properties, two will come under the group’s recently- acquired Citadines label, marking the European value-for-money brand’s first entry into Singapore.

Ascott operates service apartments under three brand names: Ascott, Somerset and Citadines.

The 148-unit Citadines Scotts will take the place of Hotel Asia in Scotts Road, which Ascott bought for $108 million in July, while the 160-unit Citadines Mt Sophia will be located at the Selegie Complex site currently being developed by Ascott’s parent CapitaLand.

The third property will assume the group’s top- tier Ascott label and have 154 units, all suites. Ascott will convert the Asia Insurance Building, which it paid $109.5 million for, into Ascott Raffles Place.

This will replace the group’s flagship property, The Ascott Singapore at Scotts Shopping Centre in Scotts Road, which Ascott sold to Wheelock Properties in June 2004. Ascott’s lease on that property was due to expire at year-end.

Ascott will spend $60 million in all to convert Hotel Asia and Asia Insurance Building into service apartments, the group said at a briefing yesterday.

It decided to refurbish the properties rather than tear down and redevelop them so that they can be opened sooner, said Ascott chief executive Cameron Ong.

Citadines Scotts will be opened by the middle of next year, while the other two will be ready in 2008.

This is to beat the onslaught of new hotel rooms that is expected in a few years’ time, with the Government releasing a slew of hotel sites this year, Mr Ong added.

He also said that Ascott Raffles Place will be injected into the group’s property trust ‘definitely within the next five years’. This fits Ascott’s ‘asset-light’ strategy to free up capital for new acquisitions.

As for Citadines Scotts, Ascott may explore other options, such as selling or developing it.

‘Property prices are still moving up, and Citadines Scotts is such a prime site, so I think Ascott has a lot of options for the property,’ he said.

Source : Straits Times -29 Sep 2006

Ascott buys 2 prime properties for $218m in expansion drive

THE Ascott Group is paying $217.5 million to acquire two prime properties that will be turned into service apartments to meet surging demand from long-stay visitors and expatriates.

Its acquisitions, due to be completed in about three weeks, are part of the group’s strategy to double its local portfolio to 1,600 units by 2010.

The most prominent property is the 20-storey Asia Insurance Building at Finlayson Green - at one time, one of South-east Asia’s tallest buildings.

Ascott will pay the Asia Life Assurance Society $109.5 million for the block, which it aims to turn into a luxury property of about 100 units targeted at corporate travellers. It will be known as Ascott Raffles Place.

‘It will be the flagship property of our Ascott global brand. It will be the best property that we have,’ said managing director and chief executive officer Cameron Ong.

The other property - Hotel Asia on Scotts Road - was believed to have been fought over by about 20 developers, including the giant Lippo Group, before Ascott secured it for $108 million. This figure includes $4.3 million for the hotel management company.

Ascott, the service residence arm of property giant CapitaLand, will retain the staff and run the hotel for a year or so, said Mr Ong. But the property will likely house another Ascott brand project or one under its upper-tier Somerset brand.

The two properties will eventually add about 300 or more units to Ascott’s local portfolio.

Mainboard-listed Ascott is already the world’s largest service residence owner-operator outside the United States. Its acquisitions come at a time when the service apartment sector here is experiencing rising occupancies and rates.

Tourism is also poised for increased growth with a government initiative to double visitor arrivals to 17 million by 2015 and triple tourism receipts to $30 billion by 2015.

Ascott chairman Lim Chin Beng said: ‘In recent years, the supply of high-end, good quality accommodation in Singapore has been reduced as a number of four- and five-star hotels have been converted into condominiums.'’

With the Government’s efforts to attract more visitors, Ascott’s proposed acquisitions will be ‘timely’ to cater to the expected rise in demand for good quality accommodation for extended stay, he said.

Ascott Raffles Place will replace the firm’s only Ascott-branded property here, The Ascott Singapore in Scotts Road, which was sold together with Scotts Shopping Centre to Wheelock Properties in 2004.

Mr Ong described the proposed Ascott Raffles Place as the ‘best place’. It will be near one of the integrated resorts, well-placed for the central business district (CBD) and near Collyer Quay, which will be redeveloped into a lifestyle hub. ‘The whole place will be revitalised and that will give us a very good platform to bring back life to the CBD area,’ said Mr Ong.

The project will see the Asia Insurance Building, erected in the early 1950s and famed across the region for its height, refurbished and brought back to its former glory, added Mr Ong. The 999-year leasehold office building has a gross floor area of about 150,000 sq ft. Ascott’s purchase price works out to $727 per sq ft.

Its price for the freehold Hotel Asia is about $720 psf of potential gross floor area.

Hotel Asia has a potential gross floor area of about 150,700 sq ft and a land area of around 35,900 sq ft. Ascott’s plan, said Mr Ong, is to enhance the two properties and hold them before they are ready to be injected into its pan-Asian real estate investment trust called Ascott Residence Trust.

On another front, Ascott will soon announce plans for a Citadines property here, catering for about 180 units. Citadines is a European value-for-money brand that Ascott acquired in 2004. It is employing it in its expansion plans in Asia.

Ascott, whose global portfolio now totals more than 16,000 units, is targeting to achieve 25,000 units by 2010.

Source : Straits Times - 5 July 2006