CapitaLand Ascott Trust, or CLAS, recently announced the issuance of its 5-year senior unsecured bonds with a final price guidance of 4.2%. These bonds carry a tenor of 5 years which will mature on 6th September 2028 with semi-annual coupon payments which are scheduled on 6 March and 6 September each year. The first coupon payment will be paid on 6 March 2024 and these notes have an expected issuance rating of BBB (Fitch).
The notes are being issued under Ascott’s S$2 billion Multicurrency Debt Issuance Programme, and the proceeds arising from this issuance will be used for refinancing the existing borrowings of CapitaLand Ascott REIT and its subsidiaries.
Company Background
CapitaLand Ascott Trust (CLAS), formerly known as Ascott Residence Trust (ART), is the largest lodging trust in Asia-Pacific with an asset value of $8.1 billion as at 30 June 2023. CLAS invests primarily in income-producing real estate and real estate-related assets which are used or predominantly used as serviced residences, rental housing properties, student accommodation and other hospitality assets across 15 countries mainly in Asia Pacific (59%), Europe (20%) and the United States (21%). CLAS has a credit rating of BBB by Fitch (Investment grade), which is an improvement from BBB- previously in May 2023. As of 29th August 2023, CapitaLand Ascott Trust has a market capital of $3.604bn.
CLAS’s 1H FY23
In 1H FY23, CLAS reported its revenue was up 30% YoY from $267.3mil in 1HFY22 to $346.9mil in 1HFY23, while gross profit was up 31% YoY from $118.2mil in 1HFY22 to $154.4mil in 1HFY23, respectively, attributed to the strong operating performance of CLAS’ properties as travel continues to pick up pace. In 2Q23, Portfolio RevPAU grew 20% YoY to $149, and this is at 98% of the pre-Covid 2Q19 pro-forma’s RevPAU. This stronger operating performance was due to average daily rates, or ADR, which have surpassed pre-Covid levels.
CLAS’ longer-stay properties, which include student accommodation and rental housing properties, maintained a strong average occupancy rate of over 95%. CLAS’ student accommodation property in the USA (Standard at Columbia) which obtained its temporary certificate of occupancy on 30 Jun 2023, is ready to receive students for AY 2023-2024 in Aug 2023. Its pre-leased occupancy is at 87% as of June 2023.
Capital Management
Regarding CLAS’s capital management, there was a slight improvement in its gearing ratio on a quarter-on-quarter basis, moving from 38.7% to 38.6%. This adjustment resulted in the company having a debt headroom of approximately $1.8 billion; and 80% of the company’s debt was secured at fixed interest rates as of 30th June 2023. Moreover, the average time until the company’s debts matured was 3.6 years, which helped in reducing the potential impact of increasing interest rates.
CLAS also maintained its effective cost of borrowing at a rate of 2.3%. Its interest coverage ratio stood at 4.3 times, indicating a comfortable ability to cover interest payments. In terms of liquidity, CLAS currently possesses a combined total of about $1.1 billion in both available cash-on-hand ($414 million) and credit facilities ($700 million). This financial position is adequate to fulfill its obligations for the fiscal years 2023 and 2024, as indicated in Figure 1.
Figure 1: Debt Maturity Profile
Overall, the reopening of borders for international travel will benefit CLAS with a boost in its growth segment within its hospitality assets and travel accommodation. However, even with economic uncertainties, CLAS’s careful financial management and two-pronged revenue stream (stable and growth) will provide downside protection and ensure a steady stream of revenue, which should instil more confidence in their noteholders.
Bond Overview
