Ascott Reit to buy Felix Hotel in Australia for $58.8m

The 150-room property will be rebranded as Citadines Connect Sydney Airport.

Ascott Residence Trust (Ascott Reit) is acquiring Australian freehold limited-service business development Felix Hotel for approximately $58.8m (A$60.6m), an announcement revealed.

The 150-room property, which was completed and opened in February 2018, will be rebranded as Citadines Connect Sydney Airport upon the completion of the acquisition in May 2019. First opened in February 2018, it is located within walking distance to the Mascot railway station and Sydney Airport, which is projected to see an increase in passenger numbers from 44.4m in 2018 to 60.7m by 2033.

DBS Equity Research notes that since there is a night curfew at the Sydney airport, the property benefits from travellers staying the night at the property.

This is said to be Ascott Reit’s first business hotel in Australia and its first property to be managed by its sponsor, The Ascott Limited (Ascott) under the new Citadines Connect brand.

“The acquisition will bolster Ascott Reit’s portfolio in Australia to over 900 units across six
properties. Ascott Reit already owns three properties in Sydney – Quest Mascot, Quest
Campbelltown and Quest Sydney Olympic Park, in addition to Citadines St Georges Terrace Perth and Citadines on Bourke Melbourne,” the firm noted.

According to Bob Tan, Ascott Residence Trust Management’s (ARTML) chairman, Australia has consistently ranked as one of Ascott Reit’s top contributing markets in terms of gross
profit.

“This acquisition will further strengthen our investment in developed markets, which collectively account for almost 80% of the asset value for Ascott Reit. Ascott Reit will continue to seek opportunities in key markets with strong corporate demand, such as Australia, Japan, Europe
and US, to deliver strong yield and growth in distribution income for our unitholders,” he added.

Ascott Reit’s proposed acquisition of Felix Hotel could imply an earnings before interest, tax, depreciation and amortisation (EBITDA yield of over 6% and $388,052 (A$404,000) per key, according to DBS.

With an approximate $290m from the sale of Ascott Raffles Place Singapore, which was sold for an estimated $353m, yet to be deployed after the acquisition of Felix Hotel presents further upside, noted DBS.