Ascott Residence Trust - DBS Research 2018-09-20: Maiden Greenfield Development


Ascott Residence Trust - Maiden Greenfield Development

  • Wins greenfield site at Singapore’s one-north to be developed into “lyf”, a co-living serviced apartment asset.
  • Total development cost inclusive of land is c.S$117m.
  • Cost per key attractive at c.S$360k; target yield on cost of c.6%.
  • Maintain BUY, Target Price of S$1.25.

What’s New

~ ~ Where SG investors share
  • ~ Where SG investors shareAscott Residence Trust announced that it has been awarded a greenfield site at Singapore’s research and innovation business hub, one-north, for a serviced apartment development. This will be ART’s maiden greenfield development.
  • Located at Nepal Hill, the property will be managed by its Sponsor, Ascott Limited under the co-living brand, lyf. The property is a 30-minute drive from the CBD and is located next to the one-north MRT station.
  • To be named lyf one-north Singapore, the property will have 324 units. ~ Where SG investors share
  • The 60-year leasehold site was put up by the JTC Corporation (JTC) for sale in a two-envelope concept and price tender system.
  • Construction is expected to start in 4Q18 with temporary occupation permit (TOP) slated to be achieved by 2020 and target opening of the property in 2021.
  • Total development cost is projected to be c.S$117m including land costs of S$62.4m, funded 100% by debt. Post-acquisition of the land, ART’s gearing is expected to increase to 37.2% from 35.7% as at 30 June 2018.
  • The development is expected to account for c.3% of ART’s value, below the 10% regulatory limit on property development for REITs.
  • We understand ART is targeting a yield of cost of c.6%. ~ Where SG investors share
  • Average daily room rates (ADR) for serviced apartments nearby is between S$200-250 with Citadines Fusionopolis Singapore consistently having an occupancy rate above 80%.

Our thoughts

  • While a greenfield development naturally has a higher risk profile than buying a stabilised asset, we are positive on this transaction given the attractive cost per key of c.S$360k compared to recent hotel/service apartments transactions in excess of S$650k per key. In addition, development risk is mitigated by ART’s sponsor having scale and brand recognition in Singapore. ~ Where SG investors share
  • For now, we maintain our BUY call and Target Price of S$1.25.

Mervin SONG CFA DBS Group Research | Derek TAN DBS Research | Carmen TAY DBS Research | 2018-09-20
SGX Stock Analyst Report BUY Maintain BUY 1.250 Same 1.250