The Ascott Group Acquires Australian Serviced Residence Chain
The Ascott Group, Asia Pacific’s largest serviced residence company, has acquired a major serviced residence chain in Australia.
It has purchased Oakford (Australia) Pty Ltd from Penlip Pty Ltd for A$7.33 million. The acquisition includes the management contracts and leases of nine operational serviced residences with 466 units.
The properties in the central business districts of Sydney, Melbourne and Hobart have average lease tenures of 18 years, with options to renew.
The purchase translates to a price earnings multiple of about 4.5 times the properties’ projected EBITDA for the financial year ending June 2002.
Under the purchase agreement, the group will additionally pay Penlip a maximum of A$7.5 million when it delivers the leases or management contracts of five more serviced residences with 408 units, with acceptable terms, by June 30 next year.
With Oakford’s existing 466 units, and potential inclusion of another 408 units, The Ascott Group will have 1395 units in Australia and New Zealand, making it the third largest serviced residence chain in Australasia. The group currently has over 6,000 serviced residence units in 16 cities in 10 countries, with 520 of these apartments in Australasia.
The Ascott Group’s chief executive officer, Mr Kee Teck Koon, said: "The acquisition is a rare opportunity to buy into a successful and well known serviced residence chain with critical mass in Australia’s biggest business hubs – Sydney and Melbourne.
"Oakford’s lease-based business model is an ideal strategic fit. It enables us to achieve meaningful presence in Australasia with minimal capital investment. It also expands our collection of leased / managed properties from 25 to 31 per cent of our total portfolio, which is in line with our strategy to become more asset-light, to increase our overall capital productivity.
"The Oakford properties are immediately income generating with GOP margin of 53 to 55 per cent. They enjoy above market occupancy at 75 to 80 per cent, at rental rates of A$130 to A$150. These provide an excellent platform for consolidating our business in Australasia, and a springboard for our further activities there,"said Mr Kee.
He added that Oakford’s founder, Mr Robert Palmer, will remain on the Oakford board as non-executive director and serve, for a period, as consultant for the group’s new project developments and expansion plans in Australasia.
Mr Kee added that although the Australian and New Zealand markets have softened due to recent events in the countries’ airline industry and the US crisis, serviced residences there are established products with stable domestic demand.
"We see good upside potential as we acquired the leases at attractive values in the current downturn. These properties will benefit from being able to immediately plug into our international marketing network and customer base.
"We can also now put in place one of the industry’s most competitive cost structures, as we have the scale to centralise our sales and marketing, procurement, and other support services across Australasia."
Mr Kee said that the group will merge the operations of The Ascott and Oakford in Australia and New Zealand, and draw resources from its extensive Asia Pacific operations, to realise significant synergies and economies of scale.
He added that brand and product rationalisation for the existing Oakford properties will be carried out over time.
The Ascott Group currently operates the 70-unit Somerset Hyde Park serviced residence in Sydney and 315-unit luxury The Ascott Metropolis in Auckland. It will open another 135-unit serviced residence in Melbourne at the end of next year.
Global Industry Leader
Mr Kee said that the Oakford acquisition is in line with the group’s drive to transform from being a leader in the Asia Pacific to a global industry leader. The company targets to expand its portfolio from 6,000 serviced residence units to 15,000 by 2005.
He added that the Oakford acquisition is part of the group’s strategy to increase its investment allocations in developed countries, such as Australia, Europe and the United States.
Mr Kee said that the lower volatility of these mature markets will provide a stable replacement for the group’s retail sector earnings, as it divests its non-core retail properties.
The Oakford purchase is scheduled to complete on November 30. The acquisition has no material effect on the group’s earnings per share or net tangible assets per share for its current financial year ending December this year.
About Oakford's Serviced Residences
Oakford Darling Harbour -- 119 units, Sussex Street, Darling Harbour
Remaining lease - 10 years
Oakford Darling Harbour is close to businesses and shopping centres in Sydney's CBD. It offers from luxurious one-bedroom suites to three-bedroom penthouses, with facilities such as a gym and rooftop swimming pool.
Oakford Potts Point - - 35 units, Wylde Street, Potts Point
Remaining lease - 3 years
Boasting magnificent views of the Sydney Opera House and Sydney Harbour Bridge, Oakford Potts Point is minutes from the CBD. It offers from studio apartments to penthouses, with a swimming pool.
Oakford City West -- 31 units, Missenden Road, Camperdown
Remaining lease - 14 years
Oakford City West is close to the University of Sydney and the Royal Prince Alfred Hospital. It offers spacious one and two-bedroom units, with private balconies, and a swimming pool.
Oakford on Collins -- 54 units, Collins Street, Melbourne CBD
Remaining lease - 23 years
Oakford on Collins is centrally located in Melbourne's CBD, opposite the Regent Theatre. It offers luxurious one and two-bedroom suites, with gym and spa facilities.
Oakford Gordon Towers -- 54 units, Lonsdale Street, Melbourne CBD
Remaining lease - 26 years
Situated in Melbourne's business and government precinct, Oakford Gordon Towers is close to Chinatown, theatres and department stores. It offers one and two-bedroom suites.
Oakford on Lygon -- 53 units, Finlay Place, Carlton
Remaining lease - 25 years
Oakford on Lygon, situated next to the famous Lygon Street entertainment district in Melbourne's CBD, is close to the Royal Exhibition Building, hospitals and universities. Units range from one to three-bedroom suites. Facilities include a business centre and Internet access in every room.
Oakford The Mews -- 40-units, Balmoral Street, South Yarra
Remaining lease - 19 years
Oakford The Mews is surrounded by trendy boutiques and cafes. The residence is a short tram ride away from the St Kilda Road business district and Albert Park.
Oakford Ultimate -- 24 units, Cnr Cromwell Road and Surrey Road North, South Yarra
Remaining lease - 21 years
Oakford Ultimate offers luxury two and three-bedroom townhouses. It is close to shopping and dining facilities at Chapel Street and Toorak Road.
Oakford on Elizabeth Pier -- 56 units, Elizabeth Street Pier, Hobart
Remaining lease - 26 years
Oakford on Elizabeth Pier offers spacious one-bedroom and family studio units with panaromic views of Hobart's picturesque waterfront. Facilities include restaurants, a gym and conference room.
About Oakford Australia
Oakford Australia is one of the largest serviced residence chains in Australia, and one of the first to introduce the concept of serviced residences in the country.
Oakford’s business model is to generate revenue via long-term leases. The majority of the apartments it manages are individually owned strata titles. About 80 per cent of its customers are major corporations.
The 18-year Oakford brand is well established in Australia. It depicts boutique apartment 'hotels' and townhouses that provide better value, space, flexibility and homely ‘ambience’, than conventional hotels.
Its Oakford on Elizabeth Pier in Hobart clinched the top award in the 3.5 to 4.5 star accommodation category in the Tasmanian Tourism Awards 2001 competition. Last year, the serviced residence bagged the top Unique Accommodations title in the Tasmanian Tourism Awards.
About The Ascott Group
The Ascott Group is the Asia Pacific's largest serviced residence company. Its The Ascott and Somerset serviced residence brands are market leaders in the region.
The luxury The Ascott brand is targeted at top executives, while the stylish Somerset brand is directed at senior to upper management executives.
Created through the merger between The Ascott Limited and Somerset Holdings Limited in November 2000, the group owns and / or manages over 6,000 serviced residence units in 16 cities in 10 countries.
Headquartered in Singapore, The Ascott Group's shares trade as "Ascott" on the Singapore Exchange. The group is the serviced residence arm of CapitaLand Limited, Southeast Asia's largest listed property company.
Ida Lim, Vice President
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