Group to expand its portfolio by over 50% in next five yrs
CAPITALAND'S service residence arm, The Ascott Limited, is expanding its portfolio by more than 50 per cent in the next five years.
The division hopes to contribute more significantly to CapitaLand as it grows - perhaps accounting for as much as 20 per cent of group earnings in future.
Ascott chief executive Lim Ming Yan shared these plans for 'transformational change' with the media, in conjunction with the launch of the group's project - Ascott Huai Hai Road Shanghai. The 278-unit property near the Xintiandi entertainment district is owned by Hong Kong-listed real estate group Lai Fung Holdings.
Ascott now has some 26,000 service residence apartments in its portfolio and it aims to raise this number to 40,000 by 2015.
The target is achievable looking at Ascott's rate of growth, Mr Lim said. This year, the firm will be rolling out about 3,100 apartments. Of these, some 1,600 units across seven properties will be ready in the second half, in countries such as China and Indonesia.
Much of the envisioned growth will come from China. Ascott has just won contracts to manage four Ascott-branded properties in Ningbo, Hangzhou, Suzhou and Guangzhou. The biggest among these will be Ascott Guangzhou IFC, with 314 units, due to open next year.
South-east Asia is likely to be the next fastest growing market for Ascott. For instance, Mr Lim is positive about Singapore's service apartment sector as the country develops as a regional business centre.
Occupancy rates for Ascott's properties in Singapore exceed 90 per cent, and 'we are constantly on the lookout for new opportunities', he said.
India and Europe are also on Ascott's radar. It could enter Italy, Switzerland, Turkey and the east European countries.
While merely taking on more management contracts is a fast way to grow, Ascott will continue to focus more on buying and running properties.
It owns and manages about 67 per cent of its portfolio, and is prepared to invest in key gateway cities, Mr Lim said.
Ascott could obtain capital for growth from private equity funds, such as the Ascott China Fund. It could also sell assets to Ascott Residence Trust for funds to re-invest.
Mr Lim did not say how much the entire portfolio expansion would cost.
But he disclosed that Ascott will invest $50 million to refurbish more than 10 of its properties in Asia and Europe over the next 12 months. This is on top of around $20 million it has put in to renovate some properties such as Somerset Liang Court.
As Ascott grows, it 'can and should be a significant part of CapitaLand', Mr Lim said. On average, it has accounted for some 10 per cent of the group's earnings in the last few years, but it would be possible and 'more meaningful' to raise this to up to 20 per cent, he added.
Source: Business Times, 2 Aug 2010