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Singapore investors make first foray into NYC hotel market with $163M buy

Singapore-based Ascott Residence Trust has made its entry to the US market with the $163.5 million purchase of the Element New York Times Square West hotel.

The move will catapult Ascott Reit into a global hospitality player as part of a strategy to grow its asset size to $6 billion by 2017.

The hotel is part of the Starwood brand.
The hotel is part of the Starwood brand.

Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) chairman, said: “Our first acquisition in the U.S. is a strategic step that will enable us to capitalize on the burgeoning hospitality market.

“The U.S. economy has been growing steadily in the past few years and is forecast to expand by 2.4 percent in 2015 and 2.5 percent  in 2016. Recovery in the U.S. hospitality market has also gained momentum. “

Revenue per available room (RevPAR), particularly in gateway cities like New York where there is high demand for accommodation, has improved significantly. RevPAR in the U.S. is expected to increase by about seven percent in 2015.

“With future demand growth expected to continue to outpace supply, we are confident that this acquisition will further enhance Ascott Reit’s portfolio and Unitholders’ returns.”

Ascott Reit started in the Asia Pacific in 2006 and expanded to Europe in 2010.

“Now we are acquiring a prime asset in the key gateway city of New York that will provide us with a strong foothold to expand our presence in the high demand market of the U.S. “ added Poh.

“Our entry into the U.S. will not only further diversify Ascott Reit’s portfolio across different countries and property cycles but also catapult Ascott Reit into a global hospitality player.

“As we aim to grow Ascott Reit’s asset size to $6.0 billion by 2017, we will continue to actively seek acquisition opportunities from both third parties and our sponsor, The Ascott Limited, in key cities in the Asia Pacific, Europe and the U.S.”

The Element Times Square is a 411-key hotel operated by Starwood Hotels which opened in 2010 and was among the first of the company’s eco-friendly properties.

With 40 million tourists visiting New York City every year, the hotel has achieved 90 percent occupancy in the last three years, according to Ronald Tay, ARTML’s Chief Executive Officer.

After the acquisition, the property will continue to be operated by LG-39 Management LLC and its affiliates under the ‘Element’ brand through a franchise by Starwood Hotels & Resorts Worldwide, Inc.

Tay added, “Ascott Reit’s focus is on properties for extended stay and ‘Element’ is a widely recognized international brand for extended stay with an established sales network. We expect the property to continue to perform well and further boost the performance of Ascott Reit’s portfolio.

“Ascott Reit remains open to acquiring properties that are operated by reputable third parties as long as such acquisitions meet our investment criteria and there is avenue for growth.”

The purchase comes on the heels of Ascott Reit’s purchase of three residences and four rental housing properties in Australia and Japan. The company plans to partly fund the acquisitions with the S$250 million proceeds from its issuance of perpetual securities, a strategy that has been well received by investors.

Ascott Reit’s serviced residences are operated under the Ascott, Citadines and Somerset brands, and are mainly located in key gateway cities such as Barcelona, Berlin, Brussels, Guangzhou, Hanoi, Ho Chi Minh City, Jakarta, Kuala Lumpur, London, Manila, Munich, Paris, Perth, Shanghai, Singapore and Tokyo.

Lexington Realty Trust owns the ground lease for 311 West 39th Street, the site on which the Element sits. It was acquired in 2013 as part of$302 million portfolio of three land parcels that include a Double Tree Hotel at 8 Stone Street and a Sheraton at 370 Canal Street.

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