MANAMA: CapitaLand’s wholly owned serviced residence business unit, The Ascott Limited (Ascott), is acquiring its first serviced residence in Docklands, Melbourne as part of its A$500 million (S$500 million) strategic partnership with Quest Apartment Hotels (Quest), one of the largest serviced apartment operators in Australia. The 221-unit property will be acquired for A$71 million (S$71 million) through a 50:50 joint venture between Ascott and Qatar Investment Authority (QIA). Quest will lease the serviced residence, which will be named Quest NewQuay Docklands, and operate it under Quest’s franchise when the property opens in 2019. Quest NewQuay Docklands will be Quest’s largest property in its network.
“Ascott is a global serviced residence leader that owns and manages over 46,000 units worldwide and we have a strong base of customer accounts that are multinational companies, while Quest is a leading operator in Australia with more than 80% of its customers from Australia’s top companies. Through our strategic partnership with Quest, we can combine our expertise to drive Ascott’s expansion in Australia and enjoy stable income as Quest will provide fixed leases for the properties and operate them under its well-established franchise. By taking a stake in Quest, Ascott also stands to benefit from the growth of the Quest franchise. Ascott focuses on prime city centre locations whereas Quest primarily targets suburban locations with underserved demand. Together, we can lead the expansion of the serviced residence sector which has significant untapped potential,” Mr Lee Chee Koon, Ascott’s Chief Executive Officer, said.
Through the Ascott-Quest alliance formed in late-2014, Ascott will invest up to A$500 million in new properties that Quest will secure for its franchise in Australia until 2019. Ascott has a right of first refusal to acquire the properties sourced by Quest. Quest will provide a lease for the properties, which will be operated under franchises using the Quest brand. In addition, Ascott acquired a 20% stake in Quest, with an option to increase it to 30%. At the same time, Ascott’s real estate investment trust, Ascott Residence Trust, also acquired three operating serviced residences in Greater Sydney from Quest. Quest Sydney Olympic Park, Quest Campbelltown and Quest Mascot are being operated under franchises by Quest.
“Forging strategic alliances globally with partners such as Quest and QIA, as well as industry leaders from land owners to property developers, construction firms, online platforms and tech companies; enables Ascott to deepen our presence and build scale in key cities. Ascott’s US$600 million equity joint venture fund with QIA has boosted our capacity to invest and grow quickly. This property in Melbourne is our first acquisition in Australia in partnership with QIA and our fourth within a span of seven months. The four acquisitions have expanded our portfolio across four gateway cities. Our partners have chosen to collaborate with us due to Ascott’s strong capabilities in managing award-winning serviced residences globally for the past over 30 years. We expect these strong partnerships to gather more momentum as we pursue Ascott’s target of 80,000 apartment units globally by 2020.”
Ascott’s serviced residence global fund was set up through a 50:50 joint venture with QIA in July 2015 with each contributing US$300 million of equity funds to the joint venture. The fund invests in serviced residences and rental housing properties with an initial focus on Asia Pacific and Europe. Ascott’s four acquisitions made in partnership with QIA have a total investment amount of US$270 million and would be funded partly by debt.
“Quest has the largest and fastest growing network of serviced apartments in Australia. Our partnership with Ascott will fast-track our plans to grow the Quest network to about 200 properties in Australia and New Zealand by the end of the decade. We are actively sourcing for opportunities particularly across the Central Business District and suburban areas of Sydney, Brisbane and Melbourne,” Mr Paul Constantinou, Chairman of Quest Apartment Hotels, said.
“Demand for accommodation in Australia from both international and domestic corporate customers remains strong but the supply of new accommodation has been lacking. Melbourne’s accommodation sector has been getting high occupancies of above 80%, driven by its strong events calendar, growing convention market and business activities. Ascott’s investment will not only enable us to accelerate Quest’s growth to cater to the demand in Australia, our tie-up with Ascott also provides a solid platform for us to take the Quest brand overseas.”
