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How CapitaLand Ascott Trust Is Recalibrating Global Lodging In FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Hello and welcome back to The Deep Dive. We are jumping straight into the thick
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  of earnings season, and today we have a really interesting one on the table.
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  We do. We are looking at the full year 2025 financial results for Capital Land
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  Ascot Trust, or as, well, most people know them, CLAS. That's right.
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  And for anyone who follows real estate in Asia, this is a big one. Oh, absolutely.
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  It is the largest lodging trust in Asia Pacific. So their scorecard really tells
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  us a lot about the state of travel, tourism, and just, you know,
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  the general economy in this part of the world.
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  Right. If they're having a good year, it usually means people are moving around.
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  Exactly. And the documents we have in front of us today, the news release,
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  the financial statements, the presentation slides, they paint a pretty detailed picture.
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  They do. Our mission today is to look at this not just as news,
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  but from a hardcore investor's perspective.
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  You know, beyond the glossy headlines, we want to know, is the company growing?
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  Are they treading water? And if I'm holding the staple securities,
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  what does this mean for me?
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  It's a great set of questions. If I had to give you an elevator pitch for this
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  deep drive, it's really about answering two things.
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  Is travel fully back to normal? Okay. And more importantly for your wallet. Okay.
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  Is the rent check in the mail. I love that framing. So let's get right to it.
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  Give us the initial snapshot. We've got the FY 2025 numbers hot off the press.
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  What is the headline theme here? I call it stability amidst activity.
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  There are a lot of moving parts under the hood, which we'll get into,
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  but the top line number for investors, the one everyone looks for first,
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  is the distribution for stapled security or DPS.
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  DPS, right. It came in at 6.10 cents.
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  6.10 cents. Okay, let me check my historical notes here. That is exactly the
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  same as last year, FY 2024.
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  Precisely. It hasn't moved a muscle. So it's flat. Now, play devil's advocate for me here.
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  As an investor, I feel like I usually want to see that number go up and to the right.
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  Is flat a disappointment here, or is there more to the story?
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  Well, in a normal, easy breezy year, sure, you want growth. But you have to
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  think about the context of 2025.
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  We've had fluctuating interest rates, currency swings that have been pretty
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  wild, and plenty of geopolitical tensions.
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  In a volatile world, flat often means resilient. Oh.
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  It means they manage to defend the dividend and keep the payout steady despite
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  some stiff headwinds. So it's less about stagnation and more about defense.
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  Exactly. But the really interesting part isn't just that the number is flat.
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  It is how they kept it flat. It wasn't by doing nothing. They had to pull some very specific levers.
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  Okay, let's unpack that how. Let's look at the financial core.
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  What are the big numbers telling us about the business itself?
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  So looking at the top line, revenue is up 3% year-on-year to S$837.6 million.
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  Okay. Gross profit followed suit, up 4% to S$385.3 million.
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  Okay, so modest, nothing explosive, just steady incremental growth.
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  Right. But then look a few lines down in the financial statement.
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  Look, the total return after tax.
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  Whoa, okay, I see it. It jumped 36% to over S$332 million. That is a massive disconnect.
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  How do you get a 36% jump in total return when your revenue only crawled up 3%?
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  This is where it gets really interesting, and it's the key to understanding
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  CLA's strategy right now.
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  That jump didn't come from renting out more hotel rooms or, you know,
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  charging guests more for breakfast.
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  It came from divestments. Selling properties.
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  Exactly. They recorded significant gains.
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  We're talking about $999 million in profit, specifically from selling properties.
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  They sold assets like InfiniGarden in Japan and Citadines Mount Sophia in Singapore.
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  And the crucial detail is that they sold them at a premium to their book value.
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  So they are cashing out on properties that have appreciated in value.
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  It's a bit like selling your used car while the market price is surprisingly
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  high. That is a great analogy. Right.
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  But to extend it, they aren't just selling the car and putting the cash under
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  the mattress or going on a holiday. Right.
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  They are selling the older car to buy a newer, more fuel-efficient one.
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  This is their recycling capital strategy. So trading up. Precisely.
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  They divested about $300 million in assets, but they reinvested,
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  acquired about $210 million into higher-yielding assets.
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  Like, what does the new car look like? Well, a prime example is Leifunan, Singapore.
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  They acquired that on December 31st, 2024, so it contributed to the full year 2025.
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  They also bought rental housing properties in Japan.
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  I see. The idea is to swap out lower-yielding assets buildings that have maybe
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  peaked for ones that make more money or are in better locations.
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  So this is active portfolio management. They aren't just landlords sitting on
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  a ring of keys waiting for the rent to come in.
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  They are trading the buildings to improve the quality of the portfolio. Exactly.
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  And that's $99 million gained from divestments. That gives them a war chest. Right.
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  They can use that cash to smooth out distributions or fund renovations,
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  which we'll talk about later.
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  That's why the total return looks so good. They realize the value of the real
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  estate itself, not just the rent.
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  Okay, that explains the financial anomaly. It's a capital gain story as much as an income story.
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  Now let's get into the operations. I want to know about the actual business
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  of heads in beds. I see this acronym all over the documents, REV-P-A-U.
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  Can we do a quick jargon buster for everyone listening? Sure.
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  REV-P-A-U stands for Revenue Per Available Unit, the gold standard metric in
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  the hospitality industry.
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  Okay. It essentially combines occupancy, how full your hotel is,
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  with the room rate, how much you charge.
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  Why do we need a combined metric? Why not just look at occupancy?
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  Because occupancy can be misleading. If you slash your room rates to $1 a night,
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  you'll have 100% occupancy, but you'll go bankrupt very quickly.
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  Conversely, if you charge $10,000 a night, you might only have one guest and your lobby is empty.
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  Rev PAU tells you how well you're balancing those two levers to maximize the
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  total cash coming in from every room you own.
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  Got it. It's the efficiency score. So what is the score for 2025?
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  Portfolio Rev PAU is $161. That is up 3% from last year.
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  And occupancy rose to 80%, up from 77% in 2024.
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  80% occupancy feels pretty healthy. That suggests people are definitely traveling
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  and staying in these places. They certainly are.
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  But it's not the same everywhere. The recovery is a bit lumpy.
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  Let's do a bit of an around-the-world tour then. Where are the hotspots in the portfolio?
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  The star performer, without a doubt, is Japan.
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  Japan again? It feels like Japan has been the travel darling for a while now.
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  It has, and the numbers back it up.
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  Revenue in Japan was up 16% year-on-year. Wow, 16 percent. And what's fascinating here is the context.
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  Do you remember late 2025?
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  China issued that advisory discouraging outbound travel to Japan.
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  Right. I do remember that. There was a lot of worry in the market.
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  People thought the tourist tap from China would get turned off and the Japanese
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  tourism sector would crash. Exactly.
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  Investors were very nervous. But look at CLA's results.
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  They didn't suffer. So why not? And the reason is diversification.
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  The documents highlight that less than 10% of their guests in Japan are Chinese tourists now.
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  Only 10%. They have pivoted to other markets, Europeans, Americans, domestic travelers.
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  So when that geopolitical hiccup happened.
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  They just kept rolling. That is resilience in action. It's like having a diversified
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  stock portfolio, but for your guest list.
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  OK, let's bring it closer to home. How is Singapore doing? Singapore is the
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  home base, and it performed well.
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  Performance was lifted by the Robertson House, which finished its renovation
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  and is now fully operational. OK.
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  And of course, the acquisition of Leifunan, which we mentioned.
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  I noticed a fun detail in the presentation slides regarding Singapore.
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  They talk about demand drivers. In 2024, they specifically mentioned the Taylor Swift effect.
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  The Ares tour moved economies. It was a genuine phenomenon. It did.
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  But looking ahead to December 2026, the slides are explicitly banking on the
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  BTS concert and the Singapore Air Show in February 2026.
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  It's a fascinating insight into the experience economy.
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  A few years ago, real estate trusts would talk about GDP growth or corporate spending.
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  Now they're literally putting pop star tour dates on their investor slides as
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  fundamental demand drivers.
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  It makes you wonder if the tour manager for BTS is now a macroeconomic indicator.
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  In the lodging sector, absolutely.
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  If BTS books a city, you can raise your room rates for that weekend. It's that simple.
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  Event tourism is becoming the new anchor tenant. Okay, moving west.
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  How about the UK and the US? The UK was a little softer.
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  RIVPAU was down about 2% in pound sterling terms.
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  But that's partly because they're starting renovations. Right.
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  Asset enhancement initiatives or AEI at the Cavendish London.
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  Right. So that's basically taking inventory offline. You can't sell a room that has painters in it.
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  Exactly. So that disrupts revenue temporarily. And the USA. A mixed bag.
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  The hotels actually did quite well. Ref PAU up 9% thanks to strong seasonal events.
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  Oh, that's pretty good. But the student housing sector, which is a big part
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  of their U.S. portfolio, was a bit tougher.
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  Rents dipped slightly, about 0.9%. because there was increased supply in the
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  market. Meaning too many new dorms being built? Exactly.
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  Competitors built new properties, so there were more options for students.
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  That means CLAS had less pricing power, supply and demand at work.
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  That brings us perfectly to the next section.
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  Strategy. You mentioned student housing. I see in the slides that CLAS has a
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  specific target to pivot towards the living sector.
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  Yes, this is a major strategic shift. they want 25% to 30% of their entire portfolio
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  to be in the living sector.
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  That means rental housing and student accommodation. Yeah.
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  They want to keep the remaining 70% to 75% in hospitality, which is your hotels
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  and service residences.
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  Right now, they are sitting at about 17% in the living sector,
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  so they need to buy more. They do. But play the skeptic with me here.
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  You just said U.S. student housing rents dipped.
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  Why pivot into a sector that is showing softness? It's about the risk profile. Think about a hotel.
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  You rent the room by the night. If there is a pandemic or a recession or a bad
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  storm, your revenue can drop to zero overnight. Right.
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  It's high growth, but high volatility. Feast or famine. Exactly.
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  Student housing and rental housing are a long stay. You sign a lease for a year.
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  Even if the economy gets a little shaky, students still go to university.
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  People still need a place to live.
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  It acts as a safety net. By increasing that slice of the pie to 30%,
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  they're trying to build a floor under their dividend. Ah.
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  So even if tourism crashes, the rent checks from the students keep coming.
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  So hospitality is for the growth, the BTS concerts and the air shows,
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  and the living sector is for the safety, the steady monthly rent.
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  Precisely. It's a barbell strategy, balancing growth with stability.
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  They don't want to be entirely dependent on tourists showing up.
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  The other big strategic pillar I'm seeing is this AEI Asset Enhancement Initiatives.
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  We touched on it with the Cavendish in London, basically shutting down a hotel to fix it up.
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  Correct. And they have a few big ones in the pipeline.
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  Somerset Liang Court in Singapore is being redeveloped and is expected to open in 2027. Right.
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  Citadines Place d'Italie in Paris is going under renovation from early 2026 to early 2027.
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  But that sounds painful for an investor. If the hotel's closed for a year, it makes zero money.
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  Doesn't that hurt the dividend? If I own the stock, I don't want a year of lower
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  payments because you're painting the walls. It would if they didn't plan for it.
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  This brings us back to those divestment gains we talked about at the start. The $99 million.
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  Right. The expert insight here is that CLAS plans to use those profits from
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  selling old buildings to top up the distribution while these hotels are closed.
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  Ah, so they are using the savings account to pay the bills while the house is being renovated.
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  Precisely. So you, as the investor, don't feel the pinch of the renovation? Thank you.
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  But you get to own a more valuable higher-rent hotel when it reopens in 2027.
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  That's smart. It's short-term pain mitigation for long-term gain.
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  That is a pretty sophisticated way to manage cash flow.
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  It keeps the investors happy while doing the necessary work.
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  Now we have to talk about the other side of the coin, risks.
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  What should we be worried about? Well, financial health is always the first
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  place to look. Their balance sheet looks decent.
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  They describe their gearing as having a well-staggered debt maturity profile.
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  Which is corporate speak for we don't have to pay back all our loans at the same time. Exactly.
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  They've spread out the repayment date so there's no massive cliff.
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  Finance costs were higher in the second half of 2025. They borrowed money to
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  buy those new properties, and interest rates, while stabilizing, aren't zero anymore.
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  That interest expense eats directly into the profit available for distribution.
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  And what about currency?
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  Being a global trust, they earn money in yen, euros, pounds,
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  and U.S. dollars. That is a major headwind.
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  The Singapore dollar has been very strong. When they earn a million yen in Japan
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  and bring it back to Singapore to pay dividends, it buys fewer Singapore dollars than it used to.
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  Forex is a constant drag on their top line when reported in SGD.
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  So it's just the price you pay for being diversified. It is, yeah. And valuations.
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  With commercial real estate wobbling in some parts of the world,
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  is the portfolio actually worth what they say it is?
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  Surprisingly, yes. The portfolio value actually increased.
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  Gains in Japan, France, and Australia offset some softness elsewhere.
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  Really? In fact, properties in key markets like Indonesia, Japan, Singapore, and the U.K.
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  Are valued higher now than they were pre-COVID. That is reassuring.
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  So despite the soft U.S. student housing and the forex drag,
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  the buildings are worth more? Correct.
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  And structurally, they're shifting towards that longer-stay model we discussed,
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  which theoretically makes those valuations stickier.
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  So let's look at the bottom line. The million-dollar question,
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  or I guess the 6.10 cent question, is that dividend safe?
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  Based on these documents, the
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  management seems very committed to what they call stable distributions.
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  They have the tools, specifically those divestment gains, to smooth out the bumps.
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  It's a managed stability. They aren't promising the moon.
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  They aren't promising double-digit growth right now, but they are working very
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  hard to make sure the floor doesn't fall out.
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  So wrapping this up, C-L-E-S-F-Y 2025.
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  It feels like a story of resilience. Absolutely. They navigated high costs,
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  a strong Singapore dollar, and geopolitical shifts to deliver a stable 6.10 cents.
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  There's actively swapping old assets for new ones, selling the used car for the hybrid.
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  And they're bidding big on the living sector for safety while keeping their
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  hotels ready for the next Taylor Swift or BTS tour.
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  It's a fascinating look at how a massive landlord maneuvers in a changing world.
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  It's not just about collecting rent. It's about curating the portfolio.
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  And being agile. If the Chinese tourists aren't coming to Japan, find other guests.
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  If the hotel's getting old, sell it or fix it. It's active management.
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  You know, before we sign off, I keep thinking about that BTS point. The Popstar Index.
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  Yeah. We talked about BTS and Taylor Swift moving markets. It really makes you
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  wonder, in the experience economy, is a Popstar tour schedule now a fundamental
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  indicator for a real estate trust.
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  I mean. Like, should analysts be tracking Ticketmaster as closely as they track interest rates?
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  It certainly seems like event tourism is the new anchor tenant.
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  In a world where people value experiences over things, the person providing
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  the experience dictates where the money flows.
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  It's a good point. If I were an analyst, I'd probably keep an eye on stadium
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  bookings alongside GDP charts.
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  Something to mull over for sure. Thank you so much for walking us through these numbers.
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  It's always a pleasure to dig past the headlines. My pleasure.
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  Always more to find in the footnotes.
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  And thank you to everyone listening. We hope this gave you a clearer picture
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  of what is happening with Capital and Ascot Trust. We will catch you on the next Deep Dive.
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  This content is intended to serve strictly and only as an informational,
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  independent, objective summary of recent events and should in no way be interpreted,
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  construed, or relied upon by any party as inside information or financial advice.