CapitaLand’s service apartment arm Ascott Group yesterday launched a China-focused private equity investment fund with a target size of US$300-500 million.
Ascott said it intends to hold at least 30 per cent of the closed-end Ascott Residence (China) Incubator Fund, subject to a maximum of US$200 million.
‘The fund will seek to maximise total returns on capital by acquiring and repositioning suitable properties or developing greenfield sites into properties which are used, or predominantly used, for service residences or rental housing,’ it said.
Completed projects will be managed by the group’s brands until operations stabilise and yields from the properties are ‘attractive for divestment to other entities for profit’.
Ascott plans to inject three residential properties totalling up to US$102.1 million into the fund to seed it. These properties are Citadines Shanghai Biyun, Citadines Xi’an Central and Somerset Youyi in Tianjin.
The fund will be placed out to institutions and rich investors. Fund-raising is expected to close by the second quarter of 2007.
Ascott said yesterday its net profit for the first quarter ended March 31, 2007 was $9.7 million versus $42.32 million a year ago - because earnings in Q1 2006 included a divestment gain of $40.5 million from the injection of 12 properties into Ascott Residence Trust.
Net profit a year ago was also restated to take into account the retrospective adoption of new accounting policy for its service residences this year.
In the latest Q1, revenue fell 11 per cent to $95.08 million from $106.54 million a year ago. Excluding the 2006 divestment, revenue for Q1 2007 would have increased 25 per cent from Q1 2006. Ascott expects to book a net gain of about $22.2 million from the sale of Hotel Asia for $147 million cash in Q3 2007.
It will continue to buy and incubate properties to build a strong pipeline. And it expects higher fee-based income from new service residence management contracts and Reit management fees.
Portfolio gains and operating performance in 2007 are expected ‘to remain strong and profitable’, it says.