Adding On To My Investment In CapitaLand Ascott Trust

Do note that this is not a buy or sell recommendation.  This is solely my personal reasons for adding the shares into my portfolio.  Do perform your own due diligence!

Recently, share prices of the Singapore-listed REITs are back to their near term lows, and for many REITs, their prices are actually very close, or at their 52-week lows.  To many die-hard fans of REITs, including myself, we are always happy to dollar cost averaging down on the REITs to capture the high dividend yield of quality REITs at rock bottom prices.  However in the past one to two years, I think REITs-investors like myself had borne the brunt of the "low getting lower" share prices for the REITs, so much so that many of us are actually running out of war chest, or some may decide to pause and take a look to see where the price supports actually lies, before continuing to invest.

Personally, I am not planning to wait as I do not know where the price supports are, or when the share prices of the REITs are going to U-turn.  As such, I decide to add on my investment, and more specifically into CapitaLand Ascott Trust (CLAST).  CLAST is a relatively new REIT that I included in my portfolio (first added in January 2024).  I have written in a previous post the reasons why I bought into this REIT at that time although it has been in my watchlist for a long time, mainly due to the revival of travel post-pandemic and how it benefits hospitality.  However, another little mentioned pull factor for me personally is the student accommodation portfolio within the REIT.  As the global education landscape evolves, the demand for high-quality student accommodation is on the rise.  CLAST, a key player in the real estate investment sector, is well-positioned to capitalize on this burgeoning market.

Several factors are driving the increasing demand for student accommodation:

1)     Globalization of Education: More students are seeking international education opportunities or even participating in overseas exchange programs, leading to a higher demand for reliable and quality student housing in major educational hubs.

2)     Urban University Expansion: Universities in urban areas are expanding, often without sufficient on-campus housing to accommodate the growing student population, pushing the need for private student accommodations.

3)     Preference for Purpose-Built Housing: Students and their families are increasingly prioritizing purpose-built students' accommodation (PBSA) for its amenities, security, and conducive living environments, even at a premium cost.

As a global hospitality REIT, CLAST’s following strategic approach made it a successful REIT to run and manage students' accommodation. 

1)     Leveraging Institutional Expertise: CLAST benefits from its extensive experience in managing serviced residences, providing a solid foundation to venture into student accommodation.  This expertise ensures high standards in property management, tenant satisfaction, and operational efficiency.

2)     Geographic Diversification: CLAST is capitalizing on its global presence to identify and invest in key educational markets.  By diversifying its student accommodation portfolio across different regions, CLAST mitigates risk and taps into varying demand dynamics.  This approach includes both established markets like the UK and Australia and emerging markets with growing international student populations.

3)     Focus on High-Quality Developments: Quality remains a cornerstone of CLAST’s strategy.  By focusing on developing and acquiring high-quality PBSA, CLAST ensures that its properties are competitive and appealing to students.  These accommodations offer modern amenities, enhanced security features, and a conducive environment for academic success.

4)     Sustainability and Innovation: Aligning with global ESG trends, CLAST is integrating sustainability into its student accommodation projects.  This includes green building practices, energy-efficient systems, and wellness amenities that promote healthy living environments.  Additionally, leveraging smart technologies such as high-speed internet, smart locks, and app-based services enhances the student experience and operational efficiency.

CLAST is one of the first REIT to incorporate student accommodation into their portfolio since 2021.  Recently many other REITs are slowly adding student accommodation into their portfolio as well, including Elite Commercial REIT and Mapletree Investments.  However, being a leader in this field, CLAST has its edge over others:

1)     Technological Integration: CLAST is incorporating cutting-edge technology to provide a seamless and connected living experience for students.  This includes smart room controls, high-speed internet, and digital platforms for maintenance and support services.

2)     Sustainability Initiatives: CLAST’s commitment to sustainability is reflected in its eco-friendly building designs and operational practices.  This not only attracts environmentally conscious students but also aligns with broader investment trends focusing on environmental, social and governance (ESG) criteria.

3)     Value-Added Services: Offering additional services such as academic support, career counseling, and social events helps CLAST differentiate its properties and provide a holistic living experience for students.

In conclusion, CLAST is well-positioned to thrive in the growing student accommodation market.  By leveraging its expertise, focusing on quality and sustainability, and strategically diversifying its portfolio, CLAST is poised to deliver long-term value to its investors.  As the demand for high-quality student housing continues to rise, CLAST’s innovative and strategic approach ensures it remains at the forefront of this dynamic sector.  This, to me, is a promising business that will continue to grow and thrive, and that will be a positive to the distributions by the REIT.  Currently, students' accommodation and rental housing properties, which are longer-stay assets, account for approximately 17% of CLAST's total portfolio value.  CLAST's medium term asset allocation target is to have this stable income base with 25-30% of its total portfolio value in these longer-stay assets, and the remaining in hospitality assets such as serviced residence or hotels for growth income.  As such, I believe CLAST will continue to add more PBSA into its portfolio in time to come, and I look forward to more positives from this REIT.  Barista FIRE, here I come...!


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