CapitaLand’s wholly owned serviced residence business, The Ascott Limited (Ascott), is acquiring an additional 60 percent stake in Quest Apartment Hotels (Quest) for $180 million. This will increase Ascott’s stake in Quest from its current 20 percent to 80 percent, propelling Ascott to become the largest serviced residence provider in Australasia.
With 180 properties located in regional and metropolitan areas across Australia, New Zealand and Fiji, the acquisition will boost Ascott’s portfolio by over 11,000 units to more than 67,000 units across 507 properties and 124 cities globally. At the same time, Ascott has the option to acquire the remaining 20 percent interest in Quest, subject to terms and conditions.
Mr Lee Chee Koon, Ascott’s chief executive officer, said: “Increasing our stake in Quest to become its majority shareholder will leapfrog Ascott to become the leading serviced residence provider in Australasia. This acquisition will give Ascott an instant boost of over 11,000 units. Scale is important for us to offer more options to customers, strengthen our sales and distribution, and help speed up Ascott’s growth. Besides entrenching Ascott’s presence in the developed and stable market of Australia, we will be able to capitalise on the established Quest brand and its highly scalable business format franchise systems and know-how, and further apply the franchise platform as a driver of growth for Ascott.”
“Since Ascott’s acquisition of a 20 percent stake in Quest in 2014, Quest’s network revenue has seen a healthy annual growth of 6 percent, resulting in strong annual profit earnings primarily from Quest’s recurring fee income. Ascott will enjoy the recurring franchise fees that Quest earns from its franchise properties and enhance the stability of our portfolio income as well as return on equity.”
Mr Paul Constantinou, chairman of Quest Apartment Hotels, said the investment sees Quest joining one of the world’s leading serviced residence networks, offering Quest guests the benefit of true global reach across 29 countries in the Americas, Asia Pacific, Europe and the Middle East.
“Quest will now further leverage the strength of Ascott’s globally recognised, award-winning brands and fast track its international expansion, whilst maintaining its successful franchise format business, along with the value and integrity of the Quest brand,” Mr Constantinou said.
“The company now has the capability to offer customers a true global accommodation solution for both transient and extended stay requirements, and will allow Quest to fast track the growth of the brand as a unique franchising platform into global markets.”
In addition, Ascott has acquired its first serviced residence in Brisbane as part of its strategic partnership with Quest. The 100-unit freehold serviced residence to be developed on a turnkey basis is acquired from an unrelated local property developer for $24 million. It will be named Quest Cannon Hill and operated as a Quest franchise when the property opens in 2018.
Quest Cannon Hill is the second acquisition under Ascott’s strategic partnership with Quest. In mid-2016, Ascott acquired the 221-unit Quest NewQuay Docklands in Melbourne for $71 million. Quest NewQuay Docklands will be Quest’s largest property in its network when it opens in 2019.
Mr Lee said: “We first took a 20 percent stake in Quest a few years back; it gave us time to work together and understand each other’s culture and strengths. After due consideration, we decided to take the partnership further with this move. We firmly believe that the synergies of Ascott and Quest will make us more competitive in the serviced residence space. Quest also has a strong talent bench that could contribute to Ascott’s global expansion plan.”
Mr Lee added: “With Ascott’s investment in Quest, we can count on our joint capabilities to tap more pipeline opportunities for turnkey delivery of new-build projects as well as ready operating properties with incumbent leases in Australasia. The synergies to be realised in the global and national cross-selling network will not only widen Ascott’s customer reach in Australasia, Quest’s customers will also have access to Ascott’s properties globally given the complementary geographical presence. Franchise, management contracts, investments, and strategic alliances will continue to be key strategies to solidify Ascott’s lead as we work towards exceeding our target of 80,000 units globally by 2020.”
With the addition of Quest Cannon Hill, Ascott currently owns and manages 10 serviced residences with over 1,300 apartment units in Brisbane, Greater Sydney, Hobart, Melbourne and Perth under the Citadines, Somerset and Quest brands. Quest has 180 properties with over 9,000 existing units in Australia, New Zealand and Fiji, and over 2,000 units under construction.