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.
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.
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.
Mr Paul Constantinou, Chairman of Quest Apartment Hotels, said: “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.”
In Australia, Ascott currently manages five serviced residences with more than 670 apartment units in Melbourne, Perth and Hobart under the Citadines and Somerset brands. Quest has more than 150 properties with over 8,000 existing units in Australia, New Zealand and Fiji, and a further 1,500 units under construction.
The serviced residence is located within the business and lifestyle precinct of NewQuay in Docklands, an extension of Melbourne’s Central Business District which is a 10-minute drive away. The ongoing development of Docklands is one of Australia’s largest urban renewal projects and the area has already attracted more than A$10 billion of private investment. Upon completion of the Docklands redevelopment in 2025, the State Government of Victoria expects Docklands would have received A$17.5 billion of private investment and be home to approximately 60,000 office workers, signifying potential demand for Quest NewQuay Docklands.