(Reuters) — Private equity investors Blackstone Group LP (BX.N) and Gaw Capital Partners are weighing separate bids for Singapore’s Ascendas Hospitality Trust (ASHP.SI), people familiar with the matter said, eyeing a target with a market value $600 million.
The potential offers are being considered as bankers say falling market valuations and higher interest rate expectations are set to stoke prospects for mergers and acquisitions of assets owned by the city state’s property trust sector.
Late last year, Saizen Real Estate Investment Trust (SZNR.SI) agreed to sell its Japan portfolio to an affiliate of U.S. private equity firm Lone Star Funds for $370 million.
“Conditions, such as lower valuations and weak DPU (distribution per unit) growth outlook, are conducive for sector consolidation,” said Krishna Guha, an analyst with Jefferies.
Ascendas Hospitality Trust is a ‘stapled’ asset comprising Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust. Stapled assets are created when two or more securities are contractually bound together so they cannot be bought or sold separately.
The trust’s managers said last month they were reviewing options after receiving an unsolicited expression of interest to buy out all its stapled securities.
The people familiar with the prospective Blackstone and Gaw Capital bid interest declined to be identified because the information was not public.
Ascendas Hospitality and Hong Kong-based Gaw Capital declined to comment. An external spokeswoman for Blackstone also declined to comment.
Ascendas Hospitality Trust has a portfolio of 11 hotels with more than 4,100 rooms in Australia, China, Japan and Singapore, its website says. The majority of its properties are in Australia.
It is the only one of six listed hospitality trusts in Singapore that is trading above its book value, Thomson Reuters data shows. The trust is currently trading at 1.1 times its book value, compared with an average of 0.83 for all Singapore’s hospitality trusts.
Ascendas Hospitality’s total returns in 2015 were 17.5 percent, compared with an average negative total return of 1.9 percent for the 35 trusts in the city-state’s REIT sector, data from the Singapore Exchange shows.
While listed companies are attracting buyer interest, Singapore’s hospitality sector is currently facing multiple challenges, including weak visitor numbers amid rising room supply.
Ascendas Hospitality Trust securities, which turned positive briefly after the news, were 0.65 percent lower in afternoon trade, while the overall market .STI was down 2.5 percent.