Quarz Capital Management, Ltd.

Sends Open Letter to the Manager of Ascendas Hospitality Trust to Engage on

the Proposal to Unlock a Total Potential Return of >35% in Ascendas Hospitality Trust’s Unit Price
GEORGE TOWN, Cayman Islands, April 25, 2019 /PRNewswire/ -- Quarz Capital Management, Ltd. (QCM), an
investment manager, today issued a letter urging for the merger of Ascendas Hospitality Trust and Ascott Residence
Trust. QCM proposes that Ascott Trust acquires A-H Trust in a cash and unit transaction where 0.75 units of Ascott
Trust and S$0.18 of cash will be exchanged for 1 unit of A-H Trust (total value of ~S$1.08 per unit, ~8% premium to
book value). The merger will solve the critical issue of overlapping investment mandates between the 2 trusts which
has important corporate governance implications.
For A-H Trust unitholders, this potential offer provides an attractive takeover premium of ~20% and addresses the
persistent discount at which the unit price trades to its Net Asset Value partly due to its sub optimal size and the
concerns about the implications of the merger between CapitaLand and Ascendas.
Ascott Trust unitholders can benefit from a ~6% jump in DPU post-merger. The enlarged Trust with its bigger market
capitalization and float can be included as a component of major REIT indices such as the FTSE EPRA NAREIT
Developed Markets Index which can drive a further rerating of its unit price.
The merged trust has an unconstrained mandate in the global hospitality sector where it can leverage on the
expertise of the integrated manager to make accretive and strategic acquisitions. Increased financial flexibility and
scale can enable the trust to expand and establish itself as market leader in new and lucrative hospitality formats to
the benefit of unitholders.
Due to the current overlapping investment mandate, we urge Ascendas Hospitality Trust to postpone any
acquisitions until full rationalization of the overlap is achieved. This is to prevent any conflict of interest and
corporate governance issues which can damage the reputation of both the Trust and Sponsor which are embarking
on a new phase of transformational changes.
QCM believes that its recommendations will deliver substantial unitholder value and has delivered the following
letter to Ascendas Hospitality Trust’s management team, board of directors and other stakeholders.

QUARZ CAPITAL MANAGEMENT, LTD. ISSUES OPEN LETTER TO

THE MANAGEMENT AND BOARD OF ASCENDAS HOSPITALITY TRUST (SGX: Q1P)
.
ALL RECIPIENTS ARE ADVISED TO READ
“IMPORTANT DISCLOSURE INFORMATION”
AT THE END OF THE ATTACHED LETTER
.
QUARZ CAPITAL MANAGEMENT, LTD.
CLIFTON HOUSE 75 FORT STREET
GEORGE TOWN I KY1-1108 I GRAND CAYMAN
CAYMAN ISLANDS
25 April 2019

TO PROPOSE THE MERGER OF ASCENDAS HOSPITALITY AND ASCOTT RESIDENCE TRUST

- CAPITAL GAINS AND DPU CAN POTENTIALLY GENERATE TOTAL RETURN IN EXCESS OF 35%-

Dear Mr. Tan and Members of the Board,

We thank you for the recent meeting. Quarz Capital has been a long-term shareholder of Ascendas
Hospitality Trust (the “Trust”, “Firm”,” “ASCHT SP”, “Ascendas-H Trust”. “Ascendas Hospitality” or “A-H
Trust”) and we congratulate management and board for their continued first rate execution.
A-H Trust’s dividend per unit (DPU) is projected to grow from S$0.0506 in FY2015 (end March) to S$0.0605
(Dvd Yld of 7%1) in FY2020 including the full year contribution from the new hotel acquisitions in Seoul
and Osaka. Management’s track record of ‘buy low, sell high’ has been demonstrated by the sale of its
China hotels at S$236million, ~100% and ~178% above book value and purchase price. This has

1
Assume unit price of ~S$0.87 post payment of ~S$0.032 DPU in May 2019
contributed to A-H Trust’s NAV per share increasing by more than 35% from S$0.74 to ~S$1.00 during the
same period. More than 80% of A-H Trust’s assets comprise of centrally located freehold hotels in the
CBDs of global gateway cities like Sydney, Melbourne, Tokyo, Osaka and Seoul. The sole leasehold
property is Park Hotel Clarke Quay which still has more than 83 years on its lease left.
Despite its prime asset base, Ascendas Hospitality trades at a ~10% discount to its net asset value, the
2nd highest level of discounts among SGX-listed hospitality trusts. This is despite its low leverage ratio of
only 33.6% and Ascendas’ best in class corporate governance. Adjusting for full payment of distributable
income and management fees in units2, A-H Trust’s DPU is forecasted at S$0.065 (Dvd Yld of ~7.5%1).
The discount to NAV partly results in A-H Trust being one of the highest yielding SGX-listed hospitality
REITs.
We believe that the continued undervaluation of A-H Trust is due to its suboptimal size. The trust is
currently the smallest in the hospitality sector and among the 10 smallest SGX-listed REITs3. Limited float
and trading volume result in insufficient research coverage and investors’ interest which further
decreases investment interest and aggravates the trust’s undervaluation. Due to its size, any significant
acquisition will also result in a substantial capital raising from A-H Trust’s existing investors base. This has
further weighed on investors’ sentiments on the trust.
The merger between CapitaLand and Ascendas will conceivably create additional uncertainty for
unitholders. Capitaland will wholly-own the managers of both A-H Trust and Ascott Residence Trust
(“Ascott Trust” or “ART SP”). However, while Capitaland owns ~45% of Ascott Trust units, it will only own
~28% of A-H Trust. Additionally, Ascott Trust has a significant existing working relationship with
Capitaland as the latter’s wholly owned Ascott Limited is the main hotel operator and tenant of Ascott
Trust’s assets. Ascott Trust also has the right of first refusal for all of Ascott Limited’s properties, which
provides a formidable pipeline of assets to further grow its own asset base.
The overlapping investment mandates of A-H and Ascott Trusts can potentially lead to corporate
governance concerns especially in connection with acquisitions. Similar issues were identified by the
Monetary Authority of Singapore (MAS) when it did not approve the manager of the then Cambridge REIT
(now ESR REIT) to be also manager of the then Macarthur Cook REIT (now AIMS APAC REIT) due to severe
concerns of overlapping investment mandates.
Quarz believes that a preferred Win-Win solution which can be value accretive to all stakeholders
including CapitaLand is the merger by way of a Trust Scheme between Ascott Residence and Ascendas
Hospitality Trust. We propose that Ascott Trust offers Ascendas Hospitality Trust’s unitholders a 5-10%
premium to book value. A tentative deal where 0.75 units of Ascott Trust and ~S$0.18 of cash will be
exchanged for 1 unit of A-H Trust can be structured (Total price of ~S$1.08).
For A-H Trust unitholders, this potential offer provides an attractive takeover premium of ~20%. It also
enables them to continue participating in the future structural growth of the hospitality sector as part of
a larger trust with increased scale and capabilities.
Ascott Trust’s unitholders can benefit from a ~6% jump in DPU from $0.068 to S$0.072 (~6% yield). This
is attributed to the lower leverage level and higher yielding assets of Ascendas Hospitality. While the
potential transaction will increase the leverage ratio of the trust slightly from ~36% to ~39%, this level is
projected to reduce to ~37% post the completion of the sale of Ascott Raffles Place.

2
>70% of S-REITS do not retain distributable income and pay the majority of management fees in units
3
In terms of Market Capitalization
 Potential Gains to Ascendas-H Trust Unitholders Potential DPU to Ascott Trust's Unitholders
(S$) (SG cents)

~20% 0.18
upside

7.17
1 unit of A-H
0.90 Trust for 0.75 0.90
unit of Ascott
Trust 6.79

Current Price Potential Takeover Price Ascott Trust Enlarged Trust

(2018 Adjusted DPU (cents)
Ascott T's Units Cash Premium

The enlarged Ascott-Ascendas Hospitality Trust (“AA-H Trust” or “Enlarged Trust”) is projected to have an
asset base and market cap exceeding S$6.6billion and S$3.6billion respectively, making it the 8th largest
S-REITs by asset under management. It potentially qualifies for inclusion in the FTSE EPRA NAREIT
Developed Markets Index tracked by more than 50% of global REIT focused funds with >S$250billion of
asset under management. Index component trusts often trade at a tighter yield with higher trading
volume due to the increase in global institutional investors tracking and investing in the component trusts.
This can potentially drive yield compression and the appreciation of AA-H Trust’s unit price to the benefit
of unitholders.
Total Assets & Market Capitalisation (S$bn)

14.0
11.5 8th largest REIT (in terms of assets)
11.3
12.0
9.7 9.5
10.0
7.9 7.8 7.4
8.0 7.2 6.8 6.8
5.3
6.0 4.3
3.4 3.2 3.1 3.0 3.0 3.0
4.0 2.8 2.7 2.7 2.5 2.4 2.3
2.2 2.0 1.9 1.9 1.8
1.6 1.5 1.5 1.4 1.4 1.3 1.2
2.0 1.0 0.9 0.8

0.0
EC WORLD
SUN

MCT

FCOT

PREIT

AIM
Cromwell

Sasseur

CACHE
SBREIT

IREIT
CMT

MNACT

SPH REIT

FCT

FHT

LMIRT
Enlarged OUE T

ESR-REIT

ASCHT

Dasin

Sabana REIT
MLT
AREIT
CCT

KREIT

ART
MINT

CRCT

FEHT

KDC

FIRT

BHG
Enlarged Trust

SGREIT

FLT

CDREIT

Manulife

Keppel-KBS

Total Assets Mkt Cap

AA-H Trust will have an unconstrained mandate in the global hospitality sector to leverage on the
expertise of the integrated manager to make accretive and strategic acquisitions. The launch of Ascott’s
Citadines Connect Business Hotels in 2019 and the subsequent purchase of Felix Hotel by Ascott
Residence (to be rebranded as Citadines City Connect) reflects the immense opportunity in business
hotels. A-H Trust owns a number of prime hotels under management contract which can be rebranded as
Citadines Connect to expedite the expansion of the brand. The enlarged AA-H Trust also has increased
financial flexibility to pursue more sizeable acquisitions where there is less competition. Increased scale
can enable the trust to expand and establish itself as market leader in new and lucrative hospitality
formats.
 Potential Increase in Free Float Potential Increase in Income Stability
(S$bn) (S$bn)
Free float: 37%
1.5x

Free float 2.2

increase from 31%
1.4 ~55% to ~60% GROSS
Master Lease PROFIT 56% 54%
and MCMGI
1.5 has higher fixed 13%
1.2 rental component
of income 9%
Ascott Trust Enlarged Trust
Non free float Free Float
Management Contract MCMGI Master Leases

A possible option is to limit both Trusts to invest in certain jurisdictions and asset classes such as service
residences or hotels. We believe this to be a suboptimal and inferior solution as it constraints the growth
potential and benefits to unitholders of both trusts. It is also contradictory to the key objectives of the
transformational merger between CapitaLand and Ascendas which is to enhance the capabilities and scale
of the Group to successfully compete in the fast changing global market place of real estate companies.
Due to the current overlapping investment mandate, we also urge Ascendas Hospitality Trust to
postpone any acquisitions until the rationalization of the overlap is resolved. This is to prevent any
conflict of interest matters which can potentially harm the reputation and trust in both the Trust and
Sponsor which are embarking on a new phase of transformational changes.
Quarz believes that its recommendations can provide a clear pathway for Ascendas Hospitality Trust to
generate a potential attractive total return of more than 35% in capital appreciation and dividends in
the mid to long-term. As long-term shareholders, Quarz look forward to working with Ascendas
Hospitality Trust’s board and management to move forward expeditiously on delivering value to all
unitholders.

Sincerely yours,
Mr. Jan F. Moermann
Chief Investment Officer, Quarz Capital Management, Ltd.

Mr. Havard Chi, CFA

Head of Research, Quarz Capital Asia (Singapore)

For further information, please contact:

operations@quarzcapital.com

About Quarz Capital Management

Quarz Capital Management, Ltd. is a value oriented and research driven investment advisory firm that
seeks to earn above average, long-term returns by identifying value investments across the globe.
www.quarzcapital.com
IMPORTANT DISCLOSURE INFORMATION
SPECIAL NOTE REGARDING THIS LETTER
THIS LETTER CONTAINS OUR CURRENT VIEWS ON THE VALUE OF ASCENDAS HOSPITALITY TRUST’S SECURITIES AND ACTION THAT
ASCENDAS HOSPITALITY TRUST’S BOARD MAY TAKE TO ENHANCE THE VALUE OF ITS SECURITIES. OUR VIEWS ARE BASED ON OUR
ANALYSIS OF PUBLICLY AVAILABLE INFORMATION AND ASSUMPTIONS WE BELIEVE TO BE REASONABLE. THERE CAN BE NO
ASSURANCE THAT THE INFORMATION WE CONSIDERED IS ACCURATE OR COMPLETE, NOR CAN THERE BE ANY ASSURANCE THAT
OUR ASSUMPTIONS ARE CORRECT. ASCENDAS HOSPITALITY TRUST ACTUAL PERFORMANCE AND RESULTS MAY DIFFER
MATERIALLY FROM OUR ASSUMPTIONS AND ANALYSIS. WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY
THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS LETTER. ANY SUCH INFORMATION SHOULD NOT BE VIEWED AS
INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. WE DO NOT RECOMMEND OR ADVISE, NOR
DO WE INTEND TO RECOMMEND OR ADVISE, ANY PERSON TO PURCHASE OR SELL SECURITIES AND NO ONE SHOULD RELY ON THIS
LETTER OR ANY ASPECT OF THIS LETTER TO PURCHASE OR SELL SECURITIES OR CONSIDER PURCHASING OR SELLING SECURITIES.
ALTHOUGH WE STATE IN THIS LETTER WHAT WE BELIEVE SHOULD BE THE VALUE OF ASCENDAS HOSPITALITY TRUST’S SECURITIES,
THIS LETTER DOES NOT PURPORT TO BE, NOR SHOULD IT BE READ, AS AN EXPRESSION OF ANY OPINION OR PREDICTION AS TO THE
PRICE AT WHICH ASCENDAS HOSPITALITY TRUST’S SECURITIES MAY TRADE AT ANY TIME. AS NOTED, THIS LETTER EXPRESSES OUR
CURRENT VIEWS ON ASCENDAS HOSPITALITY TRUST. IT ALSO DISCLOSES OUR CURRENT HOLDINGS OF ASCENDAS HOSPITALITY
TRUST SECURITIES. OUR VIEWS AND OUR HOLDINGS COULD CHANGE AT ANY TIME. WE MAY SELL ANY OR ALL OF OUR HOLDINGS
OR INCREASE OUR HOLDINGS BY PURCHASING ADDITIONAL SECURITIES. WE MAY TAKE ANY OF THESE OR OTHER ACTIONS
REGARDING ASCENDAS HOSPITALITY TRUST WITHOUT UPDATING THIS LETTER OR PROVIDING ANY NOTICE WHATSOEVER OF ANY
SUCH CHANGES. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING ASCENDAS HOSPITALITY TRUST AND ITS
PROSPECTS WITHOUT RELYING ON, OR EVEN CONSIDERING, ANY OF THE INFORMATION CONTAINED IN THIS LETTER.
As of the publication date of this report, Quarz Capital Management Ltd. and its affiliates (collectively "Quarz"), others that
contributed research to this report and others that we have shared our research with (collectively, the “Authors”) have long
positions in and own options on the stock of the company covered herein (ASCENDAS HOSPITALITY TRUST) and stand to realize
gains in the event that the price of the stock increases. Following publication of the report, the Authors may transact in the
securities of the company covered herein. All content in this report represent the opinions of Quarz. The Authors have obtained
all information herein from sources they believe to be accurate and reliable. However, such information is presented “as is”,
without warranty of any kind – whether express or implied. The Authors make no representation, express or implied, as to the
accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. All expressions
of opinion are subject to change without notice, and the Authors do not undertake to update or supplement this report or any
information contained herein.
This document is for informational purposes only and it is not intended as an official confirmation of any transaction. All market
prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice.
The information included in this document is based upon selected public market data and reflects prevailing conditions and the
Authors’ views as of this date, all of which are accordingly subject to change. The Authors’ opinions and estimates constitute a
best efforts judgment and should be regarded as indicative, preliminary and for illustrative purposes only.
Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential
complete loss of principal. This report’s estimated fundamental value only represents a best efforts estimate of the potential
fundamental valuation of a specific security, and is not expressed as, or implied as, assessments of the quality of a security, a
summary of past performance, or an actionable investment strategy for an investor.
This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or
commodity discussed herein or of any of the affiliates of the Authors. Also, this document does not in any way constitute an offer
or solicitation of an offer to buy or sell any security in any jurisdiction in which such an offer would be unlawful under the securities
laws of such jurisdiction. To the best of the Authors’ abilities and beliefs, all information contained herein is accurate and reliable.
The Authors reserve the rights for their affiliates, officers, and employees to hold cash or derivative positions in any company
discussed in this document at any time. As of the original publication date of this document, investors should assume that the
Authors are long shares of ASCENDAS HOSPITALITY TRUST and have positions in financial derivatives that reference this security
and stand to potentially realize gains in the event that the market valuation of the company’s common equity is higher than prior
to the original publication date. These affiliates, officers, and individuals shall have no obligation to inform any investor about
their historical, current, and future trading activities. In addition, the Authors may benefit from any change in the valuation of
any other companies, securities, or commodities discussed in this document. Analysts who prepared this report are compensated
based upon (among other factors) the overall profitability of the Authors’ operations and their affiliates. The compensation
structure for the Authors’ analysts is generally a derivative of their effectiveness in generating and communicating new
investment ideas and the performance of recommended strategies for the Authors. This could represent a potential conflict of
interest in the statements and opinions in the Authors’ documents.
The information contained in this document may include, or incorporate by reference, forward- looking statements, which would
include any statements that are not statements of historical fact. Any or all of the Authors’ forward-looking assumptions,
expectations, projections, intentions or beliefs about future events may turn out to be wrong. These forward-looking statements
can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, most of which are
beyond the Authors’ control. Investors should conduct independent due diligence, with assistance from professional financial,
legal and tax experts, on all securities, companies, and commodities discussed in this document and develop a stand-alone
judgment of the relevant markets prior to making any investment decision.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS LETTER ARE FORWARD-LOOKING STATEMENTS INCLUDING, BUT NOT LIMITED TO,
STATEMENTS THAT ARE PREDICATIONS OF OR INDICATE FUTURE EVENTS, TRENDS, PLANS OR OBJECTIVES. UNDUE RELIANCE
SHOULD NOT BE PLACED ON SUCH STATEMENTS BECAUSE, BY THEIR NATURE, THEY ARE SUBJECT TO KNOWN AND UNKNOWN
RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE OR ACTIVITIES
AND ARE SUBJECT TO MANY RISKS AND UNCERTAINTIES. DUE TO SUCH RISKS AND UNCERTAINTIES, ACTUAL EVENTS OR RESULTS
OR ACTUAL PERFORMANCE MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH FORWARD-
LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF THE FUTURE TENSE OR OTHER
FORWARD-LOOKING WORDS SUCH AS “VIEW,” “BELIEVE,” “CONVINCED,” “EXPECT,” “ANTICIPATE,” “INTEND,” “PLAN,”
“ESTIMATE,” “SHOULD,” “MAY,” “WILL,” “OBJECTIVE,” “PROJECT,” “FORECAST,” “MANAGEMENT BELIEVES,” “CONTINUE,”
“STRATEGY,” “PROMISING,” “POTENTIAL,” “POSITION” OR THE NEGATIVE OF THOSE TERMS OR OTHER VARIATIONS OF THEM OR
BY COMPARABLE TERMINOLOGY.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS SET FORTH IN
THIS LETTER INCLUDE, AMONG OTHER THINGS, THE FACTORS IDENTIFIED IN THE RISK SECTIONS IN ASCENDAS HOSPITALITY
TRUST’S ANNUAL REPORT FOR THE YEAR ENDED MARCH 31ST, 2018 AND PROSPECTUS. SUCH FORWARD-LOOKING STATEMENTS
SHOULD THEREFORE BE CONSTRUCTED IN LIGHT OF SUCH FACTORS, AND QUARZ CAPITAL MANAGEMENT IS UNDER NO
OBLIGATION, AND EXPRESSLY DISCLAIMS ANY INTENTION OR OBLIGATION, TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW.