The manager of Far East Hospitality Trust Q5T has reported a distribution per stapled security (DPS) of 1.92 cents for the 1HFY2023 ended June, 24.7% higher than the DPS of 1.54 cents in the same period the year before.
The higher y-o-y DPS was attributed to the trust’s higher net property income (NPI) and distribution of other gains from the divestment of Central Square. During the period, the trust received an additional payment of $18.0 million, which is the maximum amount payable by the acquirer of Central Square after obtaining provisional permission from the Urban Redevelopment Authority (URA).
Distributable income grew by 25.6% y-o-y to $38.4 million due to the same reasons.
Gross revenue grew by 26.9% y-o-y to $52.0 million as the trust saw strong performances across all its segments and despite the divestment of VRCQ on March 24, 2022. The trust’s master lease rental for the 1HFY2023 improved with more hotels performing above fixed rent. Serviced residences also achieved higher variable rents for the period.
NPI rose by 30.7% y-o-y to $49.0 million while NPI margin improved by 2.7 percentage points y-o-y to 94.1%.
For the six-month period, FEHT’s average daily rate (ADR) of hotels grew by 71.4% y-o-y to $169 with good demand from corporate groups and a further recovery in leisure bookings. The hotels on government contracts were also contracted at higher rates compared to the 1HFY2022.
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Average occupancy increased by 10.1 percentage points to 78.3% as some hotels within FEHT were “ramping up” in the 1HFY2022 after exiting the government contacts. Elizabeth Hotel was also closed for renovations and rebranded as Vibe Hotel Singapore Orchard after it reopened in November 2022.
Revenue per available room (RevPAR) for the trust’s hotels grew by 96.9% y-o-y to $133.
Serviced residences saw average occupancy dip by 0.2 percentage points y-o-y to 88.3%.
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Its ADR, however, rose by 23.0% y-o-y to $253 thanks to new long-stay bookings secured at higher rates. Revenue per available unit (RevPAU) grew by 22.8% y-o-y to $224, close to its all-time high of $230 since FEHT’s initial public offering (IPO).
Despite the disposal of Central Square, revenue from the retail and office spaces grew 11.0% y-o-y to $8.0 million due to higher occupancies and higher rent secured on the back of improving market conditions. Revenue from FEHT’s existing commercial spaces grew by 20.4% y-o-y.
“We are heartened to see our various efforts resulting in progressive improvement in operational performance across all segments of the portfolio. This has enabled gross revenue from our existing hotels and serviced residences to recover above the pre-Covid levels in 1HFY2019,” says Gerald Lee, CEO of the manager.
“With further restoration in flight capacity of major carriers in Asia Pacific and recovery of visitor arrivals into Singapore, supported by a healthy pipeline of events and activities, the portfolio can be expected to benefit from the rebound in the local hospitality sector,” he adds.
As at June 30, FEHT’s aggregate leverage stood at 32.0%, one of the lowest among the Singapore-REITs (S-REITs). Its interest coverage ratio (ICR) stood at 3.6x for the same period.
Cash and cash equivalents as at June 30 stood at $64.3 million.
In its outlook statement, the trust is positive on the return of Chinese tourists to Singapore, believing that it will “form the next phase of recovery”. In June, visitor arrivals from China grew by 18% m-o-m to 113,300 arrivals, forming about 37% of 2019’s average.
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“Despite macroeconomic headwinds arising from an elevated inflationary and interest rate environment, the REIT manager remains positive over the longer-term prospects of the hospitality industry. Continued efforts by the government and the industry to uphold Singapore’s attractiveness as a destination for investments, MICE (meetings, incentives, conferences and exhibitions), and leisure activities will drive demand for the years ahead,” says FEHT.
Stapled security holders will receive their distributions on Sept 5.
Units in FEHT closed 0.5 cents higher or 0.78% up at 64.5 cents on July 27.
