OUE Hospitality Trust 2Q18 net property income slips on lower hospitality revenue

OUE Commercial Trust's Mandarin Orchard on Orchard RoadOUE Commercial Trust's Mandarin Orchard on Orchard Road. Image taken pre-Covid

OUE Hospitality Trust reported on Friday that net property income for the second quarter fell 0.5 percent on-year to S$26.49 million amid the absence of income support for the Crowne Plaza Changi Airport (CPCA) and as hospitality segment revenue slipped.

The trust had fully drawn down the entire income support of S$7.5 million from OUE Airport Hotel as of the third quarter of 2017, the trust manager said in an SGX filing after the market close on Friday. In addition, the trust received minimum rent from CPCA as it worked to ramp up operations, the filing said.

Mandarin Orchard Singapore (MOS) posted slightly lower revenue per available room (RevPAR) on-year amid weaker wholesale segment demand, partially offset by higher transient segment demand, it said. MOS also saw a decline in banquet sales, partly offset by higher revenue from MOS’ food and beverage outlets, it said. The total revenue and net property income from hospitality segment were 1.4 percent and 0.5 percent lower on-year, respectively, it said.

The retail segment also posted lower revenue on lower effective rent per square foot per month of S$22.30, down from S$23.80 in the year-ago quarter due to negative rental reversion for the past two financial years, it said.

Gross revenue for the second quarter fell 1.4 percent on-year to S$30.73 million, it said.

The distribution per stapled security (DPS) for the quarter fell 3.3 percent on-year to 1.17 Singapore cents, it said.

OUE Hospitality Trust (OUE H-Trust) is a stapled group comprising OUE Hospitality Real Estate Investment Trust (OUE H-REIT) and OUE
Hospitality Business Trust (OUE H-BT), it said. OUE H-REIT’s portfolio has two hotels, the 1,077-room Mandarin Orchard Singapore and the 563-room CPCA, and a high-end retail mall, Mandarin Gallery. Its portfolio value was around S$2.2 billion as of the end of 2017, it said. OUE H-BT is dormant.

For the first half, net property income rose 1.3 percent on-year to S$54.78 million, while gross revenue rose 0.3 percent on-year to S$63.42 million, it said. The DPS for the first half was 2.43 Singapore cents, down from 2.51 Singapore cents in the year-ago period, it said.

In it outlook statement, the trust manager pointed to solid growth in Singapore’s international visitor arrivals in the first five months of this year.

“A strong pipeline of meetings and large biennial events in the second half of 2018 is anticipated to raise demand for hotel accommodation. Singapore is also hosting the 33rd ASEAN Summit as the ASEAN chairman in 2018, where meetings and events involving foreign delegates will be held throughout the year,” it said.

It also noted the Jewel Changi Airport, which is expected to draw 40 million to 50 million domestic and international visitors a year, will open in the first half of next year, which may spur additional traffic to CPCA.

New hotel room supply is expected to taper off, which should help strengthen occupancy, it said.

However, the trust manager said Singapore’s retail outlook was “challenging.”

“Tenants in general are more cautious and taking a longer time to renew or commit to leases,” it said. “Whilst we continue to explore leasing opportunities to optimise the occupancy of Mandarin Gallery, we remain committed to curating the right tenant mix to retain the mall’s positioning as a destination mall.”


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