OUE Hospitality Trust reports 3Q18 net property income fell as hotel revenue fell

OUE Hospitality Trust's Mandarin Orchard on Orchard RoadOUE Hospitality Trust's Mandarin Orchard on Orchard Road.

OUE Hospitality Trust reported on Wednesday that its third quarter net property income fell 1.4 percent on-year to S$29.1 million amid lower revenue from both the hospitality and retail segments.

Gross revenue fell 2.2 percent on-year in the quarter ended 30 September to S$33.2 million, it said in a filing to SGX after the market close on Wednesday.

The hospitality segment, which is the master lease income from the Mandarin Orchard Singapore hotel (MOS) and the Crowne Plaza Changi Airport hotel (CPCA), saw a 2.7 percent on-year revenue decline to S$24.74 million in the quarter.

For MOS, revenue per available room (RevPAR) fell to S$233 from S$242 in the year-ago quarter on lower average room rates and lower food and beverage sales, mainly due to lower banquet sales, although that was party offset by higher sales in all food and beverage outlets, the trust’s manager said.

CPCA’s master lease income remained flat on-year in the quarter at minimum rent as despite improved operating performance and RevPAR rising to S$187 in the quarter from S$176 in the year-ago quarter, the master lease income remained before the minimum rent, it said.

“While minimum rent was received as CPCA continued to ramp up its operations, we believe CPCA’s performance will maintain its positive trend,” Chen Yi-Chung Isaac, acting CEO of OUE Hospitality REIT Management, the REIT manager, said in the statement.

Retail revenue falls

Retail revenue, which is rental and other income from the Mandarin Gallery shopping mall, fell 0.9 percent on-year to S$8.51 million on lower effective rent per square foot per month, it said.

Committed occupancy improved to 96.8 percent at end-September from 94.7 percent a year ago, it said. But rental reversions for base rent for leases signed in the third quarter was negative 9.3 percent, it said.

“We continue to work closely with our tenants to curate a differentiated offering at the mall, as we balance between maintaining a high occupancy and driving the performance of the asset,” Chen said.

The distribution per stapled security (DPS) for the quarter was 1.28 Singapore cents, down 5.9 percent on-year from 1.36 Singapore cents in the year-ago quarter, OUE Hospitality Trust’s manager said. The DPS, which will be paid on 6 December, was lower as the trust no longer receives income support for CPCA, it said.

For the nine-month period, net property income was up 0.4 percent on-year at S$83.8 million, while gross revenue fell 0.6 percent on-year to S$96.7 million, it said. The DPS for the nine-month period was 3.71 Singapore cents, down 4.1 percent on-year from 3.87 Singapore cents in the year-ago quarter, it said.

Outlook

In its outlook, the trust pointed to continued growth in international visitor arrivals to Singapore this year as well as the Singapore Tourism Board’s increased marketing efforts and plans to revamp the Orchard Road shopping belt.

“The hospitality outlook remains positive with the continued growth of tourist arrivals and limited supply of new hotel rooms,” it said, noting the Jewel Changi Airport is expected to open by March 2019 and that Changi Airport was undergoing expansion works.

“CPCA shall benefit from the enhancement and expansion works at Changi Airport in the long term, as well as the upcoming opening of Jewel which the hotel will be connected to via a pedestrian bridge at Terminal 3,” it added.