OUE Hospitality Trust 4Q18 net property income fell 1 percent on lower hotel, retail 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 Tuesday its fourth quarter net property income fell 1 percent on-year to S$28.90 million as revenue from both its hospitality and retail properties fell.

The hospitality segment’s net property income fell 3.0 percent on-year in the quarter to S$22.58 million, while retail net property income rose 6.5 percent on-year to S$6.35 million, the trust said.

Gross revenue for the quarter ended 31 December fell 2.2 percent on-year to S$33.1 million, it said in a filing to SGX after the market close on Tuesday.

Revenue from the hospitality segment fell 2.6 percent on-year in the quarter to S$24.56 million, despite Mandarin Orchard Singapore (MOS) posting a higher revenue per available room (RevPAR) of S$229, up from S$225 in the year-earlier quarter, amid higher occupancy and higher demand, as the increase was offset by lower food and beverage sales, mainly on lower banquet sales, it said.

The retail segment revenue declined 0.9 percent on-year to S$8.52 million on lower effective rent per square foot per month of S$22.20, down from S$22.80 in the year-ago quarter, it said.

The distribution per stapled security (DPS) for the quarter was 1.28 Singapore cents, up 0.8 percent from 1.27 Singapore cents in the year-ago quarter, on lower interest expenses and a higher contribution from the retail segment, partially offset by lower income from the hospitality segment, the filing said.

For the fourth quarter, the trust’s net finance expenses fell 54.5 percent on-year to S$6.21 million, it said.

For the full year, OUE Hospitality Trust reported net property income of S$112.8 million, nearly flat on-year, on gross revenue of S$129.7 million, down 1.0 percent on-year.

Full-year DPS was 4.99 Singapore cents, down 2.9 percent from 5.14 Singapore cents in the previous year, mainly on the absence of income support for Crowne Plaza Changi Airport and lower master lease income from the hospitality segment, partially offset by lower interest expenses and higher retail-segment contributions, it said.

The income support was from OUE Airport Hotel and it was fully drawn down as of the third quarter of 2017, OUE Hospitality Trust said.

In its outlook, the trust pointed to concerns over a slower global economic growth outlook and higher uncertainty from trade policy and weaker financial market sentiment. But it added that the city-state — which is trade-dependent — has also seen continued growth in visitor arrivals. For the first eleven months of 2018, the Singapore Tourism Board reported international visitor arrivals rose 6.6 percent on-year, the filing noted.

“The hospitality sector is poised to benefit from healthy visitor arrivals and strengthened flight connectivity to key visitor markets, as a gradual recovery of the sector is expected on a reduced supply pipeline,” the trust said. The city-state is expected to see fewer new hotel rooms as a recent supply glut had depressed rates.

OUE Hospitality Trust’s portfolio includes two hotels, the 1,077-room Mandarin Orchard Singapore and the 563-room Crowne Plaza Changi Airport, and a high-end retail mall, the Mandarin Gallery.

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