UPDATE: Far East Hospitality Trust posts 1H21 net property income slipped 6 percent

Oasia Hotel, owned by Far East Hospitality TrustOasia Hotel, owned by Far East Hospitality Trust

This article was originally published on Friday, 30 July 2021 at 9:00 a.m. SGT; it has since been updated with more details. 

Far East Hospitality Trust reported Friday its first half net property income slipped 6.2 percent on-year to S$36.19 million as revenue from retail and office spaces declined due to the pandemic lowering demand for spaces primarily used for hospitality purposes.

Gross revenue for the January-to-June period declined 6.1 percent to S$41.57 million, the trust said in a filing to SGX. Revenue from retail and office spaces dropped 23.2 percent on-year to S$7.4 million.

The distribution per stapled security after some funds were retained rose 6.8 percent on-year to 1.10 Singapore cents, the trust said, citing cost savings of 16.9 percent in finance expenses and 3.9 percent in REIT manager’s fees as supporting income available for distribution.

“Given the uncertainty surrounding Covid-19, part of the distributable amount was retained for potential required assistance to tenants in the months ahead,” the trust said.

Gerald Lee, CEO of the REIT’s manager, said the pandemic had spurred Far East H-Trust to seek alternative sources of demand and to manage costs.

“Within our portfolio, the serviced residences, which had a larger base of long-term contracts, continued to perform above the fixed rent level. The gross revenue for our trust is protected by the fixed rent component of the master leases, which formed about 81 percent of gross revenue for the first half,” Lee said in the statement.

“The fixed component, with its minimum rental payment, provides downside protection for stapled securityholders and mitigates the impact of the volatility experienced during adverse economic or environmental circumstances,” he added.

Average hotel occupancy was flat on-year at 77.6 percent in the six month period on companies needing accommodation for their workers and from the government for isolation purposes, but the average daily rate (ADR) fell 35.3 percent on-year to S$66 on lower rates on those segments, the trust said.

The serviced residences’ occupancy was “healthy” at 76.2 percent on support from long-stay corporate sources, but the ADR fell 9.5 percent on-year to S$181 on lower rates from some corporate contracts, the statement said.

Outlook

The trust said it was “sanguine” on the outlook for international travel arrangements.

“As vaccination rates continue to rise globally, major economies, including Singapore, would transit to an endemic state with the resumption of business activities,” the trust said.

“This is backed by the Multi-Ministry Task Force’s assurance that Singapore will progressively facilitate international travel with countries that have done well in managing the COVID-19 situation,” it added.

Far East H-Trust said it would expedite asset enhancements to prepare for the eventual upturn, and would explore redevelopment opportunities for its properties.

The trust has a Singapore-focused portfolio of 13 properties totaling 3,143 hotel rooms and serviced residence units valued at around S$2.53 billion as of end-2020.