Far East Hospitality Trust posts steady 3Q21 net property income despite lower serviced residence demand

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

Far East Hospitality Trust reported Friday its third quarter net property income edged up 2.6 percent to S$18.32 million despite lower serviced revenue demand as commercial premises posted higher revenue due to lower rental rebates in the period.

Gross revenue for the three months ended 30 September inched up 0.7 percent on-year to S$20.76 million, the trust said in a filing to SGX.

“The master lease rental for the hotel segment was at the fixed rent level. The serviced residence segment experienced a decline in demand during the quarter but continued to perform above the fixed rent,” FEHT reported.

The income available for distribution increased 12.5 percent on-year to S$13.52 million, the trust said.

Finance expenses dropped 18 percent on-year to S$4.56 million, on lower fixed rates from newer interest rate swap contracts, and the REIT managers fees fell 0.9 percent on-year in the quarter to S$2.36 million on the lower value of the deposited property, the trust reported.

Hotel performance

Average occupancy at the hotels dropped to 79.1 percent in the quarter from 97.3 percent in the year-ago period, Far East Hospitality Trust said.

“More companies that required accommodation for their Malaysian workers looked for alternative arrangements to reduce cost. The majority of the hotels continued to be contracted to the government for isolation purposes,” the trust said.

The average daily rate fell 4.3 percent on year to S$66 on lower rates from government contracts and companies needing worker accommodation, the filing said. Revenue per available room (RevPAR) declined 22.4 percent on-year in the third quarter to S$52, FEHT said.

For the January-to-September period, net property income declined 3.4 percent to S$54.51 million on gross revenue of S$62.33 million, down 3.9 percent on-year, the trust reported. Income available for distribution for the nine-month period rose 3.0 percent on-year to S$38.84 million, the trust said.

Serviced Residence performance

The serviced residences posted average occupancy of 71.8 percent in the quarter, down 15.3 percentage points as companies needing worker accommodation sought alternative arrangements.

The average daily rate for the serviced residences fell to S$178 in the third quarter, compared with S$180 in the year-ago period, while the RevPAR dropped 18.5 percent on-year to S$128, FEHT said.

“While the support from long-stay corporate sources remained resilient throughout the pandemic, the serviced residences (SRs) experienced a decline in demand from companies requiring temporary accommodation for their foreign workers due to the border closures. Nonetheless, the SRs continued to perform above the fixed rent level,” the trust said.

Outlook

In its outlook, Far East Hospitality Trust said Singapore’s new Vaccinated Travel Lanes (VTLs) were a “step in the right direction,” with the potential for higher airline passenger capacity ahead.

“As the main conduit for arrivals in Singapore, airlines’ passenger capacity is a leading indicator for the recovery in cross-border travel. SIA [Singapore Airlines] Group passenger capacity continues to improve month-on-month,” the trust said.

But it added, “Global travel restrictions and local safe distancing measures expected to continue impacting inbound travel in the near term, with business largely supported by government and long-stay corporate contracts.”

Read more details on Far East Hospitality Trust’s results.