SINGAPORE (May 2): The manager of OUE Hospitality Trust (OUE HT) has declared a 1Q19 distribution per unit (DPU) of 1.18 cents, declining 6.3% from its DPU of 1.26 cents a year ago due to lower income from the hospitality segment as well as higher expenses.
Revenue fell 3% on-year to $31.7 million from $32.7 million previously due to lower contributions from the hospitality segment, i.e. the master lease income from the Mandarin Orchard Singapore (MOS) and Crowne Plaza Changi Airport (CPCA) hotels.
This was however partially mitigated by higher revenue from the retail segment, which pertains to rental and other income from the Mandarin Gallery shopping mall.
A higher interest expense of $5.5 million was also registered over the quarter compared to $5 million in 1Q18, which the manager attributes to higher cost of debt.
Finance expenses grew 12.8% to $6.5 million from $5.7 million previously after recognising amortised lease liabilities, with the adoption of the FRS116 accounting standard in Jan 2019, such that OUE HT’s existing land lease was recognise as a right-of-use asset with corresponding lease liabilities.
Lee Yi Shyan, chairman of OUE Hospitality REIT Management, expects growing tourist arrivals to Singapore, new tourist offerings, and investments in the integrated resorts Marina Bay Sands and Resorts World Sentosa to strengthen to strengthen the city state’s appeal as a destination – thus supporting the local hospitality sector going forward.
See: Raising the stakes
See: OUE C-REIT and OUE H-Trust in merger to create diversified S-REIT with $6.8b in assets
“In the coming quarters ahead, the strategic location of Crowne Plaza Changi Airport places the hotel in a good position to benefit from the expansion and enhancement works at Changi Airport and the newly-opened Jewel,” says Isaac Chen, acting CEO of the REIT manager.
“During the quarter, retail revenue was higher on the back of higher occupancy at Mandarin Gallery. As at 31 March 2019, Mandarin Gallery was fully leased and we continue to strengthen its positioning as a destination mall,” he adds.
OUE HT, a stapled group comprising OUE Hospitality Real Estate Investment Trust and OUE Hospitality Business Trust, is seeking to create a diversified Singapore REIT by merging with OUE Commercial REIT (OUE C-REIT) in exchange for a combination of cash and new units in the latter, by way of a trust scheme of arrangement.
The trust scheme will require OUE HT’s stapled securityholders’ approval at the general meetings to be convened. It will also require sanctioning from the Singapore Court, among others.
Units in OUE HT closed 0.7% higher at 72 cents on Thursday.
