Far East Hospitality Trust's Q4 DPS down on softer market

FAR East Hospitality Trust on Wednesday morning reported that its fourth-quarter income available for distribution was 2.3 per cent lower year on year to S$20.2 million, due to lower revenue.

This represents distribution per stapled security (DPS) of 1.12 Singapore cents, down 4.3 per cent year on year.

Revenue for the three months as at end December 2016 dropped 4.6 per cent to S$27.5 million, due to reduced revenue contribution from hotels and serviced residences, as well as marginally softer performance of the retail and office spaces.

Revenue contribution from the hotels in Q4 was lower year on year due mainly to the continued softness in corporate travel demand amid the global economic uncertainties, the group said, adding that the increase in supply further heightened the competition, in turn compressing room rates.

The hotel portfolio's revenue per available room (RevPAR) fell 7.3 per cent year on year to S$136.

For the serviced residences, although Regency House enjoyed an increase in revenue from the corporate segment after its renovation, demand from the corporate segment remained soft. The revenue per available unit (RevPAU) of the serviced residences portfolio declined 2.3 per cent year on year to S$176 in Q4 2016.

Correspondingly, net property income fell 5.4 per cent to S$24.9 million.

For the full year, available income for distribution went down 5 per cent to S$78.1 million, while DPS was down 5.9 per cent to 4.33 Singapore cents.

Revenue came in 4.9 per cent lower at S$109.1 million and net property income was 5.1 per cent lower at S$98.4 million.

As at end December 2016, 71 per cent of the trust's debt was secured at fixed interest rates. The average cost of debt was about 2.5 per cent per annum and the weighted average debt to maturity was 2.3 years.

The real estate investment trust (Reit) manager has refinanced S$250 million of its term loans into four and seven year loans. The documentation work was completed in January 2017, and the loans are expected to be drawn down in March 2017 to prepay the expiring loans ahead of their maturity.

Said Gerald Lee, chief executive officer of the Reit manager: "2016 was another challenging year for the hospitality sector as corporate travel remained soft, and as the market absorbed the supply of new hotel rooms. We will continue to implement strategies to capture a higher share of corporate bookings, while progressively upgrading our properties to improve their competitiveness and relevance to the needs of the travellers."

To this end, the Reit manager plans to refurbish the guest rooms at Orchard Parade Hotel this year, as part of the property's third phase of renovation. Orchard Parade Hotel's reception, lobby, lobby bar, swimming pool, pool deck, gym and function rooms were renovated in 2016.