Ascott Residence Trust H2 DPU falls 52% to 1.99 S cents; buys US student housing

ASCOTT Residence Trust's (ART) distribution per stapled security (DPS) fell by 52 per cent to 1.99 Singapore cents for its half year ended Dec 31, 2020 compared to 4.18 cents a year ago, reported its managers on Wednesday morning.

This brings ART's DPS for the full year to 3.03 cents, down 60 per cent from its 2019 DPS of 7.61 cents and in line with its profit guidance issued on Jan 15.

Revenue for H2 2020 fell 39 per cent on year to S$161.4 million as opposed to S$266.6 million a year ago.

The decline was mainly due to lower revenue from the trust's existing portfolio and post the divestment of Somerset Liang Court Singapore and Somerset West Lake Hanoi. Additional contributions from ART's acquisitions of Ascendas Hospitality Trust's portfolio and Quest Macquarie Park Sydney helped to partially offset this decrease.

Due to the lower revenue, gross profit for the half-year fell by S$69.2 million or 53 per cent to S$61.1 million, partially offset by lower operating costs from cost containment measures and government support measures. The decrease in gross profit was S$87.3 million on a same-store basis.

ART's managers note that about two-thirds of gross profit came from master leases and management contracts with minimum guaranteed income, which they believe will provide the trust with more stability.

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The distributable income for H2 was S$61.7 million, which is 32 per cent lower than the H2 2019 distributable income of S$90.9 million.

This comes after including a one-off partial distribution of divestment gain of S$40 million, and the release of S$5 million of distributable income retained in H1 2020 to stapled securityholders.

Bob Tan, chairman of the managers, said: "Given the resurgence and uncertainty around new strains of the coronavirus, global economic recovery remains fragile. Nonetheless, ART is well-capitalised and continues to build on our financial strength."

As at end-2020, ART had a total of about S$1 billion in cash on-hand and unutilised credit facilities, while gearing stood at 36.3 per cent. Its managers said the cash on-hand is sufficient to cover more than three years' fixed costs under a worst-case, zero-income scenario.

Separately, ART that it has acquired its first purpose-built student accommodation asset, Signature West Midtown, for US$95 million.

The asset is a 183-unit student accommodation asset in Atlanta, Georgia in the US. Its transaction is expected to be completed by end Q1 2021.

"We continue to actively reconstitute and enhance ART's portfolio as we remain disciplined in managing our capital and costs. The student accommodation asset we have acquired has strong domestic demand with high average occupancy rate of 95 per cent despite Covid-19 and will add an approximate 4.4 per cent to DPS for FY2020 on a pro forma basis," said Beh Siew Kim, chief executive of the managers.

The refurbishment of Hotel Central Times Square, formerly known as DoubleTree by Hilton Hotel New York - Times Square South, will commence in Q2 of 2021. It was previously postponed to conserve cash.

lyf one-north Singapore, ART's maiden development project, is expected to complete in Q4 of 2021.

Stapled securities of ART closed S$0.02 or 1.9 per cent lower at S$1.03 on Tuesday, before the announcement.