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Ascott Residence Trust looking at rental housing; DPS down 69% for H1
ASCOTT Residence Trust (ART) is considering an expansion of its portfolio in the rental housing market as a means of improving its resilience.
"(We're) a bit more selective in the assets we want to acquire, with a longer stay segment in our portfolio . . . Rental housing has proven itself to be very resilient," said Beh Siew Kim, chief executive of ART's managers, at a briefing to discuss the trust's results for first half ended June 30.
ART saw "resilient contribution" from its 11 rental housing properties in Japan during the period. Occupancies of these properties were more than 90 per cent.
Ms Beh said ART is "actively looking at portfolios for rental housing properties to acquire", particularly in the US and Europe - where the market is more active.
For H1 2020, the trust's distribution per stapled security (DPS) fell by 69 per cent to 1.05 Singapore cents from 3.43 Singapore cents a year ago.
Revenue was down 16 per cent to S$208.5 million for the six-month period, from S$248.4 million a year earlier.
A small portion of the decrease was attributable to the sale of Ascott Raffles Place Singapore and Somerset West Lake Hanoi.
But ART has also added to its portfolio over the past year. It acquired Citadines Connect Sydney Airport in May 2019, absorbed Ascendas Hospitality Trust in December 2019 and bought Quest Macquarie Park Sydney in February 2020.
The revenue decline therefore mostly reflects weaker demand. ART closed 21 of its properties temporarily in H1 2020.
Distributable income declined 56 per cent year on year to S$32.6 million, from S$74.6 million.
Amid the challenges brought on by Covid-19, Ms Beh said ART has "rendered support to lessees that are under strain". It may grant further support depending on market recovery. Thus, ART has retained about 15 per cent or S$5 million of its income available for distribution to stapled securityholders.
In addition to the rent abatement, ART has agreed to extend four expired French master leases on variable rent terms for one year.
Nevertheless, Ms Beh remains positive on ART's performance in the second half of the year and believes "recovery will continue to take place".
ART has already seen a "gradual pickup across key markets", she said, as most countries ease lockdowns and selectively reopen borders.
Domestic travel, long stays and support for essential workers and businesses have also mitigated the impact of the muted demand in China, the United States and France.
In China, ART's portfolio occupancy rate remained above 50 per cent in H1 2020 due to long stays mainly in the first-tier cities. Additionally, Ms Beh said the pickup from June to July was "very positive" due to gradual improvement in demand from domestic corporate and leisure segments.
Similarly, in France, there has been an increase in leisure short-stay bookings at ART's regional properties in Cannes, Lille and Marseille, though demand remains low in Paris. ART's properties also supported the accommodation needs of medical workers in Paris and Marseille during the first half of the year.
In New York, Ms Beh said there was "good occupancy" from those who were "coming up to the city over the weekend for staycations". Here, too, ART has been providing accommodation to healthcare workers and Covid-19 responders.
And, in Singapore, its properties have been used for government quarantine facilities and to house Malaysians affected by the border closure.
In a worst-case scenario, however, its managers said ART has "sufficient liquidity to cover approximately two years of fixed costs".
The trust had S$620 million in cash and unutilised credit facilities as of June 30. In mid-July, it received S$163.3 million from the completion of the sale of partial gross floor area at Somerset Liang Court Singapore and secured an additional S$60 million in credit facilities.
ART is a stapled group consisting of Ascott Real Estate Investment Trust and Ascott Business Trust. It had an asset value of S$7.6 billion as of June 30 this year.
Stapled securities of ART closed at S$0.895 on Tuesday, down S$0.025 or 2.7 per cent.